BILL ANALYSIS
SENATE COMMITTEE ON VETERANS AFFAIRS
JEFF DENHAM, CHAIRMAN
Bill No: AB 2365
Author: Lieu
Version: As amended April 8, 2010
Hearing Date: June 22, 2010
Fiscal: No
SUBJECT OF BILL
California Military Families Financial Relief Act
PROPOSED LAW
1. Allows U.S. Service personnel to go to court to
enforce rights under legal protections, default
judgments, staying actions, computing time delays due
to deployment, limiting interest rates, staying
eviction, avoiding breach of contract, preventing
foreclosure, rights under leases, and "any other
obligation, liability, tax or assessment."
2. Amend several sections of the Military and Veterans
Code (MVC) to allow for awarding of actual damages,
costs, and attorney fees to U.S. service personnel if
they are declared the "injured party" by the court.
3. Amends MVC section 409.1 to include the proper
terminology of "petition" rather than "application."
4. Amends MVC section 409.3 to require the court to
set a petition within 25 days of filing excepting that
the court "shows good cause for extending the date of
the hearing." Requires petitioner to serve 10 days
before the hearing and respondent to file five days
before hearing.
5. Amends MVC section 409.3 to prohibit court fees or
cost for petitions filed "pursuant to this section."
6. Amends MVC section 409.3 to allow the court to
grant relief to a petitioner if the court has
determined that the petitioner's ability to comply has
not been "materially affected by reason of his or her
military service."
7. Amends MVC section 409.3 to allow the court under
its grant relief powers to stay an enforcement of
obligation on "any other obligation, liability, tax,
or assessment."
EXISTING LAW AND BACKGROUND
1. During the American Civil War, Congress passed a
moratorium on civil actions against northern troops.
Certain southern states are said to have done the same
for their armies.
2. In World War I, Congress passed the Soldiers and
Sailors Civil Relief Act of 1918 to protect service
members from losing at home what they were fighting
for on the front. The law gave courts the authority
to make equitable decisions involving military
personnel who had no ability, or a compromised
ability, to meet obligations at home.
3. In 1940, Congress renewed the expired Soldiers and
Sailors Civil Relief Act, now commonly called (SSCRA).
4. In 1942, due to the courts improperly carrying out
the will of Congress, the SSCRA was amended to correct
errors of the federal courts and to give stronger
protections to those serving the United States of
America.
5. As some business owners found new ways to attempt
to avoid the SSCRA law, Congress and state
legislatures have consistently returned to defend
service members by strengthening the law. In 1991
further amendments were passed in response to the
experience of Desert Shield/Desert Storm personnel.
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6. In 2002, SSCRA protections (the Veterans Benefits
Act of 2002, Public Law 107-330. Section 305) were
extended to National Guard members activated under
Title 32 if activated for federal reasons. [Note:
Federal active duty is usually activated under Title
10 of the United States Code (U.S.C.). Usually Title
32 is state activation of the National Guard.
However, after 9/11 state National Guard units were
activated for state service in such places as airports
and bridges but the activation was done by and paid
for by the federal government.
7. In December 2003, President Bush signed a revised
version of the SSCRA, now known as the Federal Service
Members Civil Relief Act (SCRA), which again extended
SSCRA protections.
8. Existing law provides financial and legal
protections to military members, reservists, and
members of the National Guard that are called to
active duty with respect to rental agreements,
security deposits, eviction, installment contracts,
credit card interest rates, mortgage interest rates,
mortgage foreclosure, civil judicial proceedings, and
income tax payments (Service Members Civil Relief Act
of 2003, Public Law 108-189).
9. Since 2001, the California National Guard (CNG) has
responded to the needs of the state by deploying
thousands of soldiers and airmen throughout the state
for a multitude of missions, many lasting for months
and some for years. Many of these Guard members must
leave their studies in order to respond to state
emergencies. Some may be required to perform duty for
over 15 or more consecutive days (as was the case with
California's recent wildfires).
10. After September 11, 2001, California
also strengthened SSCRA. In 2002, the Military
Department sponsored AB 1433 (Horton)*, which was
chaptered into law and repealed California MVC 399
and 399.5 and added Chapter 7.5 "Protections,"
commencing with 400 through 420. AB 1433 codified
into state law many aspects of the federal SSCRA
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including eviction protection, capping interest rates
at 6%, obligations secured by real or personal
property, and protection on installment loan credit.
11. The passage of AB 1433 provided
financial protection for military members performing
military service in regards to court proceedings,
credit contract obligations, rental agreements, taxes
(except income taxes), and health/medical insurance,
as well as eviction protection for the military
members' families. These new provisions enabled
National Guard members that are serving in state or
federal status and other military reservists
performing federal duty to receive financial
protections consistent with those found within the
federal SSCRA.
12. AB 306 of 2005 (Baca)**, also known as
the "California Military Families Financial Relief
Act", created MVC sections 800-810, which updated the
state's version of SSCRA to include all California
service members whether Reserves or National Guard as
well as adding protections on auto loans.
