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New Jersey Bill Requires ‘Good Faith’ Identity Theft Determinations

New Jersey Capitol Building, TrentonA New Jersey Senate bill introduced in 2014 relating to debt collectors’ responsibilities upon receipt of notice of identity theft or misidentification crossed over to the Assembly this week. S1344 received unanimous support in the Senate Commerce Committee, with amendments, and passed from the Senate on third reading by a vote of 32-0.

The bill adopts the FDCPA’s definition of “debt,” but strays in its definition of “debt collector” which includes, in part, “any person who by any direct or indirect action, conduct, or practice, collects or attempts to collect a debt that is owed or due or asserted to be owed or due from a consumer in this State.”

Noticeably absent is the FDCPA’s phrase “owed or due another” which presumably extends the application of the legislation beyond third party debt collectors to debt buyers and other non-creditor assignees.

The definition contains the same exclusions as the FDCPA, and the Senate Committee removed an exemption for attorneys that was contained in the introduced version of the bill. Unfortunately, the legislation imposes a “good faith” standard on debt collectors which can be subject to widely varying interpretations.

The legislation requires consumers to provide a written statement claiming identity theft or misidentification within 45 days of the debt collector’s initial communication and must include:

  • Standardized FTC affidavit of identity theft;
  • Certification as to the truthfulness of the representations;
  • Specific facts supporting the claim;
  • Explanation showing that the consumer did not incur the debt;
  • Any available correspondence disputing the debt after transaction information had been provided to the consumer by the original creditor;
  • Documentation of the residence of the consumer at the time the alleged debt was incurred;
  • A telephone number for contacting the consumer or for direction that further communications be in writing only;
  • The identification of any person the consumer believes is responsible for incurring the debt; and
  • An express statement that the consumer did not authorize the use of the consumer’s name or personal information for incurring the debt.

Upon receipt, the debt collector is required to:

  • Review the information provided by the consumer and any other information available;
  • Determine in good faith whether the consumer is responsible for the debt;
  • Provide a written determination to the consumer;
  • Cease all collection activities against the consumer if it is determined the consumer is not responsible for the debt;
  • Recommence debt collection activities, if desired, if it is determined the consumer is responsible for incurring the debt.

The legislation provides specific steps that must be undertaken by the debt collector if the consumer’s notification is made orally.

A consumer commits a violation if, with the purpose to deceive or mislead, makes a false statement which he or she does not believe to be true in the written statement or certification. A debt collector commits a violation by:

  • Failing to exercise good faith in making its determination;
  • Recommencing collection activity without making a written determination;
  • Requiring the consumer to provide anything more in submitted documents or written statements beyond the last three digits of the social security number or any other personal identifier;
  • With respect to a consumer’s personal information, violating § 56:8-162 (methods of destruction of certain customer records), § 56:8-163 (disclosure of breach of security to customers) or § 56:8-164 (prohibited actions relative to display of social security numbers).

A violation may be met with injunctive relief and a civil penalty of not less than $500 nor more than $1,000 for each violation, and the action must be brought within one year of the date of the violation. A debt collector can avoid civil liability by curing the violation upon discovery or, after receipt of a written notice of a violation, notifies the consumer makes any necessary adjustments or corrections.

The legislation does provide a bona fide error defense. The Senate Committee removed a provision that would have awarded debt collectors reasonable attorneys’ fees and actual damages sustained as a result of an action brought in bad faith.

The bill has been referred to the Assembly Financial Institutions and Insurance Committee and would take effect immediately (generally upon the Governor’s signature or after 45 days if no action is taken).

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Eric Rosenkoetter is a principal at Maurice Wutscher LLP, where he provides counsel to businesses and consumer financial services firms nationwide. For many years, he has focused his practice on various aspects of financial services law. As a litigation attorney, he has conducted every aspect of the litigation process, including countless depositions, motion proceedings, bench and jury trials, and appeals in various courts. In addition, he has significant experience as a compliance and transactional attorney, providing strategic, business growth, legislative, compliance and regulatory advice to national corporations and trade associations. For example, he has drafted consumer contracts and disclosures designed to state-specific statutory requirements, and developed “Best Practices” guides and state-by-state compliance grids, for national financial services companies. He also conducted research and crafted a metrics report for a national trade association with analysis designed to counter the claims of advocacy groups. Eric’s experience also includes working for a national corporation as Executive Counsel, Chief Compliance and Ethics Officer, and Director of Legislative Affairs, and as a federal lobbyist and Director of Government and Public Affairs for a national financial services trade association. In the government sector, Eric presided over approximately 6,000 state administrative hearings, served as a staff attorney for the Missouri Senate, and handled litigation in 33 counties as a regional managing attorney. Eric frequently speaks to audiences on topics relevant to the financial services industry including regulatory compliance, data privacy law and related advocacy initiatives. For more information, see https://mauricewutscher.com/attorneys/eric-rosenkoetter/

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