BILL ANALYSIS Ó
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|Hearing Date:June 16, 2014 |Bill No:AB |
| |2503 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 2503Author:Hagman
As Amended: April 23, 2014Fiscal: Yes
SUBJECT: Repossessors.
SUMMARY: Prohibits a buy-here-pay-here dealer from knowingly using a
unlicensed person to repossess collateral on its behalf; increases the
amount of time that a repossession business is allowed to continue
when the qualified certificate holder dies; excepts a badge, cap
insignia, or jacket patch from the prohibition on using any
identification other than a registration card; extends the time period
that a repossessor has to accomplish notification of law enforcement
after taking possession of a vehicle to two hours; exempts a
repossessed vehicle from registration for the purpose of obtaining
release of the vehicle from various impounding authorities; prohibits
interfering with the transport of repossessed vehicle.
Existing law, the Business and Professions Code (BPC):
1)Provides for the licensing and regulation of repossession agencies,
repossessors, and repossessor qualified managers by the Bureau of
Security and Investigative Services (BSIS) under the Department of
Consumer Affairs (DCA). (BPC § 7500 et seq.)
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. (BPC § 7500 et seq.)
3)Provides that a financial institution that knowingly engages a
nonexempt unlicensed person to repossess collateral on its behalf is
guilty of a misdemeanor, punishable by a $5,000 fine. (BPC §
7502.2)
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4)Defines the following: (BPC § 7500.1)
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 (Vehicle Code Section
615);
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 or her debt,
by furnishing the creditor with recourse to be used in case of
failure in the principal obligation.
5)Provides that in the death of a person licensed as an individual
repossessor, an immediate family member may continue the business
under the same license for 120 days, provided that written notice is
made to BSIS, as specified. (BPC § 7505.3)
6)Requires a repossession agency to maintain records of all
transactions, including assignments forms, specified vehicle
reports, personal effects inventory, notice of seizure, and records
of all transactions pertaining to the sale of collateral, as
specified, for not less than four years. (BPC § 7507.3)
7)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. (BPC § 7507.12)
8)Authorizes the BSIS to assess administrative fines for various
prohibited acts, including using any identification to indicate
registration as a repossessor, other than a registration card issued
by the BSIS, or an employer identification card approved by BSIS.
(BPC § 7508.1)
9)Authorizes an employee officer, director, or representative of a
repossession agency to wear a badge, cap insignia, or jacket patch
if it includes all of the following: (BPC § 7508.8)
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a) A substantial part of the licensed repossession agency 's
name;
b) The BSIS-issued license number; and,
c) A word referring to the individual as a repossessor.
Existing law, the California Vehicle Code (VC):
1)Requires that when possession is taken of any vehicle on behalf of
the legal owner under the terms of a security or lease agreement,
the person taking possession shall notify the local police
department or other law enforcement agency where the repossession
occurred within one hour. (VC § 28)
2)Defines a buy-here-pay-here dealer, as an automobile dealer who
enters into contracts to sell a vehicle and who assigns less than
90% of the sales contracts to a third party for financing. (VC §
241)
3)Provides that a repossessed vehicle is exempt from registration
solely for the purpose of transporting the vehicle, as specified,
and provided that the repossessor transports with the vehicle the
appropriate documents authorizing the repossession and makes them
available to a law enforcement officer on request. (VC § 4000)
4)Provides that if the legal owner, or the legal owner's agent,
repossesses a vehicle that has renewal fees due, the Department of
Motor Vehicles (DMV) shall waive any renewal penalties for late
payment if the fees are paid within 60 days of taking possession.
(VC § 9561)
This bill:
1)Additionally includes a buy-here-pay-here dealer in the misdemeanor
prohibition from knowingly engaging a nonexempt unlicensed person to
repossess collateral.
2)Increases the length of time an immediate family member may continue
a repossession business under the license of a person who has died
from 120 to 180 days, and requires the written notice to the BSIS to
identify the person in charge of running the day-to-day operations
of the business.
3)Deletes the requirement for a repossession agency to maintain records
of all transactions pertaining to the sale of collateral that has
been repossessed.
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4)Additionally exempts a badge, cap insignia, or jacket patch from the
prohibition on using any identification to indicate registration as
a repossessor.
5)Increases the time in which a person is required to notify the police
or law enforcement agency, of the repossession of a vehicle from one
hour to two hours, and requires the report to include the following
information:
a) The location of the repossession.
b) The registered owner as provided on the assignment.
c) The individual, company, or legal owner requesting the
repossession.
d) The vehicle year, make, and model.
e) The last six digits of the vehicle identification number.
f) The repossession agency name and telephone number.
