BILL ANALYSIS Ó AB 75 Page 1 Date of Hearing: April 5, 2011 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair AB 75 (Hill) - As Introduced: December 22, 2010 SUBJECT : Documents: notaries public: solicitations. SUMMARY : Revises current provisions of laws pertaining to solicitations and public notaries, and authorizes the Secretary of State (SOS) to refuse to perform a service or refuse a filing based on a reasonable belief that the service or filing is fraudulent, as specified. Specifically, this bill : 1)Expands existing prohibitions on nongovernmental entities implying a governmental connection for solicitation purposes to federal entities, as specified. 2)Requires the disclosures on solicitations to be conspicuously displayed in certain locations, type, and manner, as specified. 3)Prohibits the use of a title, trade, or brand name in a solicitation that could be reasonably interpreted or construed as implying any federal, state, or local government connection, approval, or endorsement, including, but not limited to the following terms: "agency;" "administrative;" "assessor;" "board;" "bureau;" "collector;" "commission;" "committee;" "department;" "division;" "recorder;" "unit;" "federal;" "state;" "county;" "city;" or "municipal;" or, the name or division of any governmental agency. 4)Prohibits the specification of a date or time period when payment to the soliciting nongovernmental person, firm, corporation, or association is due, including but not limited to the following terms: "due date;" "due now;" "remit by;" "remit immediately;" "payment due'" "pay now;" "pay immediately;" or, "pay no later than" unless the solicitation displays in the same sentence as the date or time period specified how the information being solicited will be used, a description of the product or service that is to be provided and to what government agency it shall be rendered, or how the solicited funds or membership fees will be used, as applicable. AB 75 Page 2 5)Prohibits stating or implying in a solicitation that a payment to the nongovernmental entity is mandatory, required by law, or that penalties, fines or consequences will occur if payment is not made to the soliciting nongovernmental entity. 6)Makes a violation of the above requirements a misdemeanor punishable by imprisonment in a county jail not exceeding six months, or by a fine not exceeding $2,500, or by both a fine and imprisonment. 7)States that a person harmed as a result of the violation of this bill is entitled to recover, in addition to any other available remedies, damages in an amount equal to three times the amount solicited. 8)Defines "conspicuous" or "conspicuously" to mean displayed apart from other print on the page, envelope, outside cover, or wrapper and in not less than 12-point boldface font type in capital letters that is at least 2-point boldface font type sizes larger than the next largest print on the page, envelope outside cover, or wrapper and in contrasting type, layout, font, or color in a manner that clearly calls attention to the language. 9)Adds a power of attorney to the types of instruments for which a proof of the execution is prohibited and prohibits a proof of the execution for any instrument requiring a notary public to obtain a thumbprint from the party signing the document in the notary public's journal. 10)Revises the form of certificate that may be used for proof of execution. 11)Specifies that certain provisions of existing law apply only to a notary public employed by a financial institution. 12)Deletes the prescribed maximum fees a notary public may charge for specified services. 13)Authorizes SOS to refuse to perform a service or refuse a filing based on a reasonable belief that the service or filing is being requested for an unlawful, false, or fraudulent purpose, to promote or conduct an illegitimate object or purpose, or is being requested or submitted in bad faith or AB 75 Page 3 for the purpose of harassing or defrauding a person or entity. 14)Makes technical, conforming changes. EXISTING LAW : 1)Makes it unlawful for a nongovernmental entity to solicit funds or information by means of mailing, electronic message, or Internet Web site that contains a seal, insignia, trade, or brand name, or any other term or symbol that reasonably could be interpreted or construed as implying any state or local governmental connection, approval, or endorsement, as specified. 2)Requires a business to include the contact information for a referenced governmental agency in an unsolicited mailing that offers to assist the recipient in dealing with the governmental agency and makes a violation of these or other provisions related to advertising a misdemeanor, punishable by imprisonment in the county jail not exceeding six months, a fine not exceeding $1,000, or both. 3)Makes it unlawful for a person to make any untrue or misleading statements in any manner in connection with the offering or performance of an assessment reduction filing service. 4)Provides that an untrue or misleading statement includes representing that an offeror of an assessment reduction filing service is, or is affiliated with, any governmental entity by, among other things, the use of a business name including the word "appeal" or "tax" and any of a list of terms, including "agency," "bureau," or "department." 5)Authorizes proof of the execution of an instrument by certain persons and prescribes the form for that proof. 6)Prohibits a proof of the execution of any of several types of specified instruments, including a grant deed, mortgage, deed of trust, quitclaim deed, or security agreement. 7)Prescribes the duties of a notary public, including the duty to demand acceptance and payment of foreign and inland bills of exchange, or promissory notes, to protest them for nonacceptance or nonpayment, and to exercise any other powers AB 75 Page 4 and duties that by the law, may be performed by notaries. 8)Provides that a protest is a certificate of dishonor made by a United States consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. 