The California legislature has amended the existing requirements for debt collectors who receive consumer claims of identity theft with the Identity Theft Resolution Act (“Act”). See AB 1723; Cal. Civ. Code § 1785.16.2. The Act does not take effect until January 1, 2017, but creditors should immediately start implementing new policies and procedures for debt collectors to follow to ensure that the creditor’s interest is protected under the amendments.
Under the Act, the time frame for reviewing claims of identity theft has been dramatically reduced for debt collectors. Once the debt collector receives the police report, written statement, and other information required under the law, it will have 10 business days to start an investigation of the dispute. After concluding its review, the debt collector must send the results of its investigation to the consumer within 10 business days. The timeframe under the Act is in stark contrast to current law, which sets no time frame for when a debt collector must investigate a consumer’s claim of identity theft, or when the debt collector must notify the creditor associated with the account or any consumer reporting agency (“CRA”) to which the debt has been reported. Current law only 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.
While investigating the debtor’s claim of identity theft, the debt collector must review and consider all of the information provided by the debtor as well as information available to the debt collector in its file or from the creditor. The debt collector may apply common sense. For example, if the debtor has previously affirmed the debt or acknowledged it, that fact can be considered in determining whether the claim of identity theft is valid or made in good faith. The debt collector should document all communications and provide a clear explanation if it is decided that the claim is not valid. As mentioned above, once the debt collector concludes its review, it must send its decision to the debtor within 10 business days, notifying the debtor in writing that he or she is still responsible for the debt, as well as the basis for that determination. The debt collector may recommence collection activities only after making a good faith determination that the evidence presented does not establish the debtor is not responsible for that specific debt.