BILL ANALYSIS Ó
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|Hearing Date:July 1, 2013 |Bill No:AB |
| |791 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 791Author:Hagman
As Amended:June 25, 2013 Fiscal:Yes
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, and
authorizes a repossessor to wear certain identification
Existing law:
1)Provides for the licensing and regulation of repossession agencies,
repossessors, and repossessor qualified managers by the Bureau of
Security and Investigative Services (BSIS) under the Department of
Consumer Affairs (DCA). (Business and Professions Code (BPC) § 7500
et seq.)
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 seq.)
3)Specifies that the Act does not prohibit using or taking personal
effects that are connected, adjoined, or affixed to the collateral.
(BPC § 7505.2)
4)Provides that until a repossessor registration certificate is issued
or denied, a person may be assigned to work with a temporary
registration on a secure form that has been embossed by BSIS with
the state seal. (BPC § 7506.9)
5)Authorizes a repossessor to sell collateral with the written
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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))
6)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))
7)Authorizes a licensed repossession agency (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)
8)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)
9)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))
10)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)
11)Defines the following: (BPC § 7500.1)
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;
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);
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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.
This bill:
1)Specifies that the Act does not prohibit the removal of a locking
mechanism or security device on the collateral, before, during, or
after a repossession.
2)Deletes the requirement that a temporary registration card must be
embossed by BSIS with the State Seal, thereby better enabling BSIS
to implement the new DCA licensing and enforcement system BreEZe.
3)Prohibits a repossessor from selling repossessed collateral, and
authorizes BSIS to fine the repossessor $100 for the first and
second violation and $500 for each subsequent violation.
4)Revises the definition of when a vehicle repossession is complete to
also include when the repossessor moves the entire collateral
present, pushes the collateral, or gains control of the collateral.
5)Prohibits a LRA or its registrants from making a demand for payment
in lieu of repossession.
6)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.
7)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.
8)Authorizes a licensee, officer, director, partner, manager,
independent contractor, qualified certificate holder, qualified
manager, or employee of a repossession agency to wear an oval,
shield, round, square, or non-seven point badge, cap insignia, or
jacket patch if it includes all of the following:
a) A substantial part of the LRA's name;
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b) The BSIS-issued license number; and,
c) A word referring to the individual as a repossessor.
9)Authorizes BSIS to fine a licensed repossessor $100 for the first and
second violation and $250 for each subsequent violation of the above
provisions related to identification requirements.
FISCAL EFFECT: The May 24, 2013 Assembly Appropriations Committee
analysis states that costs associated with this legislation should be
minor and absorbable within existing resources.
COMMENTS:
1. Purpose. This bill is sponsored by California Association of
Licensed Repossessors (Sponsor) to update provisions of the
Collateral Recovery Act (set forth in Chapter 11, commencing with
Section 7500 of the Business and Professions Code) to address three
issues pertaining to the activities of licensed repossession
agencies: confidentiality of licensee information, appropriate
authorizations for licensed repossessors, and proper
identification.
2.Background. The Bureau of Security and Investigative Services (BSIS)
protects consumers by licensing and regulating the following
industries: alarm company operator and alarm company employees,
locksmith companies and locksmith company employees, private
investigators, private patrol operators and security guards,
proprietary private security officer and employer, repossessor
agencies and repossessor agency employees. BSIS also has
jurisdiction over firearm and baton training facilities and their
instructors.
As part of its mission, the BSIS actively investigates complaints
against its licensees and works to punish unlicensed business
operations. This includes the suspension and revocation of licenses
and seeking administrative, criminal, and civil sanctions against
violators. According to the BSIS web site, undercover sting and
sweep operations are conducted on an ongoing basis throughout all of
California.
The following provides background on the significant provisions of the
bill:
a) Removing a Locking Mechanism or Security Device. This bill
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specifies that the Act does not prohibit the removal of a locking
mechanism or security device on a vehicle, before, during, or
after a repossession. This provision would authorize a
California licensed repossessor to remove the locking mechanism
or security device, such as a "Club," or other locking device
that is securing the vehicle that is being repossessed. This is
not clearly authorized under current law, but is essential in
order to complete a safe repossession, according to the Sponsor.
b) Embossed Temporary Registration Card. This measure deletes
the requirement in existing law that a temporary registration
card must be embossed by the BSIS with the State Seal. This
change is intended to accommodate the DCA's pending
implementation of the BreEZe licensing and enforcement computer
system. The temporary registration would still be required to be
on a secure form prescribed by the BSIS Chief and issued by the
qualified certificate holder.
c) When Repossession is Complete. The bill revises the
definition of when a vehicle repossession is complete to also
include when the repossessor moves the entire collateral present,
pushes the collateral, or gains control of the collateral.
