Amended in Assembly July 1, 2015

Amended in Assembly June 23, 2015

Senate BillNo. 386


Introduced by Senator Allen

February 24, 2015


An act to amend Section 1770 of the Civil Code, and to add Chapter 3.6 (commencing with Section 870) to Division 4 of the Military and Veterans Code, relating to unlawful business practices.

LEGISLATIVE COUNSEL’S DIGEST

SB 386, as amended, Allen. Unlawful business practices.

(1) Existing law, the Consumer Legal Remedies Act, makes unlawful certain unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer, including, among other things, advertising or promoting any event, presentation, seminar, workshop, or other public gathering regarding veterans’ benefits or entitlements that does not include a specified statement. Existing law authorizes any consumer who suffers damages as a result of the use or employment by any person of a method, act, or practice declared to be unlawful, as described above, to bring an action against that person to recover or obtain damages, restitution, an order enjoining the methods, acts, or practice, or any other relief the court deems proper.

This bill would include, as an unlawful practice prohibited under the act,begin delete advertising orend deletebegin insert advertising,end insert offering forbegin delete saleend deletebegin insert sale, or sellingend insert a financial product or service that is illegal under state or federal law, including a cash payment for the assignment to a third party of the consumer’s right to receive future pension or veteran’s benefits.

(2) Existing federal law prohibits payments of benefits due or to become due under any law administered by the United States Secretary of Veterans Affairs from being assignable. Under existing federal law, in any case where a beneficiary entitled to pension compensation enters into an agreement with another person under which agreement the other person acquires for consideration the right to receive the benefit by payment of a pension compensation, the agreement is deemed to be an assignment and is prohibited.

Existing state law establishes a cause of action against any person who engages in an act of unfair competition, which includes any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising and any prohibited advertising act or practice.

This bill wouldbegin delete state that a violation of the aforementioned federal law constitutes an unlawful business practice.end deletebegin insert state an additional prohibition against advertising, offering, or entering into an agreement with a pension beneficiary that would involve an assignment of pension benefits. end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1770 of the Civil Code is amended to
2read:

3

1770.  

(a) The following unfair methods of competition and
4unfair or deceptive acts or practices undertaken by any person in
5a transaction intended to result or which results in the sale or lease
6of goods or services to any consumer are unlawful:

7(1) Passing off goods or services as those of another.

8(2) Misrepresenting the source, sponsorship, approval, or
9certification of goods or services.

10(3) Misrepresenting the affiliation, connection, or association
11with, or certification by, another.

12(4) Using deceptive representations or designations of
13geographic origin in connection with goods or services.

14(5) Representing that goods or services have sponsorship,
15approval, characteristics, ingredients, uses, benefits, or quantities
16which they do not have or that a person has a sponsorship,
P3    1approval, status, affiliation, or connection which he or she does
2not have.

3(6) Representing that goods are original or new if they have
4deteriorated unreasonably or are altered, reconditioned, reclaimed,
5used, or secondhand.

6(7) Representing that goods or services are of a particular
7standard, quality, or grade, or that goods are of a particular style
8or model, if they are of another.

9(8) Disparaging the goods, services, or business of another by
10false or misleading representation of fact.

11(9) Advertising goods or services with intent not to sell them
12as advertised.

13(10) Advertising goods or services with intent not to supply
14reasonably expectable demand, unless the advertisement discloses
15a limitation of quantity.

16(11) Advertising furniture without clearly indicating that it is
17unassembled if that is the case.

18(12) Advertising the price of unassembled furniture without
19clearly indicating the assembled price of that furniture if the same
20furniture is available assembled from the seller.

21(13) Making false or misleading statements of fact concerning
22reasons for, existence of, or amounts of price reductions.

23(14) Representing that a transaction confers or involves rights,
24remedies, or obligations which it does not have or involve, or
25which are prohibited by law.

26(15) Representing that a part, replacement, or repair service is
27needed when it is not.

28(16) Representing that the subject of a transaction has been
29supplied in accordance with a previous representation when it has
30not.

31(17) Representing that the consumer will receive a rebate,
32discount, or other economic benefit, if the earning of the benefit
33is contingent on an event to occur subsequent to the consummation
34of the transaction.

35(18) Misrepresenting the authority of a salesperson,
36representative, or agent to negotiate the final terms of a transaction
37with a consumer.

38(19) Inserting an unconscionable provision in the contract.

