BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 713
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          Date of Hearing:   May 10, 2011

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     AB 713 (Block) - As Amended:  April 12, 2011

                                  PROPOSED CONSENT
           
          SUBJECT  :   MILITARY SERVICE: LEGAL BENEFITS

           KEY ISSUE  :  SHOULD EXISTING LAW THAT ALLOWS CALIFORNIA NATIONAL 
          GUARD AND RESERVE SERVICE MEMBERS TO PETITION A COURT FOR RELIEF 
          FROM CERTAIN CIVIL LIABILITIES DURING ACTIVE MILITARY SERVICE BE 
          CLARIFIED TO ENHANCE THE AVAILABILITY OF THESE PROTECTIONS TO 
          SERVICE MEMBERS AND THEIR FAMILIES, PARTICULARLY IN LIGHT OF THE 
          FINANCIAL STRAIN THAT MULTIPLE DEPLOYMENTS CAN CREATE FOR THESE 
          FAMILIES?

           FISCAL EFFECT  :  As currently in print this bill is keyed 
          non-fiscal.

                                      SYNOPSIS
          
          This noncontroversial bill seeks to revise two sections of the 
          Military and Veterans' Code to enhance the availability of 
          certain benefits and protections from liability currently 
          afforded to National Guard and U.S. Military Reserve service 
          members and their families during periods of active military 
          service.  First, the bill would clarify the time frame when a 
          service member may exercise this ability to petition a court for 
          specified relief from these financial obligations and 
          liabilities, and would clarify when a service member's military 
          service is deemed to have commenced for this purpose.  In 
          addition, the bill would ensure that the service member's 
          dependents are also eligible for the reduction of interest rates 
          to six percent on obligations and liabilities incurred prior to 
          the service member's entry into service-a protection that is 
          currently afforded only to the service member for no discernible 
          public policy reason.  This bill is supported by the California 
          Military Department, several veterans' organizations, as well as 
          bankers and credit unions, who all agree that minor changes to 
          current law will rightfully allow service members to avail 
          themselves of these protections without unnecessary obstacles.  
          There is no known opposition, and this bill was previously 
          approved by the Assembly Committee on Veterans Affairs by a 








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          unanimous vote.

           SUMMARY  :  Enhances the availability of certain benefits and 
          protections from liability currently afforded to National Guard 
          and U.S. Military Reserve service members and their families 
          during periods of active military service.  Specifically,  this 
          bill  :   

          1)Clarifies that a service member may, at any time during his or 
            her  most current  period of military service or within six 
            months thereafter, petition for relief from any obligation or 
            liability incurred prior to the effective date of the orders 
            for his or her most current period of military service.  

          2)Clarifies that a service member may, at any time during his or 
            her  most current  period of military service or within six 
            months thereafter, petition for relief with respect to any tax 
            or assessment whether falling due prior to or during his or 
            her most current period of military service.

          3)Extends to a service member's dependents the reduction of 
            interest rates to six percent on obligations or liabilities 
            that were incurred prior to the service member's military 
            service, subject to judicial discretion as provided.

           EXISTING LAW  :  

          1)Provides that a service member may, at any time during his or 
            her period of military service or within six months 
            thereafter, petition a court for relief in respect of any 
            obligation or liability incurred by the service member prior 
            to his or her period of military service, or in respect of any 
            tax or assessment whether falling due prior to or during his 
            or her period of military service.  (Military and Veterans 
            Code Section 409.3.  All further references are to this code 
            unless otherwise specified.)

          2)Specifies a number of civil obligations and liabilities for 
            which the service member may petition a court for relief, 
            including, but not limited to, relief from: 

             a)   Eviction from the member's primary residence; 
             b)   Obligations under a lease for specified residential and 
               nonresidential property;
             c)   Obligations secured by a mortgage; 








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             d)   Nonpayment of an installment under a contract for 
               purchase of real or personal property;
             e)   Taxes or assessments, whether general or special, other 
               than taxes on income, as provided.  (Sections 406 to 
               409.4.)

          3)Provides that no obligation or liability incurred by a service 
            member before that person's entry into service shall, during 
            any part of the period of military service, bear interest at a 
            rate in excess of 6 percent per year, unless a court finds 
            that the ability of the service member to pay interest upon 
            that obligation or liability at a rate in excess of 6 percent 
            per year is not materially affected by reason of that military 
            service.  (Section 405.)

