BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 720
Author: Correa (D), et al.
Amended: 5/21/13
Vote: 21
SENATE VETERANS AFFAIRS COMMITTEE : 7-0, 4/23/13
AYES: Hueso, Knight, Block, Correa, Lieu, Nielsen, Roth
NO VOTE RECORDED: Vacancy
SENATE JUDICIARY COMMITTEE : 7-0, 4/30/13
AYES: Evans, Walters, Anderson, Corbett, Jackson, Leno, Monning
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Military service: benefits
SOURCE : California Military Department
DIGEST : This bill extends the enhanced protections currently
offered only to service members ordered to active duty as part
of the conflicts in Iraq and Afghanistan, including protection
from having to pay interest on the accumulated principal or
interest of a deferred financial obligation, to all federal
military reservists and California National Guard service
members ordered to active duty. This bill also incorporates
specific safeguards afforded to financial institutions under
other deferment statutes to financial obligations deferred by
service members under these enhanced protections.
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ANALYSIS :
Existing law:
1.Permits a federal military reservist or National Guardsman who
is called to active duty as part of the Iraq and Afghanistan
conflicts to defer payments on a financial obligation for a
period of up to six months without accruing interest on the
principal or interest of a deferred payment.
2.Permits a federal military reservist or National Guardsman who
is called to active duty to, at any time during his/her period
of active duty service or within six months thereafter, apply
to a court for relief from an obligation or liability incurred
by the member prior to his/her period of military service, or
from any tax or assessment falling due prior to or during the
period of service.
3.Authorizes, in the case of an installment contract for the
purchase of real estate, or other instrument in the nature of
a mortgage upon real estate, a stay of the enforcement of the
obligation during the applicant's period of military service,
or, if application is made after the service, for a period of
time up to the length of the period of military service. At
the conclusion of the stay of enforcement, the principal and
accumulated interest due and unpaid shall be repaid in equal
installments during the remaining life of the installment
contract or other instrument, extended by a period of time
equal to the stay of enforcement, at the rate of interest on
the unpaid balance as prescribed in the contract, or other
instrument evidencing the obligation, for installments paid
when due, and subject to any other terms as may be just.
4.Authorizes, in the case of any other obligation, liability,
tax, or assessment, a stay of the enforcement during an
applicant's period of military service, or, if application is
made after the service, for a period of time equal to the
period of military service of the applicant or any part of
that period. At the conclusion of the stay of enforcement,
the balance of principal and accumulated interest due and
unpaid at the date of termination of the period of military
service or the date of application, as the case may be, shall
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be repaid in equal periodic installments during a period of
time equal to the stay of enforcement, at the rate of interest
as may be prescribed for the obligation, liability, tax, or
assessment, if paid when due, and subject to any other terms
as may be just.
5.Permits a court to grant this specified relief after
appropriate notice and hearing, unless in its opinion the
ability of the service member to comply with the obligation or
pay the tax or assessment has not been materially affected by
reason of the member's military service.
This bill:
1.Authorizes, in the case of an installment contract for the
purchase of real estate, or other instrument in the nature of
a mortgage upon real estate, a deferment of the payments on
the obligation for a period of time equal to the service
member's period of military service.
2.Authorizes, in the case of any other obligation, liability,
tax, or assessment, a deferment of any payments on the
obligation during an applicant's period of military service,
or, from the date of termination of the period of military
service or from the date of application if made after the
service, for a period of time equal to the period of military
service.
3.Prohibits penalties from being imposed for the nonpayment of
principal or interest during a period of deferment, and
prohibits interest from being charged or accumulated on the
principal or interest on which the payment was delayed. The
bill also prohibits foreclosure or repossession of property on
which payment has been deferred, as specified.
4.Requires mortgage payments deferred during this period to be
due and payable upon the occurrence of certain specified
conditions, including the sale of the property, the maturity
of the obligation, or the further encumbrance of the property
other than for preservation or protection of the property.
5.Provides that a service member with a mortgage subject to an
impound account for the payment of property taxes, special
assessments, and certain insurance is not relieved from making
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monthly payments, as specified, and that a service member
shall not be precluded from making payments toward a deferred
mortgage.
6.Clarifies that this bill should not be applied retroactively.
Background
Existing law provides various financial and consumer-related
protections for military service members. These provisions
generally seek to provide protections against the potential
adverse effects of a deployment, and include provisions enacted
by AB 1433 (Horton, Chapter 60, Statutes of 2002), which
provided financial protection with regards to court proceedings,
credit contract obligations, rental agreements, taxes, health
insurance, and eviction protection, and AB 1666 (Frommer,
Chapter 345, Statutes of 2005), which provided additional
protection for members called into active duty with regards to
fees for recording a power of attorney, termination of mobile
telephone contracts, academic tuition, state bar fees, vehicle
leases, and residential utility service.