The Sponsor states that these amendments update the statute to
include all collateral. Often repossessors are repossessing
collateral such as jet skis, motorcycles, wheels and tires, and
office equipment that are covered by a conditional sales
contract. The Sponsor indicates that this change is necessary
because often the repossession of these types of collateral is
where the repossessor does not "gain entry" as required by the
current law.
d) Protection of Licensee Information. This bill prohibits
repossession agencies from disclosing to the public specific
information regarding the residence address, the residence
telephone number, the cell phone number, and the location or
driver's license number of an individual repossessor. According
to the Author, this ensures the protection of personal and
sensitive information, while still maintaining access to the
entire entity's business information, if needed.
The Author states that there have been instances where LRAs
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
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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 repossessor in
the performance of duties.
e) Demands for Payment in Lieu of Repossession. The Act
authorizes licensed repossessors to make demands for payment in
lieu of repossession, and to sell collateral recovered, as
specified in the Act. However, according to Sponsor, licensed
repossessors no longer engage in these practices. Therefore,
this bill deletes the obsolete provisions of the Act that pertain
to these practices while including provisions to prohibit such
practices.
f) Banning Sale of Collateral. Generally, once repossessors
recover collateral they will deliver it to an auctioneer to sell
at fair market value, according to the Sponsor. 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,
this outcome is problematic, because it does not guarantee that a
repossessed vehicle will be sold at fair market value because a
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.
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
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and second violation and $500 for each subsequent violation. The
amendments would also eliminate the proposed restriction that the
fines be based on a BSIS audit. This would ensure that BSIS
would not need to conduct an audit as a prerequisite to
establishing a violation.
g) 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 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.
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This bill would prohibit "contact and collect" practices, leaving
repossessors to rely on "hook and book" methods which do not
require repossessors to announce their presence prior to
attempting repossession.
h) Badges or Insignia. According to the Sponsor, proper
identification within the industry is accomplished by adding a
section to the Act specifically authorizing a licensee to wear a
badge or cap insignia and to require that the badge or cap
insignia contain a substantial part of the repossession agency
name and license number.
This identification will assist the public in having important
information about the status of the individual as a licensed
repossession agency, while diffusing possible situations during a
repossession before escalation.
Currently, repossessors are prohibited from using any
identification other than the BSIS issued registration card. 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.
Authorization to voluntarily wear badges, insignia, or jacket
patches 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.
The Sponsor describes the recent amendments to these provisions as
follows:
§ Ensures the current prohibition against wearing
badges in Section 7508.3 does not prohibit the authorization
to wear a badge, cap insignia or jacket patch.
§ Adds specificity that the BSIS-approved badge, cap
insignia, or jacket patch may be an oval, shield, round,
square or non-seven point in shape.
§ Clarifies that "qualified certificate holders" and
"qualified managers" would also be authorized to wear a
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badge, cap insignia, or jacket patch.
§ Clarifies that the "repossession agency license
number" must be on the badge, cap insignia, or jacket patch.
§ Adds a prohibition against a hanging badge being
worn around the neck.
§ Increases the fines for violations of these
provisions, from $25 per violation to a $100 fine on the
first and second violation, then a $250 fine for a third and
subsequent violations.
1.Prior Legislation. AB 1877 (Ma, Chapter 476, Statutes of 2012)
exempts, until January 1, 2018, an equipment dealer and its
employees from licensure as a repossession agency if they regularly
sell specified collateral subject to a security agreement of the
manufacturer or a manufacturer's affiliate.
SB 944 (BPED Committee, Chapter 432, Statutes of 2011) an omnibus bill,
makes several changes to various provisions pertaining to the
regulatory boards of the DCA. Established a four year retention
period for repossession agencies to keep inventory and adequate
information on file as to how, when, and to whom personal effects
were disposed of. Further allowed a person to work as a repossessor
pending receipt of the qualification certificate or registration
card if he or she has been approved by the BSIS and carries a
printout of the Bureau's approval from the Bureau's Web site and a
valid picture identification.
AB 1722 (Hagman, 2010), also sponsored by California Association of
Licensed Repossessors (CALR), would have made a number of changes to
laws that regulate vehicle repossession, impoundment, and release
from impoundment, and that specify licensing and qualification
requirements for licensed repossessors. The bill would have made
the following changes similar to those proposed in AB 791: prohibit
a repossession agency from publicly disclosing a registrant's
residential address, residential telephone number, cell phone
number, or driver's license; require a repossessor to record the
inventory, and the adequate information as to how, when, and to whom
the personal effects were disposed of in their permanent records for
a minimum of four years; specify that repossession is complete, when
the repossessor moves, pushes, or gains control of the collateral.
( Status : This bill died without being heard in the Assembly
Appropriations Committee.)
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AB 515 (Hagman, Chapter 322, Statutes of 2009) makes numerous revisions
to the Act and Vehicle Code Sections relating to the impound of
vehicles.
