BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 370
                                                                  Page  1

          Date of Hearing:   April 22, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                     AB 370 (Eng) - As Amended:  March 23, 2009 

          Policy Committee:                              Business and  
          Professions  Vote:                            11 - 0

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill increases the maximum penalties for unlicensed  
          contractor convictions and requires restitution to the victims  
          of unlicensed contractors.  Specifically, this bill:  

          1)Increases the maximum fine for a first conviction from $1,000  
            to $5,000. 

          2)Increases the fine for a second conviction from the greater of  
            $4,000 or 20% of the contract price, to the greater of $5,000,  
            20% of the contract price, or 20% of the aggregate payments  
            made to the unlicensed contractor. 

          3)Changes the fine for a third or subsequent conviction from  
            between $4,500 and the greater of $10,000 or 20% of the  
            contract price, to between $5,000 and the greater of $10,000,  
            20% of the contract price, or 20% of the aggregate payments.

          4)Requires a sentence to county jail of between 90 days and one  
            year for a third or subsequent conviction. (Current law  
            provides for a fine and/or imprisonment.)

          5)Specifies that a person who utilized the services of an  
            unlicensed contractor is a victim of a crime, regardless of  
            whether or not the person had knowledge that the contractor  
            was unlicensed. 

           FISCAL EFFECT  

          Potential increase in fine revenue to local governments from  
          increased penalties and potential increase in non-reimbursable  








                                                                  AB 370
                                                                  Page  2

          costs for mandatory jail sentences upon a third or subsequent  
          conviction for operating without a contractor's license.

           COMMENTS  

           1)Purpose  . According to the author's office, contractor fraud,  
            most of which involves unlicensed contractors, consistently  
            ranks in the top 10 lists of consumer complaints nationally  
            and statewide.  Despite the problems they cause, violators are  
            punished by up to six months in jail and a maximum fine of  
            $1,000 - regardless of how much money a victim paid that  
            unlicensed contractor.  Although second-time offenders pay an  
            increased fine, the potential jail time is limited to six  
            months.  Only a third-time violator is subject to up to one  
            year jail sentence."

            This bill is sponsored by the Los Angeles City Attorney Rocky  
            Delgadillo, who states in part that AB 370 "is necessary  
            because the current criminal statutes do not clearly require  
            unlicensed contractors to disgorge the amounts paid to them,  
            despite the fact that civil law specifically mandates such  
            disgorgement.  As a result, victims of unscrupulous unlicensed  
            contractors have often been denied restitution.  Since many of  
            these victims do not have the means to pursue their loss  
            through the civil courts, the unlicensed contractors are the  
            beneficiaries of this serious flaw in the current criminal  
            statute."

           2)Previous Legislation  . AB 2412 (Eng) of 2008 was a  
            substantially similar bill that the Governor vetoed.  The  
            Governor vetoed a large number of bills that year with the  
            same message that, due to the delay in passing the 2008-2009  
            State Budget, he would only sign bills that were "the highest  
            priority for California."  AB 2412 was vetoed for this reason.  



           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916)  
          319-2081