BILL ANALYSIS Ó SENATE COMMITTEE ON VETERANS AFFAIRS Senator Ben Hueso, Chair BILL NO: AB 526 HEARING DATE: 6/11/13 AUTHOR: Melendez VERSION: 4/1/2013 FISCAL: Yes VOTE: Majority SUBJECT Military service: financial protection benefits for reserve component members DESCRIPTION Summary: Adds financial protections for Reserve and California National Guard servicemembers, their spouses and legal dependents, expands scope of eligibility for protections. Existing law: Helps protect National Guard and federal military reservists from the adverse effects of military deployment by providing various financial protections with regard to court proceedings, credit contract obligations, rental agreements, taxes, health insurance, eviction protection, and fees related to recording a power of attorney, termination of mobile telephone contracts, academic tuition, state bar membership, vehicle leases, and residential utility service. Financial protections provided under Military and Veterans (MVC) §409.3 apply to: " National Guard members mobilized onto temporary state active duty by the Governor (MVC 143 or 146) or federal active duty (Title 10 or Title 32, U.S. Code); " Federal reservists mobilized onto federal active duty under Title 10, US Code. Broader protections, including prohibition on interest accrual on deferred obligations, provided under MVC §§800, apply only to: " National Guard members and federal reservists mobilized onto federal active duty "as a part of the Iraq and Afghanistan conflicts." This bill: 1. Deletes the requirement that the servicemember must have served in support of a conflict in Afghanistan or Iraq - any active duty service is now eligible. 2. Adds utility payment obligations to the list of obligations which may be deferred during active duty. 3. Requires that the servicemember deliver to the lender a copy of his or her activation or deployment order and any other information that substantiates the duration of the servicemember's military service. 4. Defines reservist and military service: (a) "Reservist" means either of the following: (1) A member of the militia, as defined in Section 120, called or ordered into state military service pursuant to Section 143 or 146, or in federal or state military service pursuant to Title 10 or 32 of the United States Code. (2) A reservist of the United States Military Reserve who has been ordered to full-time federal active duty by the President of the United States pursuant to Title 10 of the United States Code. AB 526 (Melendez) 2 (b) "Military service" means either of the following: (1) Full-time active state service or full-time active federal service of a service member who is a member of the militia, as described in paragraph (1) of subdivision (a). (2) Full-time active duty of a service member who is a reservist, as described in paragraph (2) of subdivision (a), for a period of 30 consecutive days. 5. Deletes the requirement that active duty service after the close of the Iraq or Afghanistan conflicts or active duty prior to the effective date of Section 809 be excluded. BACKGROUND Recent History of State Financial Protections The State's intent to provide increased financial protections for servicemembers called to active service can be found in several places in California Law. In response to the events of September 11, 2001, the California Military Department sponsored AB 1433 (Horton), which borrowed heavily from federal law. This bill enabled National Guard members serving in state or federal status and other military reservists performing federal duty to receive financial protections consistent with those found within the federal Soldiers and Sailors Civil Relief Act (SSCRA). These protections were placed in MVC §§400-420. In 2005, the Legislature enacted AB 306 (Baca) to amend MVC §§800-810, which originally had been enacted in 1991 to address service in the first Gulf War (Desert Storm). This bill expanded and enhanced financial protections of existing federal and state laws for members called to active duty due to ongoing conflicts in Iraq (Iraqi and Afghanistan. Both the §§400 and §§800 portions of the MVC provide for deferment of loans and other obligations during a reserve servicemember's call to active military service; however these sections are inconsistent in three ways: (1) applicability, (2) AB 526 (Melendez) 3 the process of obtaining deferrals, and (3) repayment of deferred loans and obligations. This discrepancy inadvertently financially penalizes members who must defer a portion or the entirety of their loan or obligation under MVC §409.3. For a concise three-way comparison of eligibility and benefits under MCV §§800, MVC §409.3, and federal 50 USC 591, see the chart at the end of this analysis. The Military Department estimates that one-third of deploying California National Guard members use MVC §§800 annually to defer home mortgages and car loans. They estimate that less than 10% of deploying National Guard members use §409.3 annually. Legal staff states that they are only aware of approximately 50 members deferring obligations under §409.3 during the last year. COMMENT Committee staff comments : 1. AB 526 amends MVC§§ 800, 803, and 811 of, and repeals § 809. This bill does not conflict with SB 720 (Correa), which modifies somewhat similar benefits and eligibility for mobilized reservists under § 409.3. 