BILL ANALYSIS Ó
AB 1097
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Date of Hearing: May 5, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 1097
(Holden) - As Introduced February 27, 2015
SUBJECT: Alarm companies: electronic transactions.
SUMMARY: Authorizes contracts for services or other activities
authorized by the Alarm Company Act to be conducted by
electronic means only after receiving consent from the consumer.
EXISTING LAW:
1)Licenses and regulates alarm company operators and alarm
company agents under the Alarm Company Act, administered by
the Bureau of Security and Investigative Services, within the
Department of Consumer Affairs. (Business and Professions
Code (BPC) Section 7590 et seq.)
2)Defines "alarm company operator" to mean a person who, for any
consideration, engages in business or accepts employment to
install, maintain, alter, sell, monitor, or service alarm
systems, or who responds to alarm systems, except for any
alarm agent, as specified. (BPC Section 7590.2)
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3)Defines "alarm agent" to mean a person employed by an alarm
company operator whose duties include selling on premises,
altering, installing, maintaining, moving, repairing,
replacing, servicing, responding, or monitoring an alarm
system, or a person who manages or supervises a person
employed by an alarm company to perform any of those duties or
any person in training for any of those duties. (BPC Section
7590.1(o))
4)Requires specified agreements entered into by an alarm company
pertaining to alarm systems, including, among others, lease
agreements, monitoring agreements, service agreements, and
installation agreements, be in writing. (BPC Section 7599.54)
5)Enacts the Uniform Electronic Transactions Act (UETA), which
provides that records, signatures, or contracts, may not be
denied legal effect or enforceability solely because they are
in electronic form, and that an electronic record satisfies
any law that requires a record to be in writing, and that an
electronic signature satisfies any law that requires a
signature. (Civil Code (CIV) Section 1633.1 et seq.)
6)Exempts certain transactions from the UETA, including home
solicitation contracts. (CIV Section 1633.1)
7)Defines a "home solicitation contract" to include any
contract, whether single or multiple, or any offer which is
subject to approval for the sale, lease, or rental of goods or
services or both, made at other than appropriate trade
premises in the amount of $25 dollars or more, as specified.
(CIV Section 1689.5(a))
8)Provides specified time periods for consumers to cancel a home
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solicitation contract, and requires specified disclosures and
statements, and separately executed cancellation documents in
connection with the execution of those contracts. (CIV
Section 1689.5 et seq.)
THIS BILL:
9)Authorizes contracts for services or other activities
authorized by the Alarm Company Act to be conducted by
electronic means, only with the consent of the contracting
consumer.
10)Provides that the provisions of the UETA would apply to
electronic records and electronic signatures relating to
transactions conducted by persons licensed, certified, or
registered pursuant to the Alarm Company for purposes
authorized by the Alarm Company Act.
11)Excludes contracts for services or other activities
authorized by the Alarm Company Act from the definition of a
home solicitation contract.
12)Requires those electronic contracts for services or other
activities authorized by the Alarm Company Act to comply with
specified cancellation periods, statements and disclosures
that apply to home solicitation contracts, and would authorize
a notice of cancellation and copies of the contract or offer,
and signatures, disclosures, and documents, to be provided and
transmitted electronically.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
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Purpose. This bill is sponsored by ADT Security Services .
According to the author, "Although most businesses and
individuals selling alarm systems are legitimate, some use
deceptive tactics as a core component of their sales practices
and often target the elderly, coercing them into signing
various contracts with different companies. With paper
contracts, it is virtually impossible to know who signed a
contract, when they signed, and whether or not copies of the
contract and notice of cancellation were actually delivered.
With e-contracts, however, it is possible to see when the
actual customer logged into the e-contract system, reviewed
and signed the contract, and exactly when and whether the
contract and notices were electronically delivered to the
customer.
Since 1999, technology has advanced to such a degree that
electronic contracts can now offer consumer protection
measures that exceed those of traditional paper contracts.
Therefore, at the discretion of the customer, AB 1097 would
allow alarm companies in the state to fully utilize electronic
contracts. These improvements will benefit California
consumers, the environment and the state agencies tasked with
enforcing consumer protection laws."
Background. In 1999, California adopted the Uniform Electronic
Transaction Act (UETA), which gave electronic contracts
(e-contracts) and signatures the same legal standing as
traditional paper contracts. In an effort to further protect
consumers, the state excluded in-home sales from the UETA,
which means that in-home sales vendors were required to
continue leaving a paper copy of the contract and two copies
of the notice of three-day right of rescission with the
consumer at the time of sale.
