SACRAMENTO — A California lawmaker launched a invoice Monday to crack down on faux liens filed towards politicians, court docket staff and companies that may pressure victims to spend 1000’s of {dollars} in authorized charges to clear their names and restore their credit score.
The invoice by Assemblymember Diane Papan (D-San Mateo) comes after a Occasions investigation in July discovered lien claims filed with the secretary of state’s workplace are utilized by antigovernment agitators, together with so-called “sovereign residents,” for conspiracy-laced calls for and vendettas. The U.S. Justice Division and the nonpartisan Congressional Analysis Service have referred to as faux liens a type of “paper terrorism.”
“This isn’t an unique or onerous repair,” Papan mentioned Monday after the state Legislature returned to the Capitol to start a brand new session. “The very fact is that somebody can do irreparable injury to somebody’s fame and their means to have good credit score. And we are able to definitely do higher in California.”
Liens are recorded in state Uniform Business Code databases throughout the nation, with the general public filings meant to standardize interstate transactions and alert collectors about enterprise money owed and monetary obligations.
The Occasions’ investigation discovered that state databases of UCC liens, which have been designed to be simple and fast to file, are inherently weak to abuse. A single false submitting can declare a person or enterprise owes money owed value tons of of tens of millions and even trillions of {dollars}. Others flood victims with repeated filings that make it seem they’re entangled in complicated monetary disputes.
In California, a lien recorded with the secretary of state prices $5 to file, however eradicating a fraudulent one from the general public database requires a court docket order, which may value 1000’s in lawyer and court docket charges. The state doesn’t notify an individual when a lien names them because the debtor, permitting faux filings to stay in California’s public database for years earlier than a sufferer discovers them. Many politicians and authorities staff realized from The Occasions that they’d been focused with spurious filings.
Below Meeting Invoice 501, the secretary of state’s workplace could be required to inform people inside 21 days if they’re named as a debtor in a lien submitting. The laws additionally would delay court docket charges till the top of judicial proceedings.
In circumstances the place the lien is discovered to be fraudulent, the invoice would make the responsible celebration liable to the sufferer for thrice the quantity of court docket charges paid. The invoice would additionally enhance the utmost civil penalty for submitting a fraudulent lien to $15,000, up from $5,000. California legislation already makes it a felony to knowingly file a faux lien.
“Victims of those fraudulent filings usually don’t know they’ve been focused till actual hurt is finished,” Papan mentioned. “That hurt can seem like wrecked credit score, failed background checks, or failed mortgage purposes whereas the individuals committing the fraud face comparatively little threat or consequence.”
The Nationwide Assn. of Secretaries of State mentioned the overwhelming majority of UCC filings are professional. However, in a 2023 report, the affiliation mentioned that “fraudulent or bogus filings” have been a widespread and protracted downside throughout the nation, warning that they “can create severe monetary difficulties for victims.”
One high-profile California public official who was unaware he had been named in a UCC declare till contacted by The Occasions mentioned he was alarmed to seek out that the submitting contained his house handle. The Occasions recognized tons of of different UCC filings with no obvious authorized foundation that additionally listed the house addresses of presidency officers and outstanding power-brokers, successfully turning the state’s public database right into a doxing instrument.
Within the debt claims, people falsely allege authorities officers owe them cash or property, in some circumstances claiming possession of the sufferer’s house. Different faux filings goal companies with claims of being owed money and vehicles. In some circumstances, people file dozens or tons of of pretend liens. Paid on-line courses related to fringe antigovernment ideologies educate individuals methods to report UCC liens, usually selling the filings as a strategy to strain perceived adversaries or falsely claiming that the filings can erase money owed.
Michael Rogers, a San Diego lawyer who represents auto sellers focused by faux filings, mentioned AB 501 would “enormously curb a few of the systemic abuses utilized by the sovereign citizen motion and others” who file unsupported or fraudulent lien notices.
Client credit score professional John Ulzheimer mentioned in July that liens can complicate an individual’s means to acquire a mortgage or an organization’s probabilities of securing strains of credit score. In some circumstances, he mentioned, the filings can derail job purposes for positions that require thorough background checks.
Papan mentioned her invoice would restore “steadiness and accountability” to the UCC system, guaranteeing it stays a trusted business instrument whereas including protections for Californians focused by fraudulent filings.
“We are able to’t enable the Uniform Business Code for use as a weapon,” Papan mentioned. “The truth that these kinds are getting used to wreck the integrity of business transactions may be very troubling.”