          4)Entitles dependents of a service member to the benefits 
            accorded to service members under Sections 406 to 409.4, upon 
            application to a court, unless the court finds the ability of 
            the dependents to comply with the terms of the obligation, 
            contract, lease, or bailment has not been materially impaired 
            by reason of the military service of the person upon whom the 
            applicants are dependent.  (Section 409.5.)

           COMMENTS  :  This noncontroversial bill seeks to revise two 
          sections of the Military and Veterans Code (MVC) to enhance the 
          availability of certain benefits and protections from liability 
          currently afforded to National Guard and U.S. Military Reserve 
          service members and their families during periods of active 
          military service.  First, the bill would clarify the time frame 
          when a service member may exercise this ability to petition a 
          court for specified relief from these financial obligations and 
          liabilities, and would clarify when a service member's military 
          service is deemed to have commenced for this purpose.  In 
          addition, the bill would ensure that the service member's 
          dependents are also eligible for the reduction of interest rates 
          to six percent on obligations and liabilities incurred prior to 
          the service member's entry into service-a protection that is 
          currently afforded only to the service member for no discernible 
          public policy reason.

           Stated Need for the Bill:   According to the author, an order to 
          military service can materially impact the financial stability 
          of California service members and their families, and recent 
          statutes providing financial protections to alleviate this 
          impact need to be clarified to ensure that these protections are 








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          made available to all service members whom they were intended to 
          help.  The author states:

               The members of the California National Guard and the 
               Reserve Component are unique in the fact that they are 
               both civilians and service members.  Although these 
               individuals attend monthly training and are eligible to 
               be ordered to state and federal active service, they 
               are also a part of the civilian work force and hold 
               full time occupations in their communities.  Often, a 
               call to military service can adversely affect the 
               service member and their family's financial stability, 
               as the service member may make significantly less 
               income while on military service.  The absence of the 
               service member may cause his or her family to change 
               their living situation, such as spouses needing to take 
               on additional employment or increasing the need for 
               child care.  It is these situations in which a service 
               member has been materially impacted by their order to 
               military service.  

               This legislation is critical, as clarification and 
               enhancement of Ýexisting law]will greatly improve the 
               existing protections for our deployed service members 
               and their families.  These revisions will clarify the 
               intent of the Legislature to provide financial 
               protections to deployed service members, as well as 
               extend the financial protections found in Section 405 
               (six percent cap on interest) to a service member's 
               dependents. 

           This bill clarifies applicability of existing financial 
          protections to reflect the modern frequency of recurring 
          deployments among service members.   According to the author, 
          existing law does not take into account the modern frequency of 
          recurring deployments and activations, and their potential for 
          cumulative financial impacts upon the service member and his or 
          her family.  Section 409.3 currently allows a service member to 
          petition a court for relief from certain financial obligations 
          and liabilities "at any time during his or her period of 
          military service or within six months thereafter . . . in 
          respect of any obligation or liability incurred by the service 
          member prior to his or her period of military service."  The 
          author contends that this provision, which assumes a single 
          "period of military service," does not take into account the 








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          modern reality that service members are now routinely ordered to 
          active service multiple times and for multiple purposes, and 
          that in this tough economy, a service member's financial 
          situation can easily take a turn for the worse in the period of 
          time between orders to active military service.  According to 
          the author, because the statute fails to specify which order 
          (out of potentially several orders) allows a service member to 
          petition for relief, service members who have previously been 
          ordered to military service may be unfairly deprived of the 
          benefits of the statute, even if they can prove their current 
          order materially affects their ability to pay or otherwise 
          comply with the obligation or liability. 

          The following example illustrates this point.  In 2006, a 
          service member is ordered to full-time active service to attend 
          military school for two months, and during that time takes out 
          an auto loan.  The service member completes the schooling and 
          returns to her normal civilian occupation.  In 2010, the service 
          member is again ordered to full-time military service, but this 
          time for a year-long overseas deployment.  The deployment has a 
          material effect (the standard for relief under the law) on the 
          service member's ability to comply with the loan payment terms, 
          and she seeks to petition the court for a deferment of the loan 
          under Section 409.3.  Unfortunately, the current law can be 
          interpreted to exclude the service member from seeking relief 
          due to the fact that she took out the loan while on her first 
          set of orders several years prior, regardless of whether the 
          loan currently has a material effect on the service member 
          because of her current period of military service.

