BILL ANALYSIS Ó
AB 1859
Page 1
Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 1859
(Gallagher) - As Amended March 18, 2016
SUBJECT: Collateral recovery: release of vehicle.
SUMMARY: Makes several substantive and clarifying changes to
repossession, inventory, and release procedures for collateral
recovery involving licensed repossessors, including consumer
waivers of inventory presentation, storage of personal effects,
collateral release procedures, and registration requirements.
EXISTING LAW:
1)Establishes the Bureau of Security and Investigative Services
(BSIS) within the Department of Consumer Affairs (DCA) to
license and regulate repossessors under the Collateral
Recovery Act. (BPC §§ 7500 - 7511)
2)Defines "assignment" as any written authorization by the legal
owner, lienholder, lessor, lessee, registered owner, or the
agent of any of them, to repossess any collateral, including,
but not limited to, collateral registered under the Vehicle
Code (VEH) that is subject to a security agreement that
contains a repossession clause. "Assignment" also means any
written authorization by an employer to recover any collateral
entrusted to an employee or former employee in possession of
the collateral. (BPC § 7500.1(a))
AB 1859
Page 2
3)Defines "collateral" as any specific vehicle, trailer, boat,
recreational vehicle, motor home, appliance, or other property
that is subject to a security agreement. (BPC § 7500.1(e))
4)Defines "debtor" as any person obligated under a security
agreement. (BPC § 7500.1(i))
5)Defines "legal owner" as a person holding a security interest
in any collateral that is subject to a security agreement, a
lien against any collateral, or an interest in any collateral
that is subject to a lease agreement. (BPC § 7500.1(n))
6)Defines "licensee" as an individual, partnership, limited
liability company, or corporation licensed under this chapter
as a repossession agency. (BPC § 7500.1(o))
7)Defines "repossession" as the locating or recovering of
collateral by means of an assignment. (BPC § 7500.1)
8)Requires, a licensed repossessor to remove and inventory
personal effects from the collateral after repossession. The
inventory of the personal effects must be complete and
accurate, and the personal effects must be labeled and stored
by the licensee for a minimum of 60 days in a secure manner,
except those personal effects removed by or in the presence of
the debtor or the party in possession of the collateral at the
time of the repossession. (BPC § 7507.9)
9)Authorizes a debtor, with the consent of the licensee, to
waive the preparation and presentation of an inventory if the
debtor redeems the personal effects or other personal property
AB 1859
Page 3
not covered by a security interest within the time period for
the notices required by the Act and signs a statement that the
debtor has received all the property. (BPC § 7507.9(h))
10)Requires a repossession agency to request written
authorization from the debtor before releasing personal
effects or other personal property not covered by a security
agreement. (BPC § 7507.9(i))
11)Exempts a vehicle repossessed pursuant to the terms of a
security agreement from registration solely for the purpose of
transporting the vehicle from the point of repossession to the
storage facilities of the repossessor, and from the storage
facilities to the legal owner or a licensed motor vehicle
auction, provided that the repossessor transports with the
vehicle the appropriate documents authorizing the repossession
and makes them available to a law enforcement officer on
request. (VEH § 4022)
12)Provides that a vehicle removed and seized by a peace officer
as specified shall be released to the legal owner of the
vehicle or the legal owner's agent prior to the end of 30
days' impoundment if all of the following conditions are met:
(VEH § 14602.6(f))
a) The legal owner is a motor vehicle dealer, bank, credit
union, acceptance corporation, or other licensed financial
institution legally operating in this state or is another
person, not the registered owner, holding a security
interest in the vehicle.
b) The following payment requirements are met:
i) The legal owner or the legal owner's agent pays all
AB 1859
Page 4
towing and storage fees related to the seizure of the
vehicle. No lien sale processing fees shall be charged to
the legal owner who redeems the vehicle prior to the 15th
day of impoundment. Neither the impounding authority nor
any person having possession of the vehicle shall collect
from the legal owner of the type specified in paragraph
(1), or the legal owner's agent any administrative
charges imposed pursuant to VEH § 22850.5 unless the
legal owner voluntarily requested a poststorage hearing.
