BILL ANALYSIS Ó
AB 281
Page 1
Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 281
(Gallagher) - As Introduced February 11, 2015
SUBJECT: Collateral recovery.
SUMMARY: Establishes a Collateral Recovery Disciplinary Review
Committee (DRC) to review a licensee's contestation of an
administrative fine or an applicant's license denial; prohibits
licensed repossessors from performing repair work on collateral;
authorizes licensed repossessors to display a printout of their
registration or a screenshot of their registration from the
Bureau of Security Investigative Services (BSIS) website; and
makes other technical changes.
EXISTING LAW:
1)Establishes the Collateral Recovery Act (Act) governing
collateral repossessions by a legal owner, lienholder, lessor
or lessee or the agent of any of them based on written
authorization and a security agreement, and provides for the
licensing and regulation of licensed repossession agencies
(LRAs), repossessors, and repossessor qualified managers by
the BSIS under the Department of Consumer Affairs. (Business
and Professions Code (BPC) Section 7500 et seq.).
2)Authorizes the BSIS to deny a license if the applicant has
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committed specified acts. (BPC Section 7503.5)
3)Authorizes the BSIS to assess administrative fines against any
licensee for specified acts. (BPC Section 7508.1)
4)Prohibits a person from performing the duties of a registrant
for a LRA unless he or she has in his or her possession a
valid repossessor registration card or evidence of a valid
temporary registration or registration renewal, and requires
every person engaged in repossession activities to display his
or her valid pocket card issued by the BSIS. (BPC Section
7506.9(d))
5)Authorizes a person to perform the duties of a registrant
pending receipt of a registration card if the person has been
approved by the BSIS and carries on his or her person a
hardcopy printout of the BSIS's approval from the BSIS's
website and valid picture identification. (BPC Section
7506.9(e))
6)Authorizes licensed repossessors to charge owners for repair
work on collateral, if expressly authorized to do so. (BPC
Section 7507.5)
7)Establishes two Private Security DRCs, one in northern
California and one in southern California, which licensees
have the option of using to review administrative fines and
licensure decisions, except as specified. (BPC Sections
7581.1-7581.5)
8)Establishes an Alarm Company Operator DRC, which licensees
have the option of using to review administrative fines and
licensure decisions, except as specified. (BPC Sections
7591.17-7591.20)
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THIS BILL:
1)Establishes a Collateral Recovery DRC and authorizes
licensees, or applicants for a license, under the Act to
request a review by the DRC to contest the assessment of an
administrative fine or to appeal a denial of a license and
requires the DRC to affirm, rescind or modify all appealed
decisions, except as specified.
2)Requires a licensee, or applicant for a license, to request
review by written notice to the DRC within 30 days of the
issuance of a citation, and requires the DRC to notify the
appellant within 30 days of the review of the DRC's decision.
3)Authorizes an appellant who disagrees with the DRC's decision
to request a formal administrative hearing within 30 days
following notice of the DRC's decision, otherwise the DRC's
decision is final.
4)Requires the Governor to appoint a five-member DRC, three of
whom must be actively engaged in the business of owning LRAs
and two of whom must be public members, and authorizes the
removal of any member for misconduct, incompetency or neglect
of duty.
5)Requires the DRC to meet as frequently as may be required, and
authorizes members of the DRC to be paid per diem and
reimbursed for actual travel expenses.
6)Requires the BSIS to provide the Collateral Recovery DRC all
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evidence used by the BSIS in reaching its decision prior to
any review or appeal of that decision by the DRC.
7)Authorizes a person performing the duties of a registrant to
alternatively display a hardcopy printout or electronic copy
of the bureau's approval from the BSIS's website or an
electronic screenshot display of this information directly
from the BSIS's website.
8)Authorizes a person performing the duties of a registrant for
a licensee pending receipt of a registration card if the
person has been approved by the BSIS and to alternatively
carry on his or her person an electronic screenshot display of
this information directly from the BSIS's website.