          To address this problem, the bill seeks to make two clarifying 
          changes to Section 409.3.  First, the time frame during which a 
          service member may seek relief from certain financial 
          obligations or liabilities under current law would be clarified 
          to establish that a petition for relief must be brought during 
          the  most current  period of military service or within 6 months 
          thereafter.  Second, in order to provide a date certain for 
          commencement of military service, the bill would clarify that 
          the obligation or liability must have been incurred or become 
          due before the effective date of the orders for the service 
          member's most current period of military service, except for 
          taxes or assessments, which are eligible for relief whether 
          falling due prior to or during the most current period of 
          military service.  This bill would simply allow service members 
          in these situations to exercise the right to seek relief from 








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          obligations that they feel they cannot comply with because of 
          the impact of their most current military service.  This 
          revision is not intended to change the intent or purpose of the 
          statute to provide avenues of relief to service members, but 
          merely to ensure that deserving members of the California 
          National Guard or Reserve Component who have served multiple 
          deployments are not excluded from accessing the courts because 
          of their previous orders to service.  Should this bill become 
          law, a court must still evaluate the impact of the current 
          period of military service before relief will be granted from an 
          obligation.
          
          This bill extends the interest rate cap protection to the 
          service member's dependents  .  This bill would make the 
          dependents of service members eligible for the reduction of 
          interest rates to six percent on obligations and liabilities 
          incurred prior to the service member's entry into service.  
          According to the author, "This amendment is critical as more and 
          more Californians are ordered to active service and their 
          families suffer financial hardship due to a deployment.  When a 
          service member is deployed and the household income decreases 
          due to the service member making less with military pay versus 
          their civilian pay, many families are unable to meet all of 
          their financial obligations, regardless of whether the 
          obligation is in the name of the service member or the spouse or 
          legal dependent."

          Section 405 of the Military and Veterans Code was enacted in 
          2002 (AB 1433, Ch. 60, Stats. 2002) to prohibit any obligation 
          or liability incurred by a service member prior to entry into 
          military service from bearing an interest rate in excess of six 
          percent for the duration of the period of service.  AB 1433 was 
          intended to specifically extend to members of the California 
          National Guard and Reserve Components those benefits provided 
          under the federal Servicemembers Civil Relief Act (SCRA), 50 
          U.S.C. App. §§501-596.

          AB 1433 also enacted Section 409.5, which extends to the 
          dependents of California service members most of the financial 
          protections afforded to the service members themselves.  For 
          example, provisions for eviction protection, repossession 
          protection, foreclosure protection, the right to defer 
          installment payments and loans, and the ability to terminate 
          leases early are all extended to service members' dependents 
          pursuant to Section 409.5.  








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          While the SCRA does not grant interest rate relief to dependents 
          of service members, the legislative history of AB 1433 does not 
          reveal any discernible policy reason, except perhaps to parallel 
          the federal SCRA, to not include the six percent cap on interest 
          in the set of protections extended to service members' 
          dependents pursuant to Section 409.5.  The author contends that 
          the failure to extend the interest cap benefit of Section 405 
          may be the result of simple drafting oversight, but in any case 
          is inconsistent with the intent of AB 1433 and other legislative 
          action to extend avenues of relief to both service members and 
          their dependents.  (See, for example, AB 2455 (Nava), Ch. 124, 
          Stats. 2010, extending the benefits of MVC Sections 800 through 
          811 to spouses and legal dependents of service members.) 

           PRIOR LEGISLATION  :  AB 1433 (Horton), Ch. 60, Stats. 2002, 
          allows service members to petition a court for specified relief 
          with respect to credit contract obligations, rental agreements, 
          taxes (except income taxes), and health insurance, as well as 
          eviction protection for the service members' families.  

          AB 306 (Baca), Ch. 291, Stats. 2005, authorizes service 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, plus 60 calendar days, or 180 
          days, whichever is less. 

          AB 2455 (Nava), Ch. 124, Stats. 2010, extends protections with 
          respect to deferment of vehicle loans to spouses and dependents 
          of service members, as provided.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          AMVETS-Department of California
          California Association of County Veterans Service Officers 
          California Bankers Association
          California Credit Union League
          California Military Department, Office of the Adjutant General
          California State Commanders Veterans Council
          National Guard Association of California
          Vietnam Veterans of America-California State Council

           Opposition 








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          None on file
           

          Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334