BILL NUMBER: AB 2170 CHAPTERED 09/15/04 CHAPTER 532 FILED WITH SECRETARY OF STATE SEPTEMBER 15, 2004 APPROVED BY GOVERNOR SEPTEMBER 15, 2004 PASSED THE ASSEMBLY AUGUST 25, 2004 PASSED THE SENATE AUGUST 23, 2004 AMENDED IN SENATE AUGUST 16, 2004 AMENDED IN SENATE JUNE 28, 2004 AMENDED IN ASSEMBLY APRIL 12, 2004 INTRODUCED BY Assembly Member Calderon FEBRUARY 18, 2004 An act to amend Sections 7500.2, 7507.3, 7507.9, 7507.10, and 7508.2 of, to add Section 7505.2 to, to repeal Section 7506 of, and to repeal and add Section 7500.1 of, the Business and Professions Code, relating to repossession agencies. LEGISLATIVE COUNSEL'S DIGEST AB 2170, Calderon. Collateral recovery. Existing law, the Collateral Recovery Act, provides for the licensing and regulation of repossession agencies. The act requires a licensed repossession agency to make an inventory of personal effects at the time the collateral is recovered, and requires the inventory to be signed by the repossession agency registrant or employee who performs the inventory and to include the name, address, business hours, and telephone number of the person at the repossession agency to contact for recovering personal effects. This bill would delete the signature requirement for the inventory of personal effects and would require the permanent records of the licensee to indicate the name of the employee or registrant who performed the inventory. The bill would require the inventory to include the name, address, business hours, and telephone numbers of the repossession agency, rather than of the person at the repossession agency to be contacted for recovery of personal effects. Existing law requires a licensee to serve a debtor with notice of a seizure of collateral that includes the name, address, and telephone number of the representative of the legal owner and of the representative of the repossession agency to be contacted regarding the repossession. This bill would instead require that the notice include the name, address, and telephone number of the legal owner and of the repossession agency to be contacted regarding the repossession. Existing law authorizes the assessment of specified administrative fines against a licensee that uses collateral or personal effects for the personal benefit of the licensee or officer, partner, manager, registrant, or employee of the licensee. This bill would specify that this provision does not prohibit the using or taking of personal effects connected, adjoined, or affixed to the collateral through an unbroken sequence if the use or taking is reasonably necessary to effectuate the recovery in a safe manner or to protect the collateral or personal effects. The bill would prohibit a storage fee from being charged on these personal effects for the first week. The bill would make other related changes. Because this bill would place additional requirements on a person licensed under the Collateral Recovery Act, the violation of which is a crime, the bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 7500.1 of the Business and Professions Code is repealed. SEC. 2. Section 7500.1 is added to the Business and Professions Code, to read: 7500.1. The following terms as used in this chapter have the meaning expressed in this section. (a) "Advertisement" means any written or printed communication, including a directory listing, except a free telephone directory listing which does not allow space for a license number. (b) "Assignment" means a written authorization by the legal owner, lienholder, lessor or lessee to skip trace, locate, or repossess or to collect money payment in lieu of repossession of, any collateral, including, but not limited to, collateral registered under the Vehicle Code that is subject to a security agreement that contains a repossession clause. "Assignment" also means a written authorization by an employer to recover any collateral entrusted to an employee or former employee if the possessor is wrongfully in possession of the collateral. A photocopy, facsimile copy, or electronic copy of an assignment shall have the same force and effect as an original written assignment. (c) "Bureau" means the Bureau of Security and Investigative Services. (d) "Chief" means the Chief of the Bureau of Security and Investigative Services. (e) "Collateral" means any vehicle, boat, recreational vehicle, motor home, appliance, or other property that is subject to a security agreement. (f) "Combustibles" means any substance or article that is capable of undergoing combustion or catching fire, or that is flammable, if retained. (g) "Dangerous drugs" means any controlled substances as defined in Chapter 2 (commencing with Section 11053) of Division 10 of the Health and Safety Code. (h) "Deadly weapon" means and includes any instrument or weapon of the kind commonly known as a blackjack, slungshot, billy, sandclub, sandbag, metal knuckles, dirk, dagger, pistol, or revolver, or any other firearm, any knife having a blade longer than five inches, any razor with an unguarded blade, and any metal pipe or bar used or intended to be used as a club. (i) "Debtor" means any person obligated under a security agreement. (j) "Department" means the Department of Consumer Affairs. (k) "Director" means the Director of Consumer Affairs. (l) "Health hazard" means any personal effects which if retained would produce an unsanitary or unhealthful condition. (m) "Legal owner" means a person holding a security interest in any collateral that is subject to a security agreement, a lien against any collateral, or an interest in any collateral that is subject to a lease agreement. (n) "Licensee" means an individual, partnership, limited liability