California Amends Requirements for Debt Collectors Responding to Consumer Claims of Identity Theft

The State of California legislature has amended its requirements for debt collectors who receive consumer claims of identity theft.

The law, labeled the Identity Theft Resolution Act, was signed by the Governor on September 16, 2016. The law becomes effective on Jan. 1, 2017. A complete copy of the final text of the bill can be seen here.

Current Law

Current law requires a debt collector to cease collection of a debt upon receipt of a police report filed by a consumer and a written statement alleging identity theft regarding the debt at issue. However, the current law had no time frame for when a debt collector must investigate a 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.

Newly Amended Law

Under the newly amended law, a specific time frame for reviewing claims of identity theft has been specified. Once the debt collector receives the aforementioned police report, written statement, and other information required under the law, it will have 10 business days to start an investigation of the dispute.

The amended law also requires specific affirmative action by the debt collector if the debt collector had previously furnished information about the debt to a CCRA. In that event the debt collector must also notify the CCRA of the dispute within 10 days.

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

Per 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. The debt collector’s determination shall 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.”

insideARM Perspective

insideARM recommends that all ARM companies immediately modify existing policies and procedures in their Compliance Management Systems to reflect the new law in California. Though the law does not become effective until January 1, 2017, it makes sense to implement the change immediately.

Though the section above on recommencing debt collection activities (which includes a double negative) would make my 8^th grade English teacher cringe, the intent seems clear – you may only recommence collection activities if the information provided does not confirm the consumer’s claim of identity theft.