BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                       CONSENT


          Bill No:  AB 526
          Author:   Melendez (R)
          Amended:  6/14/13 in Senate
          Vote:     21

           
           SENATE VETERANS AFFAIRS COMMITTEE  :  7-0, 6/11/13
          AYES:  Hueso, Knight, Block, Correa, Lieu, Nielsen, Roth
          NO VOTE RECORDED:  Vacancy

           SENATE JUDICIARY COMMITTEE  :  7-0, 6/25/13
          AYES:  Evans, Walters, Anderson, Corbett, Jackson, Leno, Monning

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  76-0, 4/25/13 - See last page for vote


           SUBJECT  :    Military service:  benefits

           SOURCE  :     Author


           DIGEST  :    This bill extends to a larger class of military  
          reservists the enhanced financial protections currently offered  
          only to service members ordered to active duty as part of the  
          Iraq and Afghanistan conflicts.  It also adds utility bills to  
          the list of financial obligations subject to statutory  
          deferment.

           ANALYSIS  :    Existing law:

          1. Permits a member of the United States Military Reserve or the  
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             National Guard who is called to active duty as part of the  
             Iraq or Afghanistan conflicts to defer payments on specified  
             financial obligations, including mortgages, credit cards,  
             retail installment contracts and accounts, property taxes,  
             special assessments, and automobile loans and leases, for a  
             period of up to 180 days.  

          2. Requires, in order for an obligation or liability to be  
             deferred under the Military and Veterans Code (MVC) Section  
             800, a reservist or National Guard member to deliver to the  
             lender a letter signed by the member, under penalty of  
             perjury, requesting deferment of the obligation.  

          3. Prohibits the imposition of penalties or the charging or  
             accumulation of interest on the nonpayment of principal or  
             interest during a period of deferment under the MVC.

          4. Permits any federal military reservist or National Guard  
             member who is called to active duty to, at any time during  
             his/her period of active duty service or within six months  
             thereafter, apply to a court for relief from an obligation or  
             liability incurred by the member prior to his/her period of  
             military service, or from any tax or assessment falling due  
             prior to or during the period of service. 

          5. Authorizes, in the case of an installment contract for the  
             purchase of real estate, or other instrument in the nature of  
             a mortgage upon real estate, a stay of the enforcement of the  
             obligation during the applicant's period of military service,  
             or, if application is made after the service, for a period of  
             time up to the length of the period of military service.  At  
             the conclusion of the stay of enforcement, the principal and  
             accumulated interest due and unpaid must be repaid in equal  
             installments during the remaining life of the installment  
             contract or other instrument, extended by a period of time  
             equal to the stay of enforcement, at the rate of interest on  
             the unpaid balance as prescribed in the contract, or other  
             instrument evidencing the obligation, for installments paid  
             when due, and subject to any other terms as may be just.  

          6. Authorizes, in the case of any other obligation, liability,  
             tax, or assessment, a stay of the enforcement during an  
             applicant's period of military service, or, if application is  
             made after the service, for a period of time equal to the  

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             period of military service of the applicant or any part of  
             that period.  At the conclusion of the stay of enforcement,  
             the balance of principal and accumulated interest due and  
             unpaid at the date of termination of the period of military  
             service or the date of application, as the case may be, must  
             be repaid in equal periodic installments during a period of  
             time equal to the stay of enforcement, at the rate of  
             interest as may be prescribed for the obligation, liability,  
             tax, or assessment, if paid when due, and subject to any  
             other terms as may be just.  

          7. Permits a court to grant this specified relief after  
             appropriate notice and hearing, unless in its opinion the  
             ability of the service member to comply with the obligation  
             or pay the tax or assessment has not been materially affected  
             by reason of the member's military service. 

          This bill:

          1. Expands the class of military reservists and National Guard  
             members eligible to receive benefits under MVC Section 800 et  
             seq., including benefits related to the provision of health  
             care coverage and the deferment of financial obligations, to  
             any reservist called to active duty for a period of 30 or  
             more consecutive days.

          2. Adds utility payment obligations to the list of financial  
             obligations subject to deferment under current law.

          3. Requires, in addition to a letter signed by the member under  
             penalty of perjury requesting deferment of the obligation,  
             that a service member send the lender a copy of his/her  
             activation or deployment orders as part of an application for  
             deferment under current law.

           Background
           
          California law provides a variety of financial and  
          consumer-related protections for military service members, many  
          of which are intended to mitigate the potential adverse effects  
          of a deployment.  Within this group of existing protections is  
          AB 1433 (Horton, Chapter 60, Statutes of 2002), which  
          incorporated into state law several provisions of the federal  
          Soldiers' and Sailors' Relief Act of 1940, and granted certain  

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          benefits to deployed service members regarding court  
          proceedings, credit contract obligations, rental agreements,  
          taxes, health insurance, and eviction protection.  Existing law  
          also provides additional protections for reserve and National  
          Guard service members regarding fees for recording a power of  
          attorney, termination of mobile telephone contracts, academic  
          tuition, state bar fees, vehicle leases, and residential utility  
          service.

          State law currently permits military reservists and National  
          Guard members ordered to active federal or state military  
          service to defer certain loans and financial obligations under  
          two different provisions of the MVC.  MVC Section 400 et seq.  
          (Section 400) suspends the enforcement of specified civil  
          liabilities, including financial obligations such as mortgages,  
          automobile loans, and installment contracts, for service members  
          during periods of active military service.  (MVC Section 409.3)   
          The relief afforded under this section is available only upon  
          application to a court.  At the conclusion of a period of  
          suspension, the maturity date of a suspended financial  
          obligation is extended by the period of suspension (usually the  
          period of military service), and all unpaid principal and  
          accumulated interest is added to the principal balance of the  
          financial obligation.  Consequently, a service member who defers  
          an obligation under this provision may have to pay interest on  
          deferred interest, potentially increasing the amount due on an  
          obligation after all deferred sums are rolled back into the  
          obligation's principal.

