BILL ANALYSIS �
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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, Ch�vez, Chesbro, Conway,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nestande, Olsen, Pan, Patterson, Perea, V. Manuel P�rez,
Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,
Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Cooley, Lowenthal, Nazarian, Vacancy
AL:d 8/13/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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