BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 281 Hearing Date: June 15,
2015
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|Author: |Gallagher |
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|Version: |June 8, 2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Janelle Miyashiro |
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Subject: Collateral recovery.
SUMMARY: Establishes a Collateral Recovery Disciplinary Review
Committee (DRC) within the Bureau of Security and Investigative
Services (Bureau) to review a request of a licensee to contest
an administrative fine or to appeal the denial of a license.
Authorizes licensed repossessors to display a printout of their
registration or a screenshot of their registration from the
Bureau's website. Makes clean-up, clarifying language that
prohibits licensed repossessors from performing repair work on
collateral; removes provisions in law authorizing repossessors
to make demands for payment in lieu of repossession; and removes
the reference to "skip trace". Defines "repossession" as
relating to the work of repossessors. Makes other technical,
updating, and conforming changes.
Existing law:
1) Provides for the licensure and regulation of licensed
repossession agencies (LRAs), repossessors, and repossessor
qualified managers (QMs) by the Bureau of Security and
Investigative Services (Bureau) in the Department of Consumer
Affairs (DCA) under the Collateral Recovery Act (Act), which
governs 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.
(Business and Professions Code (BPC) § 7500 et seq.)
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2) Defines a "repossession agency" to include any person who,
for any consideration whatsoever, engages in business or
accepts employment to locate or recover collateral. (BPC §
7500.2)
3) Authorizes the Bureau to deny a license if the applicant has
committed specified acts. (BPC § 7503.5)
4) Authorizes the Bureau to assess administrative fines against
any licensee for specified acts. (BPC § 7508.1)
5) 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 Bureau. (BPC §
7506.9(d))
6) Authorizes a person to perform the duties of a registrant
pending receipt of a registration card if the person has been
approved by the Bureau 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 § 7506.9(e))
7) Prohibits a licensed repossession agency or its registrants
from making payment demands in lieu of repossession as well
as prohibits licensee from selling recovered collateral.
(BPC § 7507.4)
8) Authorizes licensed repossessors to charge owners for repair
work on collateral, if expressly authorized to do so. (BPC
§7507.5)
9) Requires that all personal effects be removed from the
recovered collateral including any personal effect that is
mounted but detachable by a release mechanism. Requires a
complete and accurate inventory of the personal effects be
made, labeled, and stored by the licensee for a minimum of 60
days.
(BPC § 7507.9)
10)Requires a licensee to serve a debtor with a notice of
seizures as soon as possible after the recovery of
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collateral. (BPC § 7507.10)
11)Prohibits a licensee from falsifying or altering an
inventory. (BPC § 7508.2(f))
12)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 §§
7581.1-7581.5)
13)Establishes an Alarm Company Operator DRC, which licensees
have the option of using to review administrative fines and
licensure decisions, except as specified. (BPC §§
7591.17-7591.20)
14)Requires the person taking a vehicle by or on behalf of its
legal owner under the terms of a security or lease agreement,
to contact the city police, sheriff, or campus police
department where the taking of possession occurred within one
hour after taking possession of the vehicle by the most
expeditious means available.
(Vehicle Code (VC) § 28)
This bill:
1)Establishes a Collateral Recovery Disciplinary Review
Committee (DRC) within the Bureau to review a request from a
licensee to contest an administrative fine or appeal the
denial of a license.
a) The members of the DRC will consist of five members
appointed by the Governor: three members actively engaged
in the business of a licensed repossession agency and two
public members. Each member of the DRC will be appointed
for a term of four years.
b) 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.
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c) Authorizes an appellant who disagrees with the DRC's
decision to request a formal administrative hearing within
30 days of the DRC's notification of decision otherwise the
DRC's decision is final.
d) Requires the DRC to meet as frequently required and
authorizes members of the DRC to be paid per diem and
reimbursed for actual travel expenses.
2)Authorizes a licensed repossessor to display a hardcopy
printout or electronic copy, including a screenshot, of the
Bureau's approval from the Bureau's website.
3)Prohibits a licensed repossessor from performing or charging
for repair work, cleaning, or detailing of any collateral
recovered.
4)Updates the method repossessors use to locate collateral by
removing the reference to "skip trace" and replacing the term
with "look for".
5)Defines the term "repossession" to mean recovering collateral
by means of an assignment by the legal owner, lien-holder,
lessor, lessee or registered owner.
6)Authorizes a repossession agency to make a good faith effort
to inventory any personal effects of value through either a
written or photographic inventory.
7)Prohibits a repossession agency to inventory or remove any
trash in recovered collateral.