ii) A person operating or in charge of a storage
facility where vehicles are stored pursuant to this
section shall accept a valid bank credit card or cash for
payment of towing, storage, and related fees by a legal
or registered owner or the owner's agent claiming the
vehicle. A credit card shall be in the name of the person
presenting the card. "Credit card" means "credit card"
as defined in Civil Code (CIV) § 1747.02(a), except, for
the purposes of this section, credit card does not
include a credit card issued by a retail seller.
iii) A person operating or in charge of a storage
facility described above who violates the requirements
shall be civilly liable to the owner of the vehicle or to
the person who tendered the fees for four times the
amount of the towing, storage, and related fees, but not
to exceed five hundred dollars ($500).
iv) A person operating or in charge of a storage
facility described above shall have sufficient funds on
the premises of the primary storage facility during
normal business hours to accommodate, and make change in,
a reasonable monetary transaction.
v) Credit charges for towing and storage services shall
comply with CIV § 1748.1. Law enforcement agencies may
include the costs of providing for payment by credit when
AB 1859
Page 5
making agreements with towing companies on rates.
c) The legal owner or the legal owner's agent presents a
copy of the assignment, as defined in BPC § 7500.1(b); a
release from the one responsible governmental agency, only
if required by the agency; a government-issued photographic
identification card; and any one of the following, as
determined by the legal owner or the legal owner's agent: a
certificate of repossession for the vehicle, a security
agreement for the vehicle, or title, whether paper or
electronic, showing proof of legal ownership for the
vehicle. Any documents presented may be originals,
photocopies, or facsimile copies, or may be transmitted
electronically. The law enforcement agency, impounding
agency, or any other governmental agency, or any person
acting on behalf of those agencies, shall not require any
documents to be notarized. The law enforcement agency,
impounding agency, or any person acting on behalf of those
agencies may require the agent of the legal owner to
produce a photocopy or facsimile copy of its repossession
agency license or registration issued pursuant to the
Collateral Recovery Act, or to demonstrate, to the
satisfaction of the law enforcement agency, impounding
agency, or any person acting on behalf of those agencies,
that the agent is exempt from licensure pursuant to BPC §§
7500.2 or 7500.3.
d) No administrative costs authorized under VEH §
22850.5(a) shall be charged to the legal owner of the type
specified in paragraph (1), who redeems the vehicle unless
the legal owner voluntarily requests a poststorage hearing.
No city, county, city and county, or state agency shall
require a legal owner or a legal owner's agent to request a
poststorage hearing as a requirement for release of the
vehicle to the legal owner or the legal owner's agent. The
law enforcement agency, impounding agency, or other
governmental agency, or any person acting on behalf of
those agencies, shall not require any documents other than
those specified in this paragraph. The law enforcement
AB 1859
Page 6
agency, impounding agency, or other governmental agency, or
any person acting on behalf of those agencies, shall not
require any documents to be notarized. The legal owner or
the legal owner's agent shall be given a copy of any
documents he or she is required to sign, except for a
vehicle evidentiary hold logbook. The law enforcement
agency, impounding agency, or any person acting on behalf
of those agencies, or any person in possession of the
vehicle, may photocopy and retain the copies of any
documents presented by the legal owner or legal owner's
agent.
e) A failure by a storage facility to comply with any
applicable conditions set forth in this subdivision shall
not affect the right of the legal owner or the legal
owner's agent to retrieve the vehicle, provided all
conditions required of the legal owner or legal owner's
agent under this subdivision are satisfied.
