BILL ANALYSIS Ó
AB 2503
Page 1
Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Susan A. Bonilla, Chair
AB 2503 (Hagman) - As Amended: April 1, 2014
SUBJECT : Repossessors
SUMMARY : Revises the Collateral Recovery Act to specify that
car dealers are prohibited from using unlicensed repossessors,
to require a four month wait time before retaking a repossession
examination, to extend the period a licensed repossessor agency
(LRA) may operate under a family member in case of death of the
licensee, and to prohibit knowing submissions of false reports,
among other minor reforms. Specifically, this bill :
1)Makes it a misdemeanor, punishable by a fine of up to $5,000,
for a motor vehicle dealer that sells collateral that may be
secured by a security agreement, or a 'buy-here-pay-here'
dealer to knowingly engage a nonexempt unlicensed person to
repossess collateral on its behalf.
2)Prohibits an applicant for a repossession qualification
certificate who failed an initial or subsequent examination
from taking a subsequent examination for four months.
3)In case of the death of a person licensed as an individual,
increases from 120 to 180 the number of days following the
death of the licensee that a member of the immediate family of
the deceased licensee is entitled to continue the licensed
repossession agency (LRA) under the same license, and requires
that the required written notice to the Bureau of Security and
Investigative Services (BSIS) identify the person in charge of
running the day-to-day operations.
4)Exempts the use of a badge, cap insignia, or jacket patch by a
repossessor from the prohibition on using any identification,
other than as specified, to indicate registration as a
repossessor.
5)Authorizes BSIS to assess an administrative fine of $25, in
addition to any other fines authorized by law, against a
repossessor for knowingly submitting a false report, whether
or not it is made to an employer.
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6)Increases from one to two hours the amount of time a
repossessor has to notify law enforcement after taking
possession of a vehicle on behalf of any legal owner under the
terms of a security agreement or lease agreement, and requires
a repossessor to attempt to notify law enforcement within one
hour.
7)Requires that notification to law enforcement to include
specified information, including the location of the
repossession; the registered owner; the individual, company,
or legal owner requesting the repossession; the vehicle year,
make, and model; the last six digits of the vehicle
identification number; and the LRA's name and telephone
number.
8)Exempts from registration a vehicle that is repossessed
pursuant to the terms of a security agreement solely for the
purpose of obtaining release of the vehicle from a law
enforcement entity, impounding authority, tow yard, storage
facility, or any other person or company that has possession
of the vehicle, if the repossessor transports with the vehicle
the appropriate documents authorizing the repossession and
makes them available to a law enforcement officer on request.
9)Requires the Department of Motor Vehicles (DMV) to waive any
renewal penalties that are due for late payment for a vehicle
on which renewal fees are due and that is repossessed by a
repossessor, if the fees are paid within 60 days of taking
possession.
10)Prohibits a person from interfering with the transport of a
vehicle to a storage facility, auction, or dealer by a
repossessor once repossession is complete, and makes a
violation of that provision an infraction.
11)Makes a person who operates or is in charge of any storage
facility where vehicles that are removed by law enforcement or
public employees are stored, and who requires a copy of a
credit card before releasing a vehicle, civilly liable to the
owner of the vehicle or the person who tendered the fees for
four times the amount of towing and storage charges, up to
$500.
12)Deletes obsolete provisions of law relating to the sale of
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collateral.
EXISTING LAW
1)Provides for the licensing and regulation of LRAs,
repossessors, and repossessor qualified managers by BSIS under
the Department of Consumer Affairs. (Business and Professions
Code (BPC) Section 7500 et seq.)
2)Establishes the Collateral Recovery Act (Act), which 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. (BPC 7500 et seq.)
