BILL ANALYSIS                                                                                                                                                                                                    




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          |SENATE RULES COMMITTEE            |                        SB 386|
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                                      CONSENT 


          Bill No:  SB 386
          Author:   Allen (D)
          Introduced:2/24/15  
          Vote:     21  

           SENATE JUDICIARY COMMITTEE:  7-0, 5/12/15
           AYES:  Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,  
            Wieckowski

           SUBJECT:   Consumer Affairs


          SOURCE:    Author


          DIGEST:  This bill adds to the list of acts prohibited by the  
          Consumer Legal Remedies Act the act of advertising or offering  
          for sale a financial product that is illegal under state or  
          federal law, including any cash payment for the assignment to a  
          third party of a consumer's right to receive future pension or  
          veteran's benefits.


          ANALYSIS:   


          Existing law:


          1)States that payments of veteran's benefits shall not be  
            assignable except to the extent specifically authorized by  
            law, and such payments made to, or on account of, a  
            beneficiary shall be exempt from taxation, shall be exempt  
            from the claim of creditors, and shall not be liable to  
            attachment, levy, or seizure by or under any legal or  








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            equitable process whatever, either before or after receipt by  
            the beneficiary.  (38 U.S.C. Sec. 5301(a)(1).)

          2)Provides that in any case where a beneficiary entitled to  
            compensation, pension, or dependency and indemnity  
            compensation enters into an agreement with another person  
            under which agreement such other person acquires for  
            consideration the right to receive such benefit by payment of  
            such compensation, pension, or dependency and indemnity  
            compensation, and including deposit into a joint account from  
            which such other person may make withdrawals, or otherwise,  
            such agreement shall be deemed to be an assignment and is  
            prohibited.  (38 U.S.C. Sec. 5301(a)(3).)  
            
           3)The Consumer Legal Remedies Act (CLRA), prohibits unfair  
            methods of competition, acts or practices by any person which  
            either results in or is intended to result in the sale or  
            lease of goods or services to any consumer.  (Civ. Code Sec.  
            1770.)

          4)Enumerates several methods of unfair competition, acts, or  
            practices, including representing that a transaction confers  
            or involves rights, remedies, or obligations which it does not  
            have or involve, or which are prohibited by law.  (Civ. Code  
            Sec. 1770.)

          5)Provides that any consumer who suffers damage as a result of a  
            practice declared to be unlawful under the CLRA may bring an  
            action against that person to recover damages, as specified.   
            Existing law allows for a class action suit to be filed on  
            behalf of a class of consumers adversely affected by an unfair  
            method of competition, act, or practice.  (Civ. Code Secs.  
            1780, 1781.)

          6)Provides that the CLRA shall be liberally construed and  
            applied to promote its underlying purposes, which are to  
            protect consumers against unfair and deceptive business  
            practices and to provide efficient and economical procedures  
            to secure such protection.  (Civ. Code Sec. 1760.)

          This bill:









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          1)Adds to the list of acts prohibited by the CLRA the act of  
            advertising or offering for sale a financial product that is  
            illegal under state or federal law, including any cash payment  
            for the assignment to a third party of the consumer's right to  
            receive future pension or veteran's benefits.

          2)Makes other technical changes to the CLRA.


          Background


          Late last year, the California Department of Business Oversight  
          (DBO) issued an alert about deceptive investment schemes  
          involving future interests in military veteran benefits.   
          According to the DBO, several companies in California are  
          purchasing interests in future benefits by paying veterans  
          lump-sum cash payments in exchange for the right to receive  
          their benefit payments for a certain period of time, and then  
          selling investors interests in the revenue stream generated by  
          the receipt of those future benefit payments.  Federal law,  
          however, prohibits the assignment of future veteran's benefits  
          to third parties, and because of the non-assignability of these  
          payments and the consequent risk to investors; the cash payments  
          offered veterans through these investment schemes are typically  
          worth much less than the value of the future benefit payments.   
          (California Department of Business Oversight Issues Advisory on  
          Military Pension Advance Plans (Nov. 2014)  
           
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          percentage rate (APR) [of these products] above 100 percent."   
          (Id.)

