BILL ANALYSIS �
SB 720
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Date of Hearing: June 25, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 720 (Correa) - As Amended: May 21, 2013
Proposed Consent
SENATE VOTE : 38-0
SUBJECT : Military Service: Benefits
KEY ISSUE : SHOULD THE LEGISLATURE extend the enhanced financial
protections currently offered only to service members ordered to
active duty as part of the conflicts in Iraq and Afghanistan, to
all federal military reservists and California National Guard
service members ordered to active duty?
FISCAL EFFECT : As currently in print this measure is keyed
fiscal.
SYNOPSIS
This non-controversial bill would extend 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 would also incorporate specific safeguards afforded to
financial institutions under other deferment statutes to
financial obligations deferred by service members under these
enhanced protections. There is no known opposition.
SUMMARY : Seeks to ensure that military reservists and National
Guard members ordered to active federal or state military
service are able to defer financial obligations for all active
duty assignments under terms currently reserved only for those
recalled to active duty as part of the Iraq and Afghanistan
conflicts. Specifically, 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
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the obligation during the service member's period of military
service, or should the service member request such relief
after the start of his or her current period of military
service, or within 6 months thereafter, a deferment of such
payments for a period of time equal to the period of military
service starting from the date of application.
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 would
prohibit interest from being charged or accumulated on the
principal or interest on which the payment was delayed. The
bill would also prohibit 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 shall not be relieved from
making monthly payments, as specified, and that a service
member shall not be precluded from making payments toward a
deferred mortgage.
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. (Military and
Veterans Code Section 800 et seq. All further references are
to this code unless otherwise noted.)
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2)Permits a federal military reservist or National Guardsman who
is called to active duty to, at any time during his or 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 or her period of military
service, or from any tax or assessment falling due prior to or
during the period of service. (Section 409.3(a).)
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.
(Section 409.3(d)(1).)
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
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. (Section 409.3(d)(2).)
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. (Section 409.3(d).)
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COMMENTS : This non-controversial bill would extend 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. It would
also incorporate specific safeguards afforded to financial
institutions under other deferment statutes to financial
obligations deferred by service members under these enhanced
protections.
Background : 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
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."
Elimination of interest accrual on deferred interest and
enhanced protection for financial institutions : This bill makes
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two important changes regarding the financial protections
afforded California's deployed military reservists and National
Guardsman. First, it harmonizes certain protections currently
available under Military and Veterans Code Section 800 et seq.
with those available under Military and Veterans Code Section
409.3, by eliminating the accrual of interest on deferred
interest payable under pre-existing financial obligations, such
as mortgages and real estate purchase installment contracts, in
the latter provision. Second, it incorporates certain
protections afforded financial institutions under Section 800 et
seq. into deferments authorized under Section 409.3.
Support of California's armed forces : California public policy
has continually affirmed the need to help protect military
service personnel from the adverse effects of military
deployments. In 2002, the Legislature amended the provisions of
the Military and Veterans Code that are the subject of this
bill, and in so doing, it found and declared that:
(a) In order to provide for, strengthen, and expedite the
national or state defense under the emergent conditions
that are threatening the peace and security of the United
States and the State of California, and to enable the
United States and the State of California to more
successfully fulfill the requirements of the national or
state defense, provision is made to suspend enforcement of
civil liabilities, in certain cases, of persons in the
military service of the United States or the State of
California in order to enable these persons to devote their
entire energy to the defense needs of the nation or state.
(b) For these purposes, provisions are made in [California
law] for the temporary suspension of legal proceedings and
transactions that may prejudice the civil rights of persons
in this service . . . (AB 1433 [Horton], Chapter 60,
Statutes of 2002.)
Courts across the United States have recognized the paramount
importance of protecting our service personnel from the
dislocating effects that military service can have on a
soldier's civil obligations. The Supreme Court has held that
the federal Servicemembers Civil Relief Act (50 U.S.C. 510 et
seq.), which parallels many of the protections offered under
California law, "must be read with an eye friendly to those who
dropped their affairs to answer their country's call" (Le
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Maistre v. Leffers (1948) 333 U.S. 1, 6), and is "to be
liberally construed to protect those who have been obliged to
drop their own affairs to take up the burdens of the nation"
(Boone v. Lightner (1943) 319 U.S. 561, 575). The public policy
underlying statutes such as Military and Veterans Code Sections
409.3 and 800 et seq. "is to allow military personnel to fulfill
their duties unhampered by obligations incurred prior to their
call." (Omega Indus., Inc. v. Raffaele (D. Nev. 1995) 894 F.
Supp. 1425, 1434 [citing Patrikes v. J.C.H. Service Stations,
Inc. (N.Y.City Ct.1943) 41 N.Y.S.2d 158, 165].) This policy
extents to protect military personnel in times of peace where no
national emergency exists (Conroy v. Aniskoff (1993) 113 S.Ct.
1562, 1564-66), is "always to be liberally construed" (Boone,
319 U.S. at 574), and is to be applied in a "broad spirit of
gratitude" towards service personnel (Patrikes, 41 N.Y.S.2d at
166).
This bill furthers that important public policy by allowing
service members mobilized into state or federal active duty not
only to petition a court for relief from paying certain
financial obligations while deployed as existing law permits,
but also by lessening the financial cost of doing so. It
recognizes that when service members are deployed, particularly
to overseas locations or to combat zones, it may be difficult or
impossible for them to manage financial obligations remotely,
and that the added stress of worrying about finances back home
could undermine their effectiveness and safety. The demands
placed upon our deployed service personnel must be balanced
against the importance of honoring contractual obligations made
in the course of civic life. Public policy in California weighs
these competing interests, and allows service members to defer
certain financial obligations with the understanding that they
will be required to honor their contractual commitments when
they return home from service. This bill ensures that service
members are not penalized by having to pay a penalty in the form
of interest accrued upon deferred interest for taking advantage
of this benefit.
Pending Related Legislation : AB 526 (Melendez) seeks to extend
certain financial protections to a larger class of military
reservists and National Guard members, their spouses and legal
dependents, and would add utility bills to the current list of
obligations subject to deferment, which include mortgages,
credit card payments, installment accounts, vehicle loans, and
property taxes. Awaiting consideration in the Senate Judiciary
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Committee.
Prior Related 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 six percent 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
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.
REGISTERED SUPPORT / OPPOSITION :
Support
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California Military Department
American Legion - Department of California
AMVETS - Department of California
California State Commanders Veterans Council
Vietnam Veterans of America - California State Council
National Guard Association of California
Opposition
None on file
Analysis Prepared by : Drew Liebert and Kelly Bradfield / JUD.
/ (916) 319-2334