BILL NUMBER: AB 306 CHAPTERED 09/22/05 CHAPTER 291 FILED WITH SECRETARY OF STATE SEPTEMBER 22, 2005 APPROVED BY GOVERNOR SEPTEMBER 22, 2005 PASSED THE ASSEMBLY SEPTEMBER 7, 2005 PASSED THE SENATE SEPTEMBER 6, 2005 AMENDED IN SENATE AUGUST 29, 2005 AMENDED IN SENATE JULY 1, 2005 AMENDED IN ASSEMBLY MAY 3, 2005 AMENDED IN ASSEMBLY APRIL 21, 2005 AMENDED IN ASSEMBLY APRIL 12, 2005 INTRODUCED BY Assembly Member Baca (Coauthors: Senators Denham, Murray, and Speier) FEBRUARY 9, 2005 An act to repeal and add Chapter 3 (commencing with Section 800) of Division 4 of the Military and Veterans Code, relating to military benefits. LEGISLATIVE COUNSEL'S DIGEST AB 306, Baca Military service: benefits. (1) Existing law provides certain protections for specified members of the United States Military Reserve ordered into active state service by the President of the United States pursuant to a specified order. This bill would authorize members of the United States Military Reserve and National Guard, as defined, who are called to active duty as a result of the Iraq or Afghanistan conflicts, to defer payments on specified obligations for the period of active duty, plus 60 calendar days, or 180 days, whichever is the lesser. The bill would apply only to specified obligations which were incurred prior to the date a reservist was called to active duty and shall not apply to any active duty served after the close of the Iraq or Afghanistan conflicts or to any member of the United States Military Reserve or National Guard of this state on active duty as part of the Iraq or Afghanistan conflict prior to the effective date of the bill. This bill would provide that a deferral of payments shall not be a basis for affecting credit, as specified. It would allow the deferment of payments on mortgages, credit cards, retail installment accounts and contracts, real property taxes and assessments, and vehicle leases during the specified period and would require reinstatement of health insurance, as specified. This bill would also allow a lender to extend the term of the obligation by the amount of time the obligation was deferred. However, the bill would permit credit disability insurers to suspend coverage during the specified period unless premiums are paid or added to the related loan or account. This bill would also prohibit foreclosure or repossession of property, as defined, on which payment has been deferred. This bill would, in instances when a specified financial obligation is sold, transfer a requirement to defer payments to the purchaser of the obligation. (2) This bill, by requiring a reservist to provide information under the penalty of perjury, expands the scope of an existing crime, thereby imposing a state-mandated local program. This bill would additionally impose a state-mandated local program by imposing additional duties on county assessors and auditors. 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 with regard to certain mandates no reimbursement is required by this act for a specified reason. With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Chapter 3 (commencing with Section 800) of Division 4 of the Military and Veterans Code is repealed. SEC. 2. Chapter 3 (commencing with Section 800) is added to Division 4 of the Military and Veterans Code, to read: CHAPTER 3. THE CALIFORNIA MILITARY FAMILIES FINANCIAL RELIEF ACT 800. (a) Subject to subdivision (b), in addition to any other benefits provided by law and to the extent permitted by federal law, any member of the United States Military Reserve or the National Guard of this state who is called to active duty after the enactment of this chapter as a part of the Iraq and Afghanistan conflicts may defer payments on any of the following obligations while serving on active duty: (1) An obligation secured by a mortgage or deed of trust. (2) Credit card as defined in Section 1747.02 of the Civil Code. (3) Retail installment contract as defined in Section 1802.6 of the Civil Code. (4) Retail installment account, installment account, or revolving account as defined in Section 1802.7 of the Civil Code. (5) Up to two loans subject to the Automobile Sales Finance Act (Chapter 2b (commencing with Section 2981) of Part 4 of Division 3 of Title 14 of the Civil Code). (6) Any payment of property tax or any special assessment of in-lieu property tax imposed on real property which is assessed on residential property owned by the reservist and used as that reservist's primary place of residence on the date the reservist was ordered to active duty. (b) In order for an obligation or liability of a reservist to be subject to the provisions of this chapter, the reservist or the reservist's designee shall deliver to the lender: (1) A letter signed by the reservist, under penalty of perjury, requesting a deferment of financial obligations. (2) If required by a financial institution, proof that the reservist's employer does not provide continuing income to the reservist while the reservist is on active military duty, including the reservist's military pay, of more than 90 percent of the reservist's monthly salary and wage income earned before the call to active duty. (c) Upon request of the reservist or the reservist's dependent or designee and within five working days of that request, if applicable, the employer of a reservist shall furnish the letter or other comparable evidence showing that the employer's compensation policy does not provide continuing income to the reservist, including the reservist's military pay, of more than 90 percent of the reservist's monthly salary and wage income earned before the call to active duty. (d) The deferral period on financial obligations shall be the lesser of 180 days or the period of active duty plus 60 calendar days and shall apply only to those payments due subsequent to the notice provided to a lender as provided in subdivision (b). (e) If a lender defers payments on a closed end credit obligation or an open-end credit obligation with a maturity date, pursuant to this chapter, the lender shall extend the term of the obligation by the amount of months the obligation was deferred. (f) If a lender defers payments on an open-end credit obligation pursuant to this chapter, the lender may restrict the availability of additional credit with respect to that obligation during the term of the deferral. 