          Consumers have some remedies in existing law to seek redress  
          against individuals and companies that illegally purchase  
          assignments of future veteran's benefits.  This bill builds upon  
          those existing remedies by adding the act of advertising or  
          offering for sale a financial product that is illegal under  
          state or federal law, including any cash payment for the  
          assignment to a third party of a consumer's right to receive  
          future pension or veteran's benefits, to the list of activities  
          prohibited under the CLRA.


          Comments


          The author writes:

            Veterans of the United States Armed Forces face many  
            challenges when they return to civilian life, and some have  
            been preyed upon by unscrupulous businesses promising a lump  
            sum of money in exchange for signing over their future monthly  
            benefits.  Although these "pension poaching" schemes are  
            against federal law, advertisements for them continue to  
            appear in publications targeting veterans.  

            In pension advance schemes, an opportunistic company preys on  
            vulnerable veterans who have sacrificed, often for decades, to  
            earn a pension.  In many cases, these pensioners have no other  
            source of income when they return from active duty. An advance  
            company convinces a veteran to sign over his or her rights to  
            future compensation in return for quickly "advancing" often a  
            small fraction of the long-term money to which he or she is  
            entitled.  The interest on such transactions can be as high as  
            100 percent.
           
            Sadly, military retirees and recently returned veterans have  
            become a prime target of the pension advance industry.  As  
            with most fraud schemes targeting veterans, pension advance  
            companies routinely don't disclose key information or they  
            present it in misleading ways.  Many veterans do not realize  








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            until it is too late that they have entered into a complex  
            financial transaction that could permanently deprive them of  
            retirement income they'd put their lives on the line to earn.   
            Indeed, the veteran is frequently led to think that he or she  
            is agreeing only to a short-duration loan to temporarily get  
            them through a rough patch.

            Cashing out a federal benefit and assigning it to a third  
            party is illegal under federal law.  SB 386 would include  
            advertisements for a cash payment that reassigns veterans'  
            benefits to a third party as an illegal practice prohibited  
            under California's Consumer Legal Remedies Act, which would  
            allow prosecutors and private attorneys general to file suit  
            against these unscrupulous "pension poachers."

          Related/Prior Legislation
          
          SB 202 (Hernandez, 2015) would add to the list of acts  
          prohibited by the CLRA the act of advertising or offering for  
          sale products that contain synthetic cannabinoids or synthetic  
          stimulants, as defined.  This bill is pending in the Senate  
          Judiciary Committee.


          AB 1108 (Nielsen, 2011) would have revised the CLRA to require a  
          court to award court costs and attorney's fees to the prevailing  
          party in an action.  This bill died in the Assembly Committee on  
          Judiciary.


          AB 292 (Hayes, Chapter 1550, Statutes of 1970) enacted the CLRA,  
          which authorizes a consumer who suffers damage from the use of  
          specified unfair methods of competition and unfair or deceptive  
          acts to bring an action to recover damages or other relief.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No

          SUPPORT:   (Verified5/12/15)
          American Legion-Department of California
          AMVETS-Department of California








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          California Association of County Veterans Service Officers
          California State Commanders Veterans Council
          Military Officers Association of America, California Council of  
          Chapters
          VFW-Department of California
          Vietnam Veterans of America-California State Council


          OPPOSITION:   (Verified5/12/15)


          None Received


          ARGUMENTS IN SUPPORT:     According to the American Legion -  
          Department of California, this legislation will help reduce the  
          targeting of elderly veterans by shady financial scammers by  
          adding as an unlawful practice, prohibited under the Consumer  
          Legal Remedies Act, a cash payment for the assignment to a third  
          party of a consumer's right to receive veterans benefits.




          Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
          5/15/15 15:24:34


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