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