SACRAMENTO — A California lawmaker launched a invoice Monday to crack down on pretend liens filed towards politicians, courtroom workers and companies that may power 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 pretend 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 harm to somebody’s popularity and their capacity to have good credit score. And we will actually do higher in California.”
Liens are recorded in state Uniform Industrial Code databases throughout the nation, with the general public filings supposed 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 easy and fast to file, are inherently weak to abuse. A single false submitting can declare a person or enterprise owes money owed price tons of of hundreds of thousands and even trillions of {dollars}. Others flood victims with repeated filings that make it seem they’re entangled in advanced 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 courtroom order, which may value 1000’s in legal professional and courtroom charges. The state doesn’t notify an individual when a lien names them because the debtor, permitting pretend filings to stay in California’s public database for years earlier than a sufferer discovers them. Many politicians and authorities workers discovered from The Occasions that that they had been focused with spurious filings.
Underneath 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 courtroom charges till the tip 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 courtroom charges paid. The invoice would additionally improve 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 pretend lien.
“Victims of those fraudulent filings usually don’t know they’ve been focused till actual hurt is completed,” Papan mentioned. “That hurt can seem like wrecked credit score, failed background checks, or failed mortgage functions whereas the folks committing the fraud face comparatively little threat or consequence.”
The Nationwide Assn. of Secretaries of State mentioned the overwhelming majority of UCC filings are reputable. 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 critical 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 residence 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 device.
Within the debt claims, people falsely allege authorities officers owe them cash or property, in some circumstances claiming possession of the sufferer’s residence. Different pretend 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 folks the best way to document UCC liens, usually selling the filings as a option to stress perceived adversaries or falsely claiming that the filings can erase money owed.
Michael Rogers, a San Diego legal professional who represents auto sellers focused by pretend filings, mentioned AB 501 would “vastly curb a number of the systemic abuses utilized by the sovereign citizen motion and others” who file unsupported or fraudulent lien notices.
Shopper credit score professional John Ulzheimer mentioned in July that liens can complicate an individual’s capacity to acquire a mortgage or an organization’s probabilities of securing traces of credit score. In some circumstances, he mentioned, the filings can derail job functions for positions that require thorough background checks.
Papan mentioned her invoice would restore “stability and accountability” to the UCC system, making certain it stays a trusted industrial device whereas including protections for Californians focused by fraudulent filings.
“We will’t permit the Uniform Industrial Code for use as a weapon,” Papan mentioned. “The truth that these kinds are getting used to break the integrity of economic transactions may be very troubling.”