3)Makes it a misdemeanor, punishable by a fine up to $5,000, for
any person or financial institution to knowingly engage a
nonexempt unlicensed person to repossess collateral on its
behalf. (BPC 7502.1, 7502.2)
4)Requires an LRA to be under the active charge of a holder of a
qualification certificate, and prohibits an applicant for a
qualification certificate who failed to pass an initial
examination from taking a subsequent examination unless he or
she has paid the reexamination fee, as specified. (BPC
7505.5, 7504, 7504.4)
5)In case of the death of a person licensed as an individual,
authorizes a member of the immediate family of the deceased
licensee to continue the LRA under the same license for 120
days following the death, if written notice is made to BSIS
within 30 days of the death. (BPC 7505.3)
6)Authorizes BSIS to assess a $25 administrative fine for using
any identification to indicate registration as a repossessor,
other than the BSIS-issued registration card or a
BSIS-approved employer identification card issued by the LRA.
(BPC 7508.1)
7)Authorizes a repossessor to wear a badge, cap insignia, or
jacket label if it includes specified information. (BPC
7508.8)
8)Authorizes BSIS to assess an administrative fine of $25, in
addition to any other fines authorized by law, against a
repossessor for knowingly submitting a false report to his or
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her employer. (BPC 7508.5)
9)Requires a repossessor to notify law enforcement within one
hour after taking possession of the vehicle, and makes a
violation of that provision an infraction. (Vehicle Code (VC)
Section 28)
10)Exempts from registration a vehicle repossessed pursuant to
the terms of a security agreement solely for the purpose of
transporting the vehicle from the point of repossession to the
storage facilities of the repossessor, and from the storage
facilities to the legal owner or a licensed motor vehicle
auction. (VC 4022)
11)Requires, when a legal owner or his or her agent repossesses
a vehicle on which renewal registration fees are due, the DMV
to waive any renewal penalties that are due for late payment
if the fees are paid within 60 days of taking possession. (VC
9561)
12)Requires a person who operates or is in charge of any storage
facility where vehicles that are removed by law enforcement or
public employees are stored to accept a valid bank card or
cash for payment of towing and storage, and makes a person who
refused to accept a valid bank card civilly liable to the
owner of the vehicle or to the person who tendered the fees
for four times the amount of towing and storage fees, up to
$500. (VC 22651.1)
13)Makes it an infraction for any person to violate, or fail to
comply with any provision of the Vehicle Code, or any local
ordinance adopted pursuant to the Vehicle Code. (VC 40000.1)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill updates the Act to revise a
number of industry practices and provide licensees with
certain new protections, including new prohibitions against
the use of unlicensed repossessors, expanding prohibitions
against submitting false reports, imposing restrictions on
repeat examination applicants, extending the length of time an
LRA may continue after the death of the licensee, and
extending the time a repossessor has to provide notice to law
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enforcement after a repossession.
This bill also exempts repossessed vehicles from certain
registration requirements and penalties, makes it an
infraction to interfere with the transport of a repossessed
vehicle, and creates civil liability for making a copy of a
credit card used to release a stored vehicle.
This bill is sponsored by the California Association of Licensed
Repossessors.
2)Author's statement . According to the author, "[This bill]
updates provisions of the [Act] and various sections of the
Vehicle Code, relating to repossessions. This bill would
provide clarity to current codes while addressing various
issues pertaining to the activities of licensed repossession
agencies. Specifically the issues of identification,
notification requirements, and registration and renewal fee
exemptions are addressed.
"Last year's AB 791 ensured proper identification within the
industry by authorizing a licensee to wear a badge, cap
insignia, or jacket patch that meets specified requirements.
The Department of Consumer Affairs (DCA) is currently
authorized to levy fines for using any identification to
indicate registration as a repossessor other than a
registration card issued by the Bureau of Security and
Investigative Services. This bill would clarify this section
by adding the authorized badge, insignia, or patch as allowed
identification that is exempt from this section.
"Current law requires repossessors to notify law enforcement
within one hour of taking possession of a vehicle whenever
possession is taken by or on behalf of any legal owner under
the terms of a security agreement or lease agreement.
However, this provision is not practical, as it can be
difficult to get through to the appropriate law enforcement
agency within a one-hour time-frame. This bill would reflect
a more realistic time frame by changing the requirement to
attempting notification within one hour, and to accomplish
notification within two hours.
