Relating to the collection of consumer debt incurred by certain individuals as a result of identity theft.
Summary
HB 4238 creates a new consumer-protection rule for debts tied to identity theft. It adds Section 392.308 to the Finance Code to prohibit creditors, debt collectors, and third-party debt collectors from trying to collect a consumer debt, or the identity-theft portion of a debt, once they receive a qualifying court order declaring the consumer a victim of identity theft. The bill defines identity theft by reference to Texas law and similar laws in other jurisdictions, but excludes home loans and debts for which a judgment has already been obtained.
The bill also requires collectors to stop collection efforts within seven business days after receiving notice, notify prior recipients of the debt report that the debt is disputed and not collectible from the victim, and refrain from selling or transferring the debt except for collection from the alleged perpetrator or another responsible person. If the debt is secured by tangible personal property, the creditor may still enforce the security interest under the UCC, but may not pursue any deficiency against the victim. The bill preserves the ability of creditors and collectors to pursue the alleged identity thief directly for the debt or related remedies.
Impact
HB 4238 amends the Texas Finance Code by adding a new section that limits debt-collection activity against consumers who can document that a debt resulted from identity theft. It affects creditors, debt collectors, and third-party debt collectors by imposing a mandatory stop-collection process, notice obligations, and restrictions on assignment or sale of disputed debts. It also interacts with Texas identity-theft and court-order procedures in the Business & Commerce Code and with secured-transactions law in Chapter 9, while carving out home loans and already-reduced-to-judgment debts.
Sentiment
The bill appears to have broad bipartisan support and little visible opposition. It passed the House and Senate unanimously, and the House later concurred in Senate amendments by a 135-0 vote. The voting history suggests the measure was viewed as a straightforward consumer-protection bill aimed at preventing victims of identity theft from being wrongly pursued for debts they did not incur.
Contention
There is little evidence of major controversy in the available record. The main policy balance in the bill is between protecting identity-theft victims from collection efforts and preserving creditors’ ability to collect from the actual wrongdoer or other responsible parties. The bill also preserves enforcement of secured interests and existing judgments, which may have been intended to limit concerns from lenders and collectors about overbroad restrictions.