BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 386|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 386
Author: Allen (D)
Amended: 7/1/15
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 5/12/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE FLOOR: 38-0, 5/22/15 (Consent)
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Gaines, Galgiani, Hall, Hancock, Hernandez,
Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu,
McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell,
Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak,
Wieckowski, Wolk
NO VOTE RECORDED: Fuller
ASSEMBLY FLOOR: 79-0, 7/16/15 (Consent) - See last page for
vote
SUBJECT: Unlawful business practices
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.
SB 386
Page 2
Assembly Amendments add a provision to the Military and Veterans
Code prohibiting a person from advertising, offering, or
entering into an agreement with a pension beneficiary that would
involve an assignment of pension benefits that is prohibited by
state or federal law, and make other technical changes to
existing law.
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
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)Prohibits, under the Consumer Legal Remedies Act (CLRA),
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.)
SB 386
Page 3
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:
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.
3)Adds a provision to the Military and Veterans Code prohibiting
a person from advertising, offering, or entering into an
agreement with a pension beneficiary that would involve an
assignment of pension benefits that is prohibited by state or
federal law.
Background
Late last year, the California Department of Business Oversight
SB 386
Page 4
(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)
Page 5
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
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
SB 386
Page 6
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: (Verified8/10/15)
American Legion-Department of California
AMVETS-Department of California
California Advocates for Nursing Home Reform
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Consumer Federation of California
Los Angeles County Board of Supervisors
Military Officer Association of America, California Council of
Chapters
VFW-Department of California
Vietnam Veterans of America-California State Council
SB 386
Page 7
OPPOSITION: (Verified8/10/15)
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.
ASSEMBLY FLOOR: 79-0, 7/16/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Gordon
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
8/17/15 10:14:04
**** END ****
SB 386
Page 8