8)Requires a licensee that is unable to open a trunk, glove box,
or any other compartment, to contact the legal owner of the
recovered collateral. Within 72 hours of this notification,
the registered owner must provide the licensee with either a
key or authorize a key to be made (at the registered owner's
expense) in order for the licensee to inventory the contents
of the inaccessible compartment.
9)Authorizes a repossession agency to store any personal effects
inside the collateral until the collateral is no longer in the
possession of the repossession agency.
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10)Authorizes a repossession agency to allow a registered owner
or person in possession of the vehicle to sign a waiver
forfeiting any personal effects not covered by a security
agreement. Authorizes a repossession agency to dispose of
these forfeited personal effects immediately after obtaining
the signed waiver from the registered owner or person in
possession of the vehicle.
11)Prohibits a repossession agency from selling any personal
effects not secured by a security agreement and remitting the
money from the sale to a third party, including any lending
institution.
12)Prohibits a licensee from releasing or conspiring to release
the personal effects or other personal property not covered by
a security agreement to anyone other than the debtor or person
in possession of the collateral at the time of the
repossession.
13)Requires a licensed repossessor agency to provide a notice of
the above mentioned inventory and reporting requirements of a
repossessor agency to a legal owner from which the agency
accepts an assignment on or before January 31 of each year.
14)Prohibits a repossession agency from disclosing, to the
public, any person or nongovernmental entity's residence
address, residence telephone number, cellular telephone
number, driver's license number, work schedule, and the past,
present, or future location, of any licensee, registrant,
qualified certificate holder, qualified manager, employee, or
any independent contractor the agency employs without a court
order.
15)Authorizes a repossession agency to provide to an insurance
company, the name, driver's license number, and date of birth
of a licensee, registrant, qualified certificate holder,
qualified manager, employee, or any independent contractor the
agency employs for the purpose of verifying information for
the issuance or renewal of an insurance policy.
16)Amends the vehicle code to mandate the tow yard, storage
facility, or impounding yard to direct the registered owner of
a recovered vehicle to the city police, sheriff, or campus
police department of the jurisdiction in which the collateral
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was recovered. Prohibits the person taking possession of the
recovered vehicle on behalf of the vehicle's legal owner from
notifying the law enforcement department of the jurisdiction
of the tow yard, storage facility, or impounding yard of the
removal.
17)Makes other technical clean up references to correct code
sections in the Act.
FISCAL
EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Appropriations analysis written on May
6, 2015, this bill will result in ongoing costs of approximately
$47,000 annually (special funds) to the Bureau for a half-time
staff services analyst (SSA) position and four hearings per year
associated with the new DRC.
COMMENTS:
1. Purpose. This bill is sponsored by the California
Association of Licensed Repossessors (CALR) . According to
the Author, "AB 281 would establish a Collateral Recovery
Disciplinary Review Committee (DRC), for the purpose of
reviewing the request of a licensee to contest the assessment
of an administrative fine or to appeal a denial of a
license."
The Author states, "Disciplinary actions currently take a
lengthy period of time, sometimes a year and a half to reach
their final outcome. A DRC would result in determinations on
a much more expedited basis, and the licensee may accept the
outcome of the DRC and not pursue an appeal. That has been
the experience for DRCs with security guards."
2. Background. Under existing law, a creditor, legal, or
registered owner may contract with a repossession agency to
locate and recover viable collateral for resale, with the
proceeds going towards the outstanding loan amount. While
many car dealers offer financing on site at the dealership,
the financing component is actually covered by a separate
subsidiary or creditor, whose employees can repossess a
vehicle. However, it is common practice for those creditors
to hire repossession agencies to recover those vehicles
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instead of using its own employees. Those agencies must
register with the Bureau. All managers and employees must
also register with the Bureau, and are subject to a
background check at that time. The Collateral Recovery Act
strictly regulates the activities of repossession agencies
and their employees.
Currently, there are approximately 309 licensed repossession
agencies (LRAs),
891 actively licensed repossessors, and 330 actively licensed
repossessor qualified managers (QMs) operating within
California. In order to be eligible for licensure as a LRA,
an applicant must have at least two years (2,000 hours each
year) of compensated experience totaling not less than 4,000
hours as a registrant or a LRA. In addition to meeting
experience requirements, applicants must pass a written
examination. Any applicant who worked for a licensed
repossession agency must have been registered as a
repossession agency employee to claim the experience.
3. Disciplinary Review Committees (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 actively engaged in their
respective businesses and two of whom are public members.
DRC meetings are scheduled depending on the number of appeals
received and are conducted in accordance with the Open
Meeting Act.