          MVC Section 800 et seq. (Section 800), in contrast, permits  
          service members called to active duty specifically as part of  
          the conflicts in Iraq or Afghanistan to defer payments on  
          similar financial obligations for a period of up to six months.   
          Rather than petitioning a court, a service member need only send  
          a letter to their lender requesting deferment of a financial  
          obligation in order to receive benefits under this Section.   
          Unlike Section 400, Section 800 provides that "[n]o interest  
          shall be charged or accumulated on the principal or interest on  
          which the payment was delayed," meaning that interest cannot  
          accumulate on unpaid interest for an obligation deferred under  
          this Section.  (MVC Section 804)

          Both Section 400 and Section 800 contain other additional  
          benefits that mostly overlap with each other.  Each requires  

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          entities that were providing health care coverage prior to  
          deployment to "reinstate the health care coverage without  
          waiting periods or exclusion of coverage for preexisting  
          conditions," though the requirement in Section 400 is subject to  
          certain exceptions.  (MVC Section 806(a); MVC Section 409.4(b))   
          Both Sections extend their respective class of benefits to  
          spouses and legal dependents of an eligible military reservist  
          or National Guard service member (MVC Sections 409.5, 811(a)),  
          and prohibit the assessment of penalties for the nonpayment of  
          principal or interest during a period of deferment.  (MVC  
          Sections 409.3(b) 804)

          According to the California Military Department, approximately  
          one-third of deploying California National Guard members use  
          Section 800 to defer home mortgages and car loans.  In contrast,  
          less than 10% of National Guard members defer obligations under  
          Section 400.  Staff at the Military Department indicate that  
          they are only aware of 50 members deferring obligations under  
          Section 400 in the past year.

           Prior Legislation  

          AB 713 (Block, Chapter 105, Statutes of 2011) clarified that  
          recall to active military service gives a service member the  
          ability to apply to a court for relief from certain financial  
          obligations.  This bill also extended to the dependents of those  
          service members an existing provision of law that protects  
          service members from the assessment of interest at a rate  
          greater than 6%.

          AB 2455 (Nava, Chapter 124, Statutes of 2010) extended to  
          spouses and dependents of service members certain financial  
          protections with respect to the deferment of vehicle loans.

          AB 2365 (Lieu, Chapter 385, Statutes of 2010) enabled a service  
          member to recover actual damages, reasonable attorney fees, and  
          litigation costs from any person who violates specified rights  
          and protections codified in the MVC, including financial  
          protections for active duty personnel.  This bill granted  
          service members an expedited review of certain petitions for  
          relief from financial obligations, and provided that a court  
          shall not charge a filing fee or court costs for specified  
          actions.


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          AB 306 (Baca, Chapter 291, Statutes of 2005) authorized service  
          members who are called to active duty as part of the Iraq or  
          Afghanistan conflicts to defer payments on specified obligations  
          for the period of active duty, plus 60 calendar days, or 180  
          days, whichever is less.

          AB 1433 (Horton, Chapter 60, Statutes of 2002) enabled service  
          members to petition a court for specified relief with respect to  
          credit contract obligations, rental agreements, taxes (except  
          income taxes), and health insurance, as well as for eviction  
          protection for the service member's families.

          SB 1284 (Battin, 2002) would have extended certain financial  
          protections to military reservists called to serve on active  
          duty for national emergencies caused by the terrorist attacks on  
          New York City and the Pentagon.  This bill would have extended  
          certain existing misdemeanor provisions relating to rent relief  
          to a larger class of military reservists.  This bill died in the  
          Senate Committee on the Judiciary.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  8/9/13)

          American Legion, Department of California
          AMVETS, Department of California
          Attorney General Kamala Harris
          California Association of County Veterans Service Officers
          California State Commanders Veterans Council
          National Guard Association of California
          Vietnam Veterans of America, California State Council

           ARGUMENTS IN SUPPORT  :    According to the author:

            Military reservists who are called to active duty to serve  
            in Iraq and Afghanistan receive the financial protection to  
            defer payments without interest, up to 180 days, on a  
            mortgage, credit card, retail installment contract, retail  
            installment account, two car loans, and property tax.

            AB 526 will expand the financial protections currently given  
            to military reservists called to active duty to serve in  
            Iraq and Afghanistan to all military reservists called to  

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            active duty.  Also, utility payments will be added to the  
            list of able deferral obligations.

            With the Iraq and Afghanistan wars both winding down,  
            military reservists are being called to active duty to serve  
            elsewhere in the world and within the United States.   
            Current California law provides financial protections for  
            reservists who are called to active duty to serve in Iraq  
            and Afghanistan but not if the reservists is called to  
            active duty elsewhere.  When a military reservist is called  
            to active duty they have to leave their civilian job, for  
            the time being, and are put on military pay which is usually  
            substantially less than what they were making as a civilian.  
             With this dramatic shift in an individual's or family's  
            budget it can cause a lot of additional anxiety and stress  
            with budgetary shortfalls on top of the stress of being  
            called to fight for your country.

           ASSEMBLY FLOOR  :  76-0, 4/25/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,  
            Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez,  
            Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,  
            Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,  
            Yamada, John A. Pérez
          NO VOTE RECORDED:  Cooley, Lowenthal, Nazarian, Vacancy


          AL:d  8/13/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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