BILL ANALYSIS                                                                                                                                                                                                    Ó







         ----------------------------------------------------------------------- 
        |Hearing Date:June 6, 2011          |Bill No:AB                         |
        |                                   |75                                 |
         ----------------------------------------------------------------------- 


                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                           Bill No:        AB 75 Author:Hill
                    As Introduced:     December 22, 2010 Fiscal:Yes

        
        SUBJECT:  Documents:  notaries public:  solicitations. 
        
        SUMMARY:  Specifies requirements for solicitations that could be 
        construed or interpreted as involving a governmental entity; makes 
        changes to the law governing notaries public.

        Existing law:

        1)Federal   law  prohibits the use of any seal, insignia, trade or brand 
          name that could reasonably be interpreted or construed as implying 
          any federal government connection, approval, or endorsement unless 
          the mailing has a notification on its face, cover or wrapper that it 
          is not affiliated with any federal government agency. 

       2)Prohibits any person, firm, corporation or association that is a 
          nongovernmental entity to solicit information, or solicit the 
          purchase of or payment for a product or service or to solicit the 
          contribution of funds or membership fees, by means of a mailing, 
          electronic message or Internet website 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 government connection, approval or endorsement,  unless  :

           a)   The nongovernmental entity has an expressed connection with, 
             or the approval or endorsement of, a state or local government 
             entity, if permitted by law.

           b)   The solicitation meets both of the following requirements:

             i)     The solicitation bears on its face, in conspicuous and 





                                                                          AB 75
                                                                         Page 2



               legible type in contrast by typography, layout, or color with 
               other type on its face, the following notice:  "THIS PRODUCT OR 
               SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY ANY GOVERNMENT 
               AGENCY, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE 
               GOVERNMENT."

             ii)         In the case of a mail solicitation, the envelope or 
               outside cover or wrapper in which the matter is mailed bears on 
               its face in capital letters and in conspicuous and legible 
               type, the following notice:  "THIS IS NOT A GOVERNMENT 
               DOCUMENT."  (Business and Professions Code (BPC) § 17533.6)

       1)Requires that any business that solicits the purchase of, or payment 
          for, a service by means of an unsolicited mailing that offers to 
          assist the recipient in dealing with a state or local governmental 
          agency to do both of the following:

           a)   State on the envelope and in the mailing that it is not a 
             governmental agency and is not associated with the governmental 
             agency referenced.

           b)   Include in the mailing the contact information for the 
             governmental agency referenced (Id.)

       2)Provides, however, that a business does not have to meet the 
          requirements of item # 3) above, if either or the following 
          requirements have been met:

           a)   The business has an expressed connection with, or the approval 
             or endorsement of, a state or local governmental entity as 
             permitted by law.

           b)   The business has an "established business relationship," as 
             defined by law, with the recipient (Id.)

        5) 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," defined as 
           any service performed or offered to be performed for compensation 
           in connection with preparing or completing an application or 
           request for reduction in assessment.  Clarifies that untrue or 
           misleading statement includes:

           a)   The preparation of a request for review or an assessment 
             appeal application will result in a guaranteed reduction of 
             property taxes.





                                                                          AB 75
                                                                         Page 3




           b)   A fee is required in order for the county to process a 
             reduction of a property's value when the county really has no 
             applicable fee.

           c)   The person offering assessment reduction filing service will 
             physically represent the person being solicited before county 
             assessor staff, before an assessment appeals board, before a 
             county board of equalization or before an assessment hearing 
             officer unless the fee includes this representation.

           d)   The person offering assessment reduction filing service will 
             prepare or complete informal assessor review data or prepare or 
             complete the application in full on behalf of the person being 
             solicited unless the fee includes this service. 

           e)   The person offering assessment reduction filing service has a 
             file or record covering the person being solicited.

           f)   The person offering assessment reduction filing service  is 
             affiliated with any governmental entity, including the use of:

             i)     Any government seal, emblem or other similar symbol.

             ii)    A business name including the word appeal or tax and the 
               word assessor, agency, bureau, department, division, federal, 
               state county, city or municipal or the name of any city, 
               county, city and county, or any governmental entity.  

             iii)   An envelope that simulates an envelope containing a 
               government check, tax bill or government notice.

             iv)    An envelope or outside cover that does not state in 
               capital letters "THIS IS NOT A GOVERNMENT DOCUMENT" 

           g)   A late fee is required if the person being solicited does not 
             respond by a date stated in the solicitation.  (BPC § 17537.9)