6)Provides that a repossessed vehicle is exempt from registration in
order to obtain release of the vehicle from law enforcement, an
impounding authority, tow yard, storage facility, or any other
entity that has possession of the vehicle, provided that the
repossessor transports the repossession documents with the vehicle
and makes them available to law enforcement on request.
7)Additionally authorizes the DMV to waive penalties for late vehicle
registration payment for a repossessed vehicle in the possession of
a licensed repossessor.
8)Prohibits a person from interfering with the transport of a vehicle
to a storage facility, auction, or dealer by a licensed repossessor.
9)Makes technical, updating and conforming changes.
FISCAL EFFECT: This measure has been keyed "fiscal" by Legislative
Counsel. The May 7, 2014 Assembly Appropriations Committee analysis
cites:
1) Minor costs to the DCA for increased investigation and enforcement
workload for the BSIS.
2) Likely minor revenue increase to the BSIS from the increased fine
amounts and new penalties established by this bill.
COMMENTS:
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1.Purpose. This bill is sponsored by the California Association of
Licensed Repossessors to update the Collateral Recovery Act and the
Vehicle Code, relating to repossessions. The bill is also intended
to clarify the current codes and address various issues pertaining
to the activities of licensed repossession agencies.
More specifically, the Author states that the bill does the
following:
1) Clarifies that a buy-here-pay-here dealer is guilty of a
misdemeanor if they knowingly use an unlicensed person to
repossess collateral on its behalf.
2) Increases the amount of time that a repossession business
is allowed to continue on a license when the qualified
certificate holder dies to 180 days.
3) Exempts a badge, cap insignia, or jacket patch from the
prohibition on using any identification other than a
registration card.
4) Extends the time period that a repossessor has to
accomplish notification of law enforcement after taking
possession of a vehicle to from one hour to two hours.
5) Allows a vehicle repossessed pursuant to the terms of a
security agreement to be exempt from registration for the
purpose of obtaining release of the vehicle from various
impounding authorities.
6) Allows late registration fees to be waived for on a
repossession for reposessors as long as they are paid within 60
days.
7) Prohibits interfering with the transport of a vehicle
being repossessed by making violation of this provision an
infraction.
1.Background. The Bureau of Security and Investigative Services (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 officers and employees, and repossessor
agencies and repossessor agency employees. The Bureau also has
jurisdiction over firearm and baton training facilities and their
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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 revocation of licenses
and seeking administrative, criminal, and civil sanctions against
violators. According to the BSIS web site, undercover sting and
sweep operations are conducted on an ongoing basis throughout all of
California.
The following is background on the significant provisions of the bill:
a) Use of Unlicensed Persons by a Buy-Here-Pay-Here Dealer.
Existing law makes it a misdemeanor for a financial institution
to knowingly engage an unlicensed person to repossess collateral
on its behalf. While buy-here-pay-here dealers should fall under
this category, there are still a lot of instances of unlicensed
activity that occur with these entities. Therefore, this bill
clarifies that a buy-here-pay-here dealer is guilty of a
misdemeanor if it knowingly uses an unlicensed person to
repossess collateral on its behalf.
b) Continuing a Repossession Business after the Death of the
Qualified Certificate Holder. This bill extends the number of
days from 120 to 180 that a member of the immediate family of a
deceased licensee is entitled to continue the licensed
repossession agency. According to the Sponsor, the current time
frame of 120 days can be insufficient for family members to get
their affairs in order, and this bill will simply allow families
another 60 days to get their matters in order and to obtain a new
license, if necessary.
c) Repossessor Identification: Badges, Caps, Patches. 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. 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 BSIS. The amendments clarify that a badge,
insignia, or patch may be used to identify the individual as a
licensed reposessor.
d) Notifying Law Enforcement of a Repossession. Current law
requires repossessors to notify law enforcement within one hour
of taking possession of a vehicle whenever possession is taken by
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or on behalf of any legal owner under the terms of a security
agreement or lease agreement. However, the one hour timeframe is
not practical, as it can be difficult to get through to the
appropriate law enforcement agency within one hour. The bill
establishes a more realistic time frame by changing the
requirement to attempting notification within one hour and
accomplishing notification within two hours.
e) Repossession of a Vehicle with Expired Registration. The law
currently allows a vehicle repossessed, pursuant to the terms of
a security agreement, to be exempt from registration for the
purpose of transporting the vehicle from the point of
repossession to a storage facility. This bill clarifies that the
vehicle that is impounded and has an expired registration is also
exempt from the registration requirement for purposes of a
repossession. According to the Sponsor, there have been cases
where repossessors have been burdened with paying registration
fees (which should be the owners responsibility), or have been
unable to obtain a vehicle due to the vehicle not being
registered and this bill simply prevents this from occurring.
f) Vehicle Registration Renewal Penalties. Current law requires
DMV to waive any registration renewal penalties for a legal owner
repossessing their vehicle. The amendments additionally applies
this provision to a repossessor, thereby preventing the
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.
g) Interfering With the Transport of a Repossessed Vehicle.
