BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 515
Assemblymember Hagman
As Introduced
Hearing Date: June 9, 2009
Business and Professions Code; Vehicle Code
BCP
SUBJECT
Collateral Recovery
DESCRIPTION
This bill would make numerous revisions to the Collateral
Recovery Act and Vehicle Code Sections relating to the impound
of vehicles, including:
limiting a repossession agency's liability for damages to a
vehicle as a result of electrical failure, or specified
illegal aftermarket parts;
allowing impound of any tow vehicle used to violate the Act;
narrowing the definition of lawful experience for qualified
managers of repossession agencies;
clarifying lighting requirements for towed vehicles, and
modifying the requirement for multiple safety chains;
requiring law enforcement agencies to be open, as specified,
to issue impound releases without the necessity of making an
appointment;
requiring impound agencies to accept a valid bank credit card
or cash, as specified; and
prohibiting a legal or registered owner from changing the name
of the registered owner until a vehicle is released from
impound.
BACKGROUND
Repossession agencies contract with legal owners (e.g. lenders)
to locate and recover their property that has been sold under a
security agreement. Those agencies must register with the
Bureau of Security and Investigative Services (BSIS), part of
the Department of Consumer Affairs. All managers and employees
(more)
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must register with the Bureau, and are subject to a background
check at that time.
The Collateral Recovery Act (CRA or the Act) strictly regulates
the activities of repossession agencies and their employees.
(Bus. & Prof. Code Sec. 7500 et seq.) Among other things, the
Act requires a debtor to receive a notice as soon as possible
after recovery of collateral and requires that notice to include
a disclaimer that the repossession agency is not liable for
mechanical or tire failure as long as the failure is not the
result of the negligence of the repossession agency.
In addition to modifying that disclaimer, this bill would enact
a number of substantive and clarifying changes to sections of
the CRA and Vehicle Code that regulate qualifications for
licensed repossessors and the repossession, impoundment, and
release from impoundment of vehicles, as provided. This bill is
identical to SB 1469 (Calderon, 2008), which was vetoed by the
Governor due to the delay in passing the 2008-09 budget.
CHANGES TO EXISTING LAW
1. Existing law , the Collateral Recovery Act, provides for the
licensing and regulation of repossession agencies by the
Department of Consumer Affairs (DCA). (Bus. & Prof. Code Sec.
7500 et seq.) Existing law provides that any person who
violates, conspires with another to violate, or knowingly
engages a nonexempt licensed person to repossess collateral on
their behalf is guilty of a misdemeanor and punishable by a
fine of $5,000, imprisonment for not more than one year, or
both. (Bus. & Prof. Sec. Code 7502.1(a).)
This bill would additionally provide that any tow vehicle
subject to registration under the Vehicle Code that is used to
violate any provision of the Act is subject to removal and
impound.
2. Existing law provides that it is unlawful to operate any
vehicle, as specified, which has been modified so that any
portion, other than the wheels, has less clearance from the
surface of a level roadway than the clearance between the
roadway and the lowermost portion of any rim in contact with
the roadway. (Veh. Code Sec. 24008.)
Existing law requires a repossessor to serve a debtor with a
notice of seizure as soon as possible after the recovery of
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the collateral (vehicle) and not later than 48 hours, except
as specified. That notice must include a disclosure that a
mechanical or tire failure shall not be the responsibility of
the repossession agency unless the failure is due to
negligence of the agency. (Bus. & Prof. Code Sec. 7507.10.)
This bill would additionally require the disclosure to include
electrical failure, or the loss of, or any damage to, or as a
result of, or caused by, any aftermarket parts and accessories
not in compliance with Vehicle Code Section 24008, provided
that the failure, damage, or loss is not due to the negligence
of the repossession agency.
3. Existing law provides that whenever a tow truck or vehicle
is towing a vehicle and stoplamp and turn signal lamps cannot
be lighted and displayed on the rear of the towed vehicle, the
operator of the truck or vehicle shall use an extension cord
to display lamps mounted on the towed vehicle, as specified.
(Veh. Code Sec. 24605.)
