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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