BILL ANALYSIS
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|Hearing Date:June 21, 2010 |Bill No:AB |
| |2654 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 2654Author:Hill
As Amended: June 15, 2010 Fiscal: Yes
SUBJECT: Solicitations.
SUMMARY: Specifies requirements for solicitations that could be
construed or interpreted as involving a governmental entity, including
certain disclosures on the front and back of every page of the
solicitation; establishes penalties for violating specified disclosure
requirements and makes various technical changes.
Existing law:
1)Federal law prohibits the use of any seal, insignia, trade or brand
name that could reasonably be interpreted or construed as implying
any federal government connection, approval, or endorsement unless
the mailing has a notification on its face, cover or wrapper that it
is not affiliated with any federal government agency.
2)Prohibits any person, firm, corporation or association that is a
nongovernmental entity to solicit information, or solicit the
purchase of or payment for a product or service or to solicit the
contribution of funds or membership fees, by means of a mailing,
electronic message or Internet website that contains a seal,
insignia, trade or brand name or any other term or symbol that
reasonably could be interpreted or construed as implying any state
or local government connection, approval or endorsement, unless :
a) The nongovernmental entity has an expressed connection with,
or the approval or endorsement of, a state or local government
entity, if permitted by law.
b) The solicitation meets both of the following requirements:
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i) The solicitation bears on its face, in conspicuous and
legible type in contrast by typography, layout, or color with
other type on its face, the following notice: "THIS PRODUCT OR
SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY ANY GOVERNMENT
AGENCY, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE
GOVERNMENT."
ii) In the case of a mail solicitation, the envelope or
outside cover or wrapper in which the matter is mailed bears on
its face in capital letters and in conspicuous and legible
type, the following notice: "THIS IS NOT A GOVERNMENT
DOCUMENT."
1)Requires that any business that solicits the purchase of, or payment
for, a service by means of an unsolicited mailing that offers to
assist the recipient in dealing with a state or local governmental
agency to do both of the following:
a) State on the envelope and in the mailing that it is not a
governmental agency and is not associated with the governmental
agency referenced.
b) Include in the mailing the contact information for the
governmental agency referenced.
2)Provides, however, that a business does not have to meet the
requirements of item # 3) above, if either or the following
requirements have been met:
a) The business has an expressed connection with, or the approval
or endorsement of, a state or local governmental entity as
permitted by law.
b) The business has an "established business relationship," as
defined by law, with the recipient.
This bill:
1)Makes various technical changes.
2)Defines "conspicuous" or "conspicuously" as displayed apart from the
other print on the page, envelope, outside cover or wrapper, in at
least 12-point boldface font, in capital letters, that is at least
2-point boldface font sizes larger than the next largest print and
in a contrasting type, layout, font, or color in a manner that
clearly calls attention to the language.
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3)Adds "emblem" to the list of prohibited items contained within a
solicitation that imply connection to a government entity.
4)Specifies that the following disclosure currently required must also
be conspicuously displayed on the front and back of every page of a
solicitation or mailing: "THIS PRODUCT OR SERVICE HAS NOT BEEN
APPROVED OR ENDORSED BY ANY GOVERNMENT AGENCY, AND THIS OFFER IS NOT
BEING MADE BY AN AGENCY OF THE GOVERNMENT."
5)Specifies that the statement currently required, that the business
is not a governmental agency and is not associated with the
governmental agency referenced, must also be displayed conspicuously
and immediately below each portion of the solicitation that could be
construed to specify an amount due and payable to the recipient.
Removes the requirement for a solicitation to include the contact
information for the governmental agency required.
6)Prohibits disclosures from preceding, following or surrounding
language, words, symbols, terms or other content that result in
disclosures not being conspicuous or that introduce, modify, qualify
or explain the text of these disclosures.
7)Specifies that a solicitation cannot use a trade or brand name that
implies state or local government connection, approval, or
endorsement, including, but not limited to:
a) Agency
b) Administrative
c) Assessor
d) Board
e) Bureau
f) Collector
g) Commission
h) Committee
i) Department
j) Division
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aa) Recorder
bb) Unit
cc) State
dd) County
ee) City
ff) Municipal
gg) The name of any government agency
1)Specifies that no solicitation can state or imply mandatory payment
required is by law. Specifies that no solicitation can state or
imply that penalties or consequences will occur if payment is not
made to the soliciting nongovernmental person, firm, corporation or
association.
2)Makes a violation of this law a misdemeanor punishable by
imprisonment in a county jail, up to six months, or a fine, up to
two thousand five hundred dollars ($2500), or both.
3)Establishes remedies up to three times the amount solicited for any
person harmed as a result of a violation.
