BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 791
                                                                  Page  1

          Date of Hearing:   May 7, 2013

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                              Richard S. Gordon, Chair
                    AB 791 (Hagman) - As Amended:  April 29, 2013
           
          SUBJECT  :   Collateral recovery: repossessors.

           SUMMARY  :   Prohibits a repossessor from selling repossessed  
          collateral or accepting payment from a debtor in lieu of  
          repossession, forbids a repossession agency from disclosing  
          personal employee information as specified, and also authorizes  
          a repossessor to wear certain identification, as specified.   
          Specifically,  this bill  :  

          1)Prohibits a licensed repossession agency (LRA) or its  
            registrants from selling repossessed collateral, and  
            authorizes the Bureau of Security and Investigative Services  
            (BSIS) to fine the repossessor $100 for the first violation  
            and $500 for each subsequent violation.  

          2)Prohibits a LRA or its registrants from making a demand for  
            payment in lieu of repossession.

          3)Includes the registrant's name, the licensee's name and  
            address, and the license number amongst other information on  
            the application that shall be treated as confidential pursuant  
            to the Information Practices Act of 1977.  

          4)Prohibits a LRA from publicly disclosing, without a court  
            order, the residential address, residential telephone number,  
            cellular phone number, driver's license number, work schedule,  
            location at any point in time, or any other personal  
            information for any licensee, registrant, employee or  
            independent contractor that it employs. 

          5)Authorizes a licensed repossessor to wear a badge, cap  
            insignia, or jacket label if it includes all of the following:  


             a)   A substantial part of the LRA's name; 

             b)   The BSIS-issued license number; and, 









                                                                  AB 791
                                                                  Page  2

             c)   A word referring to the individual as a repossessor. 

          6)Authorizes BSIS to fine a licensed repossessor $25 for  
            violating the above provisions related to identification  
            requirements. 

           EXISTING LAW  : 

          1)Provides for the licensing and regulation of LRAs,  
            repossessors, and repossessor qualified managers by the BSIS  
            under the Department of Consumer Affairs. (Business and  
            Professions Code (BPC) Section 7500 et al.)

          2)Establishes the Collateral Recovery Act (Act) governing  
            collateral repossessions by a legal owner, lienholder, lessor  
            or lessee, or the agent of any of them based on written  
            authorization and a security agreement.  (BPC 7500 et al.) 

          3)Authorizes a LRA to sell collateral with the written  
            authorization from the legal owner of the collateral, and  
            specifies how the sale proceeds shall be remitted to the legal  
            owner.  (BPC 7508.2(c))

          4)Authorizes BSIS to fine the repossessor, as specified, for  
            failing to remit money from the sale of the collateral to the  
            legal owner, as specified. (BPC 7508.2(c))

          5)Authorizes a LRA or its employees to demand for payment in  
            lieu of repossession, if the demand is made pursuant to an  
            assignment for repossession in accordance with the state  
            Rosenthal Fair Debt Collection Act.  Requires the repossessor  
            to issue a receipt of payment to the individual and to submit  
            the payment to the creditor. (BPC 7507.4) 

          6)Specifies that vehicle repossession is complete when the  
            repossessor gains entry to the collateral or when the  
            collateral becomes connected to the repossessor's tow vehicle.  
             Prohibits any person other than the legal owner to direct a  
            repossessor to release a vehicle without the legal authority  
            to do so. (BPC 7507.12)

          7)Authorizes BSIS to assess a $25 fine against a repossessor who  
            uses any identification to indicate registration as a  
            repossessor except an employer BSIS-approved identification  
            card issued by the LRA. (BPC 7508.1(b))








                                                                  AB 791
                                                                  Page  3


          8)Prohibits a LRA or its employees from false or misleading  
            representation during the recovery of collateral, including  
            the implication that the individual is vouched for, bonded by,  
            or affiliated with the United States or with any state,  
            county, city, or city and county, including the use of any  
            badge, uniform, or facsimile thereof.  Authorizes BSIS to  
            issue a warning notice for the first violation, a $25 fine for  
            the second violation, and a $100 fine for any subsequent  
            violation. (BPC 7508.3) 

          9)Defines the following: 

             a)   "Repossession agency" to include any person who engages  
               in business or accepts employment to locate or recover  
               collateral, whether voluntarily or involuntarily, which is  
               subject to a security agreement (BPC 7500.1); 

             b)   "Repossessor's tow vehicle" to mean a tow vehicle which  
               is registered to a licensed repossessor that is used  
               exclusively in the course of the repossession business  
               (Vehicle Code Section 615); and, 

             c)   "Security agreement" to mean an obligation, pledge,  
               mortgage, chattel mortgage, lease agreement, deposit, or  
               lien, given by a debtor as security for payment or  
               performance of his or her debt, by furnishing the creditor  
               with recourse to be used in case of failure in the  
               principal obligation. (BPC 7500.1)

           FISCAL EFFECT  :   None.  This bill is keyed non-fiscal by the  
          Legislative Counsel. 