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
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ability to appeal a DRC decision through the administrative
process. The Collateral Recovery DRC in this bill is modeled
after the Alarm Company DRC.
When applicants and licensees file their appeals to a DRC,
Bureau 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, Bureau 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 an attorney and may bring witnesses
as character references or observers of the incident
resulting in the Bureau'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 Bureau
staff mail the applicant or licensee the DRC's decision on
their appeal within 30 days.
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 Bureau. In the Bureau's sunset report, it
noted, "To maximize the efficiency of its disciplinary
activities, the [Bureau] 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 [Bureau] licensees request an appeal
of their denials, suspensions, or imposition of fines through
DRC[s]."
The Bureau 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 Bureau, an appellant is generally
scheduled for hearing within 30 to 60 days. According to the
Bureau, this approach has resulted in no ongoing backlogs.
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Over the last three fiscal years:
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 Collateral
Recovery Act, over the last three fiscal years:
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.
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According to Bureau'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.
1. Defining Repossession. Currently, the Act does not define
the term "repossession", although the word is used throughout
the Act and is the fundamental practice which is the basis
for licensure. The Act does define a "repossession agency"
to include any person who, for any consideration whatsoever,
engages in business or accepts employment to locate or
recover collateral. Although this definition of
"repossession agency" defines "repossession" implicitly, the
industry has raised concerns over the clarity of the term.
This bill will add the definition of "repossession" to
clarify what the act of repossession is.
2. Inventory and Retention of Personal Effects from Recovered
Collateral. Under current law, licensed repossessors must
remove all personal effects in recovered collateral, provide
a complete and accurate written inventory of all items, and
provide the inventory to a debtor within 48 hours after the
recovery of the collateral. These personal effects must be
stored by the licensee in a secure location for a minimum of
60 days, after which a licensee may dispose of these items.
Any personal effects that have been disposed of are filed in
a permanent record that the licensee must retain for four
years.
Advancements in technology have rendered these written
inventories nearly obsolete. Written inventories are not
always the most accurate, as oftentimes items cannot be
identified and are mislabeled by the licensee who is
conducting the inventory. The industry has pointed out that
items, such as makeshift drug paraphernalia or other
unrecognizable personal effects are misidentified because the
licensee conducting the inventory does not know or cannot
recognize the item. Photographs of the debtor's personal
effects provide a more accurate inventory because
identification through a description of the items is not left
up to the licensee's interpretation. In addition, many
licensees already use tablet devices to help document and
inventory the personal effects retrieved alongside recovered
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collateral. This common practice helps licensees preserve an
electronic copy of the inventory for future reference and
increases the accountability of licensees.
Another issue raised by the industry is the requirement of
licensees to remove all personal effects in the recovered
collateral and store these items in a separate, secure
location. This specific issue usually pertains to vehicles
that have been repossessed. In order to further public trust
in the industry and the confidence of individuals to retrieve
their personal effects, the Author asserts that licensees
should be able to leave these items in the repossessed
vehicle after an inventory of these items has been completed
so that no items will be misplaced or lost when transferred
to a separate storage location. Current law also states that
licensees must keep all personal effects for a minimum of 60
days and may dispose of these items if the debtor does not
claim them within that time. The Author asserts that many
times, the debtor does not want to retrieve his or her
personal effects recovered at the time the vehicle is
repossessed. However, even though the debtor does not want
to keep these personal effects, the licensee must retain
these items for a minimum of 60 days.
This bill changes the requirement for licensees from having
to create a complete and accurate inventory to one of good
faith effort. The Author asserts that the change in this
language is necessary because a complete and accurate
inventory is not always possible depending on the state of
distress the collateral is in when it is recovered.
Oftentimes, there are copious amounts of trash in the
recovered vehicles, and items can be buried beneath this
trash. The Author asserts that this change, alongside the
amendments that would allow photographic inventory and the
storing of personal effects inside the collateral, will
provide greater consumer protection and encourage trust since
items that would be hidden in the repossessed vehicle would
not need to be removed and could be photographed inside the
vehicle. This bill would also allow a licensee to dispose of
any personal effects immediately after obtaining a waiver
forfeiting any personal items from the debtor or person in
possession of the collateral at the time of repossession.
The Author asserts that this will allow LRAs to dispose of
unwanted items and trash the owner has no interest in keeping
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immediately without having to wait the minimum 60 days.
3. Clarifying and Conforming Provisions. Under current law,
licensed repossessors are prohibited 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. Current law also requires every person engaged in
repossession activities to display a hardcopy printout from
the Bureau's website of his or her valid pocket card issued
by the Bureau. This bill would increase flexibility by
allowing a licensed repossessor to display an online
electronic copy or screenshot display directly from the
Bureau's website instead of just a hardcopy printout.
