BILL ANALYSIS Ó
AB 480
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CONCURRENCE IN SENATE AMENDMENTS
AB 480 (Ian Calderon)
As Amended June 25, 2013
Majority vote
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|ASSEMBLY: |76-1 |(May 28, 2013) |SENATE: |38-0 |(September 3, |
| | | | | |2013) |
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Original Committee Reference: B.,P. & C.P.
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)Excludes from the definition of a service contract any
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
nonprescription eyewear" but "shall not include contact lenses
of any kind."
4)States that no reimbursement is required by this bill 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,
changes the penalty for a crime or infraction, or changes the
definition of a crime.
The Senate amendments specify that a 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 and makes one other
technical and clarifying change.
FISCAL EFFECT : According to the Senate Appropriations
Committee, the effect of this bill would be:
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1)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).
2)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 would be issued as a
result of the bill, each paying a registration fee of $75
annually.
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 of
Electronic and Appliance Repair, Home Furnishings and Thermal
Insulation (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
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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.
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
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refund and the seller may charge an administrative fee for the
contract cancellation.
6)EARDRL and the Bureau of Electronic and Appliance Repair . The
EARDRL regulates service contracts 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 would 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
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