BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 1097|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                      CONSENT 


          Bill No:  AB 1097
          Author:   Holden (D)
          Amended:  5/11/15 in Assembly
          Vote:     21  

           SENATE BUS, PROF. & ECON. DEV. COMMITTEE:  9-0, 6/15/15
           AYES:  Hill, Bates, Berryhill, Block, Galgiani, Hernandez,  
            Jackson, Mendoza, Wieckowski

           SENATE JUDICIARY COMMITTEE:  6-0, 7/7/15
           AYES:  Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski
           NO VOTE RECORDED:  Anderson

           ASSEMBLY FLOOR:  78-0, 5/14/15 (Consent) - See last page for  
            vote

           SUBJECT:   Alarm companies: electronic transactions


          SOURCE:    ADT Security Services

          DIGEST:   This bill authorizes alarm companies to distribute  
          contracts to customers by electronic means.

          ANALYSIS: 
          
          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,  








                                                                    AB 1097  
                                                                    Page  2



             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  
                licensed by the Bureau of Security and Investigative  
                Services (Bureau) in the Department of Consumer Affairs.

              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)

           1) Prohibits a licensee from making any untrue or misleading  
             statements in connection with the business of the licensee.   
             (BPC § 7599.55)

           2) 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)

           3) Provides that an electronic contract (e-contract), record,  
             or signature can satisfy a written contract or record.   








                                                                    AB 1097  
                                                                    Page  3



             (Civil Code (CC) § 1633.7)

           4) Defines "electronic" as relating to technology and having  
             electrical, digital, magnetic, wireless, optical,  
             electromagnetic or similar capabilities.  (CC § 1633.2(e))

           5) Defines "electronic record" as a record created, generated,  
             sent, communicated, received, or stored by electronic means.   
             (CC § 1633.2(g))

           6) 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))

           7) Defines "home solicitation contract or offer" to mean any  
             contract or offer which is subject to approval for the sale,  
             lease, or rental of goods and/or services made at other than  
             appropriate trade premises in an amount of $25 or more.  (CC  
             § 1689.5(a))

           8) 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))

           9) Provides that 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)

           10)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)

           11)States that a home solicitation contract or offer must be:   
             written in the same language as principally used in the oral  
             sales presentation, dated & signed by the buyer, and contain,  
             in conspicuous proximity to the space reserved for the  
             buyer's signature, the following statement:  "You, the buyer,  








                                                                    AB 1097  
                                                                    Page  4



             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)

           12)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 e-contracts for  
            service in lieu of paper contracts at the discretion of the  
            customer.

          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 e-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.

          Background
          
          The UETA was first drafted by the National Conference of  
          Commissioners on Uniform State Laws in 1999 to help set  
          standardized state rules for creating 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  








                                                                    AB 1097  
                                                                    Page  5



          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, 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  
          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  








                                                                    AB 1097  
                                                                    Page  6



          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 authorizes alarm companies in California to distribute  
          e-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.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified7/9/15)


          ADT Security Services (source)
          California Alarm Association 
          California Cable & Telecommunications Association 


          OPPOSITION:   (Verified7/9/15)


          None received

          ARGUMENTS IN SUPPORT:  Writing in support of the bill, ADT  
          Security Services, the sponsor, 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  
          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, "Electronic contracts  








                                                                    AB 1097  
                                                                    Page  7



          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 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."

          ASSEMBLY FLOOR:  78-0, 5/14/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Linder, Medina


          Prepared by:Janelle Miyashiro / B., P. & E.D. / (916) 651-4104
          7/10/15 14:08:06


                                   ****  END  ****


          









                                                                    AB 1097  
                                                                    Page  8