BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 2106 Hearing Date: June 6,
2016
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|Author: |Irwin |
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|Version: |May 31, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Sellers of travel: registration
SUMMARY: Makes various changes to the Sellers of Travel law.
Existing law:
1) Establishes the Sellers of Travel law (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). (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
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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) and file certain information as part of registration,
including the name and contact information of individuals a
SOT contracts with. Requires the AG to suspend a SOT's
registration for failure to make payment to the Travel
Consumer Restitution Fund (TCRF) or writes a registration fee
check that is not honored. Authorizes the AG to contract for
the processing of SOT registrations. Exempts individuals that
conduct their activities in accordance with specified
procedures and disclosures. (BPC §§ 17550.20, 17550.21)
5) Establishes the Travel Consumer Restitution Corporation
(TCRC) which creates the TCRF 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)
This bill:
1) Specifies that a registration shall not be issued, renewed,
or approved until outstanding TCRF assessments are paid.
2) Requires a SOT to provide the file number issued by the
Secretary of State to the AG and specifies that failure to
provide this information is grounds for registration
suspension.
3) Exempts single-member limited liability corporations and "S"
corporations whose member is a natural person that conduct
their activities in accordance with specified procedures and
disclosures from registration.
4) Requires a SOT to also provide the AG the name and contact
information for individuals in a single-member limited
liability corporation or "S" corporation who the SOT
contracts with, as well as the file number issued by the
Secretary of State to the SOT, in addition to requirements in
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Item #4 above.
5) Prohibits the issuance, approval, or renewal of registration
until the seller of travel has paid any outstanding
assessments due to the Travel Consumer Restitution
Corporation.
6) Allows refund payments to persons aggrieved by sellers of
travel who had been paid-up participants at any time during
the 18 months previous to the time of sale.
7) Declares that any person aggrieved who files a claim for
payment from the fund would waive his or her right to bring
an action at law or equity against the seller of travel as to
that claim, as specified, unless the seller of travel had not
been a paid-up participant at any time during the 18 months
previous to the time of sale.
8) Makes technical changes.
FISCAL
EFFECT: This bill is keyed fiscal by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis
dated May 4, 2016, the bill will result in minor and absorbable
enforcement costs to the AG.
COMMENTS:
1. Purpose. This California Coalition of Travel Organizations
is the Sponsor of this bill. According to the Author, the
goals of the bill are to ensure that SOTs comply with the
requirements under current law that they obtain a California
State Tax Identification number issued by the SOS; to ensure
that a consumer's ability to recover from the TCRF does not
depend on whether the SOT was late in paying its assessment
to the TCRF by allowing consumers to recover from the fund
for up to 18 months and; to ensure that independent agents
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may be a business entity and do not have to be a natural
person, reflecting the common practice of independent agents
to organize as a single member limited liability corporation
or S-corporation.
2. Sellers of Travel Law. The 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). The 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 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
and applies to both retail and wholesale transactions,
covering 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 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 Law provides several layers of protections for consumers,
including:
a. Disclosure and identification of the seller. Among
other things, SOTs must disclose business addresses,
fictitious business names, identifying information of
principals and owners, any relationship with 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.
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b. Financial protections. Some SOTs 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 SOT 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,
the 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.
1. Arguments in Support. The Sponsor, the California Coalition
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of Travel Organizations (CCTO), writes in support of this
bill, noting that the bill updates current law in order to
enhance the consumer protections and the efficiency of the
Law. According to CCTO, some SOTS that are currently in
compliance with requirements that SOTs obtain a California
State Tax Identification number issued by the Secretary of
State have identified businesses that are not in compliance.
Ensuring that a consumer's ability to recover from the Travel
Consumer Restitution Fund [TCRF] does not depend on whether
the seller of travel was late in paying its assessment to the
TRCF.
2. Author's Amendment. The Author is concerned that some SOTs
may not be complying with requirements businesses in
California are subject to, outside of the Law. According to
the Author, authorizing the AG to withhold a SOT from being
assigned a registration number when the SOT is out of
compliance with other laws, such as those requiring certain
businesses to register operations with the Secretary of
State, will ensure consistency among state agencies and
protect consumers. The Author believes that it is important
that travel businesses are not allowed to avoid compliance
with one set of laws, yet be allowed to register as a SOT and
present themselves as compliant with California law. As
such, the bill includes a requirement that a SOT provide "the
file number issued by the Secretary of State" to the AG and
specifies that failure to provide this information is grounds
for registration suspension.
The terminology used in the bill currently is not specific,
nor clear to ensure that SOTs are providing the information
the Author intends for them to provide to the AG in order to
be registered. In response, the Author has agreed to amend
the bill according to the following:
On page 9, in line 8, strike "file number issued by the
Secretary of State" and replace with " seven digit California
corporation number assigned by the Secretary of State or the
Franchise Tax Board ".
NOTE : Double-referral to the Senate Committee on Judiciary.
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SUPPORT AND OPPOSITION:
Support:
California Coalition of Travel Organizations (Sponsor)
Opposition:
None on file as of June 1, 2016.
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