California Amends Debt Collector ID Theft Requirements

This article is not legal advice. The State of California’s legislature has amended its requirements for debt collectors who receive consumer claims of identity theft. The amended law, labeled the Identity Theft Resolution Act, was signed by Governor Jerry Brown on September 16, 2016. The law becomes effective on Jan. 1, 2017.

The current law impacts the actions taken by a debt collector when a consumer claims identity theft. The law requires a debt collector to cease collection of a debt upon receipt of (1) a police report filed by a consumer and (2) a statement written by the consumer alleging identity theft regarding the debt at issue. The current law, however, had no time frame for when a debt collector must begin investigating the consumer’s claim of ID theft, or when it was required to notify the claim of identity theft to the creditor associated with the account or any Consumer Credit Reporting Agency (CCRA) to which the debt has been reported.

Under the newly amended law, a specific time frame for reviewing claims of identity theft has been inserted into the law. Once the debt collector receives notification via the aforementioned police report, written statement and other information required under the law, that debt collector must notify the creditor or CCRA of the claim of ID theft and begin an investigation into the dispute within 10 business days.

There is no specific time frame for how quickly the debt collector must complete its review. After concluding its review, the debt collector must send the results of its investigation to the consumer within 10 business days.

The amended law also requires a debt collector that does not recommence collection activities under these provisions to notify the associated creditor no later than 10 business days after making its determination. In addition, if the debt collector furnished adverse information to a consumer credit reporting agency, the debt collector must notify the CCRA to delete that information no later than 10 business days after completing the investigation and making its determination.

The law also prohibits a creditor from selling a consumer debt to a new debt collector if the creditor has received notice that the current debt collector has terminated debt collection activities.

When can the debt collector recommence collection activities on a disputed claim? According to the new law:

“The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question. The debt collector’s determination shall be made in a manner consistent with the provisions of subsection (1) of Section 1692 of Title 15 of the United States Code, as incorporated by Section 1788.17 of this code. The debt collector shall notify the debtor in writing of that determination and the basis for that determination before proceeding with any further collection activities.”

What You Should Do

This is not legal advice: BillingTree suggests that collection agencies review their current compliance management policies and procedures to determine if they must make any changes to reflect the new law in California. Even though the law does not become effective until January 1, 2017, implementing the new procedures where warranted as soon as possible can help uncover any potential problems and reporting issues.