BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2455
                                                                  Page  1

          Date of Hearing:   March 23, 2010

                                  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  

           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  

           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          that revised the protections included in the outdated SSCRA to  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  


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          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  


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          obligation/loan is in the name of the "members" or the  
          spouse/legal dependent."


          California Credit Union League 
          California Military Department

          None on file.
          Analysis Prepared by  :    Eric Worthen / V. A. / (916) 319-3550