BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:April 1, 2013         |Bill No:SB                         |
        |                                   |269                                |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                           Bill No:        SB 269Author:Hill
                  As Introduced:     February 14, 2013   Fiscal:  Yes

        


        SUBJECT:  Prepaid rental listing service.

        SUMMARY:  Eliminates the pre-paid rental listing services only,  
        (PRLS-only) license, and requires a provider of pre-paid rental  
        listing services to hold a valid real estate license.  The rental  
        listing service provider would also have to provide his or her real  
        estate license number and notice of the consumer's rights on the  
        written contract for services before accepting payment. 

        Existing law:
        
        1) A person who wants to offer pre-paid rental listing services must  
           either hold a real estate broker's license or a pre-paid rental  
           listing services license issued by the Department of Real Estate.  
           (BPC § 10167.2 (a))

        2) To maintain a PRLS-only license, the licensee must maintain a  
           $10,000 corporate security bond or cash deposit in an account  
           assigned to the Real Estate Commissioner. (BPC § 10167.7)

        3) PRLS licensees must pass a background check, pay an application fee  
           of $100, plus $25 for each branch location at which the PRLS  
           services will be offered.  (BPC § 10167.3 (a))

        4) Prior to accepting a fee, a PRLS provider must offer a written  
           contract specifying the name, address, and telephone number of the  
           provider, acknowledgement of receipt of the amount of the fee, a  
           description of the service to be provided, and the prospective  





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           tenant's specifications for the rental property. (BPC § 10167.9)

        5) A licensee must fully refund a prospective tenant if within five  
           days of executing the contract the licensee has not provided at  
           least three currently available properties that meet the  
           prospective tenant's specifications, unless the tenant obtains a  
           rental through the licensee's services. (BPC § 10167.10(a)(1))

        6) A licensee must refund any charge above $50 if the prospective  
           tenant obtains a rental that is not through the services of the  
           licensee during the period of the contract, or does not find a  
           rental during the period of the contract, so long as the  
           prospective tenant requests the refund within ten days after the  
           end of the contract period.  (BPC § 10167.10(b)(2))

        
        This bill:

        1) Eliminates the PRLS--only license, and requires a real estate  
           salesperson or real estate broker license to offer prepaid rental  
           listing services.  

        2) Prohibits the issuance of any new PRLS-only licenses, effective  
           January 1, 2014.  

        3) Allows persons who were issued a PRLS-only license before the  
           bill's operative date to continue operating under that license,  
           until their license expires.  

        4) Requires all contracts for prepaid rental listing services to  
           include the license number held by the PRLS provider.  

        5) Requires PRLS providers to give each prospective customer a simple,  
           easy-to-understand explanation of their contractual refund rights,  
           an explanation of how they can file a complaint, and a description  
           of their options, if their PRLS provider refuses to issue them a  
           refund in accordance with their contract.  

        FISCAL EFFECT:  Unknown.  This bill has been keyed "fiscal" by  
        Legislative Counsel.

        COMMENTS:
        
        1. Purpose.  This bill is sponsored by the Author.  According to the  
           Author, fraud and abuse perpetrated by pre-paid rental listing  
           service companies has increased due to the increase in demand for  





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           rental housing, and may be curbed by restricting the ability to  
           offer these listing services to individuals holding a real estate  
           salesperson or broker's license.  Additionally, this bill provides  
           increased consumer protection by requiring each PRLS provider to  
           include their real estate license number and a statement of  
           consumer rights on the written contract for services.  This will  
           inform the consumer of their rights, the method of redress if the  
           rights are violated, and adequate information to identify the  
           licensee and verify the licensee's status prior to signing the  
           contract.

        2. Background.  A Pre-paid Rental Listing Service is a list of  
           available rentals meeting a prospective renter's selection  
           criteria, in exchange for a fee paid by the prospective renter.   
           The fee is due when the list is provided to the prospective renter,  
           but the prospective renter is entitled to a refund from their list  
           provider if they are unable to obtain a rental property using the  
           list they are provided. The Pre-paid rental list can be a valuable  
           time-saver for a consumer only if the list that is provided is  
           accurate, specifically tailored to the renter's needs, and is  
           up-to-date.  

           PRLS scams are increasingly common, and many consumers have found  
           themselves unable to obtain rentals, and unable to obtain refunds  
           of their PRLS fees from unscrupulous PRLS providers.  In recent  
           months, there have been press reports in various regions of the  
           state documenting PRLS abuses.  The DRE has issued a Consumer Fraud  
           Alert and Warning to encourage consumers to research their rental  
           list providers before paying for services.  

           A typical PRLS scam involves the promise of a list of available  
           rentals in a location and price range desired by the prospective  
           tenant.  But, when the prospective renter contacts the owners of  
           the properties on the list, they learn that the properties are not  
           for rent, have already been rented, or do not exist.   
           Alternatively, the prospective renter finds that the rental price  
           represented on the list, or that other details about the rental  
           property, are incorrect.  Compounding the problem, scammers fail to  
           provide refunds, as specified in their contracts.  

           Currently, conducting business as a PRLS provider in California  
           requires a real estate salesperson or real estate broker license,  
           or a special PRLS-only license, which entitles the license holder  
           to offer PRLS services, but none of the other services that  
           licensed real estate salespersons or brokers may perform.  






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           The low barrier to obtaining a PRLS-only license, (passing a  
           background check, posting a $10,000 bond, and paying a $100 license  
           fee) may be encouraging fraud and abuse.  The DRE's web site lists  
           fifty-eight (58) PRLS-only licensee locations, forty percent of  
           which are no longer licensed to legally provide PRLS services, due  
           either to cancellation of their bond by their bonding company (14  
           license locations) or to disciplinary actions initiated against  
           them by DRE (eight license locations).  Since the foreclosure  
           crisis began, DRE has issued thirty-four desist and refrain orders  
           to people offering PRLS services, without being licensed to do so.

           Eliminating the PRLS--only license, and requiring a real estate  
           salesperson or real estate broker license to offer prepaid rental  
           listing services will allow a prospective renter who falls victim  
           to a PRLS scam perpetrated by a real estate licensee to file a  
           claim for restitution from the DRE's Consumer Recovery Account.   
           Currently, victims of PRLS-only licensees are not eligible for  
           restitution from this fund, because the Consumer Recovery Account  
           only covers those who were victimized by persons holding a real  
           estate license.  

           The DRE will be able to use its existing authority to issue  
           citations and levy fines against unlicensed persons, when it  
           uncovers evidence of unlicensed PRLS activity.  DRE's citation and  
           fine authority is limited to licensed persons and those who are  
           unlicensed, but operating in a manner that requires a real estate  
           license.  

        3. Arguments in Support.  The  California Association of Realtors  ,  
           (CAR) supports this bill.   The CAR states that the economic  
           downturn and housing crisis has caused increased demand for rental  
           listings.  As a result, the number of fraudulent providers of  
           rental listings has also increased.  The CAR believes that  
           restricting authorization to provide rental listings to people who  
           hold a real estate license will raise the bar and help ensure  
           ethical business behavior. 
        
        SUPPORT AND OPPOSITION:
        
         Support  :

        California Apartment Association
        California Association of Realtors

         Opposition  :






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        None on file as of March 26, 2013.

        Consultant: Kristin Webb