BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2667
Author: Bloom (D)
Amended: 8/13/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-1, 6/24/14
AYES: Jackson, Corbett, Lara, Leno, Monning, Vidak
NOES: Anderson
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/23/14 - See last page for vote
SUBJECT : Rental-purchase agreements: monitoring technology
SOURCE : Consumer Federation of California
DIGEST : This bill amends the Karnette Rental-Purchase Act
(Act) to require a lessor to give clear and prominent notice to
a consumer and obtain their express consent when selling an
electronic device that has geophysical location tracking (GPS)
technology installed by the lessor. This bill prohibits the
lessor from using, selling, or sharing GPS technology for any
purpose other than the repossession of the electronic device
when there is a violation of the rental-purchase agreement, or
when requested by the consumer. This bill also prohibits a
lessor from using or installing monitoring technology on an
electronic device for any purpose other than to provide remote
technical assistance when requested by the consumer.
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Senate Floor Amendments of 8/13/14 clarify the definition of
"clear and prominent notice," and remove redundant language.
ANALYSIS :
Existing law:
1.Provides that, among other rights, all people have an
inalienable right to pursue and obtain privacy.
2.Permits a person to bring an action in tort for an invasion of
privacy and provides that in order to state a claim for
violation of the constitutional right to privacy, a plaintiff
must establish the following three elements: (a) a legally
protected privacy interest; (b) a reasonable expectation of
privacy in the circumstances; and (c) conduct by the defendant
that constitutes a serious invasion of privacy. Recognizes
four types of activities considered to be an invasion of
privacy, giving rise to civil liability including the public
disclosure of private facts.
3.Regulates, under the Act, personal property rental
transactions in which the renter has the option to apply a
portion of the rent toward purchase of the property. The Act
governs the rental of property for personal, household, or
family purposes for an initial term of four months or less.
The rental-purchase agreement must be in writing and must
contain specified information, including a description of the
property, the total number and the total amount of periodic
payments necessary to acquire the property, and a notice to
the consumer of his/her rights and obligations under the
agreement.
This bill:
1.Requires the lessor provide a clear and prominent notice, as
specified, to a consumer and obtain express consent from the
consumer at the time the lessor and the consumer enter into a
rental-purchase agreement for an electronic device if that
device has GPS technology installed by the lessor, and at any
time the GPS technology is activated or used by the lessor.
2.Prohibits a lessor shall from using, selling, or sharing GPS
technology on an electronic device for any purpose other than
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the repossession of the electronic device when there is a
violation of the rental-purchase agreement, pursuant to law,
or when requested by the consumer. This bill prohibits a
lessor from using or installing monitoring technology on an
electronic device for any purpose other than to provide remote
technical assistance when requested by the consumer, and
prohibits a lessor from acquiring any data when providing
remote technical assistance beyond what is necessary to
provide assistance to the user and beyond what the user has
consented to. This bill also provides that any data acquired
during the period a consumer consented technical assistance
shall not be retained, used, or sold for any purpose.
3.Requires a lessor to provide clear and prominent notice to a
consumer and obtain express consent from the consumer for the
installation or use of any software that allows the lessor to
provide remote technical assistance and upon the activation
and deactivation of any remote technical assistance when
requested by the consumer.
4.Requires clear and prominent notification to be displayed on
an electronic device if GPS technology is activated or used by
the lessor, except that this notification requirement shall be
suspended if the consumer or lessor reports that the
electronic device has been stolen and has filed a police
report stating that the electronic device has been stolen.
5.Provides that, in textual communications, the required
disclosures are separate and apart from a privacy policy, data
use policy, terms of service, end-user license agreement,
lease agreement, or other similar document, and of a type,
size, and location sufficiently noticeable for an ordinary
consumer to read and comprehend in print that contrasts highly
with the background on which they appear. This bill
prescribes the appropriate delivery of disclosures for
communications that are disseminated orally or through audible
means, as well through video means or through interactive
media (including the Internet).
6.Requires a lessor to provide that any GPS technology that has
been installed by the lessor on an electronic device, or can
be activated by the lessor, expires upon the first instance
the electronic device connects to the Internet after
completion of the purchase of the electronic device.
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7.Provides that the provisions above shall not be interpreted to
require a lessor to enter into a rental-purchase agreement
with any consumer who does not provide express consent to the
provisions of above-described provisions of the
rental-purchase agreement.
