BILL ANALYSIS                                                                                                                                                                                                    







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        |Hearing Date:June 24, 2013         |Bill No:AB                         |
        |                                   |469                                |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                              Senator Ted W. Lieu, Chair
                                           

                          Bill No:        AB 469Author:Wagner
                          As Amended June 18, 2013 Fiscal:Yes

        
        SUBJECT:   Telephonic sellers:  loan modifications. 
        
        SUMMARY:  Redefines "telephonic seller" to include a person making a  
        telephone solicitation to arrange or assist in the arrangement of a  
        loan modification, and thus would require that those who attempt to  
        arrange or assist in the arrangement of a loan modification must  
        comply with the law that regulates telephonic sellers and requires  
        that they register with the Department of Justice (DOJ) and provide  
        information to DOJ, as specified.

        Existing law:
        
        1)Defines a "telephonic seller" or "seller" as a person who, on his or  
          her own behalf or through salespersons or through the use of an  
          automatic dialing-announcing device, causes a telephone solicitation  
          or attempted telephone solicitation to occur which meets certain  
          criteria, as specified.  (Business and Professions Code (BPC)   
          17511.1)

        2)Defines "telephonic seller" to include a person who represents or  
          implies in a telephone solicitation, that he or she is offering to  
          make a loan, arrange or assist in arranging a loan, or provide  
          information which may lead to the obtainment of a loan. (BPC  
          17511.1(d))

        3)Requires that not less than 10 days prior to doing business in this  
          state, a telephonic seller shall register with the DOJ, by filing  
          information, as specified, on a form provided by the DOJ.
        (BPC  17511.3)






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        4)Requires that if a telephone seller represents or implies, or  
          directs salespersons to represent or imply, that the telephonic  
          seller can, or may be able to, make a loan or arrange or assist in  
          arranging a loan or to assist in providing information which may  
          lead to the obtaining of a loan, the filing with the DOJ shall  
          include information, as specified.  (BPC  17511.4 (q))

        5)Provides that any person, including, but not limited to, the  
          telephonic seller, a salesperson, agent or representative of the  
          seller, or an independent contractor, who willfully violates any  
          provisions of the Telephonic Seller's Act (Act), as specified, shall  
          upon conviction be punished as follows:  (BPC  17511.9)

           a)   By a fine not exceeding ten thousand dollars ($10,000) for  
             each unlawful transaction.

           b)   By imprisonment as specified, or by imprisonment in a county  
             jail for not more than one year.

           c)   By both the fine and imprisonment as specified above.

        6)Requires that every telephonic seller shall maintain a bond issued  
          by a surety company admitted to do business in this state and that  
          the bond shall be in the amount of one hundred thousand dollars  
          ($100,000) in favor of the State of California for the benefit of  
          any person suffering pecuniary loss in a transaction commenced  
          during the period of bond coverage with a telephonic seller who has  
          violated the Act, and specifies what the bond shall cover in terms  
          of costs and damages.  (BPC  17511.12) 

        7)Provides that it shall be unlawful, as specified, for any real  
          estate licensee, or for any person, as specified, who negotiates,  
          attempt to negotiate, arranges, attempts to arrange or otherwise  
          offers to perform a mortgage loan modification or other form of  
          mortgage loan forbearance for a fee or other compensation paid by  
          the borrower, to do any of the following:
        (BPC  10085.6, Civil Code (CC)  2944.7)

           a)   Claim, demand, charge, collect, or receive any compensation  
             until after the licensee has fully performed each and every  
             service the licensee contracted to perform or represented that  
             he, she, or it would perform.

           b)   Take any wage assignment, any lien of any type on real or  
             personal property, or other security to secure the payment of  
             compensation.





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           c)   Take any power of attorney from the borrower for any purpose.   


        8)Provides for specific requirements regarding a person who is a  
          "foreclosure consultant," as defined, and are similar to those  
          requirements as specified for a "telephonic seller."
        (CC  2945-2945.11)  

        This bill:  

        1)Includes in the definition of telephonic sellers a person who  
          represents or implies in a telephone solicitation, whether initiated  
          by the telephone seller or made in response to inquiries generated  
          by advertisements on behalf of a telephonic seller, that he or she  
          is offering to arrange or assist in arranging the modification of an  
          existing loan, or to assist in providing information which may lead  
          to the obtaining of a loan modification, as specified.

