BILL ANALYSIS �
SB 720
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Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON VETERANS AFFAIRS
Al Muratsuchi, Chair
SB 720 (Correa) - As Amended: May 21, 2013
SENATE VOTE : 38-0
SUBJECT : Military service: benefits
FISCAL EFFECT : This measure is keyed fiscal.
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
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
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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.)
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).)
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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).)
COMMENTS : This 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.
As stated by the Assembly Committee on Judiciary:
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
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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 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.
The policy underlying the existing deferral protections is to
recognize that in many cases the financial impact to a reserve
or National Guard servicemember of a call to active duty is
negative. Moreover, when such members are deployed overseas, we
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recognize that it may be difficult or impossible for them to
manage financial obligations remotely and that, particularly in
combat zones, they may be under extreme stress already without
adding worry about finances back home. We recognize their
sacrifice. We balance those considerations with the importance
in our society of honoring contractual obligations made in the
course of commerce. Our policy decision in California has been
to allow servicemembers to defer certain financial obligations
but to require that they still honor their commitments when they
return from service.
This bill is in alignment with existing policy. Iraq and
Afghanistan are the most recent conflict venues but,
unfortunately, they are unlikely to be the last. Many of the
stresses mentioned above occur as a result of a call to active
service regardless of the location of the service. Therefore it
makes sense to extend these protections to servicemembers
without regard to the particular conflict or location in which
they serve. Moreover, it is logical to harmonize the two
sections of the Military and Veterans Code which offer financial
protections, particularly with regard to whether or not interest
is chargeable on deferred obligations.
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.
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
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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
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 : John Spangler / V. A. / (916) 319-3550
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