AB909 - Financial abuse of an elder or dependent adult: fraudulent transactions: liability.

Amended IN Assembly March 28, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 909 Introduced by Assembly Member Schiavo February 19, 2025 An act to amend Section 1798.97.1 of the Civil Code, to add Section 11109 and Chapter 6 (commencing with Section 11600) to Division 11 of the Commercial Code, to amend Section 90003 of the Financial Code, and to amend Section 15630.1 of the Welfare and Institutions Code, relating to financial abuse. LEGISLATIVE COUNSEL'S DIGEST AB 909, as amended, Schiavo. Financial abuse of an elder or dependent adult: mandated reporters. adult: fraudulent transactions: liability. Existing law, the Uniform Commercial Code (UCC), provides that, unless displaced by the particular provisions of the UCC, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement the UCC. Existing law generally regulates fund transfers, including by prescribing rules applicable to a transfer pursuant to a security procedure for the detection of error to a beneficiary not intended by the sender. This bill would similarly specify that those fund transfer provisions do not displace those principles of law and equity. Existing law requires all officers and employees of a financial institution to report known or suspected instances of financial abuse of an elder or dependent adult, as specified. Existing law imposes a civil penalty for violation of this prohibition in an amount not exceeding $1,000 or, if the failure to report is willful, a civil penalty not exceeding $5,000, as specified. This bill would make nonsubstantive changes to those provisions. increase those civil penalties to $10,000 and $50,000, respectively, and would additionally authorize an elder or dependent adult who suffers financial abuse because of the noncompliance to recover those civil penalties. This bill would also enact various provisions related to protecting a victim of abuse of an elder or dependent adult with respect to a fraudulently induced transaction, defined as an “injured consumer,” including by limiting the liability of an injured consumer for a fraudulently induced transaction to the lesser of $50 or the amount of money or value of property or services obtained in the fraudulently induced transaction before the financial institution has notice that, or a reasonable basis to believe that, a fraudulently induced transaction involving the injured consumer’s account has been, or may be, effected, as prescribed. This bill would also require a financial institution that, within 60 days of transmitting to a consumer certain required documentation related to the consumer’s account, receives oral or written notice in which the consumer, among other things, indicates the consumer’s belief that the consumer is an injured consumer, to investigate, as prescribed, the alleged reasons and determine whether the consumer is an injured consumer within 10 business days. This bill would authorize an injured consumer to bring a civil action against a noncompliant financial institution, as prescribed. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 1798.97.1 of the Civil Code is amended to read: 1798.97.1. For purposes of this title, the following definitions apply: title: (a) “Adequate documentation” means documentation that identifies a particular debt, or portion thereof, as coerced debt, describes the circumstances under which the coerced debt was incurred, and takes the form of any of the following: (1) A police report. (2) A Federal Trade Commission identity theft report identifying a particular debt, or portion thereof, as coerced, but not as identity theft. (3) A court order issued pursuant to Section 6340 of the Family Code relating to domestic violence, Section 213.5 of the Welfare and Institutions Code relating to a dependent or ward of the juvenile court, or Section 15657.03 of the Welfare and Institutions Code relating to elder or dependent adult abuse. (4) (A) A sworn written certification from a qualified third-party professional based on information they received while acting in a professional capacity. (B) The documentation described by subparagraph (A) shall be signed by a qualified third-party professional and display the letterhead, address, and telephone number of the office, institution, center, or organization, as appropriate, that engages or employs, whether financially compensated or not, the qualified third-party professional, or, if the qualified third-party professional is self-employed, the documentation shall display the letterhead, address, and telephone number of the qualified third-party professional. (b) “Claim” means a right to payment, whether or not that right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, or equitable. (c) (1) “Claimant” means a person or an entity who has or purports to have a claim against a debtor arising from coerced debt, or that person’s or entity’s successor or assignee. “Claimant” includes, but is not limited to, a debt collector or a debt buyer. (2) Notwithstanding paragraph (1), “claimant” shall not include a person who caused the claim described in paragraph (1) to arise through duress, intimidation, threat of force, force, fraud, or undue influence perpetrated against the debtor. (d) “Coerced debt” means a particular debt, or portion thereof, for personal, family, or household use in the name of a debtor who is a victim of domestic violence, or a victim of elder or dependent adult abuse, or a person who is a foster youth, incurred as a result of duress, intimidation, threat of force, force, fraud, or undue influence. (1) For purposes of this subdivision, “domestic violence” has the same meaning as in Section 6211 of the Family Code. (2) For the purposes of this subdivision, “foster youth” has the same meaning as in Section 42238.01 of the Education Code. (3) For the purposes of this subdivision, “dependent adult” has the same meaning as in Section 15610.23 of the Welfare and Institutions Code. (4) For the purposes of this subdivision, “elder” has the same meaning as in Section 15610.27 of the Welfare and Institutions Code. (e) “Debtor” means a person who owes owes, or is otherwise liable for for, coerced debt. (f) “Fraud” means an initial fraudulent act that is perpetrated against the debtor. debtor, including a transaction initiated by a debtor through fraudulent inducement. (g) “Immediate family member” has the same meaning as defined in paragraph (3) of subdivision (h) of Section 1946.7. (h) “Person” means a natural person. (i) “Qualified third-party professional” means any of the following: (1) A domestic violence counselor, as defined in Section 1037.1 of the Evidence Code. (2) A sexual assault counselor, as defined in Section 1035.2 of the Evidence Code. (3) A Court-Appointed Special Advocate, as defined in Section 101 of the Welfare and Institutions Code. (4) A court-appointed attorney, as defined in subdivision (e) of Section 317 of the Welfare and Institutions Code. (5) A board certified psychiatrist or psychologist. (6) A licensed marriage and family therapist. (7) A licensed professional clinical counselor. (8) A licensed clinical social worker. (9) A social worker