801. For purposes of this chapter, "mortgage" means an obligation secured by a mortgage or deed of trust, and is limited to an obligation secured by a mortgage or deed of trust for residential property owned by the reservist and used as that reservist's primary place of residence on the date the reservist was ordered into active duty. 802. (a) Notwithstanding subdivisions (e) and (f) of Section 800, any mortgage payments delayed pursuant to Section 800 are due and payable upon the earlier of the following: (1) The sale of the property or other event specified in the documents creating the obligation permitting the lender to accelerate the loan, other than a deferral of payments authorized by Section 800. (2) Further encumbrance of the property. (3) The maturity of the obligation as defined under the terms of the documents creating the obligation or, if applicable, as extended pursuant to subdivision (e) of Section 800. (b) Nothing in this section relieves a reservist with a mortgage subject to an impound account for the payment of property taxes, special assessments, mortgage insurance, and hazard insurance from making monthly payments of an amount which is at least sufficient to pay these amounts, unless the borrower and lender agree to a lesser amount. (c) Nothing in this chapter shall preclude a reservist from making payments toward the mortgage payments deferred prior to the occurrence of any of the events in subdivision (a). 803. For purposes of this chapter, "reservist" means a member of the United States Military Reserve or National Guard of this state called to active duty as a result of the Iraq conflict pursuant to the Authorization for Use of Military Force Against Iraq Resolution of 2002 (Public Law 107-243) or the Afghanistan conflict pursuant to Presidential Order No. 13239. 804. During the period specified in Section 800, the reservist may defer the payment of principal and interest on the specified obligations. No penalties shall be imposed on the nonpayment of principal or interest during this period. No interest shall be charged or accumulated on the principal or interest on which the payment was delayed. No foreclosure or repossession of property on which payment has been deferred shall take place during the period specified in Section 800. 805. Subject to subdivisions (e) and (f) of Section 800, a stay, postponement, or suspension under this chapter of the payment of any tax, fine, penalty, insurance premium, or other civil obligation or liability of a person in military service shall not provide the basis for affecting credit ratings, denial or revocation of credit, or a change by the lender in the terms of an existing credit arrangement. 806. Any insurer, which was providing health or medical insurance to a reservist at the time the reservist was ordered to active duty, shall reinstate the health or medical insurance without waiting periods or exclusion of coverage for preexisting conditions. 807. (a) The holder of a loan or retail installment sales contract with respect to which the debtor has purchased prepaid credit disability insurance shall give notice to the debtor not less than 30 days before the expiration date of the insurance that the debtor will not be protected during the period between that expiration date and the deferred maturity date of the loan or contract unless the insurance is extended. The debtor may, at his or her option, direct the holder to add the amount of the additional premium to the unpaid balance of the loan or contract. (b) The holder of an open-ended loan or retail installment account with respect to which the debtor has purchased credit disability insurance with premiums payable monthly together with the installment payments on the loan or the account shall give notice to the debtor that the debtor will not be protected by the insurance during the period specified in Section 800 unless the debtor elects to continue payment of premiums during that period. The debtor may, at his or her option, direct the holder to add the amount of those premiums to the unpaid balance of the account. 808. (a) During the period specified in Section 800, the reservist may defer payments for leased vehicles without breach of the lease or the foreclosure or repossession of the vehicle. If a lender defers payments pursuant to this section, the lender shall extend the term of the lease by the amount of months the lease was deferred. (b) For the purposes of this chapter, "vehicle" means a vehicle as defined in Section 670 of the Vehicle Code. 809. This chapter shall not apply to any active duty voluntarily served after the close of the Iraq or Afghanistan conflicts or to any reservist on active duty as part of the Iraq or Afghanistan conflicts prior to the effective date of this measure. 810. In those instances where a financial obligation covered by this chapter is sold, any requirement to defer payments as specified in this chapter transfers to the purchaser of the obligation. 811. This chapter applies only to an obligation specified in this chapter that was incurred prior to the date that a member of the United States Military Reserve or National Guard of this state was called to active duty as part of the Iraq and Afghanistan conflicts. SEC. 3. 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. SEC. 4. If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.