BILL ANALYSIS Ó AB 2503 Page 1 Date of Hearing: April 28, 2014 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair AB 2503 (Hagman) - As Amended: April 23, 2014 SUBJECT : Repossessors SUMMARY : Makes a number of minor, non-controversial changes to the Collateral Recovery Act related to repossessors, as follows: 1)Current law makes it a misdemeanor, punishable by a fine of up to $5,000, for any person or financial institution to knowingly engage a nonexempt unlicensed person to repossess collateral on its behalf. This bill additionally applies this provision to buy-here-pay-here dealers (i.e. a car dealer who finances purchases in-house). 2)Current law, in case of the death of a person licensed as an individual repossessor, authorizes a member of the immediate family of the deceased licensee to continue the licensed recovery agency (LRA) under the same license for 120 days following the death, if written notice is made to the Bureau of Security and Investigative Services (BSIS) within 30 days of the death. This bill increases the length of time a member of the immediate family can continue the LRA under the same license to 180 days and requires that the required written notice to BSIS identify the person in charge of running the day-to-day operations. 3)Current law authorizes a repossessor to wear a badge, cap insignia, or jacket label if it includes specified information. Current law additionally 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. This bill exempts the use of a badge, cap insignia, or jacket patch by a repossessor from the prohibition against using any identification, other than as specified, to indicate AB 2503 Page 2 registration as a repossessor. 4)Current law authorizes BSIS to assess a fine of $25, in addition to any other fines authorized by law, against a repossessor for knowingly submitting a false report to his or her employer. This bill authorizes BSIS to assess the fine for knowingly submitting a false report in general, whether or not it is made to an employer. 5)Current law requires a repossessor to notify law enforcement within one hour after taking possession of a vehicle on behalf of any legal owner under the terms of a security agreement or lease agreement, and makes a violation of that provision an infraction. This bill increases that time to two hours and requires a repossessor to attempt to notify law enforcement within one hour and specifies the information to be reported. 6)Current law requires the Department of Motor Vehicles (DMV), when a legal owner or his or her agent repossesses a vehicle on which renewal registration fees are due, to waive any renewal penalties that are due for late payment if the fees are paid within 60 days of taking possession. This bill additionally applies this provision to vehicles that are repossessed by a licensed repossessor. 7)This bill 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 and deletes obsolete provisions related to the sale of collateral. EXISTING LAW : 1)Provides for the licensing and regulation of LRAs, repossessors, and repossessor qualified managers by BSIS, within the Department of Consumer Affairs. 2)Establishes the Collateral Recovery Act, which governs collateral repossessions by a legal owner, lienholder, lessor or lessee, or the agent of any of them based on written AB 2503 Page 3 authorization and a security agreement. FISCAL EFFECT : Unknown COMMENTS : In order to purchase a home, vehicle, or a major appliance, a consumer may seek out a lender 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. AB 2503 updates the Collateral Recovery Act to revise a number of industry practices and provide licensees with certain new protections, including adding new prohibitions against the use of unlicensed repossessors, expanding prohibitions against submitting false reports, 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 enforcement after a repossession. This bill also exempts repossessed vehicles from certain registration requirements and penalties and makes it an infraction to interfere with the transport of a repossessed vehicle. The author's intent with the bill is to provide more clarity to current codes while addressing various issues pertaining to the activities of licensed repossession agencies. Double referral: This bill was also referred to the Business, Professions, and Consumer Protection Committee, where it passed on April 8, 2014, by a vote of 14-0. Previous legislation : AB 791 (Hagman), Chapter 340, Statutes of 2013, authorized a repossessor to wear certain identification, AB 2503 Page 4 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, 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. REGISTERED SUPPORT / OPPOSITION : Support California Association of Licensed Repossessors (sponsor) Opposition None on file Analysis Prepared by : Anya Lawler / TRANS. / (916) 319-2093