FISCAL EFFECT: According to the April 21, 2010 Assembly Committee on
Appropriations analysis, this measure may result in potential minor
non-reimbursable costs to counties for prosecution and incarceration
related to violations of the bill's provisions, offset to some extent
by fine revenues.
COMMENTS:
1. Purpose. According to the Author, this bill stems from constituent
complaints about receiving what appear to be official government
documents warning of penalties if the recipient does not remit a
specified payment and is the product of his "There Oughta Be A Law
Contest." The Author states that "existing law provides limited
protections against fraudulent or deceptive business solicitations
and mailings that imply official government status." The Author
goes on to note, "Deceptive solicitors follow the letter of the law
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by including a disclosure statement buried deep in the
communication within 'fine print' but many of these advertisements
look official and appear to be from the State of California." The
Author also states that requiring disclosure of nongovernmental
status at the top of the first page of a solicitation will avoid
deception.
2. Background. There are many unscrupulous businesses that reach out
to consumers and business owners, offering to provide services as a
third party between the consumer or business owner and a government
entity. Some even go so far as to mail solicitations to consumers
and business owners which are disguised as government forms or
documents requiring payment. The majority of these entities target
consumers and businesses with mandatory registrations or document
filings with government entities such as homeowners filing property
tax exemptions with a local county assessor's office or businesses
filing LLC documents with the Secretary of State's Office.
Examples of misleading statements include representations that a
fee is required in order to receive a homeowners' exemption, or
that the advertised service is connected with any government
entity. One specific example highlighted by the Secretary of
State's Office involved letters sent to California corporations
directing them to submit $495 and a completed form to a private
company named "Business Filings Division" in order to dissolve
their business entity.
In one more publicized recent example of deceptive solicitations, a
San Diego County man plead guilty to charges of conspiracy to
commit wire fraud and money laundering connected to his creation of
a business specifically designed to fraudulently sell loan
modification services to homeowners who were delinquent in their
monthly mortgage payments. The company mailed solicitations
throughout the county advising homeowners that it employed highly
trained staff and had a direct connection to the US Treasury. Over
300 homeowners paid between $2,500 and $3,000 to the company
between April and July 2009, which was used to continue to operate
the company and pay its principals and did not result in any
services to homeowners.
In response to consumer and business complaints about deceptive
solicitations, the Office of the Secretary of State dedicated a
webpage to inform consumers about these mailings and clarify, "the
requests are not being made by the California Secretary of State's
office and are not being made by or on behalf of any governmental
entity. Although a business entity can use an intermediary to
submit filings and fees to our office, no business is required to
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go through another company in order to file its documents with the
Secretary of State's office."
3. Related and Previous Legislation
AB 2919 (Garcia) Chapter 256, Statutes of 2008, required businesses
that send a mailing offering to assist the recipient in dealing
with a governmental agency to state on the envelope and in the
mailing that it is not a governmental agency and is not associated
with the referenced governmental agency and required businesses to
include in the mailing the contact information for the referenced
governmental agency.
SB 1400 (Simitian) Chapter 749, Statutes of 2008, established new
rules and disclosure requirements for sweepstakes solicitations and
extends the provisions to those who sell information regarding
sweepstakes.
SB 1240 (Figueroa) Chapter 319, Statutes of 2002, specified that
solicitations by e-mail and on Internet websites shall be governed
by the same state laws regulating mail solicitations using words or
symbols that can potentially cause a misimpression of a state or
local governmental connection with the solicitations.
AB 1178 (Davis) Chapter 249, Statutes of 1997, prohibited deceptive
advertising practices related to an offer to file either a property
tax homeowners' exemption, or a property tax assessment appeal on
behalf of a consumer.
AB 532 (Morrow) Chapter 348, Statutes of 1993, conformed California
law to Federal law prohibiting certain mail from nongovernmental
entities to contain any term or symbol, as specified, that
reasonably could be interpreted or construed as implying any
federal government connection, approval, or endorsement.
4. Arguments in Support. The Consumer Federation of California
writes, "This bill protects consumers from deceptive solicitations
from non-governmental agencies posing as government fee
notification letters." They also state that this protection is
especially timely to help provide consumers with as much
information as possible to help make informed financial decisions.
5. Recent Author's Amendments. Recent amendments reflect negotiations
between the Author and the Offices of the Secretary of State,
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Controller and Department of Justice. The amendments provide
technical and clarifying changes to current law. The amendments
also ensure consumer protection by specifying language, location
and size of disclosures on solicitations that imply a government
connection.
SUPPORT AND OPPOSITION:
Support: Consumer Federation of California
Opposition: None on file as of June 15, 2010
Consultant:Sarah Mason