2. This helps align state policy with federal national security policy. The major conflicts in Iraq and Afghanistan are winding down, but are unlikely to be the last. Many of the stresses mentioned above occur with any mobilization into active service regardless of the location or type of service. Therefore, it makes sense to extend these protections to servicemembers without regard to the particular conflict or location in which they serve. 3. Utility obligations are similar to the types of obligations already deferrable under existing law (i.e., obligations secured by mortgage or deed of trust, credit cards and other retail installment payments, vehicle loans, and property taxes). Some existing protections regarding utility bills is provided in MVC § 827, The California AB 526 (Melendez) 4 Military Families Financial Relief Act, which was added in 2005 via AB 1166 (Frommer). These protections pertain to utility shutoffs and repayment plans associated with accounts in arrears. Related legislation : SB 720 (Correa, pending, 2013) " Provides that servicemembers - mobilized onto temporary state active duty by the Governor (under MVC 143 or 146) or federal active duty (under Title 10 or Title 32, U.S. Code) - are eligible under existing law to defer loans and obligations, but now can do so without being financially penalized by having to pay interest on deferred interest at the end of their deferment. " Ensures that the protections afforded to financial institutions in MVC §§800 are incorporated into MVC §409.3. Additionally, making clarifying amendments to MVC §409.3 will ensure the protections provided by this section for deployed Servicemembers shall be interpreted consistently by both members and financial institutions. POSITIONS Sponsor: Author Support: American Legion - Department of California AMVETS - Department of California California Association of County Veterans Service Officers California State Commanders Veterans Council Vietnam Veterans of America - California State Council Oppose: None received Analysis by: Wade Cooper Teasdale AB 526 (Melendez) 5 Comparison Chart of MVC §§800, MVC §409.3, and 50 USC 591 ----------------------------------------------------------------- | | MVC §§800 | MVC §409.3 | 50 USC 591 | |---------+-----------------+------------------+------------------| |Eligibili|National Guard |National Guard |Applies to Active | |ty |and Reserve |members who are |Duty members | | |members called |called to active | | | |to Iraq and |state service or |(Rarely utilized | | |Afghanistan. |active federal |as full-time, | | | |service for a |active component | | | |period in excess |Servicemembers | | | |of seven days in |very rarely | | | |any 14-day |suffer material | | | |period. |impact due to a | | | | |deployment.) | | | |and | | | | | | | | | |Reserve | | | | |Servicemembers | | | | |who have been | | | | |called to | | | | |full-time federal | | | | |active duty for a | | | | |period in excess | | | | |of seven days in | | | | |any 14-day | | | | |period. | | |---------+-----------------+------------------+------------------| |Length |The lesser of |The period of the |The period of the | |of |180 days (6 |Servicemembers' |Servicemembers' | |Deferment|months) or the |active military |active military | | |period of active |service. |service | | |duty plus 60 | |(deployment). | | |calendar days. | | | |---------+-----------------+------------------+------------------| |Process |Servicemember |Servicemember |Servicemember | |to Defer |must send a |must petition the |must apply to | | |signed letter to |court and show |court for relief | | |their lender, |they have been |and prove that | AB 526 (Melendez) 6 | |under penalty of |materially |they have been | | |perjury, |affected by their |materially | | |requesting a |most current |affected by | | |deferment of |period of |reason of | | |financial |military service |military service. | | |obligations. |in order to defer | | | | |a loan or | | | | |obligation. | | |---------+-----------------+------------------+------------------| |Method |The maturity |Extends the |Same as §409.3. | |of |date of the loan |maturity date of | | |Repayment|is extended by |the loan by the | | | |the deferred |period of | | | |amount (in |military service | | | |essence the 6 |and, at the end | | | |months of |of the deferment, | | | |payments |rolls the unpaid | | | |deferred are |principal and | | | |paid at the end) |accumulated | | | |and no interest |interest into the | | | |is charged or |principle balance | | | |accumulated on |of the loan or | | | |the principal or |obligation. | | | |interest on |(Servicemember | | | |which the |pays interest on | | | |payment was |the deferred | | | |deferred. |interest.) | | | | | | | ----------------------------------------------------------------- AB 526 (Melendez) 7