39(20) Advertising that a product is being offered at a specific
40price plus a specific percentage of that price unless (A) the total
P4    1price is set forth in the advertisement, which may include, but is
2not limited to, shelf tags, displays, and media advertising, in a size
3larger than any other price in that advertisement, and (B) the
4specific price plus a specific percentage of that price represents a
5markup from the seller’s costs or from the wholesale price of the
6product. This subdivision shall not apply to in-store advertising
7by businesses which are open only to members or cooperative
8organizations organized pursuant to Division 3 (commencing with
9Section 12000) of Title 1 of the Corporations Code where more
10than 50 percent of purchases are made at the specific price set forth
11in the advertisement.

12(21) Selling or leasing goods in violation of Chapter 4
13(commencing with Section 1797.8) of Title 1.7.

14(22) (A) Disseminating an unsolicited prerecorded message by
15telephone without an unrecorded, natural voice first informing the
16person answering the telephone of the name of the caller or the
17organization being represented, and either the address or the
18telephone number of the caller, and without obtaining the consent
19of that person to listen to the prerecorded message.

20(B) This subdivision does not apply to a message disseminated
21to a business associate, customer, or other person having an
22established relationship with the person or organization making
23the call, to a call for the purpose of collecting an existing
24obligation, or to any call generated at the request of the recipient.

25(23) (A) The home solicitation, as defined in subdivision (h)
26of Section 1761, of a consumer who is a senior citizen where a
27loan is made encumbering the primary residence of that consumer
28for the purposes of paying for home improvements and where the
29transaction is part of a pattern or practice in violation of either
30subsection (h) or (i) of Section 1639 of Title 15 of the United States
31Code or paragraphs (1), (2), and (4) of subdivision (a) of Section
32226.34 of Title 12 of the Code of Federal Regulations.

33(B) A third party shall not be liable under this subdivision unless
34 (1) there was an agency relationship between the party who
35engaged in home solicitation and the third party or (2) the third
36party had actual knowledge of, or participated in, the unfair or
37deceptive transaction. A third party who is a holder in due course
38under a home solicitation transaction shall not be liable under this
39subdivision.

P5    1(24) (A) Charging or receiving an unreasonable fee to prepare,
2aid, or advise any prospective applicant, applicant, or recipient in
3the procurement, maintenance, or securing of public social services.

4(B) For purposes of this paragraph, the following definitions
5shall apply:

6(i) “Public social services” means those activities and functions
7of state and local government administered or supervised by the
8State Department of Health Care Services, the State Department
9of Public Health, or the State Department of Social Services, and
10involved in providing aid or services, or both, including health
11care services, and medical assistance, to those persons who,
12because of their economic circumstances or social condition, are
13in need of that aid or those services and may benefit from them.

14(ii) “Public social services” also includes activities and functions
15administered or supervised by the United States Department of
16Veterans Affairs or the California Department of Veterans Affairs
17involved in providing aid or services, or both, to veterans, including
18pension benefits.

19(iii) “Unreasonable fee” means a fee that is exorbitant and
20disproportionate to the services performed. Factors to be
21considered, when appropriate, in determining the reasonableness
22of a fee, are based on the circumstances existing at the time of the
23service and shall include, but not be limited to, all of the following:

24(I) The time and effort required.

25(II) The novelty and difficulty of the services.

26(III) The skill required to perform the services.

27(IV) The nature and length of the professional relationship.

28(V) The experience, reputation, and ability of the person
29providing the services.

30(C) This paragraph shall not apply to attorneys licensed to
31 practice law in California, who are subject to the California Rules
32of Professional Conduct and to the mandatory fee arbitration
33provisions of Article 13 (commencing with Section 6200) of
34Chapter 4 of Division 3 of the Business and Professions Code,
35when the fees charged or received are for providing representation
36in administrative agency appeal proceedings or court proceedings
37for purposes of procuring, maintaining, or securing public social
38services on behalf of a person or group of persons.

39(25) (A) Advertising or promoting any event, presentation,
40seminar, workshop, or other public gathering regarding veterans’
P6    1benefits or entitlements that does not include the following
2statement in the same type size and font as the term “veteran” or
3any variation of that term:

4(i) “I am not authorized to file an initial application for Veterans’
5Aid and Attendance benefits on your behalf, or to represent you
6before the Board of Veterans’ Appeals within the United States
7Department of Veterans Affairs in any proceeding on any matter,
8including an application for such benefits. It would be illegal for
9me to accept a fee for preparing that application on your behalf.”
10The requirements of this clause do not apply to a person licensed
11to act as an agent or attorney in proceedings before the Agency of
12Original Jurisdiction and the Board of Veterans’ Appeals within
13the United States Department of Veterans Affairs when that person
14is offering those services at the advertised event.

