Tuesday, April 1, 2008
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Court Rules Identity Theft Law Inapplicable to Former Creditors
By STEVEN M. ELLIS, Staff Writer
Consumers who allege that they are victims of identity theft cannot rely on California identity theft law to sue a creditor who has since sold the account, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
Affirming a ruling U.S. District Judge Manuel L. Real of the Central District of California, the court held that Shane Satey could not maintain his claim against JPMorgan Chase & Company under California Civil Code Secs. 1798.92, et seq., over charges he alleged were fraudulently incurred on his credit card because the company ceased being a “claimant” subject to the statutes when it sold the account to a third party.
Satey brought the action in 2005, alleging that Chase, a third-party creditor, and Experian Information Solutions Inc. violated state identity theft law—as well as the federal Fair Credit Reporting Act and state and federal Fair Debt Collection Practices acts—in connection with efforts to collect an $8,666 charge from a 98 Cent Store in Glendale incurred on Satey’s Chase-issued credit card in 2002.
Disputed Charge
After becoming aware of the charge, Satey had disputed it to Chase, which closed the existing account and transferred the balance to a new account with a new number. Chase had then contacted the 98 Cent Store, where the merchant claimed that Satey himself had made the transaction, purchasing clothing and suitcases, and that Satey had provided a California driver’s license containing his driver’s license number and date of birth.
Determining that Satey’s actual driver’s license number and date of birth matched the information relayed by the merchant, Chase decided that the charge was legitimate and continued to seek payment from Satey for the amount due under the new account.
Satey refused to make any payments on the disputed charge and notified all three major credit card bureaus about the alleged identity theft. However, he referenced only the number of the original, closed account.
He subsequently received letters from CI Creditors Interchange Inc., and then from Great Seneca Financial Corporation, notifying him that they had, respectively, purchased the delinquent account and were seeking payment on it.
State Law Claims
Satey eventually dismissed all of his claims against Great Seneca voluntarily, settled his claims against Experian, and dismissed most of his claims against Chase. Nevertheless, he maintained a claim against Chase under California identity theft law for improper credit reporting, improper investigation and improper sale of the disputed account.
Under the law, a “victim of identity theft” may bring an action for damages, civil penalties, and injunctive relief against a “claimant” to establish that he or she is a victim of identity theft in connection with a claim asserted by the “claimant.”
The law defines a “claimant” as “a person who has or purports to have a claim for money or an interest in property in connection with a transaction procured through identity theft,” and a “victim of identity theft” as “a person who had his or her personal identifying information used without authorization by another to obtain credit, goods, services, money, or property, and did not use or possess the credit, goods, services, money, or property obtained by the identity theft,” and filed a police report.
Civil penalties are available if the victim can prove that notice of the alleged theft was provided to the claimant at least 30 days before filing an action; that the claimant failed to investigate the notification; and the claimant continued to pursue its claim against the victim after being presented with facts later held to entitle the victim to a judgment.
Chase moved for summary judgment, arguing that the state law was preempted by federal law and that the company did not meet the definition of a “claimant” to which the state law applied.
When Real granted the motion on the latter grounds, Satey appealed and Chase reiterated its arguments.
Not a ‘Claimant’
However, the Court of Appeals, in an opinion by Judge N. Randy Smith, declined to rule whether federal law preempted the state laws, and upheld Real’s decision on the basis that Chase was not a “claimant.”
Noting that the term claimant “reflects a present tense interest in a debt or attempt to collect,” Smith wrote that, “granting the appropriate significance to the verb tense used by the California Legislature, we cannot construe ‘claimant’ to include a person who had an interest in a disputed debt at some point in the past, but who no longer retains the interest at the time suit is filed.”
He continued:
“[W]hile Chase may have previously come within the scope of California’s Identity Theft Law, once Chase sold the debt it was no longer a ‘claimant.’”
Judge Betty B. Fletcher and Senior U.S. District Judge Samuel P. King of the District of Hawaii, sitting by designation, joined Smith in his opinion.
The case is Satey v. JPMorgan Chase & Company, No. 06-56370.
Copyright 2008, Metropolitan News Company