BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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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 León, 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, Chávez, 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 Hernández,  
            Jones, Jones-Sawyer, Levine, Logue, Lowenthal, Maienschein,  
            Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin,  
            Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,  
            V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,  
            Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,  
            Williams, Yamada, John A. Pérez
          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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