        6)Makes it unlawful to offer or perform an assessment reduction filing 
          service without the following disclosure placed at the top of each 
          page of every advertisement or promotional material and recited at 
          the beginning of every oral solicitation or broadcast advertisement: 
           "THIS ASSESSMENT REDUCTION FILING SERVICE IS NOT ASSOCIATED WITH 
          ANY GOVERNMENT AGENCY.  IF YOU DISAGREE WITH THE ASSESSED VALUE OF 
          YOUR PROPERTY, YOU HAVE THE RIGHT TO AN INFORMAL ASSESSMENT REVIEW, 
          AT NO COST, BY CONTACTING THE ASSESSOR'S OFFICE DIRECTLY.  IF YOU 





                                                                          AB 75
                                                                         Page 4



          AND THE ASSESSOR CANNOT AGREE TO THE VALUE OF THE PROPERTY OR IF YOU 
          DO NOT WISH TO CONTACT THE ASSESSOR YOU CAN OBTAIN AND FILE AN 
          APPLICATION FOR CHANGED ASSESSMENT WITH THE COUNTY BOARD OF 
          EQUALIZATION OR ASSESSMENT APPEALS BOARD ON YOUR OWN BEHALF.  AN 
          APPEALS BOARD HAS THE AUTHORITY TO RAISE PROPERTY VALUES (BUT IN NO 
          CASE HIGHER THAN THE PROPOSITION 13 PROTECTED VALUE) AS WELL AS TO 
          LOWER PROPERTY VALUES."  (Id).

        7)Makes it unlawful for a person offering assessment reduction filing 
          service to charge, demand or collect any money until after a request 
          for review is filed with an assessor (Id).

        8)Makes it unlawful for a person offering assessment reduction filing 
          service to charge, demand or collect any money until after an 
          assessment appeal is filed with the clerk of the assessment appeals 
          board (Id).

        9)Makes it unlawful for a person offering assessment reduction filing 
          service to file a request or application for reduction in assessment 
          without written authorization from the property owner (Id).

        10)Authorizes proof of the execution of an instrument by certain 
          persons and prescribes the form for that proof.  (Civil Code (CC) § 
          1180-1183)

        11)Prohibits a proof of execution of any of several types of specified 
          documents, including a grant deed, mortgage, deed of trust, 
          quitclaim deed, or security agreement as it relates to the recording 
          of transfers of property, by use of a "subscribing witness."  (CC 
          §1195)

        12)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.  (Commercial Code § 3505)

        13)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 and duties that by the 
          law, may be performed by notaries.  (Government Code (GC) § 8205)

        14)Prescribes the maximum fees a notary public may charge for 
          specified services.  (GC § 8211)

        15)Establishes fees the Secretary Of State (SOS) is authorized to 





                                                                          AB 75
                                                                         Page 5



          charge for the provision of specified business services.  (GC § 
          12182- 12197)


        This bill:

       1)Makes various technical changes.

       2)Defines "conspicuous" or "conspicuously" as displayed apart from the 
          other print on the page, envelope, outside cover or wrapper, in at 
          least 12-point boldface font, in capital letters, that is at least 
          2-point boldface font sizes larger than the next largest print and 
          in a contrasting type, layout, font, or color in a manner that 
          clearly calls attention to the language.

       3)Adds "emblem" to the list of prohibited items contained within a 
          solicitation that imply connection to a government entity.
           
       4)Specifies that the following disclosure currently required must also 
          be conspicuously displayed on the front and back of every page of a 
          solicitation or mailing:  "THIS PRODUCT OR SERVICE HAS NOT BEEN 
          APPROVED OR ENDORSED BY ANY GOVERNMENT AGENCY, AND THIS OFFER IS NOT 
          BEING MADE BY AN AGENCY OF THE GOVERNMENT."

       5)Prohibits disclosures from preceding, following or surrounding 
          language, words, symbols, terms or other content that result in 
          disclosures not being conspicuous or that introduce, modify, qualify 
          or explain the text of these disclosures.

       6)Specifies that a solicitation cannot use a trade or brand name that 
          implies state or local government connection, approval, or 
          endorsement, including, but not limited to:

           a)   Agency

           b)   Administrative

           c)   Assessor

           d)   Board

           e)   Bureau

           f)   Collector

           g)   Commission





                                                                          AB 75
                                                                         Page 6




           h)   Committee

           i)   Department

           j)   Division

           aa)  Recorder

           bb)  Unit

           cc)  Federal

           dd)  State

           ee)  County

           ff)  City

           gg)  Municipal

           hh)  The name or division of any government agency

        8)Specifies that a solicitation cannot outline a date or time period 
          when payment to the soliciting entity is due unless the solicitation 
          also displays the date or time period specified, how the information 
          being solicited will be used, a description of the service that is 
          to be provided or how the solicited funds or membership fees will be 
          used.  Specifies that a solicitation cannot use any of the following 
          terms to indicate a date or time period when payment is due, 
          including, but not limited to:

           a)   Due date

           b)   Due now

           c)   Remit by

           d)   Remit immediately

           e)   Payment due

           f)   Pay now

           g)   Pay immediately






                                                                          AB 75
                                                                         Page 7



           h)   Pay no later than

        9) Specifies that no solicitation can state or imply that penalties or 
           consequences will occur if payment is not made to the soliciting 
           nongovernmental person, firm, corporation or association. 

