BILL ANALYSIS
AB 63
Page 1
Date of Hearing: March 17, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 63 (Mendoza) - As Introduced: December 9, 2008
SUBJECT : Service contracts.
SUMMARY : Requires a retailer selling a service contract to
maintain the service contract information and make the contract
available to the purchaser upon request, as specified.
Specifically, this bill :
1)Requires a retailer that sells a service contract to do either
of the following during the period that the service contract
is in effect:
a) Maintain contract information that includes a
description of the terms and conditions of the service
contract and provide that information to the purchaser or
other beneficiary upon request; or,
b) Obtain a copy of the service contract, and provide a
copy of the service contract to the requester within 10
business days upon request from the purchaser of the
service contract or other beneficiary.
2)Specifies that the requirements of this bill do not apply to a
vehicle service contract.
EXISTING LAW authorizes the sale of service contracts obligating
the service contractor to provide to the buyer of the product,
without additional charge, all of the services and functional
parts that may be necessary to maintain proper operation of the
product for the duration of the contract, except as specified.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office,
"Consumers often misplace their receipt or warranty and are
forced to return to the store where they purchased the extended
warranty. Many retailers do not keep this information and place
the responsibility on the consumer to retain documentation for
AB 63
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the contract." This bill would require retailers who sell
service contracts to retain the information necessary for the
customer to redeem them.
Background : Initially, the majority of service contracts were
offered and sold by the manufacturer or by the retailer. Due to
the complexity of administering an extended service plan, a
growing number of retailers and manufacturers enlist third-party
firms to handle their service obligations. These third-party
firms are paid by the retailer or manufacturer to handle the
everyday responsibility of managing their service contracts and
for providing assistance to the consumer.
Although the service contract industry was relatively small at
the outset it began to expand by the mid-1990's as major
technological advances were created and provided at the retail
level. In 1993, the San Francisco Chronicle reported that
Californians were spending approximately $500 million annually
on some form of service warranties. However, only 50% of
consumers who purchased service contracts could seek recourse
under existing state laws when they encountered problems with
their agreements. Moreover, retail sellers were disclosing
scarce information about the third party responsible for the
performance of the contract. Overall, it was widely reported
that consumers were not receiving the benefits or the services
in the agreements they were buying from retailers.
Based on consumer complaints, the Legislature passed SB 798
(Rosenthal, Chapter 1265, Statutes of 1993), which provided the
Bureau of Electronic and Appliance Repair the authority to
enforce regulations for the conduct of service contractors and
for the general enforcement of retail service contract law.
Additionally, SB 798 required more thorough disclosure of the
parties responsible for the services contained in the contract
as well as detailed procedures that the buyer can follow in
order to obtain performance of any obligation under the
contract.
Related legislation : AB 1866 (Mendoza) of 2008 was an identical
bill that the Governor vetoed. The Governor vetoed a
substantial number of bills that year with the same message
that, due to the delay in passing the 2008-2009 State Budget, he
would only sign bills that were "the highest priority for
California." AB 1866 was vetoed for this reason.
AB 63
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REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
Opposition
None on file.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301