BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1723


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          Date of Hearing:   April 26, 2016


                           ASSEMBLY COMMITTEE ON JUDICIARY


                                  Mark Stone, Chair


          AB 1723  
          (Dodd) - As Amended March 28, 2016


          SUBJECT:  DEBT COLLECTION: IDENTITY THEFT


          KEY ISSUE:  IN ORDER TO STREAMLINE RESOLUTION OF IDENTITY THEFT  
          DISPUTES, SHOULD a debt collector face tighter deadlines for  
          investigating a debtor's claim of identity theft and for  
          notifying the debtor and credit reporting agency of the results  
          of the investigation?

                                      SYNOPSIS


          According to the author, identity thieves can wreak havoc on a  
          consumer's credit profile by opening new credit accounts and  
          taking out unauthorized loans using the consumer's stolen  
          identity.  The debts incurred in this manner often end up in  
          debt collection, and victims of identity theft may be repeatedly  
          contacted by debt collectors and have adverse information  
          reported on their credit reports as a result of the identity  
          theft.  Many victims only become aware of the crime months after  
          the crime, when their accounts go into collection.  Many  
          consumers who submit a dispute to a debt collector often find  
          that their dispute goes into a "black hole."  They report that  
          they never hear back from the debt collector and it may take  
          many months for fraudulent accounts to be removed from the  
          victims' credit reports, causing even greater damage to their  








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          credit.  This bill seeks to establish deadlines for debt  
          collectors to investigate identity theft disputes and notify  
          victims of identity theft, creditors, and credit reporting  
          agencies of the outcome of the investigations.  Among other  
          things, this bill requires a debt collector that has reported  
          adverse information about a debtor to a consumer credit  
          reporting agency to notify the agency that the account is  
          disputed, and initiate a review within 10 business days of  
          receiving a written statement by the debtor and other  
          documentation supporting a claim of identity theft.  The bill  
          also requires that a debt collector must notify creditors that  
          debt collection activities must be terminated no later than 10  
          business days after making a determination to cease collection  
          activities because of identity theft.  The bill is sponsored by  
          Encore Capital, a large debt-buying company based in San Diego,  
          and reflective of its pro-consumer stance is supported by  
          Attorney General Kamala Harris and the Consumer Attorneys of  
          California.  The bill has no known opposition and previously  
          passed the Assembly Banking & Finance Committee by a 12-0 vote.


          SUMMARY:  Establishes firmer deadlines for debt collectors to  
          investigate identity theft disputes and to notify victims of  
          identity theft, their creditors, and credit reporting agencies  
          of the outcome of the investigation.  Specifically, this bill:    



          1)Requires a debt collector that has reported adverse  
            information about a debtor to a consumer credit reporting  
            agency (CCRA), to notify the agency that the account is  
            disputed, and initiate a review within 10 business days of  
            receiving a written statement and other documentation  
            supporting a claim of identity theft by the debtor.


          2)Provides that a debt collector shall send notice of its  
            determination to the debtor no later than 10 business days  
            after concluding the review.








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          3)Provides that if the debt collector had furnished adverse  
            information about the debtor to a credit reporting agency,  
            then the debt collector must notify the agency to delete the  
            adverse information no later than 10 business days after  
            making a determination to cease collection activities in the  
            case of identity theft.


          4)Requires that a debt collector notify creditors that debt  
            collection activities have been terminated no later than 10  
            business days after making a determination to cease collection  
            activities in the case of identity theft.


          5)Provides that a creditor shall not pursue further collections  
            against or sell a consumer debt of a debtor once debt  
            collection activities have been terminated based upon the  
            debtor's claim of identity theft.


          EXISTING LAW:   


          1)Requires a debt collector to cease collection activities,  
            until completion of a specified review process, upon receipt  
            from a debtor of all of the following:


             a)   A copy of a police report filed by the debtor alleging  
               that the debtor is the victim of an identity theft crime,  
               including, but not limited to, a violation of Section 530.5  
               of the Penal Code, for the specific debt being collected by  
               the debt collector.


             b)   The debtor's written statement that the debtor claims to  
               be the victim of identity theft with respect to the  








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               specific debt being collected by the debt collector.   
               (Civil Code Section 1788.18 (a). All further references are  
               to this code unless otherwise stated.)


          2)Provides that the debtor's written statement above shall  
            consist of any of the following:


             a)   A Federal Trade Commission's Affidavit of Identity  
               Theft.
             b)   A written statement that contains the content of the  
               Identity Theft Victim's Fraudulent Account Information  
               Request offered to the public by the California Office of  
               Privacy Protection.


             c)   A written statement that certifies that the  
               representations are true, correct, and contain no material  
               omissions of fact to the best knowledge and belief of the  
               person submitting the certification, to be accompanied by  
               additional documentation including, but not limited to: (1)  
               A copy of the debtor's driver's license or state  
               identification card; (2) Specific facts supporting the  
               claim of identity theft, if available; (3) Any explanation  
               showing that the debtor did not incur the debt; (4) Any  
               available correspondence disputing the debt after  
               transaction information has been provided to the debtor;  
               and (5) Copies of bills and statements showing that the  
               debtor lived at another residence at the time the debt was  
               incurred.  (Section 1788.18 (b).)


          3)Requires the debt collector to review and consider all of the  
            information provided by the debtor and other information  
            available to the debt collector in its file or from the  
            creditor, and permits the debt collector to recommence debt  
            collection activities only upon making a good faith  
            determination that the information does not establish that the  








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            debtor is not responsible for the specific debt in question.   
            (Section 1788.18 (d).)
          4)Requires the debt collector to notify the debtor in writing of  
            that determination and the basis for that determination before  
            proceeding with any further collection activities, and further  
            requires this determination to be based on all of the  
            information provided by the debtor and other information  
            available to the debt collector in its file or from the  
            creditor.  (Section 1788.18 (d).)