or caseworker employed by an adult protective service agency for the purposes described in Chapter 13 (commencing with Section 15750) of Part 3 of Division 9 of the Welfare and Institutions Code. (10) A social worker who has completed the child welfare training program described in Article 2 (commencing with Section 16205) of Chapter 3 of Part 4 of Division 9 of the Welfare and Institutions Code. (j) (1) “Sworn written certification” means a document in which the author declares under penalty of perjury as true any material fact, and which is accompanied by the following, to the extent that an item listed below is relevant to the debtor’s allegation that the debt is coerced debt: (A) A copy of the debtor’s driver’s license or identification card, as issued by the state. (B) Any other identification document that supports the statement that the particular debt, or portion thereof, is coerced debt. (C) An express statement that the debtor did not willingly authorize the use of the debtor’s name or personal information for incurring the coerced debt, and specific facts supporting the claim of coerced debt, if available, and, if not all of the debt was coerced, a statement identifying the portion thereof that was coerced. (D) Any available correspondence disputing the coerced debt after transaction information has been provided to the debtor. (E) Information, if known by the debtor, including, but not limited to, a credit card number or loan number, that can be used by the claimant to identify the account associated with the coerced debt and the person or persons in whose name the debt was incurred. (F) The identity of the person or persons who coerced the debtor into incurring the debt and contact information for that person or persons, if known by the debtor, unless the debtor signs a sworn statement that disclosing this information is likely to result in abuse, as defined in Section 6203 of the Family Code, to the debtor or an immediate family member of the debtor. (G) A telephone number for contacting the person signing the certification concerning any additional information or questions, or direction that further communications to the debtor be in writing only, with the mailing address specified in the statement. (2) The certification required by this subdivision shall be sufficient if it is in substantially the following form: “I declare under penalty of perjury that the representations made herein are true, correct, and contain no material omissions of fact. _______(Date and Place)________ _______(Signature)________” SEC. 2. Section 11109 is added to the Commercial Code, to read: 11109. This division does not displace, as described in Section 1103, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause. SEC. 3. Chapter 6 (commencing with Section 11600) is added to Division 11 of the Commercial Code, to read: CHAPTER 6. Fraudulent Transfers 11600. (a) California residents reported losing over one billion four hundred thirty-four million dollars ($1,434,000,000) to fraud in 2023. (b) The true amount lost due to fraud is substantially greater than is reported due to unawareness of reporting mechanisms and other factors. (c) Data consistently show that elders are more likely to lose substantial amounts to fraud than their younger counterparts. (d) Fraud detrimentally impacts the economic stability of elders and dependent adults. As a social determinant of health, the economic instability caused by fraud has a wide range of health and quality-of-life consequences and robs elders and dependent adults of dignity, self-worth, independence, and mental well-being. (e) Fraudulently induced transactions cause elders and dependent adults to lose critical savings, which leads to a higher demand for public services and costing taxpayers significant sums of money each year. (f) Elders and dependent adults rely on financial institutions to protect them from threats of fraudulently induced transactions. (g) Financial institutions are best suited to identify fraudulently induced transactions and money laundering and better equipped to bear the risk of loss therefor. 11601. (a) “Abuse of an elder or dependent adult” has the same meaning as defined in Section 15610.07 of the Welfare and Institutions Code. (b) “Consumer” means a natural person who resides in California. (c) “Debt collector” has the same meaning as defined in Section 1788.2 of the Civil Code. (d) “Dependent adult” has the same meaning as defined in Section 15610.23 of the Welfare and Institutions Code. (e) “Elder” has the same meaning as defined in Section 15610.27 of the Welfare and Institutions Code. (f) “Financial institution” means a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or any other person who, directly or indirectly, holds an account belonging to a person. (g) “Fraudulently induced transaction” means a fund transfer, payment order, cash withdrawal, cash advance, direct deposit, credit extension, or other financial transaction available to consumers, however made or denominated, that was entered into by an elder or dependent adult in reliance on any fraudulent, deceptive, or misleading information or representation of another person. (h) “Injured consumer” means a natural person who resides in the state who is a victim of abuse of an elder or dependent adult with respect to a fraudulently induced transaction. (i) “Payment order” has the same meaning as defined in Section 11103. (j) “Person” has the same meaning as defined in Section 1201. (k) “Reimbursing institution” means a financial institution that credits an injured consumer’s account pursuant to subdivision (b) of Section 11605. 11602. (a) (1) Except as provided in paragraph (2), an injured consumer’s liability for a fraudulently induced transaction shall not exceed the lesser of either of the following: (A) Fifty dollars ($50). (B) (i) The amount of money or value of property or services obtained in the fraudulently induced transaction before the financial institution has notice that, or a reasonable basis to believe that, a fraudulently induced transaction involving the injured consumer’s account has been, or may be, effected. (ii) For purposes of this subparagraph, notice is sufficient if steps have been taken as may be reasonably required in the ordinary course of business to provide the financial institution with the pertinent information, whether or not a particular officer, employee, or agent of the financial institution does in fact receive that information. (2) An injured consumer’s liability may exceed the amounts listed in paragraph (1) if the financial institution establishes that the financial liability in excess of those amounts would not have occurred but for the injured consumer’s failure to report within 60 days of transmittal to the injured consumer of the periodic statement pursuant to Sections 1637 and 1693d of Title 15 of the United States Code any fraudulently induced transaction which appears on that periodic statement. (b) In an action to determine a consumer’s liability for a financial transaction that the consumer alleges was fraudulently induced, both of the following apply: (1) The financi [Text truncated for display. Full text available on Congress.gov.]