company, or corporation licensed under this chapter as a repossession agency. (o) "Multiple licensee" means a repossession agency holding more than one repossession license under this chapter, with one fictitious trade style and ownership, conducting repossession business from additional licensed locations other than the location shown on the original license. (p) "Person" includes any individual, partnership, limited liability company, or corporation. (q) "Personal effects" means any property that is not the property of the legal owner. (r) "Private building" means and includes any dwelling, outbuilding, or other enclosed structure. (s) "Qualified certificate holder" or "qualified manager" is a person who possesses a valid qualification certificate in accordance with the provisions of Article 5 (commencing with Section 7504) and is in active control or management of, and who is a director of, the licensee's place of business. (t) "Registrant" means a person registered under this chapter. (u) "Secured area" means and includes any fenced and locked area. (v) "Security agreement" means an obligation, pledge, mortgage, chattel mortgage, lease agreement, deposit, or lien, given by a debtor as security for payment or performance of his or her debt, by furnishing the creditor with a recourse to be used in case of failure in the principal obligation. "Security agreement" also includes a bailment where an employer-employee relationship exists or existed between the bailor and the bailee. (w) "Services" means any duty or labor to be rendered by one person for another. (x) "Violent act" means any act that results in bodily harm or injury to any party involved. SEC. 3. Section 7500.2 of the Business and Professions Code is amended to read: 7500.2. A repossession agency means and includes any person who, for any consideration whatsoever, engages in business or accepts employment to locate or recover collateral, whether voluntarily or involuntarily, including, but not limited to, collateral registered under the provisions of the Vehicle Code which is subject to a security agreement, except for any person registered pursuant to Article 7 (commencing with Section 7506). SEC. 4. Section 7505.2 is added to the Business and Professions Code, to read: 7505.2. Nothing in this chapter prohibits the using or taking of personal effects that are connected, adjoined, or affixed to the collateral through an unbroken sequence, if that use or taking is reasonably necessary to effectuate the recovery in a safe manner or to protect the collateral or personal effects. No storage fee shall be charged for the first week on any personal effects used to effectuate a recovery pursuant to this section. Any personal effects used or taken pursuant to this section shall be processed in a reasonably expedient manner pursuant to Sections 7507.9 and 7507.10. SEC. 5. Section 7506 of the Business and Professions Code is repealed. SEC. 6. Section 7507.3 of the Business and Professions Code is amended to read: 7507.3. A repossession agency shall be required to keep and maintain adequate records of all transactions, including, but not limited to, assignment forms; vehicle report of repossession required by Section 28 of the Vehicle Code; vehicle condition reports, including odometer readings, if available; personal effects inventory; notice of seizure; and records of all transactions pertaining to the sale of collateral that has been repossessed, including, but not limited to, bids solicited and received, cash received, deposits made to the trust account, remittances to the seller, and allocation of any moneys not so remitted to appropriate ledger accounts. Records, including bank statements of the trust account, shall be retained for a period of not less than four years and shall be available for examination by the bureau upon demand. In addition, collateral and personal effects storage areas shall be made accessible for inspection by the bureau upon demand. An assignment form may be an original, a photocopy, a facsimile copy, or a copy stored in an electronic format. SEC. 7. Section 7507.9 of the Business and Professions Code is amended to read: 7507.9. Personal effects shall be removed from the collateral. A complete and accurate inventory of the personal effects shall be made, and the personal effects shall be labeled and stored by the licensee for a minimum of 60 days in a secure manner, except those personal effects removed by or in the presence of the debtor or the party in possession of the collateral at the time of the repossession. (a) The date and time the inventory is made shall be indicated. The permanent records of the licensee shall indicate the name of the employee or registrant who performed the inventory. (b) The following items of personal effects are items determined to present a danger or health hazard when recovered by the licensee and shall be disposed of in the following manner: (1) Deadly weapons and dangerous drugs shall be turned over to any law enforcement agency for retention. These items shall be entered on the inventory and a notation shall be made as to the date and the time and the place the deadly weapon or dangerous drug was turned over to the law enforcement agency, and a receipt from the law enforcement agency shall be maintained in the records of the repossession agency. (2) Combustibles shall be inventoried and noted as "disposed of, dangerous combustible," and the item shall be disposed of in a reasonable and safe manner. (3) Food and other health hazard items shall be inventoried and noted as "disposed of, health hazard," and disposed of in a reasonable and safe manner. (c) Personal effects may