SB 1469 (Calderon, 2008) would have allowed the impoundment of tangible
property used to violate the Act, required law enforcement agencies
that impound vehicles to remain open, without the necessity of
making an appointment, and to issue a release to the registered
owner or legal owner of a vehicle whenever the agency is open to
serve the public, required facilities where impounded vehicles are
stored to accept credit cards, and made various revisions to the Act
concerning tow vehicles. ( Status : This bill was vetoed by the
Governor.)
SB 659 (Calderon, Chapter 192, Statutes of 2007) makes several
revisions to the laws related to repossession of motor vehicles by
clarifying provisions related to vehicle ownership, dealing with
possible threats or violence towards a repossessor, and clarifying
the requirements for impounded cars.
AB 2318 (Calderon, Chapter 418, Statutes of 2006) provides that a
repossessor shall not be required to remove property that is
attached to or on the collateral being repossessed if the
repossessor cannot determine whether or not the item is a "personal
effect" (i.e., property that does not belong to the legal owner of
the collateral) or a part of the collateral; however the repossessor
shall remove and inventory all items that can be removed without
using tools; increases the fine to $250 for a repossession agency
that does not register a repossessor with the BSIS in a timely
fashion.
AB 481 (Calderon, 2005) would have provided that a repossessor shall
not be obliged to determine whether property is a "personal effect"
or who owns the "personal effect;" provides that no one shall
interfere with a repossessor in the performance of his or her lawful
duties once the repossession, as defined, is complete. ( Status :
This bill was vetoed by the Governor.)
2.Arguments in Support. The California Association of Licensed
Repossessors (Sponsor) states that the bill updates the Act to
addresses three issues pertaining to the activities of licensed
repossession agencies: protection of licensee information; demands
for payment in lieu of repossession; badges or insignia. The
revisions proposed by the bill are intended to ensure privacy,
legitimacy, and accountability within the profession, according to
the Sponsor.
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3.Policy Issue: The use of badges by licensed repossessors. This bill
would authorize a licensed repossessor to wear a badge, cap or
jacket patch as long as they contain a substantial part of the
repossession agency's name; the repossessor license number; and a
word referring to the individual as a repossessor. The
identification is subject to approval by the BSIS and the badge may
be an oval, shield, round, square, but cannot be a seven point
badge.
The Sponsor states that repossessors are currently prohibited from
using any identification other than the BSIS issued registration
card, and indicates 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 dangerous situations if
the debtor tries to defend his or her property from a supposed
thief. The Sponsor believes the identification in the bill will
assist the public in having important information about the status
of the individual as a licensed repossession agency, while diffusing
possible situations during a repossession before escalation.
The Collateral Recovery Act already restricts a repossessor licensed in
California or any employee or registrant of a repossessor from using
any false or misleading representation during the course of a
repossession, prohibiting "The false representation or 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." (BPC § 7508.3 (a))
This issue raises some concern, specifically regarding the use of a
badge by a repossessor. On the federal level. the "Fair Debt
Collection Practices Act" prohibits debt collector from using any
false, deceptive, or misleading representation or means in
connection with the collection of any debt, and prohibits the false
representation or implication that the debt collector is vouched
for, bonded by, or affiliated with the United States or any State,
including the use of any badge, uniform, or facsimile thereof. (15
USC 1692e § 807 (1))
In California, private investigators, which are also regulated by BSIS
are prohibited from wearing or using a badge in connection with an
investigation since it may mislead others to believe that he or she
is a peace officer or other government official. (BPC § 7539)
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Furthermore, repossessors do not use the local sheriff or police to
assist in a repossession, because as peace officers they act under
"color of state law" and may not advance the completion of a
repossession or prevent a repossession from occurring. The police
or sheriff may no more force a debtor to surrender a car than they
may, after a car has been repossessed, force the repossessor to
return it. Without a court order, either action by a peace officer
would violate the "due process" requirements of the 14th Amendment
of the United States Constitution and Article 1, Section 13 and 15
of the California Constitution.
Furthermore, the presence of a peace officer or a patrol car
accompanying a repossessor has been found by several courts to
constitute "color of law" and has taken the repossession out of the
area of "purely private conduct without state assistance."
It is not so much whether the repossessor represents himself or herself
as a peace officer or not, it the use of a badge makes a debtor
think that the repossessor is a peace officer, then it is action
under "color of law."
While, the stated purpose of these provisions in the bill is to give
clearer identification of the repossessor, the Committee may wish
exercise caution about this provision authorizing the use of badges
by a person affiliated with a repossession agency.
SUPPORT AND OPPOSITION:
Support:
California Association of Licensed Repossessors (Sponsor)
Opposition:
None on files as of June 27, 2013
Consultant:G. V. Ayers