This bill would remove the reference to an extension cord,
thus allowing the use of cordless stoplamps and turn signal
lamps.
4. Existing law provides that vehicles towed by a
repossessor's tow vehicle are exempt from multisafety chain
requirements so long as the vehicle is not towed more than one
mile from the point of repossession and is secured by one
safety chain. (Veh. Code Sec. 29004.)
This bill would instead apply that provision as long as the
vehicle is not towed more than one mile on a public highway
and is secured by one safety chain.
5. Existing law requires every office licensed as a
repossession agency to be under the active charge of a
qualified certificate holder. (Bus. & Prof. Code Sec.
7505.1.) Certificate holders must be at least 18 years of age
and have two years of lawful experience. Existing law defines
"lawful experience" as experience in recovering collateral as
a registrant under the Act, or as a salaried employee of a
financial institution or vehicle dealer. (Bus. & Prof. Code
Sec. 7504.)
This bill would provide that lawful experience does not
include any employment performing work other than skip
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tracing, debt collection, or actual collateral recovery.
This bill would clarify that nothing prohibits a licensee from
having more than one qualified certificate holder in an
office.
6. Existing law provides that a peace officer or, in certain
other cases, a magistrate, may cause the removal and seizure
of a vehicle, as specified. Existing law also provides that a
vehicle removed and seized may be released to the legal owner
or the legal owner's agent prior to the end of 30 days
impoundment if certain conditions are met, including, but not
limited to the requirement that the legal owner or the legal
owner's agent pay all towing and storage fees related to the
seizure of the vehicle. (Veh. Code Secs. 14602.6, 14602.7,
14602.8, 21100.4.)
This bill would require law enforcement agencies that impound
vehicles to remain open, without the necessity of making an
appointment, to issue a release to the registered owner or
legal owner, or the agent of either, whenever the agency is
open to serve the public.
This bill would require specified facilities where impounded
vehicles are stored to accept valid bank credit cards, as
defined, or cash as payment for towing, storage, and related
fees and would make the facility civilly liable for four times
the amount of those fees, not to exceed $500, if they fail to
do so. This bill would also require those facilities to have
sufficient funds on the premises to accommodate, and make
change in, a reasonable monetary transaction.
This bill would prohibit a legal owner, registered owner, or
person in possession of a vehicle from changing, or attempting
to change, the name of the legal owner or registered owner
until the vehicle is released from impound.
This bill would require a legal owner to indemnify and hold
harmless a storage facility for any claims arising out of the
release of the vehicle to the legal owner or the legal owner's
agent and from any damage to the vehicle after its release,
including the reasonable costs associated with defending any
such claims.
This bill would impose additional requirements regarding the
release of impounded vehicles, as specified, and make it a
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misdemeanor for a legal owner of an impounded vehicle to
release the vehicle to the registered owner in certain
circumstances.
COMMENT
1. Stated need for the bill
According to the author:
AB 515 is necessary to clarify some ambiguous parts of
current law, as well as to make some changes that will
result in better trained repossessors and safer repossession
activity.
2. Limitation on liability for damage to repossessed vehicles
Under current law, a repossessor must serve the debtor with a
notice of seizure as soon as possible after recovery of the
collateral, as specified. That notice must include disclosure
that: "Damage to a vehicle during or subsequent to a
repossession and only while the vehicle is in possession of the
repossession agency and which is caused by the repossession
agency is the liability of the repossession agency." (Bus. &
Prof. Code Sec. 7507.10(d).) The disclosure further states that
any mechanical or tire failure is not the responsibility of the
repossession agency unless the failure is due to the agency's
negligence.
This bill would modify that disclosure of exemption from
liability to also include damage due to electrical failure or
specified illegal aftermarket parts. It should be noted that
this language was suggested by this committee's analysis for SB
1469 in response to the broad language that was contained in SB
1469 at that time. The committee analysis stated that the
suggested language regarding electrical components and
aftermarket parts was intended to address the following two
examples provided by the sponsor:
Modern alarm systems, particularly aftermarket alarm
systems, deadbolt the vehicle's locks and hood latches.