        10)Makes a violation of this law a misdemeanor punishable by 
           imprisonment in a county jail, up to six months, or a fine, up to 
           two thousand five hundred dollars ($2500), or both.

        11)Establishes remedies up to three times the amount solicited for any 
           person harmed as a result of a violation.

        12)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.

        13)Specifies that certain provisions of existing law apply only to a 
           notary public employed by a financial institution.

        14)Deletes the prescribed maximum fees a notary public may charge for 
           specified services.

        15)Authorizes the 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 for the purpose of harassing 
           or defrauding a person or entity.


        FISCAL EFFECT:  According to the May 4, 2011 Assembly Committee on 
        Appropriations analysis, any additional costs for the SOS would be 
        minor and absorbable. The analysis also notes that to the extent this 
        legislation would reduce fees paid by entities attempting bogus 
        filings, that loss would be offset by savings achieved by staff not 
        being required to process those bogus filings.  The analysis states 
        that the bill may result in potential minor non-reimbursable costs to 
        counties for prosecution and incarceration related to violations of 
        the bill's provisions, offset to some extent by fine revenues.  

        COMMENTS:
        
        1. Purpose.  The  Author  is the Sponsor of this bill.  According to the 





                                                                          AB 75
                                                                         Page 8



           Author, the measure strengthens the law to prevent deceptive 
           business solicitations and reduces the potential for document fraud 
           by closing significant loopholes affecting notary services and 
           solicitation disclosures.  
           
           According to information provided by the Author and SOS, the 
           Attorney General of California has received well over 10,000 
           complaints from the public about these deceptive 
           government-look-a-like forms and cites one lawsuit brought by the 
           Attorney General, the defendants were charged with sending out 
           986,000 misleading solicitations.  This bill will put a stop to 
           this practice by requiring third party vendors to put larger, more 
           obvious disclaimers on their solicitations to make it clear they 
           are not government documents.  It also increases the penalty for 
           failing to put disclaimers on the solicitations.  These 
           clarifications will provide businesses receiving these misleading 
           solicitations with a more readily recognizable disclaimer, as well 
           as make this type of deceptive practice easier to prosecute and 
           eliminate.

           The Author also believes it is important to give the SOS the 
           authority to refuse to process documents that are clearly intended 
           for fraudulent purposes.  When a notarized document is presented to 
           the SOS for a certificate of authentication, the SOS is only 
           permitted to determine the authenticity of the notary public's 
           signature, not the authenticity of the underlying document.  If the 
           notary signature is valid, the SOS must authenticate the notary 
           public's signature.  Once the SOS 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 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 Author believes 
           the likelihood of these occurrences will decrease.  

           Additionally, the Author sees benefit in prohibiting the use of a 
           subscribing witness when establishing a power of attorney.  
           Currently, if a person has signed a document, but does not 
           personally appear before a notary public, another person can appear 
           on their behalf to attest that the principal signer signed the 
           document.  The person appearing on behalf of the principal is 
           called a subscribing witness.  Although existing law prevents a 





                                                                          AB 75
                                                                         Page 9



           subscribing witness from being used as proof of signing on specific 
           real property documents to be recorded, they can be used in the 
           proof of signing of a power of attorney document that could later 
           be used to fraudulently sign multiple real property deeds or impact 
           all aspects of a person's estate.

           Information provided by the Author outlines how 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 bill eliminates the mandate for all 
           notaries public, except for those that work for financial 
           institutions, from processing antiquated documents (i.e., protests) 
           that are frequently used for fraudulent purposes, as the protest 
           can be used to begin civil legal proceedings.  This protest 
           procedure is archaic and is seldom performed for legitimate 
           purposes.  The Author and SOS see this process as beyond the 
           expertise of most notaries public and assert that these bogus 
           protests have been used in tax evasion schemes, as well as a way to 
           harass people by asserting invalid liens.  

        2. Background.  There are many unscrupulous businesses that reach out 
           to consumers and business owners, offering to provide services as a 
           third party between the consumer or business owner and a government 
           entity.  Some even go so far as to mail solicitations to consumers 
           and business owners which are disguised as government forms or 
           documents requiring payment.  The majority of these entities target 
           consumers and businesses with mandatory registrations or document 
           filings with government entities such as homeowners filing property 
           tax exemptions with a local county assessor's office or businesses 
           filing LLC documents with the SOS.  Examples of misleading 
           statements include representations that a fee is required in order 
           to receive a homeowners' exemption, or that the advertised service 
           is connected with any government entity.  One specific example 
           highlighted by the SOS involved letters sent to California 
           corporations directing them to submit $495 and a completed form to 
           a private company named "Business Filings Division" in order to 
           dissolve their business entity.   