"This bill would exempt registration for a vehicle repossessed
pursuant to the terms of a security agreement solely for the
purpose of obtaining release of the vehicle from an impounding
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authority. This prevents a repossessor from being burdened
with paying for a registration simply for attempting to obtain
a release for a vehicle. Additionally, this bill would
prevent a repossessor from having to pay registration renewal
penalties if repossessing a vehicle on which fees are overdue,
as long as the fees are paid within 60 days of taking
possession."
3)The profession of repossession . In order to purchase a home,
vehicle, or a major appliance, a consumer may seek out a
lender in order to finance the deal. A security agreement
(e.g. mortgage, obligation, or lease agreement) gives a lender
a security interest in a specified asset or property pledged
as collateral. When a debtor defaults on payments, the lender
is authorized to collect and resell the collateral to offset
the delinquent amount owed by the debtor. Under existing
law, a creditor may use a collections agency to recover loan
payments in default from customers, and if that is
unsuccessful, a creditor may hire an LRA to recover - or
repossess - viable collateral for resale, with the proceeds
going towards the outstanding loan amount.
A substantial portion of repossessions involve vehicles due to
their relatively high value, the ease of resale and the
ability to repossess vehicles without home entry or other
permission since they are commonly parked outside.
According to BSIS, there are around 400 LRAs, over 1,000
repossessors, and close to 450 repossessor qualified managers
licensed in California.
4)Prohibition against using unlicensed repossessors . In
addition to financial institutions that may secure collateral
under a security agreement, other entities, such as car
dealers (which typically use third party financing) and
buy-here-pay-here dealers (dealers that do not use third party
financing and maintain their own sales and lease portfolios)
may have collateral that is secured under a security
agreement. According to the sponsors, these car dealers,
especially buy-here-pay-here dealers, represent a large number
of lenders who use unlicensed repossessors to collect their
collateral.
Existing law makes it a misdemeanor for "any person" to
knowingly engage a nonexempt unlicensed person to repossess
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collateral on its behalf, and specifies that financial
institutions are also subject to a misdemeanor for a
violation. Although a car dealer is already subject to a
misdemeanor for a violation of those provisions, which apply
to "any person," the sponsors assert that making it explicit
in statute that car dealers are also subject to the same
provisions may reduce unlicensed activity.
5)Extension of license in case of death of licensee . If an LRA
is licensed as an individual, and that individual dies, an
immediate family member of the former licensee may continue
the LRA under the same license for up to four months following
the death, if written notice is made to BSIS within 30 days of
the death. This bill would extend this timeframe to six
months, thereby giving more time for family members to get
their affairs in order and to obtain a new license, if
necessary.
6)Clarifying and updating the act . AB 791 (Hagman) (Chapter
340, Statutes of 2013) authorized repossessors to voluntarily
wear badges, cap insignia, or jacket labels that identify the
LRA's name, license number and role as a repossessor to help
consumers visually identify a licensed repossessor for LRAs
that choose to identify themselves in that manner. However,
BPC 7508.1 still authorizes BSIS to assess a $25
administrative fine for using any identification other than a
bureau-issued registration card, or a bureau-approved employer
identification card issued by the LRA, to indicate
registration as a repossessor. This bill amends this section
to conform to the new authorization provided by AB 791.
Because AB 791 also prohibited an LRA from selling repossessed
collateral, this bill would also delete obsolete provisions
relating to the sale of collateral in accordance with AB 791.
7)Law enforcement notification . Repossessors are required to
notify law enforcement within one hour after taking possession
of a vehicle, and may be found guilty of an infraction and
punishable with a fine between $300 and $500. District
attorneys, city attorneys, and city prosecutors are required
to notify BSIS of any convictions. While it is unknown how
many repossessors have been fined or convicted for violating
these provisions, according to the sponsors, it has been much
more difficult in recent years to get through to law
enforcement within one hour of repossessing a vehicle, and
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repossessors are frequently being instructed to call back
because more pressing matters require immediate attention.