Unless the repossessor has the key to the vehicle to disarm
the alarm, it will sound and continue to sound until the
battery is drained or until it is disconnected under the
hood. Even if the window is broken to gain entry, it may be
impossible to open the hood to disconnect the battery. This
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natural process may cause some damage to other electrical
components on the vehicle.
Furthermore, some vehicles use electrically-actuated
hydraulic lifts to lower (i.e., "slam") the chassis
(sometimes lower than permitted by law). If a car alarm is
activated and it drains the battery, the hydraulic lifts
will release and the vehicle will drop to the ground. If it
is towed or loaded on a tilt trailer, there is the
possibility of damage to an aftermarket front spoiler or
some ground effects hardware.
Ordinary vehicles which have not been altered or tampered
usually don't face these issues. However, other vehicles
that have been "pimped" illegally may suffer damage during
the repossession process in situations completely beyond the
control of the repossessor. It is these situations to which
we intend to extend the current protections.
3. Additional penalty for violation of the CRA
The sponsor notes that in California, "one has to be licensed,
qualified, or registered to perform a repossession, or be
specifically exempt." Under current law, any person who
violates, conspires with another to violate, or knowingly
engages a nonexempt unlicensed person to repossess collateral on
their behalf is guilty of a misdemeanor. (Bus. & Prof. Code Sec.
7502.1.) Despite the allowance of a $5,000 fine and/or
imprisonment, the sponsor maintains that current law "does not
provide enough incentive for enforcement."
To provide that incentive, this bill would expand those
penalties by authorizing the removal and impound of any tow
vehicle subject to registration under the Vehicle Code that is
used to violate the CRA. Similar to the exemption from
liability discussed in Comment 2, this language was also
suggested by the committee analysis for SB 1469 to address
concerns that the initial language went well beyond the
impounding of tow vehicles involved in unlicensed activity.
4. Clarifying requirements for lighting and safety chains on
towed vehicles
The sponsor notes that, under existing law, "when a vehicle is
being towed by a tow truck or repossessor's tow vehicle, the
rear must be illuminated by lights connected via an 'extension
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cord,'" and that current technology permits the use of wireless
tail lamps. Accordingly, this bill would strike the references
in existing law to extension cords, thus permitting the use of
wireless tail lamps. The sponsor notes that this change will
conform the law to current practice.
This bill would also modify the requirement for multiple safety
chains by allowing a vehicle to be secured by only one safety
chain so long as the vehicle is not towed more than one mile on
a public highway. That exception currently applies when towing
no more than one mile from the point of repossession. The
sponsor states that the one-mile rule is for safety purposes,
and contends that by changing "point of repossession" to "public
highway," the bill intends to "exclud[e] the distance towed on
private driveways and parking lots."
5. Limiting experience requirements for, and revising the
allowable number of, qualified managers
Under existing law, every office licensed as a repossession
agency must be under the active management of a qualified
certificate holder. Existing law requires applicants for
qualification certificates to be at least 18 years of age and
have two years of lawful experience, as specified. Lawful
experience is defined as experience in recovering collateral as
a registrant of the CRA (working for a repossession agency in
California) or as a salaried employee of a financial institution
or vehicle dealer. This bill would further narrow the
definition of lawful experience by providing that lawful
experience does not include any employment performing work other
than skip tracing, debt collection, or actual collateral
recovery.
The sponsor notes that this provision is intended "[t]o conform
to the current policy of the Bureau of Security and
Investigative Services (BSIS)," and that the language was
drafted by BSIS. It should be noted that the language of this
provision addresses the committee's previous concerns about a
related provision in SB 1469 that was stricken at the request of
the committee. Specifically, the committee analysis expressed
concerns that the stricken provision would have "create[d] a
closed industry in which the only way a person may become a
qualified certificate holder ([manager] of a repossession
agency) is by working for the industry itself." Unlike that
stricken provision, the present language of AB 515 tightens up
experience requirements while still allowing someone to come
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from outside the industry to become a qualified manager.
