BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 791|
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THIRD READING
Bill No: AB 791
Author: Hagman (R)
Amended: 8/13/13 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 10-0, 7/1/13
AYES: Lieu, Emmerson, Block, Corbett, Galgiani, Hernandez,
Hill, Padilla, Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/19/13
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 77-0, 5/29/13 (Consent) - See last page for
vote
SUBJECT : Collateral recovery: repossessors
SOURCE : California Association of Licensed Repossessors
DIGEST : This bill 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.
ANALYSIS :
Existing law:
1.Provides for the licensing and regulation of repossession
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agencies, repossessors, and repossessor qualified managers by
the Bureau of Security and Investigative Services (BSIS) under
the Department of Consumer Affairs (DCA).
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.
3.Specifies that the Act does not prohibit using or taking
personal effects that are connected, adjoined, or affixed to
the collateral.
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.
5.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.
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.
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.
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.
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
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card issued by the LRA.
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.
11.Defines the following terms: (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 ;
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/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 $250 for the first
and second 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 or gains control of the collateral.
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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 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, qualified
certificate holder, qualified manager, 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; (b) the
BSIS-issued license number; and (c) a word referring to the
individual as a repossessor.
9.Authorizes the BSIS to fine a licensed repossessor $100 for
the first violation, $175 for the second violation, and $250
for each subsequent violation of the above provisions related
to identification requirements.
Background
BSIS . The 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
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revocation of licenses and seeking administrative, criminal, and
civil sanctions against violators. According to the BSIS
Internet 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:
Removing a locking mechanism or security device . This bill
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; and authorizes 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 existing law, but is essential in order
to complete a safe repossession, according to the sponsor.
Embossed temporary registration card . This bill 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 will still be required to be on a secure
form prescribed by the BSIS Chief and issued by the qualified
certificate holder.
Completion of repossession . This bill revises the definition of
when a vehicle repossession is complete to also include when the
repossessor moves the entire collateral present or gains control
of the collateral. The sponsor states this updates 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
existing law.
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
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to the author's office, this ensures the protection of personal
and sensitive information, while still maintaining access to the
entire entity's business information, if needed. The author's
office 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
and retaliate. Currently, the BSIS does not disclose personal
information about a repossessor. An online license search of a
licensed repossessor via the BSIS Internet Web site will only
display the repossessor's name and license number. This bill
prohibits the disclosure of personal information without a court
order to protect the safety of a repossessor in the performance
of duties.
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 the 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.
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/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.
This bill prohibits a repossessor from selling collateral. BSIS
will have the authority to issue a $250 fine for the first and
second violation and $1,000 for each subsequent violation. This
bill eliminates the proposed restriction that the fines be based
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on a BSIS audit. This ensures that BSIS will not need to
conduct an audit as a prerequisite to establishing a violation.
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/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. This
bill prohibits "contact and collect" practices, leaving
repossessors to rely on "hook and book" methods which do not
require repossessors to announce their presence prior to
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attempting repossession.
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/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.
This bill ensures the current prohibition against wearing badges
in Business and Professions Code 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" will also be
authorized to wear a 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; and
increases the fines for violations of these provisions, from $25
per violation to a $100 fine on the first violation, $175 for
the second violation, then a $250 fine for each subsequent
violation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: Yes
According to the Senate Appropriations Committee:
Investigation and enforcement: DCA anticipates that this bill
will increase investigation and enforcement workload for 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.
SUPPORT : (Verified 8/19/13)
California Association of Licensed Repossessors (source)
ARGUMENTS IN SUPPORT : The bill's sponsor, the California
Association of Licensed Repossessors, states that this 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; and badges or insignia. The revisions proposed by
the bill are intended to ensure privacy, legitimacy, and
accountability within the profession.
ASSEMBLY FLOOR : 77-0, 5/29/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Ch�vez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Jones, Jones-Sawyer, Levine, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel P�rez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Holden, Linder, Vacancy
MW:ej 8/15/13 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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