13. Other state legislation-
a) California MVC 800-810 was codified by SB 1
(Calderon)*** in 1991 to provide emergency economic
relief to California residents called to active
military service during the Iraq-Kuwait crises. This
legislation augmented protections that were already
afforded under the federal statute known as the
Soldiers and Sailors Civil Relief Act (SSCRA) of 1940.
b) AB 1666 (Frommer) of 2005, the California Families
Financial Relief Act of 2005, addressed (among other
things) the following:
waives county recorder fee for power of
attorney for recording a service member's agent
if that member is performing military service:
allows for the cancellation of a cell
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phone contract within 30 days if the member or
spouse sends a written notice to the cell phone
service provider;
requires a full refund of tuition and
fees for college students ordered to military
service if they withdraw prior to the school's
withdrawal date;
waives bar dues for the time period in
which the military member is serving military
duty;
allows for past due or on a vehicle
lease to be paid in equal installments over the
length of time the member served military duty if
a vehicle lease is terminated pursuant to the
federal Service Members Civil Relief Act; and
allows qualified customers to receive up
to 180 days of shutoff protection for utilities
if income reduction is due to a member of the
family being activated to duty and the individual
notifies the public service provider of the need
for assistance.
COMMENT
1. When reservists or guardsmen are activated, they
usually take a pay cut. AB 306 of 2005 was written to
bring state level SSCRA protections to California's
post 9/11 veterans who are in such circumstances.
2. The bill's sponsor-the California Military
Department-contends that lack of an enforcement
mechanism in AB 306 of 2005 has allowed businesses to
ignore the law without fear of any real accountability
stating, "Financial institutions recognize that many
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Servicemembers will be unable to challenge the
institution's denial of these protections due to the
servicemembers' lack of sophistication of the courts,
the inability to get an attorney to accept their case
or the geographic limitations a deployment to an
overseas combat zone presents."
3. Sponsors further contend that without the ability
to recover attorney's fees that there is no recourse
to service members, "if a creditor has refused to
defer a mortgage or lower the interest rate to six
percent for pre-service debts, the over-charged
interest may only amount to several hundred dollars.
Finding an attorney to take such a case is nearly
impossible unless that attorney knows that reasonable
compensation will be allowed by the court for
undertaking such an action to protect the rights of a
Servicemember."
4. The sponsors also contend that while service
members are away their credit is being destroyed to
the detriment of both the service member and his or
her family and that without a timely solution, even if
a soldier's request for deferral is finally granted,
that in the meantime that person's credit is ruined in
the leaving activated military personnel with a no-win
situation.
5. The California Bankers Association (CBA) agrees
that there is no enforcement mechanism in the present
code but maintain that the sponsor's solution will
actually put activated military personnel in a worse
position than they presently are in. CBA mentions
that this bill creates a private right of action that
will force creditors to go on the defensive and tie
cases up in court for a far longer time than it would
take industry regulators to solve the problem.
6. The CBA suggests that sections 4 and 7 of the bill
be amended to strengthen the hands of banking
regulators since all commercial banks that military
personnel would deal with are under the jurisdiction
of these regulators. CBA believes that by moving
these claims to the front of the line and giving
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enforcement responsibilities to the Attorney General,
the Department of Financial Institutions, the Office
of the Comptroller of Currency, the Office of Thrift
Supervision, and, if legal, even local district
attorneys, then compliance with the law may be delayed
in some cases, but the delay would not be near as long
as the delay involved in a lawsuit.
7. The sponsors of the bill claim that MVC already
gives service members the right of private action but
that military personnel cannot afford to hire a lawyer
(see comment #3 above) and that this bill does not
establish a private right of action but rather gives
the already existing right of action an enforcement
mechanism stating, "It is necessary to provide an
enforcement mechanism to ensure the Legislature's
stated intent to enable Servicemembers to devote their
entire energy to the defense needs of the nation or
state."
8. In line with the sponsor's opinion as stated in
comment #7, the sponsor opposes the previously
mentioned amendments on the grounds that giving
regulators enforcement authority would remove a right
for service members that already exist.
Even if jurisdiction was given to banking regulators
state law could only bind those banks chartered by the
state while it would rely upon the volition of federal
regulators as to whether or not they wanted to enforce
state laws on federally chartered banks.
9. The CBA points out that this bill has a problem in
the fact that if these cases do become litigated, then
this bill has no provisions on how to deal with
appeals and the delays that will cause for those
wearing the uniform.
10. The sponsor does not share the concern
over delays due to appeals saying that any bank action
would be held in abeyance through the appeals process.
Additionally the Military Department says the cases
they have vetted are all checked for compliance with
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the written law beforehand, are cut and dried, and
that all cases they are concerned with will be decided
in favor of the soldiers, claiming that soldiers are
told there is nothing that can be done if the soldier
has not complied in the first place.
PRIOR ACTIONS
Assembly Veterans Affairs8-0
Assembly Judiciary 10-0
Assembly Floor 71-0 (Consent)
SUPPORT
California Military Department (Sponsor)
Adjutant General (Sponsor)
CA County Veteran Service Officers
Vietnam Veterans of America, CA Council
National Guard Association of California
OPPOSE
None received
OTHER
California Bankers Association (neutral if amended)
*Jerome Horton served in the Assembly in 2002
** Joe Baca, Jr. served in the Assembly in 2005.
***Charles Calderon served in the Senate in 1991
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