Currently, there is no penalty for attempting to interfere with
the transport of a vehicle being repossessed. This bill would
prohibit a person from interfering with the transport of a
vehicle being repossessed by making interference an infraction.
This is necessary to ensure the safety of all involved in the
repossession of a vehicle, according to the Sponsor.
1.Related Legislation. AB 791 (Hagman, Chapter 340, Statutes of 2013)
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 use a badge, cap or insignia for
identification.
AB 1877 (Ma, Chapter 476, Statutes of 2012) exempted, until January 1,
2018, an equipment dealer and its employees from licensure as a
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repossession agency if they regularly sell specified collateral
subject to a security agreement of the manufacturer or a
manufacturer's affiliate.
SB 944 (BPED Committee, Chapter 432, Statutes of 2011) an omnibus bill,
made several changes to various provisions pertaining to the
regulatory boards of the DCA. Established a four year retention
period for repossession agencies to keep inventory and adequate
information on file as to how, when, and to whom personal effects
were disposed of. Further allowed a person to work as a repossessor
pending receipt of the qualification certificate or registration
card, if he or she has been approved by the BSIS and carries a
printout of the Bureau's approval from the Bureau's Web site and a
valid identification picture.
AB 1722 (Hagman, 2010), also sponsored by California Association of
Licensed Repossessors (CALR), would have made a number of changes to
laws that regulate vehicle repossession, impoundment, and release
from impoundment, and that specify licensing and qualification
requirements for licensed repossessors. The bill would have made
the following changes similar to those proposed in AB 791: prohibit
a repossession agency from publicly disclosing a registrant's
residential address, residential telephone number, cell phone
number, or driver's license; require a repossessor to record the
inventory, and the adequate information as to how, when, and to whom
the personal effects were disposed of in their permanent records for
a minimum of four years; specify that repossession is complete, when
the repossessor moves, pushes, or gains control of the collateral.
( Status : AB 1722 died without being heard in Assembly
Appropriations Committee.)
AB 515 (Hagman, Chapter 322, Statutes of 2009) made numerous revisions
to the Act and Vehicle Code Sections relating to the impounding of
vehicles.
SB 659 (Calderon, Chapter 192, Statutes of 2007) made several revisions
to the laws related to repossession of motor vehicles by clarifying
provisions related to vehicle ownership, dealing with possible
threats or violence towards a repossessor, and clarifying the
requirements for impounded cars.
AB 481 (Calderon, 2005) would have provided that a repossessor shall
not be obliged to determine whether property is a "personal effect"
or who owns the "personal effect"; provides that no one shall
interfere with a repossessor in the performance of his or her lawful
duties once the repossession, as defined, is complete. ( Status : AB
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481 was vetoed by the Governor.)
2.Arguments in Support. In sponsoring the bill, the California
Association of Licensed Repossessors (CALR) argues the bill would
provide clarity and enhance the protection of California consumers.
CALR states that last year's AB 791 (Hagman, Chapter 340, Statutes
of 2013) ensured proper identification within the industry by
authorizing a licensee to wear a badge, cap insignia, or jacket
patch that meets specified requirements. The law currently
prohibits a repossessor from using any identification to indicate
registration as a repossessor other than a registration card issued
by the BSIS. This bill clarifies these provisions by authorizing
the use of a badge, insignia, or patch to be used to identify a
person as a repossessor.
CALR argues that the requirement for a repossessor to notify law
enforcement within one hour of taking possession of a vehicle 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
reflects a more realistic time frame by changing the requirement to
attempting notification within one hour, and to accomplish
notification within two hours.
Finally, CALR states that the bill exempts a repossessed vehicle from
registration solely for the purpose of obtaining release of the
vehicle from an impounding authority. This prevents a repossessor
from being burdened with paying for a registration simply for
attempting to obtain a release for a vehicle.
NOTE: Double-referral to Transportation and Housing Committee second.
SUPPORT AND OPPOSITION:
Support:
California Association of Licensed Repossessors (Sponsor)
Opposition:
None received as of June 11, 2014.
Consultant:G. V. Ayers
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