8.Defines various terms, including:
A. "Monitoring technology" as any hardware, software, or
application utilized in conjunction with an electronic
device that can cause the device to capture, monitor,
record, or report information about user activities with or
without the user's knowledge.
B. "Express consent" as the affirmative agreement to any
use or installation of GPS technology or remote technical
assistance. Express consent does not include consent given
when either option is highlighted or preselected as a
default setting.
Background
Rent-to-own (RTO) stores offer home appliances, furniture,
televisions, stereo equipment, and other appliances for rent
with the option to purchase. A consumer enters into an
agreement with an RTO dealer and makes weekly or monthly
payments. After a specified number of payments, the dealer
transfers ownership of the item to the consumer. Prior to 1994,
RTO transactions were not specifically governed by any other
specific California law. This changed with the passage of AB
722 (Karnette, Chapter 1026, Statutes of 1994), which enacted
the Act to rectify the lack of both regulation of, and
disclosures by, the RTO industry. Accordingly, the Act requires
every rental-purchase agreement, as defined, to be in writing
and to contain certain information in a single document that
sets forth all the agreements of the lessor and the consumer
with respect to the rights and obligations of each party. Such
information includes, for example, a description of the personal
property and the total number and total amount of periodic
payments necessary to acquire the property. It also includes a
notice to the consumer of his/her rights and obligations under
the agreement. Additionally, the Act prohibits the inclusion of
certain provisions in these agreements and specifies the
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parameters of the consumer's liability for loss of, or damage
to, the property and those of permissible security deposits.
Any waiver or modification of the Act's provisions is void and
unenforceable as contrary to public policy.
Of particular concern for the purposes of this bill is the issue
of consumer rights and necessary disclosures regarding spyware
technologies on electronic devices that are rented out by an RTO
retailer to a consumer. On this issue, the Act is currently
silent. This issue was brought to the forefront in 2012, when
the Federal Trade Commission (FTC) took action against a
national rent-to-own retailer for using monitoring and tracking
software to secretly collect data, including photos of consumers
who had rented home computers or laptops through the device's
"webcam." The resulting FTC order now prohibits the company
from using monitoring technology to gather consumers'
information from rental computers, or receiving, storing or
communicating such information, except to provide technical
support at a consumer's request. Additionally, the terms of the
settlement bar the company from gathering information from any
consumer product via GPS technology without clearly notifying
and obtaining express consent from consumers at the time of
rental. Moreover, the settlement further prohibits the company
from installing or activating such technology on rental
computers that does not clearly notify consumers of its presence
immediately before each use, including via a prominent icon on
the computer, and bars the company from deceptively gathering
information about consumers, and from using improperly obtained
information to collect debt, money, or property as part of a
rent-to-own transaction. (FTC Press Release, FTC Approves Final
Order Settling Charges that Aaron's Inc. Allowed Franchisees to
Spy on Consumers via Rental Computers (Mar. 11, 2014)
[as of Jun.
21, 2014].)
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/13/14)
Consumer Federation of California (source)
American Civil Liberties Union
Consumer Attorneys of California
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ARGUMENTS IN SUPPORT : According to the author:
The rent-to-own (RTO) industry enters into contracts with
consumers for electronic devices pursuant to the Karnette
Rental-Purchase Act (Civil Code Sections 1812.620-1812.649).
Currently, there are no restrictions to the use of monitoring or
GPS technology on rented electronic devices in this Act.
This bill restricts the use of monitoring and GPS technology on
rent-to-own electronic devices to help protect consumer's
privacy.
Under this bill, consumers will receive notification and give
consent when GPS technology has been installed on their
electronic device by the RTO lessor. While the bill protects
consumers from any unwarranted use of monitoring and GPS tech,
it also allows the lessor to use "remote technical assistance"
technology when requested by the consumer and provides the
lessor with flexibility for using GPS to track a device when
there is a violation of the rental contract or a report of a
stolen device.
In doing so, this bill codifies an FTC Federal Trade Commission
agreement ensuring that all RTO companies are compliant with
monitoring and GPS tracking restrictions suggested by the FTC.
ASSEMBLY FLOOR : 75-0, 5/23/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Holden, Jones, Jones-Sawyer,
Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, John A. Pérez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
NO VOTE RECORDED: Bonilla, Harkey, Roger Hernández, V. Manuel
Pérez, Vacancy
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AL:e 8/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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