This bill would give repossessors a more realistic timeframe to
comply with notice requirements, and would also standardize
the information required to be provided to law enforcement to
provide consistency to repossessors and law enforcement.
8)Registration and renewal penalty exemptions . Repossessed
vehicles are exempt from registration requirements for
purposes of transporting the vehicle from the point of the
repossession to the storage facilities of the repossessor, and
from the storage facilities to the legal owner or a vehicle
auction. After a repossessed vehicle reaches the legal owner
or a vehicle auction, registration is not required to be paid
until the vehicle is sold to its next owner. However, this
exemption does not apply when a vehicle is impounded or held
by a person or entity and the repossessor is seeking release
of the vehicle. This bill would also exempt repossessors
seeking to release a vehicle from an impounding entity from
paying registration fees, which would leave that
responsibility with the future owner of the vehicle.
In addition, the DMV currently waives renewal penalties for late
renewal registration fees for a vehicle that is repossessed by
a legal owner, or his or her agent, if those fees are paid
within 60 days of taking possession. This bill would clarify
that this exemption would also apply to vehicles that were
repossessed by a repossessor on behalf of a legal owner.
9)Interfering with the transport of a repossessed vehicle .
Despite provisions of law that make it an infraction for
persons to willfully tamper with a vehicle or to climb onto or
in it, or make it a misdemeanor for a person to prevent
someone with custody or possession of a vehicle from taking or
driving the vehicle without the owner's consent, the sponsors
assert that repossessors frequently encounter debtors who
interfere with their duties, which poses a risk to both the
debtor and the repossessor. The sponsors seek to reduce these
risky encounters by making clear that it is unlawful to
interfere with the transport of a repossessed vehicle, and
assert that debtors may be deterred from interfering with a
repossessed vehicle if they knew they could be subject to an
infraction.
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10)Questions for the Committee .
Is a mandatory four month wait period for reexamination
warranted? LRAs are required to have a qualified manager in
charge of the day-to-day operations of the business, and
existing law requires qualified managers to pass the
repossession examination. Those who fail the examination may
currently retake the examination upon paying reexamination
fees and submitting a completed application for reexamination.
According to the sponsors, this process may take two to three
weeks. Currently, BSIS has partnered with an outside entity
to administer examinations, and examinees can schedule an
examination six days a week. According to the sponsors, some
applicants retake an examination as often as possible until
they eventually pass, rather than focusing on acquiring the
requisite knowledge, which this bill seeks to prevent by
requiring a four month wait time.
It is unclear the extent to which the current examination
structure poses a risk to consumers, and there is no direct
evidence of such. However, making an applicant wait four
months before retaking an examination may pose a barrier to
LRAs who may be waiting to start a business or find someone
who can replace a current or former qualified manager in order
to be in compliance with the Act, and may unfairly penalize
applicants who were appropriately prepared, but perhaps had a
"bad test day".
Additionally, no other licensed profession under BSIS, including
private patrol operators, alarm company operators, or private
investigators, has a mandatory wait period for reexamination.
According to BSIS, creating a different testing requirement
for repossessors that is not in accordance with other licensed
professions would require substantial reconfiguration of the
current licensing system, including the new BreEZe licensing
system BSIS is transitioning to, and result in implementation
delays and significant costs.
As a result, the Committee may wish to consider leaving in place
the current law regarding examination requirements, and that
the corresponding language of this bill be deleted.
Are there instances where it might be appropriate to make a copy
of a credit card? When a repossessor obtains release of a
vehicle from a storage facility, the facility may make a
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photocopy of their driver license and the credit card used to
pay for the release. According to the sponsors, allowing
facilities to have hard copies of credit card account numbers
in addition to copies of a person's driver license, which
contains personally identifying information, opens up great
risk to credit card fraud.