Existing law permits military reservists and National Guard
members ordered to active federal or state military service to
defer certain loans and financial obligations under two
different provisions of the Military and Veterans Code.
Military and Veterans Code Section 409.3 suspends enforcement of
specified civil liabilities, including financial obligations
such as mortgages, automobile loans, and installment contracts,
for service members during periods of active military service.
The relief afforded under this section is available only upon
application to a court, and at the conclusion of the period of
suspension, the maturity date of the financial obligation is
extended by the period of military service, and all unpaid
principal and accumulated interest is added to the principal
balance of the financial obligation. Consequently, a service
member who defers an obligation under this provision incurs
interest on any deferred interest potentially increasing the
amount due on an obligation after all deferred sums are rolled
back into the obligation's principal at the conclusion of the
deferment period.
Military and Veterans Code Section 800 et. seq., in contrast,
permits service members called to active duty specifically as
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part of the Iraq or Afghanistan conflicts to defer payments on
similar financial obligations for a period of up to six months.
Rather than petitioning a court, a service member need only send
a letter to their lender requesting deferment of a financial
obligation in order to receive benefits under this provision.
Additionally, Military and Veterans Code Section 804 provides
that "[n]o interest shall be charged or accumulated on the
principal or interest on which the payment was delayed."
Prior Legislation
AB 713 (Block, Chapter 105, Statutes of 2011), clarified that
recall to active military service, gives a service member the
ability to apply to a court for relief from certain financial
obligations. This bill also extended an existing provision of
law that protects service members from the assessment of
interest at a rate greater than 6% to the dependents of those
service members.
AB 2455 (Nava, Chapter 124, Statutes of 2010), extended certain
financial protections with respect to deferment of vehicle loans
to spouses and dependents of service members.
AB 2365 (Lieu, Chapter 385, Statutes of 2010), enabled a service
member to recover actual damages, reasonable attorney fees, and
costs from any person who violates specified rights and
protections of the Military and Veterans Code, granted service
members an expedited review of certain petitions for relief from
financial obligations, and provided that a court shall not
charge a filing fee or court costs for specified actions.
AB 306 (Baca, Chapter 291, Statutes of 2005), authorized service
members who are called to active duty as a result of the Iraq or
Afghanistan conflicts to defer payments on specified obligations
for the period of active duty, plus 60 calendar days, or 180
days, whichever is less.
AB 1433 (Horton, Chapter 60, Statutes of 2002), enabled service
members to petition a court for specified relief with respect to
credit contract obligations, rental agreements, taxes (except
income taxes), and health insurance, as well as eviction
protection for the service members' families.
SB 1284 (Battin, 2002), would have extended certain financial
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protections to military reservists called to serve on active
duty for national emergencies caused by the terrorist attacks on
New York City and the Pentagon. This bill would have extended
certain existing misdemeanor provisions relating to rent relief
to a larger class of military reservists. This bill died in the
Senate Committee on the Judiciary.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/17/13)
California Military Department (source)
American Legion - Department of California
AMVETS - Department of California
California State Commander Veterans Council
National Guard Association of California
Veterans Caucus, California Democratic Party
Vietnam Veterans of America - California State Council
ARGUMENTS IN SUPPORT : According to the sponsor:
It is not practical to treat the two deferments in
distinctively different ways. By amending MVC Sec.409.3 to
treat the repayment of deferred loans and obligations in
the same manner as MVC Sec.800, all Servicemembers who are
called to state or federal active service, regardless of
the geographical location, would be able to defer loans and
obligations under a single code section. This eliminates
the situation where Servicemembers have to defer loans and
obligations under two code sections and provides financial
institutions with a singular mechanism in which to
calculate deferred monies back into the original loan.
Protections for financial institutions do not currently
exist in MVC Sec.409.3. In codifying MVC Sec.800, the
Legislature recognized the inherent risks of financial
institutions during the deferment process and built in
protections for lenders. This proposal would add the
protections provided to financial institutions in MVC
Sec.802 to MVC Sec.409.3, ensuring that financial
institutions are not forced to take on additional financial
risk.
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Military and Veterans Code Sec.800 will become null and
void in the near future. As the conflicts in Afghanistan
come to a close, the financial protections offered under
MVC Sec.800 will become inactive. However, this
legislation anticipates the National Guard's continued
deployments in support of the Department of Defense in the
post-conflict era. This legislation ensures the
protections provided by California to those that defend and
serve their state and nation remain.
(AL:nl):ej 5/22/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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