9)Clarifies that assignments do not include authorization to
collect money in lieu of repossession for any collateral.
10)Prohibits licensed repossessors from performing, or charging
for, repair work on collateral.
11)Makes additional technical changes.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
1)Purpose. This bill is sponsored by the California Association
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of Licensed Repossessors . According to the author, "[This
bill] clarifies the job description of repossessors, promotes
flexibility, and establishes a [DRC] - a proven mechanism to
save time and taxpayer dollars."
2)Background. When a debtor defaults on payments for a home,
vehicle or product, the creditor is authorized to collect and
resell the collateral to defray the delinquent amount owed by
the debtor. Under existing law, a creditor may use a
collections agency to recover loan payments in default from
customers, and if that is unsuccessful, a creditor may hire an
LRA to recover viable collateral for resale, with the proceeds
going towards the outstanding loan amount. A substantial
portion of repossessions involve vehicles due to their
relatively high value, the ease of resale and the ability to
repossess vehicles without home entry or permission since they
are commonly parked outside.
According to BSIS, during Fiscal Year 2013-14, there were
approximately 309 actively licensed LRAs, 891 actively
licensed repossessors and 330 actively licensed repossessor
qualified managers operating in California.
Identification Requirements. The Act prohibits repossessors
from performing those duties unless he or she has in his or
her possession a valid repossessor registration card or
evidence of a valid temporary registration or registration
renewal. The Act also requires every person engaged in
repossession activities to display his or her valid pocket
identification card issued by the BSIS. However, the Act
authorizes a person to perform repossession activities pending
receipt of a registration card if the person has been approved
by the BSIS and carries on his or her person a hardcopy
printout or electronic copy of the BSIS's approval from the
BSIS's website and valid picture identification. According to
the author, this bill would provide additional flexibility by
allowing all licensees to display a hardcopy of their
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registration, an electronic copy of their registration, or a
screenshot display directly from the BSIS website as proof of
registration.
DRCs. The Private Security Services Act establishes two DRCs,
one in northern California and one in southern California, and
the Alarm Company Operator Act establishes one DRC. The DRCs
provide their respective applicants and licensees an alternate
path to consider appeals of the BSIS's decisions to deny,
suspend or revoke licenses, or assess administrative fines.
All DRCs are comprised of five members appointed by the
Governor, three of whom are professional members. DRC
meetings are scheduled depending on the number of appeals
received.
The DRC Process. The Private Security Services Act and the
Alarm Company Operator Act have different processes for their
respective DRCs. For Private Security DRCs, applicants and
licensees have the option of filing an appeal with the DRC or
through the administrative hearing process. If the applicant
or licensee requests the appeal to be heard first by the DRC,
the applicant or licensee may still appeal a DRC decision
through the administrative process. For the Alarm Company
Operator DRC, applicants and licensees are required to file
their appeal with a DRC first, and are then provided the
ability to appeal a DRC decision through the administrative
process.
When applicants and licensees file their appeals to a DRC,
BSIS staff schedules the appeal review for an upcoming meeting
and mail the respondent information about the meeting and what
to expect. Approximately two weeks before a scheduled DRC
meeting, BSIS staff provides each DRC member with a case file
for each appeal to be heard during the meeting. During the
hearing, the applicant or licensee is afforded the opportunity
to present his or her case. He or she may be represented by
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an attorney and may bring witnesses as character references or
observers of the incident resulting in the BSIS's action. DRC
members ask questions to clarify issues related to the case to
obtain the information needed to make a decision on the
appeal. The average hearing time per person is 15-30 minutes.
The BSIS staff mail the applicant or licensee the DRC's
decision on their appeal within 30 days.
DRC Statistics. In March of this year, the Assembly Committee
on Business and Professions and the Senate Committee on
Business, Professions and Economic Development held a joint
sunset oversight hearing to review several of the boards and
bureaus under the DCA, including the BSIS. In the BSIS's
sunset report, it noted, "To maximize the efficiency of its
disciplinary activities, the [BSIS] ensures that those
licensees eligible to have their appeals heard by a Bureau
[DRC] are properly notified of this option in a timely manner.