           COMMENTS  :   

           1)Purpose of this bill  .  This bill aims to provide additional  
            protections for both consumers and licensed repossessors by  
            revising the Act which governs how repossesors may legally  
            recover collateral property on behalf of creditors.  Those  
            revisions include a prohibition on repossessors accepting  
            payment on behalf of creditors - either by selling the  
            collateral, or demanding payment in lieu of repossession - and  
            then transmitting those payments to the creditor.  This bill  
            would also prohibit LRAs from publicly disclosing personal  
            employee information without a court order, and authorize a  








                                                                  AB 791
                                                                  Page  4

            repossessor to wear a badge, insignia, or jacket label, as  
            specified.  This bill is sponsored by the California  
            Association of Licensed Repossessors (CALR).

           2)Author's statement  .  According to the author, "AB 791 updates  
            provisions of the Act to address issues pertaining to the  
            activities of LRAs: confidentiality of licensee information,  
            appropriate authorizations for licensed repossessors, and  
            proper identification." 

           3)The profession of repossession  .  When a debtor defaults on  
            payments for a home, vehicle, or product, the creditor is  
            authorized to collect and resell the collateral to defray the  
            delinquent amount owed by the debtor.   Under existing law, a  
            creditor may use a collections agency to recover loan payments  
            in default from customers, and if that is unsuccessful, a  
            creditor may hire a LRA to recover viable collateral for  
            resale, with the proceeds going towards the outstanding loan  
            amount.  

            A substantial portion of repossessions involve vehicles due to  
            their relatively high value, the ease of resale and the  
            ability to repossess vehicles without home entry or permission  
            since they are commonly parked outside.    

            According to BSIS, there are currently about 400 LRAs, 1,100  
            repossessors, and 450 repossessor qualified managers operating  
            in California.

           4)Banning the sale of collateral  .  Generally, once repossessors  
            recover collateral they will deliver it to an auctioneer to  
            sell at fair market value.  The proceeds of repossessed  
            collateral, minus the costs for repossession and resale, are  
            deducted from a debtor's outstanding balance owed to a  
            creditor.  For example, if a debtor owes $10,000 for a vehicle  
            that is repossessed and sold for $6,000, the debtor still owes  
            the creditor $4,000, even though he or she no longer owns or  
            possesses the vehicle.  

            While the majority of repossessed vehicles are sold at  
            auction, a repossessor may personally sell the collateral if  
            the creditor authorizes such a sale in the repossessor's  
            contract.  However, the sponsors contend that this outcome is  
            problematic, because it does not guarantee that a repossessed  
            vehicle will be sold at fair market value because a  








                                                                  AB 791
                                                                  Page  5

            repossessor's sale is not subject to the same public bidding  
            requirements as an auction. 

            For example, an unscrupulous repossessor may intentionally  
            sell a repossessed vehicle to a relative or friend at a lower  
            price than what could have been fetched at an auction, which  
            results in a smaller recovery and a larger outstanding debt  
            for the consumer.  The sponsor argues that repossessors  
            usually deliver vehicles to auctions instead of selling them  
            in order to avoid a dispute with the consumer over a vehicle's  
            sale price. 

            This bill simply prohibits a repossessor from selling  
            collateral.  BSIS would have the authority to issue a $100  
            fine for the first violation and $500 for each subsequent  
            violation. 

           5)Banning collection in lieu of repossession  .  Currently,  
            creditors can contractually require repossessors to attempt to  
            collect payment from a debtor prior to the seizure of  
            collateral during an unannounced repossession attempt.  This  
            process, referred to as "contact and collect," requires a  
            repossessor to knock on the debtor's door and ask if the  
            debtor would like to pay the debt in lieu of repossession.  A  
            debtor who agrees to pay under this process can keep the  
            collateral and the repossessor will issue a receipt to the  
            debtor as proof of payment and then deliver the collected  
            payment to the creditor.  The benefits of the "contact and  
            collect" process is that it creates a win-win situation for  
            all parties:  the consumer gets to keep the car, the creditor  
            is paid, and the repossessor is paid for services rendered and  
            does not have to deliver a vehicle to auction or log  
            repossessed inventory. 

