SACRAMENT- A California lawmaker on Monday introduced a bill to end bogus liens filed against politicians, court clerks 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 Assemblywoman Diane Papan (D-San Mateo) comes after a Times investigation in July found that garnishment claims filed with the Secretary of State's office are used by anti-government agitators, including so-called “sovereign citizens,” for conspiracy-based lawsuits and vendettas. The U.S. Department of Justice and the nonpartisan Congressional Research Service have called bogus seizures a form of “paper terrorism.”
“This is not an exotic or onerous solution,” Papan said Monday after the state Legislature returned to the Capitol to begin a new session. “The fact is that someone can cause irreparable harm to another person's reputation and ability to have good credit. And we can certainly do better in California.”
Liens are recorded in state Uniform Commercial Code databases nationwide, and public filings are intended to standardize interstate transactions and alert creditors about business debts and financial obligations.
The Times investigation found that UCC's state lien databases, which were designed to be simple and quick to file, are inherently vulnerable to abuse. A single false filing can claim that an individual or company has debts worth hundreds of millions or even trillions of dollars. Others inundate victims with repeated submissions that make it appear they are entangled in complex financial disputes.
In California, filing a recorded lien with the Secretary of State costs five dollars, but removing a fraudulent one from the public database requires a court order, which can cost thousands of dollars in attorney and court fees. The state does not notify a person when a lien names them as a debtor, allowing false 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 subjected to false presentations.
Under Assembly Bill 501, the Secretary of State's office would have to notify people within 21 days if they are named as a debtor in a lien filing. The legislation would also delay court fees until the end of court proceedings.
In cases where the lien is determined to be fraudulent, the bill would make the at-fault party liable to the victim for three times the amount of court costs 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 crime to knowingly file a false lien.
“Victims of these fraudulent submissions often have no idea they have been attacked until real damage is done,” Papan said. “That damage may look like ruined credit, failed background checks, or botched mortgage applications, while the people who commit the fraud face relatively few risks or consequences.”
The National Association. of Secretaries of State said the vast majority of UCC filings are legitimate. But in a 2023 report, the association said “fraudulent or false filings” were a widespread and persistent problem across the country, and warned that “they can create serious financial hardship for victims.”
A high-profile California public official who did not know he had been named in a UCC complaint until he was contacted by The Times said he was alarmed to discover 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 debt claims, individuals falsely claim that government officials owe them money or property, and in some cases claim to own the victim's home. Other fake filings target businesses with claims that they are owed cash and cars. In some cases, people file dozens or hundreds of false liens. Paid online classes associated with fringe anti-government ideologies teach people how to file UCC liens, often promoting filings as a way to pressure perceived adversaries or falsely claiming that filings can erase debts.
Michael Rogers, a San Diego attorney who represents auto dealers victimized by false filings, said AB 501 would “greatly curb some of the systemic abuses used by the sovereign citizen movement and others” who file fraudulent or unsubstantiated lien notices.
Consumer credit expert John Ulzheimer said in July that liens can complicate a person's ability to get a mortgage or a business's chances of obtaining lines of credit. In some cases, he said, the filings can derail job applications for positions that require extensive background checks.
Papan said his bill would restore “balance and accountability” to the UCC system, ensuring it remains a reliable business tool while adding protections for Californians who are victims of fraudulent filings.
“We cannot 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 business transactions is very concerning.”
