BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 1107 Hearing Date: June 15,
2015
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|Author: |Irwin |
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|Version: |April 8, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Sellers of travel: regulation.
SUMMARY: Requires a seller of travel, as defined, to maintain
their business records for a period of three years; authorizes
the Attorney General to recover their costs and attorney fees
pursuant to an audit that determines noncompliance with the
Sellers of Travel Law; and provides for an assessment issued by
Travel Consumer Restitution Corporation to be sent pursuant to
electronic billing.
Existing law:
1) Establishes the Sellers of Travel law which provides a
comprehensive scheme for the regulation of sellers of travel
(SOT), as defined, and requires a seller of travel, unless
exempted, to register with the Attorney General (AG) and to
comply with various requirements. (Business and Professions
Code (BPC) § 17550 et. seq.)
2) 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).
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(BPC § 17550.1(a))
3) 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 § 17550.1(b))
4) Requires a SOT to register with the Attorney General's office
(AG).
(BPC § 17550.20)
5) 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)
6) 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 § 17550.15(c))
7) 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 § 17550.15(f))
8) 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 § 17550.38)
9) Authorizes the TCRC to bill a SOT for fees necessary to
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maintain the fund.
(BPC § 17550.44)
10)Directs the TCRC to mail a SOT any assessments required to
maintain the fund. (BPC § 17550.44)
This bill:
1) Requires a SOT to maintain business records for a minimum
period of three years.
2) Authorizes the AG to recover costs and attorney's fees if the
AG determines through an examination (audit) that the SOT has
failed to comply with any requirements of the SOT Law.
3) Clarifies that an assessment issued by the TCRC shall be
sent, rather than mailed under current law, effectively
authorizing electronic billing.
FISCAL EFFECT: This bill is keyed "fiscal" by Legislative
Counsel. According to the Assembly Committee on Appropriations
analysis dated May 6, 2015, this bill will result in negligible
fiscal impact to the California Department of Justice.
COMMENTS:
1. Purpose. The California Coalition of Travel Organizations
(CCTO) is the Sponsor of this bill. According to the Author,
the current SOT law was enacted in 1995, prior to the
advancement of Internet and electronic transactions, and
required the TCRC to bill SOTs by mail. The Author believes
"it would be more efficient for billings to be made
electronically." The Author adds that current law does not
require SOTs to maintain their business records for any
period of time and record retention would be very helpful to
the AG's Office which has responsibility for the oversight of
the law, including responsibility to conduct audits and
investigations of SOTs. According to the Author, "requiring
that SOTs retain at least 3 years of business records for
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auditing purposes would help ensure that the AG's office will
have sufficient records to review in the event of an audit."
While the current SOT's law provides that the TCRC shall
recover costs and expenses for examinations or investigations
when it participates in an investigation (Business and
Professions Code Section 17550.33), there is no corresponding
provision allowing the AG's Office to recover costs for its
examinations or audits. In other contests, these audits or
examination costs are usually chargeable to the examinee when
a violation is found. The revision proposed in this bill
would assist in the funding of the costs of the AG by
providing authority for the AG to recover its costs when an
audit finds that the SOT Law has been violated.
2. Sellers of Travel Law. The Sellers of Travel Law was enacted
by SB 918 (Chapter 1123, Statutes of 1994), authored by
then-Assemblymember Jackie Speier and sponsored by the
California Coalition of Travel Organizations working in
cooperation with the AG's office. The law requires all
sellers of travel to register with the AG's office, pay an
annual fee of $100 to fund the program and pay annual
assessments into a self-sustaining restitution fund (the
TCRF). This law provides specific protections to consumers
who purchase sea or air transportation either singly or in
conjunction with other travel services, such as lodging and
car rentals. The Seller of Travel Law applies to all sellers
located in California, as well as those who sell or offer to
sell from locations outside the state to persons located in
California. The law applies to both retail and wholesale
transactions, and covers sales by tour operators,
consolidators, and wholesalers. A seller who only offers
lodging, bus, or train tours without also offering air or sea
transportation is not covered by the Seller of Travel Law.
Lodging establishments that book travel for their guests and
accept no money for doing so, along with airlines, and cruise
lines are also not covered by this law.
The Sellers of Travel Law provides several layers of protections
for consumers, including:
a. Disclosure and identification of the seller. Among
other things, sellers of travel must disclose business
addresses, fictitious business names, identifying
information of principals and owners, any relationship with
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airlines, and the location of a trust account or
information about a surety bond. The registration number,
displayed in all advertising and offers to sell, is a means
of identifying the businesses in the event of claims or
complaints and does not indicate any review or approval of
the business by the AG's office. Therefore, so long as the
seller discloses the necessary information in its
application and pays the appropriate fees, the registration
will be approved and a registration number issued.
b. Financial protections. Some sellers of travel must
deposit payments into a trust account or obtain a surety
bond on behalf of their customers. In addition, sellers
receiving payment from a passenger may not use that money
for any other purpose (i.e., to buy travel on behalf of
another passenger, pay rent or business overhead, or any
personal use) until it has delivered the purchased goods
and services.
c. Restitution fund. The law provides for a private
non-profit corporation, the TCRC, which administers
the TCRF. If the purchaser is located in California
and the purchase is from a registered seller of travel
whose principal place of business is also in
California, and the purchaser does not receive what he
or she contracted to purchase, the purchaser can file
a claim with the TCRC. Registered California sellers
and out-of-state sellers whose stock is nationally
traded are required to pay annual assessments to the
TCRC.
d. Written disclosures. Prior to or at the time of
receiving any payment, a seller of travel must provide
the purchaser with various written disclosures
including its name, business address and telephone
number, an itinerary, a statement about its
cancellation policy, the total amount to be paid, the
amount paid to date, the date of any future payment,
the purpose of the payment made, an itemized statement
of any balance due, whether it has a trust account or
surety bond, whether the payment is protected by the
TCRF, and how to make a claim of the TCRC.
In addition to those primary purposes highlighted above,
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the Sellers of Travel Law also provides for a number of
"guarantees." In the event that there is a cancellation,
the purchaser is entitled to receive a prompt and
automatic refund. If there is a material
misrepresentation by the seller, the law likewise
requires a refund. Finally, the law provides that once
the seller has received the purchaser's full payment, the
purchased tickets must be promptly delivered.
3.Arguments in Support. The Sponsor of this bill, the
California Coalition of Travel Organizations (CCTO)
writes in support of this bill, noting that it would
enhance the state's unique and effective SOT law to the
benefit of both California consumers as well as the
state's travel industry.
NOTE : Double-referral to Senate Committee on Judiciary (Second).
SUPPORT AND OPPOSITION:
Support:
California Coalition of Travel Organizations (CCTO) (Sponsor)
Opposition:
None on file as of June 9, 2015.
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