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With the advancement in technology, traditional paper contracts
are nearly obsolete. E-contracts which offer added consumer
protection properties are a viable solution to replace paper
contracts. E-contracts are reproducible, and metadata showing
when the contract and other documents were signed, emailed,
and even opened, can be subpoenaed, whereas paper contracts
are easily misplaced and can be damaged over time. In
addition, many in-home vendors use tablet devices to help
assess customer needs and discuss contract terms. The author
asserts that using such tablets to contract with customers
would reduce environmental impact and preserve an electronic
copy of the document for future reference, which could be
emailed to customers for their own files, thereby providing
greater transparency into the contracting process.
Current Related Legislation. AB 1131 (Dababneh), of the current
legislative session, would authorize additional persons to
send records by electronic transmission by providing that an
insurer, agent, broker, or any other person licensed by the
Department of Insurance may send electronic records. STATUS:
This bill is in the Assembly Insurance Committee.
Prior Related Legislation. SB 536 (Berryhill) of 2014, was
identical to this bill. NOTE: This bill was held in the
Assembly Rules Committee.
ARGUMENTS IN SUPPORT:
According to the sponsors, ADT Security Services , "State law
currently requires in-home sales vendors to leave a copy of the
contract and two copies of the notice of three-day right of
rescission with the consumer at the time of the sale. This
means that millions of pages of paper contracts and notices are
left with California consumers today, many of whom would gladly
accept and prefer electronic versions of those documents. [This
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bill] would allow alarm customers to receive these copies
electronically, if they choose?.We believe it is time to update
California statute to allow companies in the state to fully
utilize e-contracts and to electronically send (email) the
required contract and notice of rescission documents to the
customer, without requiring that wasteful paper copies also be
generated and left behind. Of course, electronic contracting is
voluntary, and consumers must first consent."
The California Alarm Association writes in support, "Many alarm
companies are equipping their sales people with tablet devices.
Tablets allow customers to adjust font size to better read the
terms and conditions of the contract. In addition, software can
be used to force a customer to read and acknowledge each page of
the contract before advancing to the next page. Ultimately,
once the customer reviews, initials, and signs the contract; an
electronic copy of the contract will be sent immediately to the
customer. The contract can then be electronically stored on the
customer's computer, whereas paper contracts are often lost or
destroyed."
The California Cable & Telecommunications Association writes in
support, "The adoption of this proposal would result in greater
convenience for alarm service customers by providing an
immediate electronic contract access to consumers, providing for
greater consumer protections and verification of customer
authorization, and confirming that customers understand and
review their right to cancel services."
ARGUMENTS IN OPPOSITION:
None on file.
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AMENDMENT:
In order to authorize the use of electronic contracts and the
ability to satisfy documentation with electronic documents, the
bill, in addition to adding this specific authorization to the
Business and Professions Code, makes conforming changes in the
Civil Code, which include applying the UETA to alarm company
contracts. Because provisions under the Civil Code require home
solicitation contracts, which frequently include these alarm
company contracts, to be accompanied with paper documents, this
bill exempts alarm company contracts from the definition of a
home solicitation contract. Because the intent of the bill is
to merely authorize the use of electronic documents in lieu of
paper documents, the author should consider leaving these
contracts within the definition of a home solicitation contract,
and therefore subject to any other requirements relating to home
solicitation contracts, and instead specifically authorize the
use of electronic documents in those situations that currently
require paper copies.
On page 2, line 3, strike Contracts and insert Notwithstanding
Section 7599.54, contracts
On page 2, line 14, amend subdivisions (b) and (c) as follows:
(b) Contracts Notwithstanding Section 1689.6 of the Civil
Code, for contracts for services or other activities
authorized by this chapter , shall comply with paragraph (1) of
subdivision (a) of, and subdivisions (d) and (e) of, Section
1689.6 of the Civil Code, provided however, that a notice of
cancellation and copies of the contract or offer described in
those provisions may be provided and transmitted
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electronically.
(c) Contracts Notwithstanding Section 1689.7 of the Civil
Code, for contracts for services or other activities
authorized by this chapter , shall comply with paragraph (1) of
subdivision (a) of, and subdivision (c) of, Section 1689.7 of
the Civil Code, provided however, that the signatures,
disclosures, and documents described in those provisions may
be provided and transmitted electronically.
Strike Section 4 of the bill.
REGISTERED SUPPORT:
ADT Security Services (sponsors)
California Alarm Association
California Cable & Telecommunications Association
REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301
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