BILL ANALYSIS                                                                                                                                                                                                    

                             JEFF DENHAM, CHAIRMAN

          Bill No:        AB 2365
          Author:         Lieu
          Version:        As amended April 8, 2010
          Hearing Date:   June 22, 2010
          Fiscal:         No

                                 SUBJECT OF BILL  
          California Military Families Financial Relief Act

                                   PROPOSED LAW  
              1.   Allows U.S. Service personnel to go to court to  
               enforce rights under legal protections, default  
               judgments, staying actions, computing time delays due  
               to deployment, limiting interest rates, staying  
               eviction, avoiding breach of contract, preventing  
               foreclosure, rights under leases, and "any other  
               obligation, liability, tax or assessment."

             2.   Amend several sections of the Military and Veterans  
               Code (MVC) to allow for awarding of actual damages,  
               costs, and attorney fees to U.S. service personnel if  
               they are declared the "injured party" by the court.

             3.   Amends MVC section 409.1 to include the proper  
               terminology of "petition" rather than "application."

             4.   Amends MVC section 409.3 to require the court to  
               set a petition within 25 days of filing excepting that  
               the court "shows good cause for extending the date of  
               the hearing."  Requires petitioner to serve 10 days  
               before the hearing and respondent to file five days  
               before hearing.

             5.   Amends MVC section 409.3 to prohibit court fees or  
               cost for petitions filed "pursuant to this section."


             6.   Amends MVC section 409.3 to allow the court to  
               grant relief to a petitioner if the court has  
               determined that the petitioner's ability to comply has  
               not been "materially affected by reason of his or her  
               military service."

             7.   Amends MVC section 409.3 to allow the court under  
               its grant relief powers to stay an enforcement of  
               obligation on "any other obligation, liability, tax,  
               or assessment."

                          EXISTING LAW AND BACKGROUND  
             1.   During the American Civil War, Congress passed a  
               moratorium on civil actions against northern troops.   
               Certain southern states are said to have done the same  
               for their armies.  

             2.   In World War I, Congress passed the Soldiers and  
               Sailors Civil Relief Act of 1918 to protect service  
               members from losing at home what they were fighting  
               for on the front.  The law gave courts the authority  
               to make equitable decisions involving military  
               personnel who had no ability, or a compromised  
               ability, to meet obligations at home.

             3.   In 1940, Congress renewed the expired Soldiers and  
               Sailors Civil Relief Act, now commonly called (SSCRA).  

             4.   In 1942, due to the courts improperly carrying out  
               the will of Congress, the SSCRA was amended to correct  
               errors of the federal courts and to give stronger  
               protections to those serving the United States of  

             5.   As some business owners found new ways to attempt  
               to avoid the SSCRA law, Congress and state  
               legislatures have consistently returned to defend  
               service members by strengthening the law.  In 1991  
               further amendments were passed in response to the  
               experience of Desert Shield/Desert Storm personnel.  

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             6.   In 2002, SSCRA protections (the Veterans Benefits  
               Act of 2002, Public Law 107-330. Section 305) were  
               extended to National Guard members activated under  
               Title 32 if activated for federal reasons. [Note:   
               Federal active duty is usually activated under Title  
               10 of the United States Code (U.S.C.).  Usually Title  
               32 is state activation of the National Guard.   
               However, after 9/11 state National Guard units were  
               activated for state service in such places as airports  
               and bridges but the activation was done by and paid  
               for by the federal government.

             7.   In December 2003, President Bush signed a revised  
               version of the SSCRA, now known as the Federal Service  
               Members Civil Relief Act (SCRA), which again extended  
               SSCRA protections.

             8.   Existing law provides financial and legal  
               protections to military members, reservists, and  
               members of the National Guard that are called to  
               active duty with respect to rental agreements,  
               security deposits, eviction, installment contracts,  
               credit card interest rates, mortgage interest rates,  
               mortgage foreclosure, civil judicial proceedings, and  
               income tax payments (Service Members Civil Relief Act  
               of 2003, Public Law 108-189).