          5)Provides that no inference or presumption that the debt is  
            valid or invalid, or that the debtor is liable or not liable  
            for the debt, shall arise if the debt collector decides after  
            the review to cease or recommence the debt collection  
            activities.  Further provides that the exercise or nonexercise  
            of rights under this section is not a waiver of any other  
            right or defense of the debtor or debt collector.  (Section  
            1788.18 (e).)


          6)Requires a debt collector who ceases collection activities  
            under these provisions and does not recommence those  
            collection activities to do all of the following:


             a)   If the debt collector has furnished adverse information  
               to a consumer credit reporting agency, notify the agency to  
               delete that information.
             b)   Notify the creditor that debt collection activities have  
               been terminated based upon the debtor's claim of identity  
               theft.  (Section 1788.18 (g).)


          FISCAL EFFECT:  As currently in print this bill is keyed  
          non-fiscal.


          COMMENTS:  This bill seeks to streamline the resolution of  








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          identity theft disputes, in response to reports that too many  
          consumers have difficulty getting debt collectors to investigate  
          and respond to their documentation establishing a claim of  
          identity theft.  To accomplish this, the bill seeks to establish  
          firm 10-day deadlines for debt collectors to investigate  
          identity theft disputes and to notify victims of identity theft,  
          their creditors, and credit reporting agencies of the outcome of  
          the investigation.  The author explains the need for the bill as  
          follows:


               Identity theft is a critical issue for many California  
               consumers. [. . .] Today, many victims become aware of the  
               crime, months later, when their accounts go into  
               collection. Many consumers who submit a dispute to a debt  
               collector often find that their dispute goes into a "black  
               hole." Many victims never hear back from the debt  
               collector, and it may take many months for the fraudulent  
               account to be removed from the victims' credit reports.  
               This delay causes even greater damage to a victim's credit  
               which can prevent him or her from obtaining consumer and  
               home loans. In addition, victims suffer needless stress  
               endlessly trying to stop unwarranted collection.


               Consumers need more certainty and information in the  
               process of resolving disputed debts when the disputes  
               result from identity theft.  AB 1723 would establish  
               reasonable timeframes for debt collectors to initiate  
               investigations, update or delete adverse information on the  
               consumer's credit report, and respond to consumers  
               regarding the outcome of their investigation.


          This bill establishes quicker timelines that streamline the  
          process of investigating and resolving identity theft matters.   
          According to the author, California law does not impose adequate  
          timelines upon debt collectors to review and resolve identity  
          theft claims, and as a result, consumers may be subject to  








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          months of improper collection and credit reporting activities  
          that could otherwise be avoided.  Current federal law  
          effectively provides a floor by establishing a 30-day timeframe  
          for investigations of disputed debts (15 U.S.C. 1692g).  This  
          bill improves upon this by requiring debt collectors to initiate  
          an investigation within ten business days of receiving a report  
          from a consumer with the identity theft information set forth in  
          Section 1788.18.  If the debt collector has furnished adverse  
          information about the debtor to a credit reporting agency, this  
          bill would impose a ten-business day timeline for the debt  
          collector to notify the credit reporting agency that the account  
          is disputed.  According to the sponsor, this notification  
          process takes some debt collectors up to 60 days, so this bill  
          establishes a much quicker deadline for providing such  
          notification to the credit reporting agency.  Finally, this bill  
          would require the debt collector, after concluding its review of  
          the consumer's information, to notify the consumer of its  
          decision about the validity of his or her claim, regardless of  
          the outcome.  Current law unfortunately only requires  
          notification when the debt collector determines the claim is  
          invalid and seeks to recommence debt collection activities.

          This bill provides additional notification to consumers and  
          prevents further collection by creditors when identity theft or  
          fraud is verified.  This bill also revises the process that  
          applies when a debt collector has found merit to the debtor's  
          claim of identity theft and ceased collection activities.   
          First, if the debt collector had furnished adverse information  
          about the debtor to a credit reporting agency, then current law  
          requires the debt collector to notify the agency to delete the  
          adverse information, but does not specify a timeline for when  
          such notification must be made.  In the meantime, the adverse  
          credit information potentially wreaks havoc upon the victim of  
          identity theft.  (Section 1788.18 (g)(1).)  To address this  
          problem, this bill establishes that the agency must be notified  
          to delete that information no later than 10 business days after  
          the debt collector makes its determination.  Second, current law  
          requires only that creditors be notified that debt collection  
          activities have been terminated based upon the debtor's claim of  








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          identity theft, but does not specify when this notification must  
          take place.  (Section 1788.18 (g)(2).)  This bill would ensure  
          that creditors receive this notification within ten business  
          days.  Finally, the bill also prohibits a creditor that has been  
          notified that collection activities have been terminated  
          pursuant to a consumer's claim of identity theft from pursuing  
          further collections on or selling the debt if the consumer is a  
          victim of identity theft.

          REGISTERED SUPPORT / OPPOSITION:


          Support

          Attorney General Kamala Harris


          California Association of Collectors


          Consumer Attorneys of California


          Contra Costa District Attorney's Office


          Encore Capital


          Napa County District Attorney's Office


          Sonoma County District Attorney's Office


          Yolo County District Attorney's Office

          Support (if amended)









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          California Bankers Association



          Opposition

          None on file




          Analysis Prepared by:Anthony Lew / JUD. / (916) 319-2334