Licensed repossessors are also prohibited from demanding
payment in lieu of repossession. This bill would further
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.
In the definition of the term "assignment", the phrase "skip
trace" is used to refer to a method of collateral recovery
that repossessors have utilized. "Skip-tracing" is performed
by gathering as much information about the subject for
recovery as possible; through DMV records, personal contacts,
phone number databases, credit reports, criminal background
checks, utility bills, public tax information, job
applications, or any other method to find either where the
individual in possession of collateral might be located, or
the collateral itself. This term, however, is outdated as
the current practice of repossession no longer utilizes
"skip-tracing" as a primary means of located collateral to be
recovered. A more accurate method that repossessors utilize
to recover collateral is simply to physically look for,
locate, and recover the collateral. This bill will replace
"skip-trace" with "look for" in order to reflect the current
methods of locating and recovering collateral.
4. Prior/Related Legislation. AB 921 (Jones, 2015) of the
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current legislative session would establish a disciplinary
review committee for licensed private investigators.
( Status : This bill is currently set for hearing on June 22,
2015 in the Senate Business Professions and Economic
Development Committee.)
AB 2503 (Hagman, Chapter 390, Statutes of 2014) among other
things, required the repossessor of a vehicle to contact law
enforcement within one hour of the repossession and required
the licensee to continue to attempt notification if law
enforcement was unavailable until the required information
was provided.
AB 791 (Hagman, Chapter 340, Statutes of 2013) among other
things, prohibited a licensed repossession agency or its
registrants from making a demand for payment in lieu of
repossession and prohibited a licensed repossession agency
from selling collateral recovered under the Collateral
Recovery Act.
AB 515 (Hagman, Chapter 322, Statutes of 2009) made numerous
revisions to the Collateral Recovery Act and Vehicle Code
Sections relating to the impound of vehicles.
AB 659 (Ma, Chapter 192, Statutes of 2007) specified that the
legal owner of collateral registered under the Vehicle Code
includes the seller or lessee named on a valid conditional
sales contract or lease agreement and requires a licensed
repossessor to provide details about the incident to the
person who made the assignment. That person will then be
required to notify a subsequent repossessor of that
information at the time of making another assignment to skip
trace, locate, or repossess that vehicle.
AB 2318 (Calderon, Chapter 418, Statutes of 2006) provided
that a repossessor shall not be required to remove property
that is attached to or that is on the collateral of being
repossessed if the repossessor cannot determine whether or
not the item is a "personal effect" (i.e., property that does
not belong to the legal owner of the collateral) or a part of
the collateral, except that the repossessor shall remove and
inventory all items that can be removed without using tools,
and increases the fine to $250 on a repossession agency that
does not register repossessors with the BSIS in a timely
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fashion.
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)
established the Private Security Disciplinary Review
Committee.
5. Arguments in Support. Writing in support of the bill, the
California Association of Licensed Repossessors (CALR)
states, "AB 281 would revise the Collateral Recovery Act to
clarify the job description of repossessors, promote
flexibility, and establish a disciplinary review committee -
a proven mechanism to save time and taxpayer
dollars?Establishing this committee will provide an
opportunity for the Bureau of Security and Investigative
Services to save money, and for quicker decisions to be made
in the pending cases of licensees."
6. Recommended Amendments. To add further clarity and
consistency for definitions within the Act, the Author should
amend the bill according to the following:
In BPC § 7500.1:
a) The new definition of repossession in subdivision (v)
should include the term "locating" to be consistent with
how repossession agencies are currently defined in BPC.
b) Additionally, since the definition of "repossession" is
linked to "assignment", which is defined in subdivision
(b), the entities that can request repossession services
need to align. If it is decided that "registered owner" is
to be included in (v), then "registered owner" must also be
included in (b).
c) Lastly, if "registered owner" is included in
subdivisions (b) and (v), a subdivision to define this term
must be added. In regard to defining "registered owner",
there is collateral that is subject to a security agreement
that can be repossessed, but there is no formal process for
the lessee to register the collateral. If "registered
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owner" were to be defined, it might need to be confined to
the following collateral: vehicle, trailer, boat,
recreational vehicle and motor home. However, in doing so,
the concerns would be how the owner of other property that
cannot be registered would be treated.
SUPPORT AND OPPOSITION:
Support: California Association of Licensed Repossessors
(Sponsor)
Opposition: None on file as of June 9, 2015.
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