BILL ANALYSIS
SB 204
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Date of Hearing: June 29, 2009
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Pedro Nava, Chair
SB 204 (Benoit, Huff & Runner) - As Amended: June 8, 2009
SENATE VOTE : 33-1
SUBJECT : Financial transactions: escrow agents.
SUMMARY : Enacts changes to the Escrow Law, relating to annual
fees, audit frequency, and license surrender. Specifically,
this bill :
1)Deletes the January 1, 2010 sunset date on the Escrow Law
annual assessment, thus permanently capping it at $2,800, and
deletes the section of law that provides for a pro rata
licensee assessment if the $2,800 annual assessment were to
sunset.
2)Increases the amount of the special assessment the
commissioner may levy, if the annual assessment is
insufficient to cover his/her annual expenses related to
administering the Escrow Law, from $500 to $1000, and
increases the amount of time that licensees have to pay that
assessment from 30 to 60 days after notification by the
commissioner.
3)Requires (rather than authorize) the commissioner to conduct
an indoctrination or preliminary examination, or both, of any
new escrow agent licensee within one year of license issuance,
and additionally extends this requirement to include an
indoctrination or preliminary examination, within one year, of
any escrow agent licensee that undergoes a change in
ownership.
4)Requires (rather than authorize) the commissioner to conduct
an examination of a new escrow agent licensee within two years
of license issuance, and additionally extends this requirement
to include an examination within two years, of any escrow
agent licensee that undergoes a change of ownership.
5)Deletes the reference to an agreed upon procedures report
performed by an independent certified public accountant from
the section of the Escrow Law relating to license surrender
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and replace it with a reference to a document prescribed by
rule or order of the commissioner, including, but not limited
to, any document(s) which demonstrate that all custodial fund
accounts have been properly transferred and closed.
6)Deletes the requirement that the commissioner of DOC find that
there has been no violation of law, in order to accept the
surrender of an escrow agent's license, and instead authorizes
the commissioner to accept a license surrender upon a finding
that the surrender is in the public interest.
EXISTING LAW
1)Establishes an annual licensee fee of up to $2,800 annually
for every licensed escrow agent, per office or location, and
requires the commissioner of the Department of Corporations
(DOC) to set the annual licensee fee amount at a level
necessary to cover the costs and expenses, including overhead,
associated with enforcement of the Escrow Law. [Financial
Code, Section 1700 et seq.]
2)Authorizes the commissioner of DOC to levy a special
assessment on each escrow agent of up to $500 for each office
or location, if the commissioner finds that the costs and
expenses associated with enforcing the Escrow Law, including
overhead, will exceed the amounts that will be collected from
the annual assessment.
3)Gives licensees up to 30 days in which to pay this special
assessment, after being notified by the commissioner, and
imposes specified penalties on licensees who fail to timely
pay the assessment.
4)Sunsets existing law #1 through #3 above on January 1, 2010,
and provides for an alternate method of assessing annual fees,
once the existing law fee provisions sunset. This alternate
method requires each escrow agent to annually pay to the
commissioner its pro rata share of the commissioner's Escrow
Law administrative costs.
5)Requires the commissioner to conduct an examination of every
licensed escrow agent as often as the commissioner deems
necessary and appropriate, but not less than once every 48
months.
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6)Authorizes, but does not require, the commissioner to conduct
an indoctrination or preliminary examination, or both, of any
new licensee, within one year of issuing a license to that
licensee, and authorizes, but does not require, an examination
of a new licensee within two years of license issuance.
7)Provides that an escrow agent's license remains in effect,
until it is surrendered, revoked, or suspended.
8)Requires licensees who cease to engage in business as escrow
agents, and who no longer wish to be licensed, to notify the
commissioner in writing, and submit a closing audit or review
prepared by an independent certified public accountant, as
specified (Section 17600).
9)Provides that an escrow agent's license is not surrendered
until the commissioner has reviewed and accepted the closing
audit report or review, made a determination that there has
been no violation of law, and accepted tender of the license
in writing.
10)Creates the Escrow Law Advisory Committee in DOC, consisting
of eleven members, as specified, including the commissioner of
DOC, representatives of the Escrow Agents' Fidelity
Corporation, and various members of the escrow industry. The
Escrow Law Advisory Committee is required to meet at least
quarterly, and is intended to assist the commissioner in
implementing his or her duties under the Escrow Law.
FISCAL EFFECT : Unknown
COMMENTS :
The Escrow Law protects members of the public who entrust their
money or other assets to independent escrow agents in
California. Escrow agents, joint control agents and Internet
escrow agents are subject to the provisions of the Escrow Law.
The Escrow Law requires any person engaged in the escrow
business or joint control business in this state to be a
corporation organized for that purpose and to be licensed by the
Commissioner of DOC.
In 2005, SB 408 (Margett) was signed into law. This bill
extended the sunset date on existing law pertaining to licensing
fees and assessments for escrow agents imposed by the DOC from
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January 1st, 2006 to January 1st, 2010. SB 408 also limited the
amount of penalties the DOC may impose on an escrow agent as
well as clarified what information relative to a person's
criminal history was needed on an escrow agent's application.
The author believes this bill is necessary to place limits on
licensed escrow industry assessment fees (a cost levied against
licensed escrow agents and businesses by DOC) by eliminating the
sunset in current law, thus preventing the historic pro-rata
assessment structure from taking effect.
AB 1646 (Conroy, 1996) capped the fee for each escrow office or
location at $2,800 annually. Prior to AB 1646, a pro-rata fee
structure was utilized by the DOC for each annual assessment,
resulting in a cost of $15,000 to $18,000 for a typical small
escrow office or location. SB 204 will prevent the annual
assessment from reverting back to this pro-rata fee structure.
The language in SB 204 is the result of discussions between the
Escrow Institute of California (sponsor), DOC, and Senator
Benoit. The DOC has agreed that the $2,800 annual assessment is
sufficient for the purposes of industry oversight and
regulation. If this is ever not the case, the DOC may levy a
"special assessment" of up to $1,000 - increased from $500 by
this bill. However, the DOC has never levied a special
assessment on the escrow industry, despite having had the
authority to do so since 1996.
The sponsor states, "SB 204 is a very modest measure, which, if
enacted, would bring consistency and stability to the Annual
Regulatory Assessment which each escrow licensed location pay
the DOC."
REGISTERED SUPPORT / OPPOSITION :
Support
Escrow Institute of California (Sponsor)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
SB 204
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