BILL ANALYSIS Ó AB 704 Page 1 Date of Hearing: May 6, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 704 (Cooley) - As Amended April 6, 2015 ----------------------------------------------------------------- |Policy |Insurance |Vote:|12 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill modifies escrow rules for underwritten title companies (UTCs), making them consistent with rules governing independent escrow companies. AB 704 Page 2 FISCAL EFFECT: 1)One-time costs to the California Department of Insurance (CDI), under $100,000, and annual ongoing costs of less than $100,000 to manage new bonding and regulatory requirements at a state, instead of county, level (Insurance Fund). 2)Projected revenues of in the range of $50,000 annually (Insurance Fund). COMMENTS: 1)Purpose. According to the author, this bill is designed to level the playing field for independent escrow companies licensed by the Department of Business Oversight (DBO) and the companies that are authorized to perform escrow services that are licensed by CDI (UTCs). The author argues that UTCs face unnecessarily burdensome regulatory requirements in comparison to the independent escrow companies regulated by the DBO, and the escrow rules that govern UTCs should be made consistent with those rules. 2)Background. Escrow is often used in real estate transactions, where money is kept in custody of a neutral third party until specified conditions have been fulfilled. The vast majority of escrow services in California are performed by either independent escrow companies or UTCs, who are also authorized to issue title insurance policies. Because the two business arrangements are regulated by two different state agencies, regulation is not consistent. For example, bonding requirements for a UTC are currently $7,500 in each county in which business is transacted, while independent escrow companies have one statewide amount. This bill only addresses AB 704 Page 3 the escrow component of a UTC regulatory structure, not the title insurance component. 3)Opposition. CDI is opposed to this bill unless amended to require a bond instead of being able to choose a bond, a deposit, or a letter of credit; to increase the amount of the security tenfold; to make the security amount fixed regardless of the account activity; and clarify the regulation does not apply to non-title insurance-related escrows. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081