13)Provides that, when collateral is released to a licensed
repossessor, licensed repossession agency, or its officers or
employees, the following apply:
a) The law enforcement agency and the impounding agency,
including any storage facility acting on behalf of the law
enforcement agency or impounding agency, shall comply with
the release requirements of VEH § 14602.6 and shall not be
liable to the registered owner for the improper release of
the vehicle to the legal owner or the legal owner's agent
provided the release complies with the provisions of this
section. A law enforcement agency shall not refuse to
issue a release to a legal owner or the agent of a legal
owner on the grounds that it previously issued a release.
b) The legal owner of collateral shall, by operation of law
and without requiring further action, indemnify and hold
harmless a law enforcement agency, city, county, city and
county, the state, a tow yard, storage facility, or an
impounding yard from a claim arising out of the release of
AB 1859
Page 7
the collateral to a licensed repossessor or licensed
repossession agency, and from any damage to the collateral
after its release, including reasonable attorney's fees and
costs associated with defending a claim, if the collateral
was released in compliance with this section. (VEH §
14602.6(j))
14)Provides that, pursuant to VEH § 4022 and to VEH §
22651(o)(3)(B), a vehicle obtained by a licensed repossessor
as a release of collateral is exempt from registration
pursuant for purposes of the repossessor removing the vehicle
to his or her storage facility or the facility of the legal
owner. A law enforcement agency, impounding authority, tow
yard, storage facility, or any other person in possession of
the collateral shall release the vehicle without requiring
current registration and pursuant to VEH §14602.6(f). (VEH §
4000(g)(1))
15)Provides that the legal owner of collateral shall, by
operation of law and without requiring further action,
indemnify and hold harmless a law enforcement agency, city,
county, city and county, the state, a tow yard, storage
facility, or an impounding yard from a claim arising out of
the release of the collateral to a licensee, and from any
damage to the collateral after its release, including
reasonable attorney's fees and costs associated with defending
a claim, if the collateral was released in compliance with
this subdivision. (VEH § 4000(g)(2))
THIS BILL:
1)Redefines "repossession" or "repossess" as the locating and
physical recovering of collateral by means of an assignment.
2)Requires, for purposes of an inventory after repossession, a
licensee to make a good faith effort to inventory the personal
AB 1859
Page 8
effects, but excludes trash of any kind and hidden personal
effects.
3)Authorizes a licensee to allow a debtor or a person in
possession of the collateral to sign, at the time of
repossession or at a later date, a waiver forfeiting personal
effects or other personal property not covered by a security
agreement and waiving an inventory of those personal effects
or other personal property. Provides that, once the waiver
has been signed, the licensee shall immediately dispose of the
personal effects or personal property.
4)Prohibits a licensee from releasing or conspiring or agreeing
to release personal effects or other personal property not
covered by a security agreement to anyone other than the
debtor.
5)Authorizes a licensee to store personal effects or personal
property inside the collateral until the collateral is no
longer in the possession of the licensee. The collateral
shall not leave the possession of the licensee until all
personal effects or personal property has been removed.
6)Provides that, when collateral is released to a licensed
repossessor, as specified, the following apply:
a) Pursuant to VEH § 4022, a vehicle obtained by a licensed
repossessor as a release of collateral is exempt from
registration for purposes of the repossessor removing the
vehicle to his or her storage facility or the facility of
the legal owner. A law enforcement agency, impounding
authority, tow yard, storage facility, or any other person
in possession of the collateral shall release the vehicle
AB 1859
Page 9
without requiring current registration and pursuant to this
section. The law enforcement agency shall be open to issue
a release to the legal owner or a licensed repossessor
whenever the agency is open to serve the public for
nonemergency business.
b) The law enforcement agency and the impounding agency,
including any storage facility acting on behalf of the law
enforcement agency or impounding agency, shall comply with
the registration exemption and release requirements and
shall not be liable to the registered owner for the
improper release of the vehicle to the legal owner or a
licensed repossessor provided the release complies with
this section. A law enforcement agency shall not refuse to
issue a release to a legal owner or a licensed repossessor
on the grounds that it previously issued a release.
