BILL ANALYSIS Ó
AB 480
Page 1
ASSEMBLY THIRD READING
AB 480 (Ian Calderon)
As Amended March 21, 2013
Majority vote
BUSINESS & PROFESSIONS 13-0
APPROPRIATIONS 16-0
-----------------------------------------------------------------
|Ayes:|Gordon, Jones, Bocanegra, |Ayes:|Gatto, Harkey, Bigelow, |
| |Campos, Dickinson, | |Bocanegra, Bradford, Ian |
| |Eggman, Hagman, Holden, | |Calderon, Campos, Eggman, |
| |Maienschein, Mullin, | |Gomez, Hall, Ammiano, |
| |Skinner, Ting, Wilk | |Linder, Pan, Quirk, |
| | | |Wagner, Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Includes optical products in the current definition of
a retail service contract, which would require agreements for
pre-paid services relating to the replacement, maintenance or
repair of prescription and non-prescription eyewear to be in a
written contract, among other duties. Specifically, this bill:
1)Adds optical products to the existing definition of a service
contract.
2)Defines optical products to mean "prescription and
nonprescription eyewear" and "shall not include contact lenses
of any kind."
3)States that no reimbursement is required by this bill pursuant
to Section 6 of Article XIIIB of the California Constitution
because the only costs that may be incurred by a local agency
or a school district will be incurred because this bill
creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction
within the meaning of Section 17556 of the Government Code, or
changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, Bureau of Electronic and Appliance Repair (BEAR)
currently has approximately 19,000 licensees. It is estimated
AB 480
Page 2
that this legislation could add approximately 3,000 additional
licensees. On-going costs associated with those additional
licenses would be approximately $230,000 per year (Electronic
and Appliance Repair Fund), which would be mostly offset by
$215,000 in fee revenue. The fund does not have the resources
to cover the on-going additional $15,000 in costs.
COMMENTS :
1)Purpose of this bill . This bill adds optical products to the
current definition of service contracts (also known as
extended warranties, protection plans, and service agreements)
so that retailers and manufacturers can sell service contracts
for prescription and nonprescription eyewear. Additionally,
it subjects the administrators and sellers of such contracts
to the Electronic Appliance Repair Dealer Registration Law
(EARDRL) and requires them to register with the Bureau. This
bill is author sponsored.
2)Author's statement . According to the author, "Optical
products are not included in the definition of service
contracts, so the [Bureau] does not have the ability to
authorize the sale of service contracts covering optical
products?optical service contracts have become a popular
product in virtually every state with one in three customers
opting to purchase coverage. This national trend underscores
the need for the inclusion of optical products within the
definition of service contracts so that a wider range of
products commonly purchased by consumers may be protected
against damage or loss."
3)Service contracts . Service contracts generally provide for
the pre-paid repair or replacement of specified consumer
products. These contracts may be for a fixed period of time
or a specified duration, and are usually paid for on a monthly
or annual basis. Service contracts are commonly marketed as
extended warranties, service agreements, maintenance
agreements or protection plans. Service contract agreements
may be offered and sold by the manufacturer or retailer of the
product, but due to the complexity of administering a service
plan, retailers often engage third-party firms to handle the
day-to-day responsibilities of managing service contracts and
providing assistance to consumers.
AB 480
Page 3
There are numerous consumer products for which service
contracts are available, including furniture, electronics,
appliances, home healthcare products, jewelry, and fitness
equipment, among many others. Currently, optical products
such as prescription and non-prescription eyeglasses,
sunglasses, or goggles are not included in the definition of a
service contract and consumers therefore are unable to buy a
service contract for them.
Optical products may come with their own manufacturer's
warranty, but those could be for a limited period of time or
include only limited product parts. Technically speaking, a
service contract is different from a manufacturer's warranty
in that it is an additional item purchased separately from the
product. A warranty is typically included in the price of the
item, whereas a service contract comes at an additional cost.
As opposed to covering only the manufacturers' defects, the
service contract may cover other incidents such as sitting on
your eyeglasses or dropping them by mistake.
4)Types of service contracts . Most service contracts fall into
one of six basic types: 1) date of purchase plans, which begin
on the date the customer purchases the product and the service
plan; 2) extension plans, which extend a manufacturer's
warranty for a specified time period; 3) major component
programs, also known as "primary protection" plans, which
protect the major product component such as the picture tube
in the television; 4) comprehensive programs, which cover all
parts and labor for a specified period of time, such as one or
five years; 5) replacement programs, which guarantee product
replacement if the item should fail during the term of the
plan; and, 6) deductible programs, which require the consumer
to be responsible for a deductible, such as the first $50 in
repairs, after which the program covers any additional repair
costs.
5)Service contract rescission rights . Under current law,
consumers can cancel a service contract within 30 days of
purchase for a full refund, minus any claims that may have
been paid. After 30 days, a consumer may receive a prorated
refund and the seller may charge an administrative fee for the
contract cancellation.
6)EARDRL and the BEAR . The EARDRL regulates service contracts
AB 480
Page 4
relating to the maintenance or repair of specified appliances,
and makes it unlawful for a person to act as a service
contract seller or administrator without first registering
with BEAR. The law further protects consumers by requiring
that service contractors provide the service guaranteed in the
contract. Additionally, service contractors must provide
financial backing for the service contracts issued.
BEAR regulates registered service contractors who sell service
contracts for the repair of consumer electronics and
appliances in California. BEAR can fine violators, or revoke
or suspend their registration. Retailers are required to hold
a valid BEAR registration in order to act as a service
contract seller. Retailers with multiple locations are
required to have a separate registration for each location
that sells service contracts. Further, companies offering a
contract via the internet must also have a registration for
contracts sold to California residents. The registration fee
is $75 per location and is renewed annually.
With the inclusion of optical products in the definition of a
service contract, this bill will require retailers who wish to
offer these contracts to register with BEAR and submit the
appropriate registration materials. If a company is already
registered as a service contract provider, this bill would not
require it to register again, unless its optical division is a
separate business entity within the company.
7)Optical products . The types of optical products covered by
this bill are prescription and non-prescription eyeglasses,
reading glasses, and likely include ski goggles and other
non-prescriptive optical products sold at sunglass and glass
retailers, sporting goods stores, pharmacies and other
locations as well. The cost of eyeglasses can vary depending
on the manufacturer, retailer, prescription, and the purpose
of use, but prices can range from $20 to $700 or more.
Analysis Prepared by : Elissa Silva / B.,P. & C.P. / (916)
319-3301
FN: 0000837
AB 480
Page 5