Fraudulent lien bill discussed

The Banking, Commerce and Insurance Committee heard testimony Feb. 13 on a bill directed at fraudulent lien filers.

Under LB982, introduced by Omaha Sen. Burke Harr on behalf of the Nebraska Secretary of State, would change the powers of the secretary of state’s office regarding removal of fraudulent or suspect financing statements.

Under the bill, if the secretary of state receives a complaint or has reason to believe that a financing statement or other record filed with the office under the Uniform Commercial Code is fraudulent or otherwise improper, the secretary of state may remove the filing from existing files after giving notice and an opportunity to respond to the secured party and the debtor.

In addition, an individual affected by a fraudulent statement would be allowed to recover damages from the person responsible for the fraudulent statement.

Harr said the secretary of state is in the best position to determine whether or not a lien filing is legitimate.

“They are on the front line … they are the ones who see it,” he said. “The office knows when it sees a fraudulent [lien].”

Secretary of State John Gale testified in support of the bill, saying 16 states have enacted similar legislation. Most filers are legitimate, he said, but a small percentage of individuals use the lien system as a tool for harassment.

Gale said that allowing his office to remove suspect filings would protect an individual’s property who is targeted by a fraudulent lien. Currently, victims of fraudulent lien filings must go through the courts to try and clear their names, he said.

“We’re asking for a post-filing administrative remedy,” Gale said. “If [lien filers] want to sue us, they can sue us, but at least the burden is not on the victim.”

Katie Zulkoski, testifying on behalf of the Nebraska State Bar Association, opposed the bill. She said the bill lacks recourse for individuals whose legitimate filings may be removed by the secretary of state’s office as fraudulent.

Robert Hallstrom of the Nebraska Bankers Association testified in a neutral capacity. He said the association has been trying for years to balance the interests of controlling fraudulent lien filings with legitimate filer’s concerns that their liens not be removed unjustly.

“We could never come to a suitable solution,” Hallstrom said.

The committee took no immediate action on the bill.