c) A vehicle removed and seized for any reason shall be
released to the legal owner of the vehicle or to a licensed
repossessor if all of the following conditions are met:
i) The legal owner is a motor vehicle dealer, bank,
credit union, acceptance corporation, or other licensed
financial institution legally operating in this state or
is another person, not the registered owner, holding a
security interest in the vehicle.
ii) The following payment requirements are met:
(1) The legal owner or the licensed repossessor
pays all towing and storage fees related to the
seizure of the vehicle. Any person having possession
of the vehicle shall not collect from the legal owner
of the type specified in paragraph (1) or a licensed
repossessor any administrative charges imposed
pursuant to VEH § 22850.5 unless the legal owner
voluntarily requested a poststorage hearing.
(2) A person operating or in charge of a storage
AB 1859
Page 10
facility where vehicles are stored pursuant to this
section shall accept a valid bank credit card or cash
for payment of towing, storage, and related fees by a
legal owner or a licensed repossessor claiming the
vehicle. A credit card shall be in the name of the
person presenting the card. "Credit card" means
"credit card" as defined in CIV § 1747.02(a), except,
for the purposes of this section, credit card does not
include a credit card issued by a retail seller.
(3) A person operating or in charge of a storage
facility described above who violates the requirements
shall be civilly liable to the owner of the vehicle or
to the person who tendered the fees for four times the
amount of the towing, storage, and related fees, but
not to exceed five hundred dollars ($500).
(4) A person operating or in charge of a storage
facility described above shall have sufficient funds
on the premises of the primary storage facility during
normal business hours to accommodate, and make change
in, a reasonable monetary transaction.
(5) Credit charges for towing and storage services
shall comply with CIV § 1748.1. Law enforcement
agencies may include the costs of providing for
payment by credit when making agreements with towing
companies on rates.
(6) The legal owner or licensed repossessor
presents a copy of the assignment, as defined in
subdivision (b) of Section 7500.1 of the Business and
Professions Code; a release from the one responsible
governmental agency, only if required by the agency; a
government-issued photographic identification card;
AB 1859
Page 11
and any one of the following, as determined by the
legal owner or the licensed repossessor: a certificate
of repossession for the vehicle, a security agreement
for the vehicle, or title, whether paper or
electronic, showing proof of legal ownership for the
vehicle. Any documents presented may be originals,
photocopies, or facsimile copies, or may be
transmitted electronically. The law enforcement
agency, impounding agency, or any other governmental
agency, or any person acting on behalf of those
agencies, shall not require any documents to be
notarized. The law enforcement agency, impounding
agency, or any person acting on behalf of those
agencies may require the licensed repossessor to
produce a photocopy or facsimile copy of its
repossession agency license or registration issued
pursuant to Chapter 11 (commencing with Section 7500)
of Division 3 of the Business and Professions Code.
(7) No administrative costs authorized under
subdivision VEH § 22850.5(a) shall be charged to the
legal owner, of the type specified above, who redeems
the vehicle unless the legal owner voluntarily
requests a poststorage hearing. No city, county, city
and county, or state agency shall require a legal
owner or a licensed repossessor to request a
poststorage hearing as a requirement for release of
the vehicle to the legal owner or the licensed
repossessor. The law enforcement agency, impounding
agency, or other governmental agency, or any person
acting on behalf of those agencies, shall not require
any documents other than those specified in this
paragraph. The law enforcement agency, impounding
agency, or other governmental agency, or any person
acting on behalf of those agencies, shall not require
any documents to be notarized. The legal owner or the
licensed repossessor shall be given a copy of any
documents he or she is required to sign, except for a
AB 1859
Page 12
vehicle evidentiary hold logbook. The law enforcement
agency, impounding agency, or any person acting on
behalf of those agencies, or any person in possession
of the vehicle may photocopy and retain the copies of
any documents presented by the legal owner or licensed
repossessor.
