SACRAMENTO — A California lawmaker introduced a bill Monday to crack down on fake liens filed against politicians, court employees and businesses that can force victims to spend thousands of dollars in legal fees to clear their names and repair their credit.
The bill by Assemblymember Diane Papan (D-San Mateo) comes after a Times investigation in July found lien claims filed with the secretary of state’s office are used by antigovernment agitators, including so-called “sovereign citizens,” for conspiracy-laced demands and vendettas. The U.S. Justice Department and the nonpartisan Congressional Research Service have called fake liens a form of “paper terrorism.”
“This isn’t an exotic or onerous fix,” Papan said Monday after the state Legislature returned to the Capitol to begin a new session. “The fact is that someone can do irreparable damage to someone’s reputation and their ability to have good credit. And we can certainly do better in California.”
Liens are recorded in state Uniform Commercial Code databases across the country, with the public filings intended to standardize interstate transactions and alert creditors about business debts and financial obligations.
The Times’ investigation found that state databases of UCC liens, which were designed to be straightforward and quick to file, are inherently vulnerable to abuse. A single false filing can claim an individual or business owes debts worth hundreds of millions or even trillions of dollars. Others flood victims with repeated filings that make it appear they are entangled in complex financial disputes.
In California, a lien recorded with the secretary of state costs $5 to file, but removing a fraudulent one from the public database requires a court order, which can cost thousands in attorney and court fees. The state does not notify a person when a lien names them as the debtor, allowing fake filings to remain in California’s public database for years before a victim discovers them. Many politicians and government employees learned from The Times that they had been targeted with spurious filings.
Under Assembly Bill 501, the secretary of state’s office would be required to notify individuals within 21 days if they are named as a debtor in a lien filing. The legislation also would delay court fees until the end of judicial proceedings.
In cases where the lien is found to be fraudulent, the bill would make the guilty party liable to the victim for three times the amount of court fees paid. The bill would also increase the maximum civil penalty for filing a fraudulent lien to $15,000, up from $5,000. California law already makes it a felony to knowingly file a fake lien.
“Victims of these fraudulent filings often have no idea they’ve been targeted until real harm is done,” Papan said. “That harm can look like wrecked credit, failed background checks, or failed mortgage applications while the people committing the fraud face relatively little risk or consequence.”
The National Assn. of Secretaries of State said the vast majority of UCC filings are legitimate. But, in a 2023 report, the association said that “fraudulent or bogus filings” were a widespread and persistent problem across the country, warning that they “can create serious financial difficulties for victims.”
One high-profile California public official who was unaware he had been named in a UCC claim until contacted by The Times said he was alarmed to find that the filing contained his home address. The Times identified hundreds of other UCC filings with no apparent legal basis that also listed the home addresses of government officials and prominent power-brokers, effectively turning the state’s public database into a doxing tool.
In the debt claims, individuals falsely allege government officials owe them money or property, in some cases claiming ownership of the victim’s home. Other fake filings target businesses with claims of being owed cash and cars. In some cases, individuals file dozens or hundreds of fake liens. Paid online classes associated with fringe antigovernment ideologies teach people how to record UCC liens, often promoting the filings as a way to pressure perceived adversaries or falsely claiming that the filings can erase debts.
Michael Rogers, a San Diego attorney who represents auto dealers targeted by fake filings, said AB 501 would “greatly curb some of the systemic abuses used by the sovereign citizen movement and others” who file unsupported or fraudulent lien notices.
Consumer credit expert John Ulzheimer said in July that liens can complicate a person’s ability to obtain a mortgage or a company’s chances of securing lines of credit. In some cases, he said, the filings can derail job applications for positions that require thorough background checks.
Papan said her bill would restore “balance and accountability” to the UCC system, ensuring it remains a trusted commercial tool while adding protections for Californians targeted by fraudulent filings.
“We can’t allow the Uniform Commercial Code to be used as a weapon,” Papan said. “The fact that these forms are being used to damage the integrity of commercial transactions is very troubling.”
This story originally appeared on LA Times