            However, if a debtor contests the repossession under the  
            "contact and collect" process, the repossessor cannot collect  
            payment nor can he or she repossess the vehicle because it  
            would be illegal.  A repossessor may leave and reattempt  
            repossession on a later date, but the debtor may use the delay  
            to conceal the vehicle.  The "contact and collect" process  
            also puts the repossessor in the position of being responsible  
            for money collection when their expertise lies in property  
            seizure. 

            Alternatively, a repossessor is also allowed to seize a  








                                                                  AB 791
                                                                  Page  6

            vehicle without the debtor's knowledge or consent, which is  
            known as a "hook and book."  Under this process, the  
            repossessor simply seizes a vehicle that is publicly  
            accessible (usually parked on the street or in the driveway).   
            Once the vehicle is hitched to the repossessor's tow truck,  
            repossession is technically complete and a debtor cannot stop  
            the repossessor from driving away with the vehicle.  If a  
            debtor wants the vehicle back, the debtor must contact the  
            creditor to work out a financial arrangement.  If the debtor  
            witnesses the repossession and wishes to pay for and keep the  
            vehicle after repossession is complete, a repossessor will  
            call the creditor to accept payment over the phone and release  
            the vehicle once payment is received and authorization to  
            release is granted by the creditor. 

            This bill would prohibit "contact and collect" practices,  
            leaving repossessers to rely on "hook and book" methods which  
            do not require repossessors to announce their presence prior  
            to attempting repossession. 

           6)Banning disclosure of an employee's personal information  .  The  
            qualifying manager of a LRA is financially liable for employee  
            negligence, such as any damage caused in the course of  
            repossessing a vehicle.  LRAs are not statutorily required to  
            carry liability insurance coverage, but often do purchase it  
            voluntarily to protect themselves against potential  
            liabilities that may arise in the course of repossession.  A  
            LRA is also required to insure repossession tow vehicles.   
            Repossessors who damage vehicles may be fired or released from  
            service, but the LRAs may still experience an increase in  
            their insurance premiums and deductibles.

            According to the sponsors, LRAs may retaliate against a former  
            employee by informing a debtor whose vehicle was repossessed  
            how to locate that former employee by disclosing personal  
            information such as the new work address.  Debtors might use  
            that information to track a repossessor down and retaliate. 

            Currently, the BSIS does not disclose personal information  
            about a repossessor.  An online license search of a licensed  
            repossessor via the BSIS Web site will only display the  
            repossessor's name and license number.  

            This bill would prohibit the disclosure of personal  
            information without a court order to protect the safety of a  








                                                                  AB 791
                                                                  Page  7

            repossessor in the performance of duties.

           7)Authorization to wear badges, insignia, and labels  .   
            Currently, repossessors are prohibited from using any  
            identification other than the BSIS-issued registration card.   
            The sponsor contends that the lack of obvious official  
            identification has presented problems with debtors who see an  
            individual dressed in plain clothes repossessing their vehicle  
            and believe the repossessor is stealing the vehicle.  This can  
            result in a dangerous situation if the debtor resorts to  
            violence to defend his or her property from a supposed thief.   
               

          The sponsors believes that authorization to voluntarily wear  
            badges, insignia, or jacket labels identifying the LRA's name,  
            license number and role as a repossessor will help consumers  
            visually identify a licensed repossessor for LRAs that choose  
            to identify themselves in that manner.  These uniform  
            provisions were modeled after the uniform requirements of  
            security guards who are also licensed by BSIS.  

           8)Questions for the Committee.   Given that this bill authorizes  
            and creates a standard for official identification gear  
            (badges, insignia and labels) in order to better inform  
            consumers of the repossessor's legitimate role and perhaps  
            even prevent violent confrontations, it is unclear why these  
            measures are voluntary.  Presumably, protection of the  
            consumer and the repossessor would be maximized if the  
            repossessor were required to wear some form of  
            badge/insignia/label while on duty - and particularly when  
            repossessing a vehicle.  The Committee may wish to inquire of  
            the author and sponsor as to why identification measures  
            should be voluntary rather than mandatory. 