(8) A failure by a storage facility to comply with
any applicable conditions set forth in this
subdivision shall not affect the right of the legal
owner or a licensed repossessor to retrieve the
vehicle, provided all conditions required of the legal
owner or licensed repossessor under this subdivision
are satisfied.
d) A legal owner or a licensed repossessor that obtains
release of a vehicle shall not release the vehicle to the
registered owner of the vehicle, the person who was listed
as the registered owner when the vehicle was impounded, or
any agents of the registered owner, unless the registered
owner is a rental car agency.
e) The legal owner or the licensed repossessor shall not
relinquish the vehicle to the registered owner or the
person who was listed as the registered owner when the
vehicle was impounded until the registered owner or that
owner's agent presents his or her valid driver's license or
valid temporary driver's license to the legal owner or the
licensed repossessor. The legal owner, licensed
repossessor, or person in possession of the vehicle shall
make every reasonable effort to ensure that the license
presented is valid and that possession of the vehicle will
not be given to the driver who was involved in the original
impoundment proceeding until the expiration of the
impoundment period.
f) The legal owner of collateral shall, by operation of law
AB 1859
Page 13
and without requiring further action, indemnify and hold
harmless a law enforcement agency, city, county, city and
county, the state, a tow yard, storage facility, or an
impounding yard from a claim arising out of the release of
the collateral to a licensed repossessor and from any
damage to the collateral after its release, including
reasonable attorney's fees and costs associated with
defending a claim, if the collateral was released in
compliance with this section.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the California Association
of Licensed Repossessors . According to the author, this bill
"makes necessary clarifying changes to the code and streamlines
repossessor licensee inventory requirements. Current law
requires repossessors to inventory trash and hidden items which
is both cumbersome and unnecessary. This bill will provide a
mechanism for debtors to allow the reposessor to dispose of
personal effects they do not want, while also making sure that
important personal effects that are left in the collateral are
properly inventoried. The bill also makes sure that licensees
can easily recover vehicles from storage facilities and aligns
provisions of vehicle release with current provisions in law."
Background. The Collateral Recovery Act (Act) provides for the
licensing and regulation of repossessors. Among other things,
the Act specifies standards for education, experience, and
repossession procedures. However, the sponsor notes that the
Act is out of date in some instances. Therefore, this bill aims
to clarify and update the Act.
AB 1859
Page 14
Requirements for Making an Inventory. According to the
sponsors, the requirements surrounding the inventory of personal
items in repossessed collateral are too inflexible. The Act
currently requires a licensed repossessor to remove all personal
effects from collateral and make a "complete and accurate
inventory of the personal effects."
However, the sponsor notes that collateral can often contain a
large number of leftover personal effects. As a result,
"compiling a complete and accurate inventory is difficult
because frequently collateral contains many items that are trash
or hidden." Further, all items must be labeled and stored for
at least 60 days. Because a licensee is not permitted to put
items back into the collateral after they have been inventoried,
licensees note difficulties with storage and sorting.
Therefore, this bill clarifies the extent to which a licensee
must inventory items.
Presentation of Inventory. After an inventory, licensees must
either hold onto personal effects for the statutorily mandated
period or present the inventory and provide the personal effects
to the debtor upon request. However, sometimes a debtor does
not want the presentation or some of the items. Therefore, this
bill clarifies the procedures surrounding waiver of presentation
and adds additional requirements, including requiring the
licensee to keep the waiver confidential and prohibiting the
release of personal effects to others besides the debtor.
Release of Collateral. The sponsors also state that
repossessors regularly face difficulty obtaining collateral
because of registration requirements. Many storage facilities
and impounding agencies require proof of current registration to
release a vehicle. However, repossessors (as agents of the
legal owner) are sometimes denied the collateral because the DMV
AB 1859
Page 15
records do not list the legal owner as the registrant. This can
occur when the debtor, who is no longer the legal owner, is
still listed as the registered owner. In those situations, the
legal owner is unable to obtain the vehicle. In order to remedy
those situations, this bill combines relevant sections from VEH
§§ 4000 and 14602.6 into a new VEH section to clarify that a
licensed repossessor is exempt from registration requirements
when acting as the legal owner's agent.