Each year, approximately 900 [BSIS] licensees request an
appeal of their denials, suspensions, or imposition of fines
through DRC[s]."
The BSIS notes that the number of pending appeal cases changes
depending on the fluctuating quantity of incoming appeal
requests from applicants and licensees. It also states that
it has been able to address a high number of pending appeals
by scheduling two-day hearings and meeting monthly to
accommodate the number of appeals. Once an appeal is received
by the BSIS, an appellant is generally scheduled for hearing
within 30 to 60 days. According to the BSIS, this approach has
resulted in no ongoing backlogs.
Over the last three fiscal years:
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The Private Security DRC had an annual average of 20
meetings and an average caseload of 35 appeals per meeting.
The Alarm Company Operator DRC held an annual average of 3
meetings and had an average caseload of 9 appeals per
meeting.
The annual cost for the Southern California Private
Security DRC, which had 11 meetings, was $27,820.32, and
for the Northern California Private Security DRC, which had
10 meetings, was $12,700.00. The annual cost for the Alarm
Company Operator DRC, which had four meetings, was
$7,978.69. This does not include staff time.
The Private Security DRC overturned an average of 203
decisions and upheld an average of 345 decisions. The
Alarm Company DRC overturned an average of five decisions
and upheld an average seven decisions.
The Private Security DRC received an annual average of
12 citation appeals. The Alarm Company DRC received one
citation appeal (FY 2013-14).
There was an annual average of 11 requests for formal
administrative appeals for citations and fines for all BSIS
professions.
By way of comparison, for licensees under the Act, over the
last three fiscal years:
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There were 38 citations and 1 appeal, for an annual
average of 13 citations and less than one appeal each year.
There were 58 license denials and 17 appeals, for an
annual average of 19-20 denials and 5-6 appeals each year.
According to BSIS, the average time for appeals of a
license denial under the Act is 570 days. Based on the
past three fiscal years, the overall average time for cases
to be considered through the administrative hearing process
is 290-300 days.
According to BSIS's 2014 sunset report, there are much fewer
licensees under the Act (under 2,000) while there were nearly
25,000 alarm company licensees and nearly 300,000 private
security licensees.
This bill would establish a Collateral Recovery DRC, to
consist of five members appointed by the Governor, for
purposes of reviewing requests of licensees to contest the
assessment of an administrative fine or for applicants to
appeal the denial of a license. According to the author,
disciplinary actions currently take a long period of time,
sometimes a year a half to reach their final outcome. A DRC
would result in determinations on a much more expedited basis,
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and the licensee may accept the outcome of the DRC and not
pursue an additional appeal. In addition, the full
adjudication costs are paid out of the licensee fund, which
will be saved if the licensee accepts the decision of the DRC.
Clean-up Provisions. The Act prohibits the sale of collateral
recovered under the Act or making a demand for payment in lieu
of repossession and authorizes BSIS to assess administrative
fines for those acts (BPC Section 7580.2(c)). In addition,
the Automotive Repair Act requires automotive repair dealers
to register with the Bureau of Automotive Repair, unless he or
she or is an employee of an automotive repair dealer and
repairs motor vehicles only as an employee. An "automotive
repair dealer" is defined as a person who engages in the
business of repairing or diagnosing malfunctions of motor
vehicles for compensation (BPC Sections 9880.1, 9880.2, and
9884.6).
This bill would make conforming changes in the Act and clarify
that repossession assignments do not include authorization to
collect money in lieu of repossession, and prohibit
repossessors from performing repair work and charging that
work to the legal owner. Because a substantial portion of
repossessions involve vehicles, licensees under the Act are
already prohibited from performing repair work on those
vehicles under the Automotive Repair Act.