9)Prescribes the maximum fees a notary public may charge for specified services. 10)Establishes the fees SOS is authorized to charge for the provision of specified business services. FISCAL EFFECT : Unknown COMMENTS : Purpose of this bill . According to the author's office, "Over the past few years, deceptive solicitation schemes have arisen to take advantage of the statutorily required filings with the SOS's office. The misleading solicitations sent to companies sometimes appear to be official government documents and imply that the company must pay an exorbitant fee in order to file the documents with the SOS. In many cases the solicitations threaten penalties if the company does not file with the third party entity, though businesses are not required to do so. "Under current law, false documents can easily be notarized and submitted to the SOS for processing. When a notarized document is presented to the SOS, the Secretary is only permitted to determine the authenticity of the notary public signature, not the underlying authenticity of the document. If the notary signature is valid, the SOS must authenticate the notary's signature. After verifying the signature, the SOS must attach its seal to the document, which makes the document appear authentic, though the underlying statements have not been verified. "The Attorney General's office has tracked more than 50 entities engaged in this type of ploy and has received over 10,000 complaints from the public about these government look-a-like forms and threats. In one lawsuit brought by the Attorney General's office, the defendants sent out 986,000 misleading solicitations by mail." AB 75 Page 5 Background . According to information provided by the author, bogus documents are often notarized and submitted to the SOS for processing. When a notarized document is presented to the SOS for authentication, the SOS is only permitted to determine the authenticity of the notary public's signature and seal, not the authenticity of the underlying document. Once the SOS's certificate is attached to a document, even if the underlying document is not authentic, it can be used to harass people with false financial claims and to obtain fraudulent identification indicating diplomatic immunity. Other entities may view the SOS's certificate as proof that the underlying documents are valid, rather than simply an authentication of the notary public's signature and seal. A "subscribing witness" is a person who witnesses the signing of a document and appears before a notary public on behalf of the principal signer to attest that the principal signer has signed the document. Although current law prevents the use of a subscribing witness as proof of signing on specific real property documents, a subscribing witness can currently be used when notarizing a power of attorney document that could be later used to fraudulently sign multiple real property deeds or other estate documents. A "protest" is a written statement by a notary public, or other official authorized to administer oaths, identifying a negotiable instrument, and certifying that it was presented for payment or the reason why the instrument was not presented for payment, and that the negotiable instrument was not accepted or paid. Examples of negotiable instruments include a check or promissory note. The failure to pay after presentment is called a "dishonor." The purpose of the protest is to serve as a formal statement of dishonor and to initiate the formal process required to begin civil proceedings to secure payment for the negotiable instrument that has been dishonored. Notaries public are currently required to perform "protests" and issue certificates of dishonor related to nonpayment of negotiable instruments, such as a check or promissory note. The protest can then be used to begin civil legal proceedings. According to information provided by the author, this protest procedure is archaic and is seldom performed for legitimate purposes. Bogus protests have been used in tax evasion schemes, as well as to harass people and entities with false financial claims. AB 75 Page 6 This bill is a reintroduction of AB 898 (Lieu) and AB 2654 (Hill) of 2010, which were vetoed. In his veto message of both bills, the Governor cited concern over the inclusion of a private right of action. This bill contains the private right of action, authorizing the recovery of an amount equal to three times the amount solicited. Support . The SOS writes in support, "Once the SOS's certificate is attached to the document, if the underlying document is not authentic (often referred to as 'bogus') it can be used to file false financial claims against people and to obtain fraudulent identification implying that the holder of the document has diplomatic immunity from prosecution. Other entities in receipt of the documents may view the SOS's certificate as proof that the underlying documents are valid rather than simply as an authentication of the notary public's signature. By providing the SOS the discretion to refuse a filing that is unlawful, false or fraudulent, the likelihood of these occurrences will decrease." Previous legislation . AB 898 (Lieu) of 2010, revises current provisions of laws pertaining to solicitations and public notaries. This bill was vetoed. AB 2654 (Hill) of 2010, specifies requirements for solicitations that could be construed or interpreted as involving a state or federal governmental entity, including certain disclosures on the front and back of every page of the solicitation and the envelope; and, establishes penalties for violating specified disclosure requirements and makes various technical changes. This bill was vetoed. REGISTERED SUPPORT / OPPOSITION : Support California Association of Realtors Highland Area Chamber of Commerce Long Beach Area Chamber of Commerce Secretary of State Debra Bowen Simi Valley Chamber of Commerce South Bay Association of Chambers of Commerce AB 75 Page 7 Opposition None on file. Analysis Prepared by : Rebecca May / B.,P. & C.P. / (916) 319-3301