BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 1859 Hearing Date: June 27, 2016 ----------------------------------------------------------------- |Author: |Gallagher | |----------+------------------------------------------------------| |Version: |June 21, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- 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, inventory 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 (Act). (Business and Professions (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 that is subject to a security agreement that AB 1859 (Gallagher) Page 2 of ? 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)) 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) AB 1859 (Gallagher) Page 3 of ? 8) Requires a licensed repossessor to remove and inventory personal effects from the collateral after repossession. Requires the inventory of the personal effects be complete and accurate, and the personal effects 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 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. (Vehicle Code (VEH) § 4022) AB 1859 (Gallagher) Page 4 of ? 12)Provides that a vehicle removed and seized by a peace officer as specified 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 towing and storage fees related to the seizure of the vehicle, as specified. 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 AB 1859 (Gallagher) Page 5 of ? 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) Requires credit charges for towing and storage services 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. AB 1859 (Gallagher) Page 6 of ? 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 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, 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 agency, impounding AB 1859 (Gallagher) Page 7 of ? 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 AB 1859 (Gallagher) Page 8 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 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)) AB 1859 (Gallagher) Page 9 of ? 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) Deletes and reinstates the definition of "assignment" as "repossession order". Makes technical changes throughout the bill to reflect this new terminology. 2) Defines "locate" or "locating" to mean searching visually, by a licensee, for collateral without the use of an electronic device, including, but not limited to, a camera, scanner, or automated license plate reader. 3) Redefines "repossession" or "repossess" as the locating and physical recovering of collateral by means of repossession order. 4) Exempts employees of a licensee who are operating electronic devises, including, but not limited to, cameras, scanners, and automated license plate readers, for the purpose of locating collateral or documenting the location of collateral from complying with the Act. AB 1859 (Gallagher) Page 10 of ? 5) Requires, if the collateral is locked, the licensee inventory the personal effects within 15 days, if possible. 6) Authorizes, with the consent of the licensee, the debtor to waive the preparation and presentation of an inventory if the debtor redeems the personal effects or other personal property not covered by a security interest within the time period for the notices required or prior to the completion of the inventory, whichever is earlier, and signs a statement that reads only as follows: a) "I, [insert debtor's name here], have received all personal effects that were in the vehicle at the time of the repossession." b) "Requires that no other signature or document be required to waive the preparation and presentation of an inventory. If the debtor claims there are personal effects or personal property missing, the licensee shall provide the debtor with the phone number of the licensed repossession agency. A licensee shall not require the person retrieving the personal effects to sign any other documents or waivers prior to the return of the personal effects. No other documents or signatures shall be required for the person to receive the personal effects. Any fees paid for clerical, handling, administering, inventorying, or storage of personal effects are confidential and shall only be disclosed by the licensed repossession agency as ordered by a court of competent jurisdiction." 7) 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. AB 1859 (Gallagher) Page 11 of ? 8) Authorizes a licensee, who has been notified that collateral will be retrieved, 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. 9) Clarifies that a licensed repossession agency is not liable for the act or omission of a debt collector in making a repossession order. 10)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 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. AB 1859 (Gallagher) Page 12 of ? 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 AB 1859 (Gallagher) Page 13 of ? related to the seizure of the vehicle, as requested. (2) 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 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. AB 1859 (Gallagher) Page 14 of ? (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; 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. AB 1859 (Gallagher) Page 15 of ? (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 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. AB 1859 (Gallagher) Page 16 of ? 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 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. AB 1859 (Gallagher) Page 17 of ? 11)Makes other technical and clarifying changes. FISCAL EFFECT: This bill has been keyed "fiscal" by Legislative Counsel. According to the Assembly Appropriations Committee analysis dated on May 11, 2016, this bill will minor and absorbable costs to DCA. COMMENTS: 1. Purpose. The California Association of Licensed Repossessors is the sponsor of this bill. According to the Author, this bill "clarifies and updates the Collateral Recovery Act so that 'repossession' includes 'repossess' and means the 'locating or physically recovering of collateral by means of a repossession order' and so that the commonly-used and understood term 'repossession order' is used rather than the outdated term 'assignment.' The measure also adds consumer protection by addressing the inventory process in situations where the collateral is locked, so that the licensee will have 15 days to inventory the personal effects if possible. Additional consumer protection is provided in instances when individuals decide to waive the preparation and presentation of inventory. These protections include a prohibition against additional signatures or documents being required for them to receive the personal effects. The bill also ensures that a licensee storing personal effects inside the collateral must comply with the notice and inventory provisions of the Act. Lastly, the measure adds a new section to the Vehicle Code setting forth the procedures and liability provisions that are currently in separate sections of that code and that apply when a vehicle is released to a licensee." 2. Background. The Collateral Recovery Act provides for the licensing and regulation of repossessors. Among other things, the Act specifies standards for education, experience, and repossession procedures. However, the AB 1859 (Gallagher) Page 18 of ? sponsor notes that the Act is out of date in some instances. Therefore, this bill aims to clarify and update the Act. 3. Requirements for Inventory of Personal Effects. According to the sponsor, the requirements pertaining to the inventory of personal effects in repossessed collateral do not address the situation where the collateral is locked and the personal effects cannot be inventoried. The Act currently requires a licensed repossessor to remove all personal effects from the collateral and make a "complete and accurate inventory of the personal effects." Further, all items must be labeled and stored for at least 60 days. The sponsor notes that "personal effects that are locked in collateral cannot be inventoried. As a result, compiling a complete and accurate inventory in compliance with the Act as written cannot be accomplished." Therefore, this bill allows the licensee 15 days to complete the inventory of personal effects, if possible. Within this time, the licensee has the opportunity to contact the legal owner, registered owner or person in possession of the vehicle at the time or repossession, to obtain a key to the vehicle. The licensee will then be able to inventory the personal effects in compliance with the Act. 4. 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. 5. 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 records do not list the legal owner as the registrant. This can occur when the debtor, who AB 1859 (Gallagher) Page 19 of ? 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 Vehicle Code section to clarify that a licensed repossessor is exempt from registration requirements when acting as the legal owner's agent. 6. 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. 7. Arguments in Support. The California Association of Licensed Repossessors (Sponsor) underscores that "this legislation would revise the Collateral Recovery Act and the Vehicle Code to enhance the consumer protections set forth in current laws, and update the laws where appropriate." SUPPORT AND OPPOSITION: Support: The California Association of Licensed Repossessors (Sponsor) Opposition: None on file as June 21, 2016. -- END -- AB 1859 (Gallagher) Page 20 of ?