be disposed of after being held for at least 60 days. The inventory, and adequate information as to how, when, and to whom the personal effects were disposed of, shall be filed in the permanent records of the licensee. (d) The inventory shall include the name, address, business hours, and telephone number of the repossession agency to contact for recovering the personal effects and an itemization of all personal effects removal and storage charges that will be made by the repossession agency. The inventory shall also include the following statement: "Please be advised that the property listed on this inventory will be disposed of by the repossession agency after being held for 60 days from the date of this notice IF UNCLAIMED." (e) The inventory shall be provided to a debtor not later than 48 hours after the recovery of the collateral, except that if: (1) The 48-hour period encompasses a Saturday, Sunday, or postal holiday, the inventory shall be provided no later than 72 hours after the recovery of the collateral. (2) The 48-hour period encompasses a Saturday or Sunday and a postal holiday, the inventory shall be provided no later than 96 hours after the recovery of the collateral. (3) Inventory resulting from repossession of a yacht, motor home, or travel trailer is such that it shall take at least four hours to inventory, then the inventory shall be provided no later than 96 hours after the recovery of the collateral. When the 96-hour period encompasses a Saturday, Sunday, or postal holiday, the inventory shall be provided no later than 120 hours after the recovery of the collateral. (f) Environmental, Olympic, special interest, or other license plates issued pursuant to Article 8 (commencing with Section 5000), Article 8.4 (commencing with Section 5060) or Article 8.5 (commencing with Section 5100) of Chapter 1 of Division 3 of the Vehicle Code that remain the personal effects of the debtor shall be removed from the collateral and inventoried pursuant to this section. If the plates are not claimed by the debtor within 60 days, they shall be effectively destroyed and the licensee shall, within 30 days thereafter, notify the Department of Motor Vehicles of their effective destruction on a form promulgated by the chief that has been approved as to form by the Director of the Department of Motor Vehicles. (g) The notice may be given by regular mail addressed to the last known address of the debtor or by personal service at the option of the repossession agency. (h) The debtor may waive the preparation and presentation of an inventory if the debtor redeems the personal effects or other personal property not covered by a security interest within the time period for the notices required by this section and signs a statement that he or she has received all the property. (i) If personal effects or other personal property not covered by a security agreement are to be released to someone other than the debtor, the repossession agency may request written authorization to do so from either the debtor or the legal owner. (j) The inventory shall be a confidential document. A licensee shall only disclose the contents of the inventory under the following circumstances: (1) In response to the order of a court having jurisdiction to issue the order. (2) In compliance with a lawful subpoena issued by a court of competent jurisdiction. (3) When the debtor has consented in writing to the release and the written consent is signed and dated by the debtor subsequent to the repossession and states the entity or entities to whom the contents of the inventory may be disclosed. SEC. 8. Section 7507.10 of the Business and Professions Code is amended to read: 7507.10. A licensee shall serve a debtor with a notice of seizure as soon as possible after the recovery of collateral and not later than 48 hours, except that if the 48-hour period encompasses a Saturday, Sunday, or postal holiday, the notice of seizure shall be provided not later than 72 hours or, if the 48-hour period encompasses a Saturday or Sunday and a postal holiday, the notice of seizure shall be provided not later than 96 hours, after the repossession of collateral. The notice shall include all of the following: (a) The name, address, and telephone number of the legal owner to be contacted regarding the repossession. (b) The name, address, and telephone number of the repossession agency to be contacted regarding the repossession. (c) A statement printed on the notice containing the following: "Repossessors are regulated by the Bureau of Security and Investigative Services, Department of Consumer Affairs, Sacramento, CA 95814. Repossessors are required to provide you, not later than 48 hours after the recovery of collateral, with an inventory of personal effects or other personal property recovered during repossession unless the 48-hour period encompasses a Saturday, Sunday, or a postal holiday, then the inventory shall be provided no later than 96 hours after the recovery of collateral." (d) A disclosure that "Damage to a vehicle during or subsequent to a repossession and only while the vehicle is in possession of the repossession agency and which is caused by the repossession agency is the liability of the repossession agency. A mechanical or tire failure shall not be the responsibility of the repossession agency unless the failure is due to the negligence of the repossession agency." (e) If applicable, a disclosure that "Environmental, Olympic, special interest, or other license plates issued pursuant to Article 8 (commencing with Section 5000), Article 8.4 (commencing with Section 5060) or Article 8.5 (commencing with Section 5100) of Chapter 1 of