           In one more publicized recent example of deceptive solicitations, a 
           San Diego County man plead guilty to charges of conspiracy to 
           commit wire fraud and money laundering connected to his creation of 
           a business specifically designed to fraudulently sell loan 
           modification services to homeowners who were delinquent in their 
           monthly mortgage payments.  The company mailed solicitations 
           throughout the county advising homeowners that it employed highly 
           trained staff and had a direct connection to the US Treasury.  Over 





                                                                          AB 75
                                                                         Page 10



           300 homeowners paid between $2,500 and $3,000 to the company 
           between April and July 2009, which was used to continue to operate 
           the company and pay its principals and did not result in any 
           services to homeowners.  

           In response to consumer and business complaints about deceptive 
           solicitations, the SOS dedicated a webpage to inform consumers 
           about these mailings and clarify, "the requests are not being made 
           by the California Secretary of State's office and are not being 
           made by or on behalf of any governmental entity.  Although a 
           business entity can use an intermediary to submit filings and fees 
           to our office, no business is required to go through another 
           company in order to file its documents with the Secretary of 
           State's office."  

        3. Similar and Related Previous Legislation.   AB 898  (Torrico) of 2010 
           and  AB 2654  (Hill) of 2010 were very similar to this bill.  The 
           bills were vetoed by the Governor.  In his veto messages, the 
           Governor indicated concern with the private right of action 
           provision contained in both bills and hesitancy to sign something 
           into law that could lead to "spurious lawsuits".

            AB 2919  (Garcia, Chapter 256, Statutes of 2008) required businesses 
           that send a mailing offering to assist the recipient in dealing 
           with a governmental agency to state on the envelope and in the 
           mailing that it is not a governmental agency and is not associated 
           with the referenced governmental agency and required businesses to 
           include in the mailing the contact information for the referenced 
           governmental agency.

            SB 1400  (Simitian, Chapter 749, Statutes of 2008) established new 
           rules and disclosure requirements for sweepstakes solicitations and 
           extends the provisions to those who sell information regarding 
           sweepstakes.

            SB 1240  (Figueroa, Chapter 319, Statutes of 2002) specified that 
           solicitations by e-mail and on Internet websites shall be governed 
           by the same state laws regulating mail solicitations using words or 
           symbols that can potentially cause a misimpression of a state or 
           local governmental connection with the solicitations.

            AB 1178  (Davis Chapter 249, Statutes of 1997) prohibited deceptive 
           advertising practices related to an offer to file either a property 
           tax homeowners' exemption, or a property tax assessment appeal on 
           behalf of a consumer.






                                                                          AB 75
                                                                         Page 11



            AB 532  (Morrow, Chapter 348, Statutes of 1993) conformed California 
           law to Federal law prohibiting certain mail from nongovernmental 
           entities to contain any term or symbol, as specified, that 
           reasonably could be interpreted or construed as implying any 
           federal  government connection, approval, or endorsement.

        4. Arguments in Support.   Secretary of State Debra Bowen  writes in 
             support of this bill, noting that it will close significant 
           loopholes and eliminate methods of potential fraud.
           
           Various  Chambers of Commerce  also support this bill, stating that 
           it strengthens disclaimer requirements and increases the penalty 
           for failing to put disclaimers on solicitations, making it easier 
           for businesses to readily recognize the disclaimers and easier to 
           prosecute and eliminate this type of deceptive practice.

            Capitol Corporate Services, Inc  ., which has over 40,000 clients 
           throughout the U.S. and over 1,000 entities registered or qualified 
           to conduct business in California, also agrees with other 
           supporters that this is an important bill which protects those 
           conducting legitimate business in California by requiring clear and 
           obvious disclaimers, as well as reduces the potential for document 
           fraud.

        NOTE:  Double-referral to Judiciary Committee (second).
        
        SUPPORT AND OPPOSITION:
        
         Support:  

        California Association of Realtors
        Capitol Corporate Services, Inc.
        Highland Area Chamber of Commerce
        Law Offices of Harold S. Small
        Long Beach Area Chamber of Commerce
        Secretary of State Debra Bowen
        Simi Valley Chamber of Commerce
        South Bay Association of Chambers of Commerce
        Thoits Insurance Service
        TriMark Economy Restaruan Fixtures
        Turner, Aubert and Friedman, LLP

         Opposition:  

        None on file as of May 31, 2011






                                                                          AB 75
                                                                         Page 12




        Consultant:Sarah Mason