The sponsors note that unlike other companies that may be
required to notify customers of security breaches that may
have jeopardize the security of someone's credit card
information, these facilities do not follow such protocols.
They also point out that hard copies of credit card
information are unnecessary because the facility will already
have a copy of someone's driver license and the transaction
will already be recorded by virtue of running the credit card,
which may produce a receipt that has some identifying
information. This bill would prohibit making a copy of a
credit card used to release a vehicle, and make a person at
the facility civilly liable to the vehicle owner or person who
tendered the fees up to four times the amount of towing and
storage fees, up to $500, for a violation.
While it there no known state prohibition on making copies of a
person's credit card, the Song-Beverly Credit Card Act does
prohibit printing more than five numbers of a person's credit
card on a receipt that is provided to the cardholder or
retained by the entity. However, that law does make an
exception when the sole means of recording a person's credit
or debit card account number is by handwriting or by an
imprint or copy of the credit card, and does not apply to
other documents that are used for internal administrative
purposes. As a result, the Committee may wish to consider
amending the bill to insert a similar allowance for making or
retaining a copy of a credit card when it is for a legitimate
business purpose.
11)Previous legislation . AB 791 (Hagman) (Chapter 340, Statutes
of 2013) authorized a repossessor to wear certain
identification, as specified, prohibited a repossessor from
selling repossessed collateral or accepting payment from a
debtor in lieu of repossession, and prohibited a repossession
agency from disclosing personal employee information.
AB 505 (Hagman) (Chapter 322, Statutes of 2009) revised the Act
and limited an LRA's liability for damages to a vehicle,
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allowed the impound of any tow vehicle used to violate the
Act, narrowed the definition of lawful experience for
qualified managers of repossession agencies, and required
impound agencies to accept a valid bank credit card or cash.
SB 821 (Committee on Business, Professions and Economic
Development), Chapter 307, Statutes of 2009, required that if
more than one vehicle is repossessed, each vehicle shall be
considered and reported separately for purposes of meeting law
enforcement notification requirements.
SB 532 (Committee on Transportation), Chapter 1007, Statutes of
1999, required that the notification to law enforcement
agencies that is required whenever possession of a vehicle is
taken by or on behalf of any legal owner under the terms of a
security or lease agreement notification be made within one
hour after taking possession of the vehicle.
12)Suggested Committee amendments .
The Committee and author may wish to consider accepting the
following technical and clarifying amendments:
a) In the title of the bill, strike "75.4.4".
b) On page 4, line 3, strike "institution," and add
"institution or".
c) On page 4, line 4, strike "may be" and add "is".
d) On page 4, line 5, strike "paragraph (73) of".
e) On page 4, line 7, strike "deal" and add "dealer".
The Committee and author may wish to consider the following
amendment to delete the proposed language pertaining to a four
month restriction on reexaminations:
f) On pages 4, strike lines 33 and 34, and on page 5,
strike lines 1 to 7, and renumber the remaining bill
sections.
The Committee and author may wish to consider the following
amendment to add an exemption for copying of credit cards when
necessary to the transaction:
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g) On page 11, line 1, add "(a)" at the beginning of the
paragraph.
h) On page 11, line 19, add a new subdivision (b) and add,
"This section shall not apply to transactions in which the
sole means of recording the person's credit card account
number is by handwriting or by an imprint or copy of the
credit card."
i) On page 11, former line 19, insert "(c)".
13)Arguments in support . According to the sponsors, "The
California Association of Licensed Repossessors (CALR)
supports AB 2503, legislation [?] that would update provisions
of the Collateral Recovery Act in the Business and Professions
Code and various sections of the Vehicle Code relating to
repossessions. These revisions would provide clarity and
enhance the protection of California consumers?. AB 2503
updates statutes regulating repossession agencies to clarify
responsibility of fees and registration, and to ensure safety
and accountability within the profession."
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Licensed Repossessors (sponsor)
Opposition
None on file.
Analysis Prepared by : Eunie Linden / B.,P. & C.P. / (916)
319-3301