BILL ANALYSIS                                                                                                                                                                                                    Ó




                    Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 791 (Hagman) - Collateral Recovery: Repossessors
          
          Amended: August 13, 2013        Policy Vote: Business &  
          Professions 10-0
          Urgency: No                     Mandate: No
          Hearing Date: August 19, 2013                                
          Consultant: Jacqueline Wong-Hernandez                       
          
          This bill does not meet the criteria for referral to the  
          Suspense File. 
          

          Bill Summary: AB 791 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, authorizes a  
          repossessor to wear specified identification, establishes fines  
          for violations, and expands the criteria for completion of a  
          repossession.

          Fiscal Impact: 
                   Investigation and enforcement: The Department of  
                Consumer Affairs (DCA) anticipates that this bill will  
                increase investigation and enforcement workload for the  
                Bureau of Security and Investigative Services (BSIS),  
                which will require an additional $39,000 (Special Fund)  
                ongoing for a .5 Associate Governmental Program Analyst,  
                as well as minor additional travel costs.
                 Fines: Likely minor revenue increase to the BSIS from  
               the increased fine 
                  amounts and new penalties established by this bill. 

          Background: Existing state law defines 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; a  
          "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 a "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  








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          or her debt, by furnishing the creditor with recourse to be used  
          in case of failure in the principal obligation. (Business and  
          Professions Code § 7500.1)

          The licensing and regulation of repossession agencies,  
          repossessors, and repossessor qualified managers is administered  
          by the BSIS under the DCA. The Collateral Recovery Act (Act)  
          governs 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, and it: 

         1)Specifies that the Act does not prohibit using or taking  
            personal effects that are connected, adjoined, or affixed to  
            the collateral.  

         2)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. 

         3)Authorizes a repossessor 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.  

         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.  

         5)Authorizes a licensed repossession agency (LRA) or its  
            employees to demand 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.   


         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.  

         7)Authorizes BSIS to assess a $25 fine against a repossessor who  
            uses any identification to indicate registration as a  








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            repossessor except an employer BSIS-approved identification  
            card issued by the LRA.  

         8)Prohibits an 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. (BCP § 7500 et seq.)

          Proposed Law: AB 791 makes numerous changes to the Collateral  
          Recovery Act. Specifically, 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 the BSIS with the State Seal,  
               thereby better enabling BSIS to implement its new DCA  
               licensing and enforcement system.

             3)   Prohibits a repossessor from selling repossessed  
               collateral, and authorizes the BSIS to fine the repossessor  
               $250 for the first violation and $1,000 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 an 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 an LRA from publicly disclosing, without a  








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               court order, the residential address or 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  
               specified information.

             9)   Authorizes the BSIS to fine an LRA $100 for the first  
               violation, $175 for a second violation, and $250 for each  
               subsequent violation of the provisions related to  
               identification requirements.

          Staff Comments: This bill makes numerous changes to the  
          Collateral Recovery Act; some are clarifying, but others are  
          substantive shifts in the requirements and prohibitions relative  
          to LRAs. This bill also creates new penalties (fines) and  
          increases certain existing penalties. Nothing in this bill will  
          necessarily drive increased violations and enforcement  
          activities, but the bill's changes to statute could increase  
          violations since it expands prohibited activities. The extent to  
          which new workload would be created is unknown, and will depend  
          on the actions of LRAs (compliance level) and consumers (number  
          of complaints lodged).

          The DCA anticipates that this bill will result in increased  
          investigation and enforcement workload for the BSIS. The agency  
          anticipates requiring an additional half-time staff person, for  
          an annual cost for $39,000 (Special Fund) and minor travel costs  
          for that employee, both of which will be covered by LRA  
          licensing fees. To the extent that increased enforcement results  
          in greater penalties paid for violations, there will be a  
          revenue increase to the BSIS.