BILL ANALYSIS Ó
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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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