BILL ANALYSIS SENATE COMMITTEE ON VETERANS AFFAIRS JEFF DENHAM, CHAIRMAN Bill No: AB 2455 Author: Nava Version: As Introduced Hearing Date: June 22, 2010 Fiscal: No SUBJECT OF BILL Amending California Military Families Financial Relief Act PROPOSED LAW 1. Amends Military and Veterans' Code (MVC) section 800 to make state level Soldiers' and Sailors' Civil Relief Act (SSCRA) protections apply to all auto loans and not only "seller-assisted" auto loans. 2. Guarantees that financial protections protect the service member's family. 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 1 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 America. 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. 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 Page 2 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 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 who served in the post 9/11 era, whether Reserves or National Guard, as well as adding protections on auto loans. 13. Other state legislation- Page 3 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 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. Waiver of bar dues for the time period in which the military member is serving military duty. Allows for past due or unpaid amounts 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. 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. Page 4 COMMENT 1. This bill is another in a long line of legislation (federal and state) since 1942 that attempts to protect those serving our country who otherwise are in situations beyond their control. When reservists or guardsmen are activated, they usually take a pay cut. 2. The Military Department (sponsor) says the change of definition in auto loan is needed because "the true intent of 'The California Military Families Financial Relief Act' cannot be carried out". 3. Delinquency of spouses shows up on a service member's credit report. Those extending credit are not necessarily honoring relief legislation for soldiers. For example, if a soldier has a family vehicle in his/her spouse's name because she is at home while the service member is deployed, even though the family budget has still been impacted certain entities maybe taking the opportunity to not comply with the law using the excuse that the vehicle is in the name of the spouse instead of the service member. 4. The problem, according to the Military Department, is that "legal staff found ambiguity in the manner that the vehicle loans were subject to the Automobile Sales Finance Act". 5. The shortcomings of the existing legislation lies in a definitional reference within MVC section 800. Section 800 presently references the Civil Code regarding auto loans; however, that code section references specifically "The Automobile Sales Finance Act," which covers only "seller-assisted" loans. When a potential purchaser walks into an auto-dealership without pre approval from a bank the car dealer helps set up financing. This form of financing is known as "seller-assisted" because the dealer finds a lender. Page 5 If a soldier got pre-approval from his or her bank or credit union, there is no seller assisted financing and, therefore, there is no protection for that service member, or his or her family, under MVC 800. 6. Changing section 800 to refer to vehicles instead of the Auto Sales Finance Act will allow every auto loan of deployed soldiers to be protected under the relief act. PRIOR ACTIONS AB 2455 (Nava) Assembly Veterans 7-0 Assembly Floor 71-0 (Consent) AB 306 (Baca) Senator Cedillo "Aye" 9/6/2005 Senator Denham "Aye" 9/6/2005 Assemblywoman Negrete McLeod "Aye" 5/31/2005 Assemblyman Wyland "Aye" 5/31/2005 SUPPORT Military Department (Sponsor) CA Bankers Association CA Credit Union League CA State Commanders Veterans Council National Guard Association of CA OPPOSE None received *Jerome Horton served in the Assembly in 2002 Page 6 ** Joe Baca, Jr. served in the Assembly in 2005. ***Charles Calderon served in the Senate in 1991 Page 7