BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 480|
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THIRD READING
Bill No: AB 480
Author: Ian Calderon (D)
Amended: 6/25/13 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 10-0, 6/17/13
AYES: Lieu, Emmerson, Block, Corbett, Galgiani, Hernandez, Hill,
Padilla, Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : 6-0, 7/1/13
AYES: De León, Walters, Gaines, Hill, Lara, Steinberg
NO VOTE RECORDED: Padilla
ASSEMBLY FLOOR : 76-1, 5/28/13 - See last page for vote
SUBJECT : Service contracts
SOURCE : NEWAsurion
DIGEST : This bill defines "service contract" to also include
"optical products," as defined, thereby requiring a written
contract for the performance of services relating to the
maintenance, replacement, or repair of optical products, and
making administrators and sellers of those contracts subject to
registration and regulation by the Bureau of Electronic and
Appliance Repair, Home Furnishings and Thermal Insulation
(Bureau). Specifies that "service contract" shall not include a
contract in which a consumer agrees to pay a provider of vision
care services for a discount on optical products or contact
lenses for a specified duration.
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ANALYSIS :
Existing law:
1.Regulates service contract sellers, service contract
administrators, and electronic service dealers by the Bureau.
2.Defines certain terms for purposes of the service contract
law, including "service contract," "service contract
administrator" or "administrator," "service contract seller"
or "seller," and "obligor."
3.Makes it unlawful for any person to act as a service contract
administrator or a service contract seller without first
registering with the Bureau under the Electronic and Appliance
Repair Dealer Registration Law.
4.Provides that unless lawfully transacting business as an
insurance agent, a service contract administrator or
third-party seller, who does not have a service contract
reimbursement insurance policy covering all of the service
contracts sold, shall be deemed to be the unlawful transaction
of the business of insurance and subject to specified criminal
penalties.
This bill:
1.Includes optical products in the definition of "service
contract" thereby requiring a written contract for the
performance of services relating to the maintenance,
replacement, or repair of optical products, and thus making
administrators and sellers of those contracts subject to
registration and regulation by the Bureau.
2.Specifies that "service contract" shall not include a contract
in which a consumer agrees to pay a provider of vision care
services for a discount on optical products or contact lenses
for a specified duration.
3.Defines "optical products" to mean prescription and
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nonprescription eyewear and shall not include contact lenses
of any kind.
Background
Service contacts . Service contracts (also referred to as
protection plans, extended warranties or maintenance agreements)
cover a broad range of products which are collectively governed
by the provisions of BPC Section 9801 et seq.
Service contracts are bought separately from the product and
last for a specific period of time. Similar to insurance
policies, these contracts assure consumers that should something
go wrong with a product their investment is protected at a
fraction of the cost of out-of-pocket repair work.
Those providing service contracts must register with the Bureau
and comply with both the laws and regulations regarding service
contracts and service contract sellers. Service contracts are
also subject to regulation pursuant to the Song-Beverly Warranty
Act which is intended to protect consumers who purchase goods
covered by service contracts and extended warranties by
requiring that certain provisions be included in the contracts
and by obligating the service contract sellers to adhere to
certain standards when providing such contracts or warranties.
History of the regulation of service contracts in California .
In 1998, SB 2075 (Polanco, Chapter 1075) required the DCA to
conduct an in-depth study of the evolving marketplace related to
home service contracts and to include recommendations regarding
regulation of home service contracts. On August 31, 1999, the
DCA released its report titled, The Service Contract Industry in
California - Market Trends and Policy Issues (Service Contract
Report). The following background information regarding the
regulation of service contracts is extracted from that report:
The Bureau was given regulatory responsibility regarding
"service contracts" in 1994, with the passage of the
Service Contractor Registration Act. The reason for this
was that many of these service contracts provided for the
maintenance, repair and/or replacement of electronics and
appliances by service dealers that Bureau already
regulated. The main force behind California's regulation
of service contracts was the occurrence of defaulting on
contracts by service contract providers. In the early
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1990s, consumer complaints about defaults by service
contract companies increased considerably. A number of
service contract companies simply went out of business or
moved out of state, leaving consumers without the
protection for which they paid. Consumers also complained
that contracts sold to them simply duplicated repair
services already covered by the manufacturer's warranty.
By duplicating coverage, service contract providers were
charging consumers extra money for services that were
already included in their purchases, since manufacturers'
warranties are included in the purchase prices of products.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Increased licensing and enforcement workload requiring 1.5
positions and $102,000 in 2014-15, 2.3 positions and $167,000
in 2015-16, and 2.9 positions and $231,000 ongoing (Electronic
and Appliance Repair Fund).
Estimated registration fee revenues of $109,000 in 2014-15,
and $218,000 ongoing (Electronic and Appliance Repair Fund).
This estimate assumes 2,900 new licenses will be issued as a
result of this bill, each paying a registration fee of $75
annually.
SUPPORT : (Verified 7/1/13)
NEWAsurion (source)
California Retailers Association
ARGUMENTS IN SUPPORT : According to the author's office, 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
and Appliance Repair Dealer Registration Law and requires them
to register with the Bureau.
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The bill's sponsor, NEWAsurion, states that service contracts
provide a low cost means of protecting investments in such
products and have become extremely important to consumers.
Optical products, however, are excluded from the list of
products covered under the definition of service contracts.
Consequently, service contracts insuring optical products cannot
be sold in California even though every other state in the
nation authorizes their sale. The sponsor further argues, "The
fact that one in three consumers of optical products nationwide
chooses to buy coverage indicates strong consumer demand for
optical service contracts, and underscores the need to permit
the sale of optical service contracts in California. AB 480
would solve this arbitrary limitation by expanding the
definition of service contracts to include "optical products,"
thereby authorizing the sale of optical service contracts in
California." The sponsor contends that this bill will not only
benefit businesses offering this service, but also provide
consumers greater protection by allowing a wider range of
in-demand products entering the marketplace to be insured
against damage or loss.
The California Retailers Association (CRA) indicates that by
adding "optical products" to the definition of a service
contract, this bill will allow consumers access to replacement,
maintenance and repair services for their prescription and
non-prescription eyewear. Retailers who wish to offer this type
of service contract will be required to register annually with
the Bureau. CRA believes that the additional annual license fee
revenue will more than offset any state costs that may result
from this bill.
ASSEMBLY FLOOR : 76-1, 5/28/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
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Yamada, John A. Pérez
NOES: Donnelly
NO VOTE RECORDED: Holden, Patterson, Vacancy
MW:ej 7/2/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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