        2)Provides that the filing (and registration) with the DOJ shall  
          include the following:

           a)   The name and addresses of all persons who, in the previous 24  
             months, obtained loan modifications for those who responded to  
             the seller's solicitations or representations that it could  
             modify an existing loan or arrange for or assist in arranging for  
             a loan modification or could assist in providing information  
             which could lead to the modification of an existing loan.

           b)   The names and addresses of all persons who, in the previous 24  
             months, obtained loan modifications for those who responded to  
             the solicitations or representations of the seller's predecessor  
             that it could modify an existing loan or arrange for or assist in  
             arranging for a loan modification or could assist in providing  
             information which could lead to the modification of an existing  
             loan.

        FISCAL EFFECT:  This measure has been keyed "fiscal" by Legislative  
        Counsel.  According to the Assembly Appropriations Committee Analysis  
        dated May 8, 2013, there are no significant costs associated with this  
        legislation.  The analysis states that any local government costs  
        resulting from the mandate in this measure would not be  
        state-reimbursable because the mandate only involves the definition of  
        a crime or penalty for conviction of a crime. 

        COMMENTS:





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        1. Purpose.  This bill is sponsored by the  Author  .  According to the  
           Author, this bill is intended to regulate individuals making  
           telephone solicitations related to loan modifications.  By adding  
           loan modification to the definition of a "telephonic seller", this  
           bill would apply existing law requiring registration and regulation  
           of telephonic sellers to those solicitations, thereby giving  
           consumers stronger protections and more robust remedies against  
           unscrupulous sales practices.  

           According to the Author, "While it is currently illegal to collect  
           upfront fees for loan modification services, the scams have  
           continued unabated?   AB 469 would provide an additional tool to  
           law enforcement to shut down the most insidious loan modification  
           scams, those that, through the operation of boiler rooms, prey on  
           massive numbers of distressed homeowners, often specifically  
           targeting non-English speakers and other vulnerable groups."

        2. Background.  This bill would redefine "telephonic sellers" to  
           include individuals who make telephone solicitations relating to  
           loan modifications, and require those individuals to provide  
           specific information to DOJ regarding their solicitations, annually  
           register with the DOJ and be subject to regulatory oversight by  
           DOJ.  This measure would apply to telephone solicitations for  all   
           types of loan modifications, not just residential home loan  
           modifications.  

        Under existing law, any salesperson who makes a telephone solicitation  
           and is not properly registered with the DOJ is guilty of a  
           misdemeanor, punishable by a fine up to $2,500, county imprisonment  
           up to six months, or both.  In addition, any telephonic seller or  
           other person working with or on behalf of the telephonic seller and  
           who does not comply with the requirements to register with DOJ and  
           provide the necessary information to the DOJ, or commits any  
           deceptive or fraudulent act, or any willful violation of the laws  
           relating to telephonic sellers is punishable by a fine up to  
           $10,000, county imprisonment up to one year, or both.  This bill  
           would apply those penalties and enforcement tools against  
           individuals who sell loan modification services by phone and  
           violate the law.   

        Current law also prohibits the collection of advance fees in  
           connection with loan modifications, or other forms of mortgage loan  
           forbearance, and requires that individuals who wish to charge a fee  
           may only do so for services rendered, and for mortgage foreclosure  
           consultants, pursuant to a contract.  They must also provide notice  





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           to borrowers regarding other options available to the borrower.   
           "Mortgage Foreclosure Consultants", as defined, are also required  
           to meet similar requirements regarding registration with DOJ and  
           providing specified information, as are "Telephonic Sellers."  

        3. Prior Related Legislation.   AB 1950  (Davis, Chapter 569, Statutes  
           of 2012) deletes the sunset date on two provisions of a 2009 bill  
           that prohibited collecting up-front fees in connection with offers  
           to help borrowers obtain mortgage loan modifications or other forms  
           of mortgage loan forbearance; extends the statute of limitations  
           from one year to three years on specified, real estate-related  
           misdemeanors; and makes a technical and clarifying change to the  
           Real Estate Law.

         SB 980  (Vargas, Chapter 563, Statutes of 2012) extends the sunset date  
           on the state's prohibition against collecting up-front fees in  
           connection with mortgage loan modifications and other forms of  
           mortgage loan forbearance, from January 1, 2013 to January 1, 2017.

         SB 94  (Calderon, Chapter 630, Statutes of 2009) prohibits persons,  
           until January 1, 2013, from charging advance fees to borrowers in  
           connection with a loan modification, and requires those who wish to  
           charge a fee for loan modification services to provide a notice to  
           borrowers regarding other options available to the borrower.   

         
        NOTE  :  Double-referral to Senate Committee on Banking and Financial  
        Institutions second.


        SUPPORT AND OPPOSITION:
        
         Support:  

        None on file as of June 18, 2013.

         Opposition:  

        None on file as of June 18, 2013.



        Consultant: Bill Gage








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