Prior Related Legislation. AB 281 (Gallagher), Chapter 740,
Statutes of 2015 allowed reposessors to show proof of their
license via various media, established a disciplinary review
committee to review the request of a licensee to contest the
assessment of an administrative fine or appeal a denial of a
license, and made other technical changes.
AB 2503 (Hagman), Chapter 390, Statutes of 2014 amended the
definition of a "repossession agency," updated law enforcement
notification requirements, updated condition report
requirements, exempted registration of a vehicle for the purpose
of removing the vehicle to their storage facility or the
facility of the owner, held storage facilities harmless for any
liability associated with the release of the collateral, and
made other technical changes.
AMENDMENT(S):
For additional clarity, the author should make the following
amendments:
1)Page 4, line 27, after "any collateral," insert:
a repossession order ,
AB 1859
Page 16
2)Make conforming changes and change all references to a
repossession "assignment" to a repossession "order" throughout
the Act.
3)Page 5, below line 30, insert:
Section 7504 of the BPC is amended to read:
7504. (a) Except as otherwise provided in this chapter, an
applicant for a qualification certificate shall comply with
all of the following:
(1) Be at least 18 years of age.
(2) Have been, for at least two years of lawful experience,
during the five years preceding the date on which his or her
application is filed, a registrant or have had two years of
lawful experience in recovering collateral within this state.
Lawful experience means experience in recovering collateral as
a registrant pursuant to this chapter or as a salaried
employee of a financial institution or vehicle dealer. Lawful
experience does not include any employment performing work
other than skip tracing, debt collection, or actual collateral
recovery.
4)Page 5, in line 40, strike " responsible for hidden personal
effects. The ", strike lines 37 through 39 and insert:
complete and accurate inventory of the personal effects that
are not locked and not retrievable without a key, combination,
or damage to the collateral or personal effects shall be made,
and the
5)Page 8, in line 6, strike " waives " and insert:
may waive
AB 1859
Page 17
6)Page 8, in line 9, strike " within the time period for the
notices required by ", strike lines 10 through 18 and insert:
prior to the completion of the inventory and signs a statement
that reads only as follows: "I, ____________, the debtor, have
received all personal effects that were in the vehicle at the
time of the repossession ."
(2) No other signature or document shall be required to waive
the preparation and presentation of an inventory. The document
shall be subject to the confidentiality provision of
subdivision (k).
7)Page 8, in line 23, strike " A " and insert:
Subject to paragraph (1), a
8)Page 8, in line 30, after "inventory" insert:
or waiver of inventory as provided in subdivision (h)
9)Page 9, below line 1, insert:
(5 ) No other signatures, conditions, documents or information
regarding the inventory, personal effects or statement may be
required or given except as provided in this section or as
ordered by a court of competent jurisdiction.
10)Page 9, in line 2, after "licensee" insert:
who has been notified that collateral will be retrieved
11)Page 9, in line 2, after "effects" insert:
in compliance with the security standards of this Act
AB 1859
Page 18
12)Page 9, in line 4, strike " The " and insert:
If a licensee stores personal effects pursuant to this
subdivision, the
13)Page 12, strike lines 4-14:
(2) The legal owner or the licensed repossessor shall not
relinquish the vehicle to the registered owner or the person
who 6was listed as the registered owner when the vehicle was
impounded until the registered owner or that owner's agent
presents his or her valid driver's license or valid temporary
driver's license to the legal owner or the licensed
repossessor. The legal owner, licensed repossessor, or person
in possession of the vehicle shall make every reasonable
effort to ensure that the license presented is valid and that
possession of the vehicle will not be given to the driver who
was involved in the original impoundment proceeding until the
expiration of the impoundment period.
REGISTERED SUPPORT:
None on file.
REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Vincent Chee / B. & P. / (916) 319-3301
AB 1859
Page 19