15(ii) The statement in clause (i) shall also be disseminated, both
16orally and in writing, at the beginning of any event, presentation,
17seminar, workshop, or public gathering regarding veterans’ benefits
18or entitlements.

19(B) Advertising or promoting any event, presentation, seminar,
20workshop, or other public gathering regarding veterans’ benefits
21or entitlements which is not sponsored by, or affiliated with, the
22United States Department of Veterans Affairs, the California
23Department of Veterans Affairs, or any other congressionally
24chartered or recognized organization of honorably discharged
25members of the Armed Forces of the United States, or any of their
26auxiliaries that does not include the following statement, in the
27same type size and font as the term “veteran” or the variation of
28that term:


30“This event is not sponsored by, or affiliated with, the United
31States Department of Veterans Affairs, the California Department
32of Veterans Affairs, or any other congressionally chartered or
33recognized organization of honorably discharged members of the
34Armed Forces of the United States, or any of their auxiliaries.
35None of the insurance products promoted at this sales event are
36endorsed by those organizations, all of which offer free advice to
37veterans about how to qualify and apply for benefits.”


39(i) The statement in this subparagraph shall be disseminated,
40both orally and in writing, at the beginning of any event,
P7    1presentation, seminar, workshop, or public gathering regarding
2veterans’ benefits or entitlements.

3(ii) The requirements of this subparagraph shall not apply in a
4case where the United States Department of Veterans Affairs, the
5California Department of Veterans Affairs, or other congressionally
6chartered or recognized organization of honorably discharged
7members of the Armed Forces of the United States, or any of their
8auxiliaries have granted written permission to the advertiser or
9promoter for the use of its name, symbol, or insignia to advertise
10or promote the event, presentation, seminar, workshop, or other
11public gathering.

12(26) begin deleteAdvertising or end deletebegin insertAdvertising, end insertoffering forbegin delete saleend deletebegin insert sale, or sellingend insert
13 a financial product that is illegal under state or federal law,
14including any cash payment for the assignment to a third party of
15the consumer’s right to receive future pension or veteran’s benefits.

16(27) Representing that a product is made in California by using
17a Made in California label created pursuant to Section 12098.10
18of the Government Code, unless the product complies with Section
1912098.10 of the Government Code.

20(b) (1) It is an unfair or deceptive act or practice for a mortgage
21broker or lender, directly or indirectly, to use a home improvement
22contractor to negotiate the terms of any loan that is secured,
23whether in whole or in part, by the residence of the borrower and
24which is used to finance a home improvement contract or any
25portion of a home improvement contract. For purposes of this
26subdivision, “mortgage broker or lender” includes a finance lender
27licensed pursuant to the California Finance Lenders Law (Division
289 (commencing with Section 22000) of the Financial Code), a
29residential mortgage lender licensed pursuant to the California
30Residential Mortgage Lending Act (Division 20 (commencing
31with Section 50000) of the Financial Code), or a real estate broker
32licensed under the Real Estate Law (Division 4 (commencing with
33Section 10000) of the Business and Professions Code).

34(2) This section shall not be construed to either authorize or
35prohibit a home improvement contractor from referring a consumer
36to a mortgage broker or lender by this subdivision. However, a
37home improvement contractor may refer a consumer to a mortgage
38lender or broker if that referral does not violate Section 7157 of
39the Business and Professions Code or any other law. A mortgage
40 lender or broker may purchase an executed home improvement
P8    1contract if that purchase does not violate Section 7157 of the
2Business and Professions Code or any other law. Nothing in this
3paragraph shall have any effect on the application of Chapter 1
4(commencing with Section 1801) of Title 2 to a home improvement
5transaction or the financing of a home improvement transaction.

6

SEC. 2.  

Chapter 3.6 (commencing with Section 870) is added
7to Division 4 of the Military and Veterans Code, to read:

8 

9Chapter  3.6. Nonassignability of Veterans’ Benefits
10

 

begin delete
11

870.  

A violation of Section 5301 of Title 38 of the United
12States Code, prohibiting a beneficiary entitled to pension
13compensation under any law administered by the United States
14Secretary of Veterans Affairs from entering into an assignment
15agreement with another person where the other person acquires
16for consideration the right to receive the benefit by payment of a
17pension, shall constitute an unlawful business practice within the
18meaning of Section 17200 of the Business and Professions Code.

end delete
19begin insert

begin insert870end insert  

end insert
begin insert

A person shall not advertise, offer, or enter into an
20agreement with a pension beneficiary that would involve an
21assignment of pension benefits that is prohibited by state or federal
22law.

end insert


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