             9.   Since 2001, the California National Guard (CNG) has  
               responded to the needs of the state by deploying  
               thousands of soldiers and airmen throughout the state  
               for a multitude of missions, many lasting for months  
               and some for years.  Many of these Guard members must  
               leave their studies in order to respond to state  
               emergencies.  Some may be required to perform duty for  
               over 15 or more consecutive days (as was the case with  
               California's recent wildfires).

             10.             After September 11, 2001, California  
               also strengthened SSCRA.  In 2002, the Military  
               Department sponsored AB 1433 (Horton)*, which was  
               chaptered into law and repealed California MVC 399  
               and 399.5 and added Chapter 7.5 "Protections,"  
               commencing with 400 through 420.  AB 1433 codified  
               into state law many aspects of the federal SSCRA  

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               including eviction protection, capping interest rates  
               at 6%, obligations secured by real or personal  
               property, and protection on installment loan credit.

             11.             The passage of AB 1433 provided  
               financial protection for military members performing  
               military service in regards to court proceedings,  
               credit contract obligations, rental agreements, taxes  
               (except income taxes), and health/medical insurance,  
               as well as eviction protection for the military  
               members' families.  These new provisions enabled  
               National Guard members that are serving in state or  
               federal status and other military reservists  
               performing federal duty to receive financial  
               protections consistent with those found within the  
               federal SSCRA.  

             12.             AB 306 of 2005 (Baca)**, also known as  
               the "California Military Families Financial Relief  
               Act", created MVC sections 800-810, which updated the  
               state's version of SSCRA to include all California  
               service members whether Reserves or National Guard as  
               well as adding protections on auto loans.

             13.             Other state legislation-

                     a) California MVC 800-810 was codified by SB 1  
               (Calderon)*** in 1991   to provide emergency economic  
               relief to California residents called to active  
               military service during the Iraq-Kuwait crises.  This  
               legislation augmented protections that were already  
               afforded under the federal statute known as the  
               Soldiers and Sailors Civil Relief Act (SSCRA) of 1940.

               b) AB 1666 (Frommer) of 2005, the California Families  
               Financial Relief Act of 2005, addressed (among other  
               things) the following:

                           waives county recorder fee for power of  
                    attorney for recording a service member's agent  
                    if that member is performing military service:

                           allows for the cancellation of a cell  

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                    phone contract within 30 days if the member or  
                    spouse sends a written notice to the cell phone  
                    service provider;

                           requires a full refund of tuition and  
                    fees for college students ordered to military  
                    service if they withdraw prior to the school's  
                    withdrawal date;  

                           waives bar dues for the time period in  
                    which the military member is serving military  

                           allows for past due or  on a vehicle  
                    lease to be paid in equal installments over the  
                    length of time the member served military duty if  
                    a vehicle lease is terminated pursuant to the  
                    federal Service Members Civil Relief Act; and

                           allows qualified customers to receive up  
                    to 180 days of shutoff protection for utilities  
                    if income reduction is due to a member of the  
                    family being activated to duty and the individual  
                    notifies the public service provider of the need  
                    for assistance.


             1.   When reservists or guardsmen are activated, they  
               usually take a pay cut.  AB 306 of 2005 was written to  
               bring state level SSCRA protections to California's  
               post 9/11 veterans who are in such circumstances.

             2.   The bill's sponsor-the California Military  
               Department-contends that lack of an enforcement  
               mechanism in AB 306 of 2005 has allowed businesses to  
               ignore the law without fear of any real accountability  
               stating, "Financial institutions recognize that many  

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               Servicemembers will be unable to challenge the  
               institution's denial of these protections due to the  
               servicemembers' lack of sophistication of the courts,  
               the inability to get an attorney to accept their case  
               or the geographic limitations a deployment to an  
               overseas combat zone presents."

