BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 1097 Hearing Date: June 15,
2015
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|Author: |Holden |
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|Version: |May 11, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant|Janelle Miyashiro |
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Subject: Alarm companies: electronic transactions.
SUMMARY: Authorizes alarm companies to distribute contracts to
customers by electronic means.
Existing law:
1)Establishes the Alarm Company Act, which provides for the
licensure and regulation of alarm company operators and the
certification and registration of alarm company employees.
(Business and Professions Code (BPC) § 7590)
2)States that every agreement by an alarm company, including but
not limited to lease agreements, monitoring agreements, and
service agreements, must be in writing. Additionally, each
agreement must contain:
a) The name business address, business telephone number,
and the license number of the alarm company operator or
registration number of any alarm agent who solicited or
negotiated the agreement.
b) Approximate dates when the work will begin and when it
will be completed.
c) A description of the work being done and materials used.
d) A disclosure that the alarm company operators are
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licensed by the Bureau of Security and Investigative
Services (Bureau) in the Department of Consumer Affairs
(DCA).
e) A description of the alarm system and its major
components.
f) Other matters agreed to by the parties in the contract.
g) Statement that upon completion, the alarm company will
teach the purchaser in the system's proper use.
h) Payments and payment schedules for initial residential
sales and lease agreements totaling over $250 over the time
period fixed by the agreement. (BPC § 7599.54)
3)Prohibits a licensee from making any untrue or misleading
statements in connection with the business of the licensee.
(BPC § 7599.55)
4)Mandates any licensee, qualified certificate holder, firearms
qualification card holder, or registrant to notify the Bureau
within 30 days of any change or residence or business address.
(BPC § 7599.59)
5)Provides that an electronic contract, record, or signature can
satisfy a written contract or record. (Civil Code (CC) §
1633.7)
6)Defines "electronic" as relating to technology and having
electrical, digital, magnetic, wireless, optical,
electromagnetic or similar capabilities. (CC § 1633.2(e))
7)Defines "electronic record" as a record created, generated,
sent, communicated, received, or stored by electronic means.
(CC § 1633.2(g))
8)Defines "electronic signature" as an electronic sound, symbol,
or process attached to or logically associated with an
electronic record and executed or adopted by a person with the
intent to sign the electronic record. (CC § 1633.2(h))
9)Defines "home solicitation contract or offer" to mean any
contract or offer which is subject to approval for the sale,
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lease, or rental of goods and/or services made at other than
appropriate trade premises in an amount of twenty-five dollars
or more. (CC § 1689.5(a))
10)Defines "appropriate trade premises" as the premises where
either the owner or seller normally carries out business or
where goods are normally offered or exposed for sale. (CC §
1689.5(b))
11)A contract may be conducted by electronic means based on the
context and surrounding circumstances of the agreement. A
party that agrees to conduct a transaction by electronic means
may refuse to conduct other transactions by electronic means.
(CC § 1633.5)
12)States that a buyer has the right to cancel a home
solicitation contract or offer until midnight of the third
business day after the day on which the buyer signs an
agreement or offer to purchase. (CC § 1689.6)
13)States that a home solicitation contract or offer must be:
a) Written in the same language as principally used in the
oral sales presentation.
b) Dated & signed by the buyer.
c) Contain, in conspicuous proximity to the space reserved
for the buyer's signature, the following statement: "You,
the buyer, may cancel this transaction at any time prior to
midnight of the third business day after the date of this
transaction. See the attached notice of cancellation form
for an explanation of this right." (CC § 1689.7)
14)Excludes certain transactions from being conducted
electronically, including the creation and execution of wills,
codicils, health care powers of attorney, or testamentary
trusts. (CC § 1633.3)
This bill:
1) Authorizes alarm company salespersons to use electronic
contracts for service in lieu of paper contracts at the
discretion of the customer.
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2) Extends the provisions of the Uniform Electronic Transactions
Act (UETA) to cover transactions conducted by persons
licensed, certified, or registered under the Alarm Company
Act.
3) Requires 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.
4) Authorizes any signatures, disclosures, and documents
required by these home solicitation contracts to be provided
and transmitted by electronic means.
FISCAL
EFFECT: None. This bill has been keyed "nonfiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by ADT Security Services .
According to the Author, "AB 1097 allows alarm company
salespeople to use electronic contracts, at the discretion of
the customer."
