BILL ANALYSIS AB 2455 Page 1 Date of Hearing: March 23, 2010 ASSEMBLY COMMITTEE ON VETERANS AFFAIRS Paul Cook, Chair AB 2455 (Nava) - As Introduced: February 19, 2010 SUBJECT : Military service: benefits SUMMARY : This bill would authorize members of the military to defer payment on up to 2 loans on vehicles. This bill would also provide that a spouse or legal dependent, or both, of a member of the military is entitled to the deferral of payment benefits accorded to a member, if the member is eligible for those benefits. EXISTING LAW authorizes members of the United States Military Reserve and National Guard (members) 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 including up to 2 loans subject to the Automobile Sales Finance Act. FISCAL EFFECT : Unknown. COMMENTS : In 2003, the Service Members Civil Relief Act (SCRA) was signed into federal law. This was a new federal statute that revised the protections included in the outdated SSCRA to reflect new economic realities. Previous legislation was intended to augment the federal SCRA and provide financial protection benefits to California's service members that are superior to the benefits already granted them pursuant to SCRA. When the existing law was put into practice, attorneys in the Staff Judge Advocate Corps of the California National Guard found that the law needed minor revisions to ensure that "members" and their families are provided all of the intended protections. Specifically, California National Guard legal staff found ambiguity in the manner that vehicle loans were subject to the Automobile Sales Finance Act, which led to some "members" having their vehicle loan deferment request denied by some financial institutions. Additionally, it was found that by not extending the relief provided to "members" to their family. The author believes the true intent of "The California Military Families Financial AB 2455 Page 2 Relief Act" can not be carried out when considering that the companion statute to MVC 800-811 specifically extends the protections and financial relief to a "member's" family, possibly due to legislative oversight in omitting the family in MVC 800-811. Currently, MVC 800(a)(5) provides for the deferment of two vehicle loans subject to Civil Code 2981. Civil Code 2981, as written, applies to the sales contract of a motor vehicle between a buyer and a seller. Subsequent case law (not related to MVC issues), extended the benefits of Civil Code 2981 to seller-assisted financing, such as when the car dealer finds a lender for the buyer. Unfortunately, Civil Code 2981 does not directly address the scenario whereby a buyer goes directly to his own bank to obtain a car loan. Several financial institutions have used this loophole to deny deferments to "members" who obtain the loans directly from them. The author has stated this correction to the statute is necessary to ensure that members of the California National Guard and Reserves, deployed to Iraq and Afghanistan, are able to obtain the full benefit of the spirit of the law. The existing California Military and Veterans Code 800(a)(5) is intended to help "members" and their families avoid the financial hardships that can occur with prolonged deployments into a war zone. Due to the reference of Civil Code 2981 in MVC 800(a)(5), some financial institutions use a loophole that allows them to exclude certain vehicle loans and are not complying with the full intent of the law. A companion statute within the MVC involving deferments of obligations, 409.5, extends the benefits of MVC 406-409.4 to the dependents of "members". The intent of the law is to provide relief to "members" and their families. The failure to extend all protections and benefits under 800-811 to the spouses and legal dependents of "members" is inconsistent with the spirit of the law. The author goes on to state, "this amendment is critical as more and more Californians are ordered to active duty in Iraq and Afghanistan and their families suffer the hardships of deployment. When a "members" is deployed and the family income decreases due to the "members" making less on military pay versus their civilian pay, many families are unable to maintain all of their financial obligations, regardless of whether the AB 2455 Page 3 obligation/loan is in the name of the "members" or the spouse/legal dependent." REGISTERED SUPPORT / OPPOSITION : Support California Credit Union League California Military Department Opposition None on file. Analysis Prepared by : Eric Worthen / V. A. / (916) 319-3550