             3.   Sponsors further contend that without the ability  
               to recover attorney's fees that there is no recourse  
               to service members, "if a creditor has refused to  
               defer a mortgage or lower the interest rate to six  
               percent for pre-service debts, the over-charged  
               interest may only amount to several hundred dollars.   
               Finding an attorney to take such a case is nearly  
               impossible unless that attorney knows that reasonable  
               compensation will be allowed by the court for  
               undertaking such an action to protect the rights of a  

             4.   The sponsors also contend that while service  
               members are away their credit is being destroyed to  
               the detriment of both the service member and his or  
               her family and that without a timely solution, even if  
               a soldier's request for deferral is finally granted,  
               that in the meantime that person's credit is ruined in  
               the leaving activated military personnel with a no-win  

             5.   The California Bankers Association (CBA) agrees  
               that there is no enforcement mechanism in the present  
               code but maintain that the sponsor's solution will  
               actually put activated military personnel in a worse  
               position than they presently are in.  CBA mentions  
               that this bill creates a private right of action that  
               will force creditors to go on the defensive and tie  
               cases up in court for a far longer time than it would  
               take industry regulators to solve the problem.

             6.   The CBA suggests that sections 4 and 7 of the bill  
               be amended to strengthen the hands of banking  
               regulators since all commercial banks that military  
               personnel would deal with are under the jurisdiction  
               of these regulators.  CBA believes that by moving  
               these claims to the front of the line and giving  

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               enforcement responsibilities to the Attorney General,  
               the Department of Financial Institutions, the Office  
               of the Comptroller of Currency, the Office of Thrift  
               Supervision, and, if legal, even local district  
               attorneys, then compliance with the law may be delayed  
               in some cases, but the delay would not be near as long  
               as the delay involved in a lawsuit.

             7.   The sponsors of the bill claim that MVC already  
               gives service members the right of private action but  
               that military personnel cannot afford to hire a lawyer  
               (see comment #3 above) and that this bill does not  
               establish a private right of action but rather gives  
               the already existing right of action an enforcement  
               mechanism stating, "It is necessary to provide an  
               enforcement mechanism to ensure the Legislature's  
               stated intent to enable Servicemembers to devote their  
               entire energy to the defense needs of the nation or  

             8.   In line with the sponsor's opinion as stated in  
               comment #7, the sponsor opposes the previously  
               mentioned amendments on the grounds that giving  
               regulators enforcement authority would remove a right  
               for service members that already exist.

               Even if jurisdiction was given to banking regulators  
               state law could only bind those banks chartered by the  
               state while it would rely upon the volition of federal  
               regulators as to whether or not they wanted to enforce  
               state laws on federally chartered banks.

             9.   The CBA points out that this bill has a problem in  
               the fact that if these cases do become litigated, then  
               this bill has no provisions on how to deal with  
               appeals and the delays that will cause for those  
               wearing the uniform.

             10.             The sponsor does not share the concern  
               over delays due to appeals saying that any bank action  
               would be held in abeyance through the appeals process.

               Additionally the Military Department says the cases  
               they have vetted are all checked for compliance with  

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               the written law beforehand, are cut and dried, and  
               that all cases they are concerned with will be decided  
               in favor of the soldiers, claiming that soldiers are  
               told there is nothing that can be done if the soldier  
               has not complied in the first place.

                                  PRIOR ACTIONS  
          Assembly Veterans Affairs8-0
          Assembly Judiciary       10-0
          Assembly Floor           71-0 (Consent)

          California Military Department (Sponsor)
          Adjutant General (Sponsor)
          CA County Veteran Service Officers
          Vietnam Veterans of America, CA Council
          National Guard Association of California

          None received
          California Bankers Association (neutral if amended)

          *Jerome Horton served in the Assembly in 2002
          ** Joe Baca, Jr. served in the Assembly in 2005.
          ***Charles Calderon served in the Senate in 1991

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