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 AB 791 (Hagman) Page 1 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 AB 791 (Hagman) Page 2 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 AB 791 (Hagman) Page 3 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.