           9)Technical amendments  .  The Committee and author may wish to  
            consider the following technical amendments: 

          According to the author, the April 29th amendments mistakenly  
            did not delete the language that would have prohibited BSIS  
            from publicly releasing information obtained in an application  
            except for the applicant/licensee's name, address, and  
            registration number.  The Committee recommends rectifying that  
            error with a technical amendment to delete the unnecessary  
            language in question.









                                                                  AB 791
                                                                  Page  8

               On page 2, line 6, after "Code)" insert "and shall not be  
               released to the public except for the registrant's full  
               name, the licensee's name and address, and the registration  
               number"

               On page 2, line 7 delete "the following"

            In order to prevent any potential conflict with other  
            provisions of law, the employee privacy provision of this bill  
            should be amended to make clear that it does not override  
            other legitimate provisions of law that require or permit  
            information to be disclosed:   

              On page 4, line 36, strike "A" and insert "Except as  
            otherwise provided by law, a"

            The badge/insignia/label requirement for the LRA's name should  
            be amended to permit the use of the LRA's entire name, require  
            the use of the word "repossessor," and be approved by BSIS, if  
            possible.  The suggested amendments would also clarify that  
            these provisions do not apply to temporary permits that  
            authorize repossessors to work prior to initial licensure, and  
            prohibit a repossessor from wearing a badge on a belt, which  
            is a style of identification usually reserved for law  
            enforcement.

                 On page 5, line 10, strike "A" and insert "All or a"

                 On page 5, strike line 15, and insert "(3): The word  
          "repossessor." 

               On page 5, line 16, before "(b)" insert: 

                    (4) A repossessor shall not wear a badge on his or her  
               belt.
                    (5) All badges, cap insignias, or jacket labels worn  
                    by a repossessor shall be of a standard design  
                    approved by the director and shall be clearly visible.  

                    (6) These provisions shall not apply to temporary  
               permits. 

           10)Arguments in support  .  According to the sponsor, the CALR,  
            this bill is "intended to ensure privacy, legitimacy, and  
            accountability within the [repossession] profession.  Numerous  








                                                                  AB 791
                                                                  Page  9

            situations have occurred where an individual at a LRA has  
            disclosed, without a court order, personal information about  
            the licensee who actually performed the repossession.  Many  
            times, the licensee no longer works for the LRA and left the  
            LRA under unfavorable terms.  This is information that cannot  
            be found on the [BSIS] Web site.   This information has  
            usually been released to an individual whose vehicle was  
            repossessed by the licensee? and claims the repossessed  
            vehicle was damaged or is just angry and upset that their  
            vehicle was repossessed.  

            "Releasing personal information about individual who performed  
            the repossession has the potential for serious consequences.   
            Such release has resulted in the vandalizing of the licensee's  
            truck and residence and, on some occasions, physical  
            altercations? 

            "An individual licensed to repossess automobiles is not  
            trained in the laws and regulations that control collection of  
            payments.  The test a licensee must pass to receive a  
            qualified manager's license does not cover [debt collection  
            laws].  Therefore, it is not in the best interest of the  
            California consumer to have an individual that has no formal  
            training in debt collection [to be] in the field collecting  
            money? It is simply better that the job of collecting payments  
            be left to the individuals formally trained and knowledgeable  
            about payment collection laws, rules, and regulations. 

            "Situations often arise where a person who is having his or  
            her vehicle repossessed becomes alarmed and believes that the  
            vehicle is in the process of being stolen when in fact it is  
            being lawfully repossessed by a licensed repossessor.  In  
            these instances, identification of the individual who is  
            conducting the repossession would assist the public in having  
            important information about the status of the individual as a  
            repossessor, while diffusing possible [violent] situations  
            during a repossession before it escalates."

           11)Previous Legislation  .  AB 1722 (Hagman) of 2010 would have  
            prohibited a LRA from publicly disclosing a repossessor's  
            residential address, residential telephone number, cellular  
            phone number, or driver's license number.  AB 1722 was held in  
            the Assembly Appropriations Committee.

           REGISTERED SUPPORT / OPPOSITION  :   








                                                                  AB 791
                                                                  Page  10


           Support 
           
          California Association of Licensed Repossessors (sponsor) 

           Opposition 
           
          None on file. 
           
          Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916)  
          319-3301