BILL ANALYSIS Ó
AB 1107
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Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 1107
(Irwin) - As Amended April 8, 2015
SUBJECT: Sellers of travel: regulation.
SUMMARY: Authorizes electronic billing of a seller of travel
(SOT) by the Travel Consumer Restitution Corporation; requires
that the SOT retain business records for at least three years
for auditing purposes; and, provides for cost recovery for the
Attorney General's office when a violation is found during an
audit of business records.
EXISTING LAW:
1)Defines a SOT as a person who sells, provides, furnishes,
contracts for, arranges, or advertises that he or she can or
may arrange, or has arranged, at wholesale or retail either of
the following: air or sea transportation either separately or
in conjunction with other travel services, or land or water
vessel transportation, other than sea carriage, either
separately or in conjunction with other travel services if the
total charge to the passenger exceeds three hundred dollars
($300). (Business and Professions Code (BPC) Section
17550.1(a))
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2)Excludes from the definition of a SOT the following: an air
carrier; an ocean carrier; a hotel, motel, or similar lodging
establishment that arranges for transportation for its
registered guests; a motor club; or a motor or rail carrier
or water vessel operator operating from a state, federal, or
other governmental entity. (BPC Section 17550.1(b))
3)Requires a SOT to register with the Attorney General's office
(AG). (BPC Section 17550.20)
4)Mandates a SOT deposit all funds received from a passenger for
air or sea transportation for any person, or for any travel
services offered by the seller of travel, and any refunds made
by carriers or providers of travel services, into a secure
trust account. (BPC 17550.15)
5)Limits the use of monies in the trust account to be used for
payment for transportation or travel service purchased by the
passenger, for payment to the Airlines Reporting Corporation,
for commission due to the SOT, and to make refunds to the
passenger, as specified. (BPC Section 17550.15(c))
6)Requires a SOT to file an irrevocable agreement with the AG or
a district attorney to allow examination of all business
records at its written request. (BPC Section 17550.15(f))
7)Establishes the Travel Consumer Restitution Corporation (TCRC)
which creates the Travel Consumer Restitution Fund as a
mechanism for an aggrieved passenger to be reimbursed when a
SOT fails to provide for travel or in the event that a SOT
becomes insolvent. (BPC Section 17550.38)
8)Authorizes the TCRC to bill a SOT for fees necessary to
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maintain the fund. (BPC 17550.44)
9)Directs the TCRC to mail a SOT any assessments required to
maintain the fund. (BPC Section 17550.44)
THIS BILL:
1) Requires a SOT to maintain business records for a minimum of
three years.
2)Gives the AG the right to recover costs when an audit reveals
a violation of this chapter, as specified.
3)Allows the TCRC to bill a SOT assessments to maintain the
funds in a manner including electronic means.
4)Makes other non-substantive, technical changes.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
1)Purpose. This bill is sponsored by the California Coalition
of Travel Organizations . According to the author, "AB 1107 is
intended to update California's unique and effective Seller of
Travel (SOT) law in order to enhance the consumer protections
and the efficiency of the law, by authorizing electronic
billing by the Travel Consumer Restitution Corporation (TCRC)
of sellers of travel to support the travel restitution fund,
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requiring that SOTs retain at least 3 years of business
records for auditing purposes, and allowing the Attorney
General's office to recover its costs from an audit when a
violation has been determined."
2)Background. In 1995, the State of California enacted the SOT
Law designed to protect consumers from unscrupulous travel
providers. Several other states, including Florida, Hawaii,
Iowa, Nevada, and Washington, have their own versions of SOT
laws that require registration and trust funds provisions
similar to California. The SOT law requires a seller of
travel to register with the AG's office and mandates that
passenger funds be maintained in a trust account. As part of
the SOT law, the Travel Consumer Restitution Fund was
established to provide an expeditious route for aggrieved
passengers to recover for loss when a seller of travel fails
to deliver the travel documents, becomes insolvent, or refuses
to refund a client.
Business Records Requirement. The current law only requires
that a SOT provide to the AG all business records relating for
auditing purposes upon request. However, the law is silent on
the amount of time that a SOT must retain the records. There
are no uniform standards for the amount of time a business
should keep its business records. Recommendations vary
depending on the type of record. For example, the Internal
Revenue Service typically recommends that tax records be kept
for seven years. Most certified public accounts similarly
recommend that all documentation relating a business be
retained for seven years. Aside from good business practice,
there is no law preventing a business to dispose of records at
an earlier time. This bill amends the law so that a SOT is
explicitly instructed to retain records for at least three
years.
Recovery of Costs by the AG. Under the SOT law, the AG is
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vested with the duty to audit a SOT for compliance with the
trust fund provisions. While this is not a typical function
of the AG, the AG is charged with auditing the Travel Consumer
Restitution Corporation (BPC Section 17550.53) and Charitable
Trusts (GC Section 12598). For these auditing services, the
AG is entitled to cost recovery. Further, it is typical for
the AG to recovery costs and fees from a court proceeding
regardless of statutory mandates. This bill mirrors the
provisions in the other statutes relating to auditing by the
AG and is consistent with the award of costs and fees for
other legal actions.
Billing by Electronic Means. When the SOT law was drafted in
1996, the provision allowing the TCRC to assess fees to a SOT
was drafted using language requiring delivery by mail.
Technology has advanced since that time and this bill
logically give the authority to bill in a manner determined by
the TCRC including electronic means.
REGISTERED SUPPORT:
California Coalition of Travel Organizations (sponsor)
REGISTERED OPPOSITION:
None on file.
AB 1107
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Analysis Prepared by:Christian Jagusch / B. & P. / (916)
319-3301