1)Current Related Legislation. AB 921 (Jones) of the current
legislative session would establish a DRC for private
investigators. STATUS: This bill is pending in the Assembly
Appropriations Committee.
2)Prior Related Legislation. AB 791 (Hagman), Chapter 340,
Statutes of 2013, among other things, prohibited an LRA or its
registrants from making a demand for payment in lieu of
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repossession, and prohibited an LRA from selling collateral
recovered under the Act.
AB 409 (Yee), Chapter 381, Statutes of 2006, provided licensees
under the Board of Barbering and Cosmetology with appeal
rights to the DRC established by the Board.
AB 3291 (McPherson), Chapter 1285, Statutes of 1994, revised and
recasted the Private Investigator Act, including provisions
relating to the Private Investigator DRC.
ARGUMENTS IN SUPPORT:
According to the sponsors, the California Association of
Licensed Repossessors , "Existing law prohibits a person from
performing the duties of a repossessor unless the person has a
valid repossessor registration card. During the course of
repossession, repossessors are often asked to show proof of this
registration. [This bill] would protect consumers by allowing a
repossessor to easily display this information in several
formats; including a hardcopy, an online electronic copy, or a
screenshot display directly from the [BSIS's] website. [This
bill would also] establish a Collateral Recovery [DRC.]?for
purposes of reviewing the request of a licensee to contest the
assessment of an administrative fine or to appeal the denials of
a license. Establishing this committee will provide an
opportunity for the [BSIS] to save money, and for quicker
decisions to be made in the pending cases of licensees. [DRCs]
are currently established for alarm company operators and
private security services. The DRC for repossessors will be
modeled after existing DRCs, which have proven to be extreme
effective in resolving these cases."
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ARGUMENTS IN OPPOSITION:
None on file.
POLICY ISSUE FOR CONSIDERATION:
Overturning a BSIS Decision. The process surrounding the review
of a DRC decision overturning a BSIS fine or denial is unclear.
The author may wish to amend the bill to specify the details of
this process.
AMENDMENTS:
Intent of the Bill. Existing law authorizes the use of hardcopy
printout or an electronic copy of the BSIS's approval from the
BSIS's website as an alternate form of registration pending
receipt of the registration card. The author's intent is to
similarly allow persons who have been issued registration cards
the flexibility of providing that proof of registration through
similar means. As a result, the author may wish to consider
amending the bill to include those alternate forms of proof of
registration to be used in lieu of the registration card,
instead of being used in lieu of the pocket card.
"Electronic Copy" Vs. Electronic Screenshot." BPC Section
7506.9(e) authorizes the use of an "electronic copy" of the
BSIS's approval from the BSIS website as proof of registration
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pending receipt of the registration card. Because this
provision may be interpreted to include an electronic screenshot
display of that information that is stored, for example, on a
person's phone, the author may wish to consider deleting the
provision that allows a registrant to pull this information
directly from the BSIS's website and instead specifying that an
electronic copy includes an electronic screenshot of the BSIS's
approval. If a licensee relies on the ability to display this
information directly from the website, but encounters technical
difficulties while on the job, for example, poor internet
connection, the licensee may be penalized for misplaced reliance
on the ability to prove registration, when it would be
relatively simple for a licensee to store an electronic copy of
this information.
To address the issues raised above, the author should adopt the
following amendments:
On page 6, line 5, delete "(c)" and add: (f)
On page 6, subdivision (d), restore to existing law.
On page 6, line 3, after "card" insert: a hardcopy printout or
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electronic copy of the bureau's approval from the bureau's
Internet Web site, which may include an electronic screenshot of
that information,
On page 6, subdivision (e), restore to existing law.
On page 6, line 15, delete "site" insert: site, which may
include an electronic screenshot of that information,
On page 7, lines 25-26, strike: the business of owning licensed
repossession agencies , and insert, business as a licensed
repossession agency
REGISTERED SUPPORT:
California Association of Licensed Repossessors (sponsor)
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REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301