This bill would further clarify that nothing prevents a
repossession agency from having more than one qualified manager.
6. Provisions relating to impound
In addition to the above provisions that generally apply to
repossessors, this bill would enact several changes that relate
to the impound of vehicles by a law enforcement agency.
a. Law enforcement agencies must be open, as specified, to
issue impound releases
The sponsor notes that "[w]hen a vehicle is impounded by a law
enforcement agency, it cannot be released from impound without
the owner first obtaining a police release. Some small police
agencies only grant releases by appointment during limited,
inconvenient hours. This delays the release of vehicles and
increases storage costs for consumers." In response to that
issue, this bill would require a law enforcement agency to be
open, without the necessity of making an appointment, to issue
a release whenever that agency is open to serve the public.
Although this provision could arguably place an additional
burden on smaller law enforcement agencies, the committee
received no opposition to this provision (or the bill) and the
proposed requirement appears appropriate and could result in a
benefit to consumers.
b. Impound agencies must accept credit cards from legal
owners
The sponsor notes that existing Vehicle Code sections require
tow operators and impound yards to accept credit cards in most
circumstances. (See Veh. Code Sec. 22651.1, 22658(k).) This
bill would expand those requirements by providing that impound
agencies and towing companies must accept a valid bank credit
card or cash for payment of towing, storage, and related fees
by a legal or registered owner in all situations. Violation
of those provisions would result in civil liability for four
times the amount of those fees, but not to exceed $500.
In support of the above requirement, the sponsor states:
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"Presently, an impound agency or towing company must accept
credit cards for towing and storage fees when registered or
legal owners redeem their vehicles in approximately 80% of
impound situations. This bill [would] expand[] the law to
require acceptance of bank credit cards in all situations."
c. Prohibition on changing the legal or registered owner
until release from impound
The sponsor states that "[o]n occasion, if a vehicle is
impounded because the driver was unlicensed, the legal or
registered owner may try to change the name of the registered
owner to obtain early release of the vehicle so it can be
improperly returned to the unlicensed driver." To address
that issue, this bill would prohibit a legal owner, registered
owner, or person in possession of a vehicle from changing or
attempting to change the name of the legal or registered owner
until the vehicle is released from impound.
d. Other changes relating to impound
This bill would additionally: (1) require a legal owner to
indemnify and hold harmless a storage facility for any claims
arising out of the release of the vehicle to the legal owner
or the legal owner's agent and from any damage to the vehicle
after its release, as specified; (2) impose additional
requirements regarding the release of impounded vehicles (such
as requiring the legal owner or their agent to be given copies
of documents they are required to sign, and requiring a
release from the responsible governmental agency, if required
by that agency); and (3) make it a misdemeanor for a legal
owner of an impounded vehicle to release the vehicle to the
registered owner in violation of specified statutory
prohibitions on release.
7. Suggested technical amendments
The following technical amendments are suggested to correct a
drafting error:
1) On page 9, line 32, strike ";" and insert ","
2) On page 9, line 32, strike "," and insert ";"
8. Veto of SB 1469 (Calderon, 2008)
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This bill is identical to SB 1469 (Calderon, 2008). In vetoing
that bill, the Governor stated:
The historic delay in passing the 2008-2009 State Budget has
forced me to prioritize the bills sent to my desk at the end
of the year's legislative session. Given the delay, I am
only signing bills that are the highest priority for
California. This bill does not meet that standard and I
cannot sign it at this time.
Support : California Financial Services Association (CFSA)
Opposition : None Known
HISTORY
Source : California Association of Licensed Repossessors
Related Pending Legislation : None Known
Prior Legislation :
SB 1469 (Calderon, 2008), was identical to this bill. This bill
was vetoed by the Governor.
SB 659 (Calderon, Ch. 192, Stats. 2007), made several revisions
to the laws related to repossession of motor vehicles by
clarifying provisions related to vehicle ownership, dealing with
possible threats or violence towards a repossessor, and
clarifying the requirements for impounded cars.
Prior Vote :
Assembly Business and Professions Committee (Ayes 10, Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 73, Noes 0)
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