The Author states that, "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. With paper contracts
it is virtually impossible to know who signed a contract,
when they signed it, 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."
2. Background. The Uniform Electronic Transaction Act (UETA)
was first drafted by the National Conference of Commissioners
on Uniform State Laws (NCCUSL) in 1999 to help set
standardized state rules for creating electronic contracts
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(e-contracts) that would provide the same legal obligation as
traditional paper transactions. Included in these
standardized rules are specific definitions to e-contract
terms in relation to traditional contractual agreements. The
UETA defines an "electronic record" as a contract or other
type of record created, generated, communicated, received, or
stored by electronic means. An "electronic signature" is
defined by the UETA as an electronic sound, symbol, or
process attached to or logically associated with a contract
or record and executed or adopted by a person with the intent
to sign the record.
There are certain transactions that are not covered under the
UETA. These include wills, trusts, codicils to a will,
health care powers of attorney, transactions governed by the
U.C.C, the Uniform Computer Information Transactions Act
(UCITA), and any state law exempting application. When the
UETA was released, states had the option of adopting the
entire UETA law or part(s) of the proposed provisions in the
act.
In 1999, California became one of the first states to adopt
the UETA, giving
e-contracts and signatures the same legal standing as
traditional paper contracts. In an effort to further protect
consumers, California additionally exempted in-home sales
from the UETA. Almost any consumer transaction $25 or more
which takes place in the buyer's home or away from other
appropriate trade premises constitute an in-home sale.
Additionally, in 2010, California passed the Consumer's
Rights to Cancel Home Solicitation Contracts through the Home
Solicitation Sales Act. This Act gives consumers the ability
to cancel a sale or contract made through an in-home sale
without penalty or obligation if the consumer gives a proper
notice within three business days. With this additional UETA
exemption in the use of e-contracts and the cancellation
provisions in the Home Solicitation Sales Act, in-home sales
vendors are currently required to continue leaving a paper
copy of the contract and two copies of the notice of
three-day right of recession with the consumer at the time of
the sale.
However, advancements in technology have rendered these paper
contracts including in-home sales paper contracts nearly
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obsolete. Paper contracts are easily misplaced and can be
damaged over time. E-contracts offer added consumer
protection properties because they are reproducible, and
metadata (data that summarizes basic information about other
data) showing when the contract and other documents were
signed, emailed, and even opened, can be subpoenaed. Many
in-home vendors use tablet devices to help assess customer
needs and discuss contract terms, an already common practice
that the Author asserts will further reduce environmental
impact. This common practice helps salespersons preserve an
electronic copy of the document for future reference, which
can be emailed to customers for their own files, providing
greater transparency into the contracting process. The
Author further argues that this transparency with the
adoption of e-contracting will give the state additional
enforcement tools to ensure that the sale was a voluntary
transaction with the fulfillment of all notice requirements.
This bill would authorize alarm companies in California to
distribute electronic contracts without requiring a separate
paper copy to be generated at the discretion of the customer.
Consumers who still wish to receive a paper copy of their
contract will still maintain this option.
3. Prior/Related Legislation. AB 1131 (Dababnah, 2015) of the
current legislative session, would authorize additional
persons to send life insurance 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 waiting for a hearing in Senate
Insurance Committee.)
SB 536 (Berryhill, 2014) is identical to this bill except
that SB 536 would have additionally excluded contracts for
services or other activities authorized by the Alarm Company
Act from the definition of a home solicitation contract.
( Status : This bill was held in Assembly Rules Committee.)
4. Arguments in Support. Writing in support of the bill, ADT
Security Services states, "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
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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 (CAA) writes, "Electronic
contracts provide better verification on whom and when a
contract was signed, as well as when the contract and notice
of cancelation are received. A date and time stamp appears
on emails, verifying when they are sent. It is also possible
to see when the customer has logged into the e-contract
system. AB 1097 would still allow the customer to receive a
paper contract. However, as mentioned above, an electronic
contract allowed under this bill will provide additional
consumer protections."
The California Cable & Telecommunications Association (CCTA)
writes, "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 service."
NOTE : Double-referral to Senate Committee on Judiciary (Second).
SUPPORT AND OPPOSITION:
Support:
ADT Security Services (Sponsor)
California Alarm Association (CAA)
California Cable & Telecommunications Association (CCTA)
Opposition:
None on file as of June 9, 2015.
-- END --
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