Division 3 of the Vehicle Code that remain the personal effects of the debtor will be removed from the collateral and inventoried, and that if the plates are not claimed by the debtor within 60 days, they will be destroyed." (f) A disclosure of the charges payable by the debtor to the repossession agency for the storage of the collateral and personal effects from the date of repossession until release of the property from storage. The notice may be given by regular mail addressed to the last known address of the debtor or by personal service at the option of the repossession agency. SEC. 9. Section 7508.2 of the Business and Professions Code is amended to read: 7508.2. The director may assess administrative fines for any of the following prohibited acts: (a) Recovering collateral or making any money demand in lieu thereof, including, but not limited to, collateral registered under the Vehicle Code, that has been sold under a security agreement before a signed or telegraphic authorization has been received from the legal owner, debtor, lienholder, lessor, or repossession agency acting on behalf of the legal owner, debtor, lienholder, or lessor of the collateral. A telephonic assignment is acceptable if the legal owner, debtor, lienholder, lessor, or repossession agency acting on behalf of the legal owner, debtor, lienholder, or lessor is known to the licensee and a written authorization from the legal owner, debtor, lienholder, lessor, or repossession agency acting on behalf of the legal owner, debtor, lienholder, or lessor is received by the licensee within 10 working days or a request by the licensee for a written authorization from the legal owner, debtor, lienholder, lessor, or repossession agency acting on behalf of the legal owner, debtor, lienholder, or lessor is made in writing within 10 working days. Referrals of assignments from one licensee to another licensee are acceptable. The referral of an assignment shall be made under the same terms and conditions as in the original assignment. The fine shall be twenty-five dollars ($25) for each of the first five violations and one hundred dollars ($100) for each violation thereafter, per audit. (b) Using collateral or personal effects, which have been recovered, for the personal benefit of a licensee, or officer, partner, manager, registrant, or employee of a licensee. The fine shall be twenty-five dollars ($25) for the first violation and one hundred dollars ($100) for each violation thereafter. This subdivision does not apply to personal effects disposed of pursuant to subdivision (c) of Section 7507.9. Nothing in this subdivision prohibits the using or taking of personal property connected, adjoined, or affixed to the collateral through an unbroken sequence if that use or taking is reasonably necessary to effectuate the recovery in a safe manner or to protect the collateral or personal effects. (c) Selling collateral recovered under the provisions of this chapter, except with written authorization from the legal owner or mortgagee thereof. The fine shall be one hundred dollars ($100) for the first violation and five hundred dollars ($500) for each violation thereafter, per audit. (d) Failing to remit all money due clients within 10 working days after finalization of the sale of collateral. The licensee shall deposit all money received in the form of cash or negotiable instruments made payable to the licensee for money due clients from the sale of collateral that has been repossessed in a trust account within five working days, and the money shall be withdrawn only for remittance to the client and for the payment of amounts due the licensee. The fine shall be two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each violation thereafter. For purposes of this subdivision, "finalization of sale" means the time when the documents of title or ownership which permit transfer of title from the legal owner to the purchaser are received by the repossession agency. (e) Failing to remit moneys collected in lieu of repossession or redemption to a client within 10 working days after receipt of the moneys. The fine shall be two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each violation thereafter. (f) Failing to deliver to a client any negotiable instrument received by the licensee made payable to the client within 10 working days of receipt of the negotiable instrument. No licensee, manager, registrant, or employee of a licensee shall accept a negotiable instrument made payable to a client unless they have authorization from the client to accept the negotiable instrument. The fine shall be two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each violation thereafter. (g) Unlawfully entering any private building or secured area without the consent of the owner, or of the person in legal possession thereof, at the time of repossession. The fine shall be five hundred dollars ($500) for each violation. (h) Committing unlawful assault or battery on another person. The fine shall be five hundred dollars ($500) for each violation. (i) Falsification or alteration of an inventory. The fine shall be twenty-five dollars ($25) for each violation. (j) Soliciting from the legal owner the recovery of specific collateral registered under the Vehicle Code or under the motor vehicle licensing laws of other states after the collateral has been seen or located on a public street or on public or private property without divulging the location of the vehicle. The fine shall be one hundred dollars ($100) for the first violation and two hundred fifty dollars ($250) for each violation thereafter. SEC. 10. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.