BILL ANALYSIS �
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|Hearing Date:June 6, 2011 |Bill No:AB |
| |75 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 75 Author:Hill
As Introduced: December 22, 2010 Fiscal:Yes
SUBJECT: Documents: notaries public: solicitations.
SUMMARY: Specifies requirements for solicitations that could be
construed or interpreted as involving a governmental entity; makes
changes to the law governing notaries public.
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:
i) The solicitation bears on its face, in conspicuous and
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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." (Business and Professions Code (BPC) � 17533.6)
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 (Id.)
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 (Id.)
5) Makes it unlawful for a person to make any untrue or misleading
statements in any manner in connection with the offering or
performance of an "assessment reduction filing service," defined as
any service performed or offered to be performed for compensation
in connection with preparing or completing an application or
request for reduction in assessment. Clarifies that untrue or
misleading statement includes:
a) The preparation of a request for review or an assessment
appeal application will result in a guaranteed reduction of
property taxes.
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b) A fee is required in order for the county to process a
reduction of a property's value when the county really has no
applicable fee.
c) The person offering assessment reduction filing service will
physically represent the person being solicited before county
assessor staff, before an assessment appeals board, before a
county board of equalization or before an assessment hearing
officer unless the fee includes this representation.
d) The person offering assessment reduction filing service will
prepare or complete informal assessor review data or prepare or
complete the application in full on behalf of the person being
solicited unless the fee includes this service.
e) The person offering assessment reduction filing service has a
file or record covering the person being solicited.
f) The person offering assessment reduction filing service is
affiliated with any governmental entity, including the use of:
i) Any government seal, emblem or other similar symbol.
ii) A business name including the word appeal or tax and the
word assessor, agency, bureau, department, division, federal,
state county, city or municipal or the name of any city,
county, city and county, or any governmental entity.
iii) An envelope that simulates an envelope containing a
government check, tax bill or government notice.
iv) An envelope or outside cover that does not state in
capital letters "THIS IS NOT A GOVERNMENT DOCUMENT"
g) A late fee is required if the person being solicited does not
respond by a date stated in the solicitation. (BPC � 17537.9)
6)Makes it unlawful to offer or perform an assessment reduction filing
service without the following disclosure placed at the top of each
page of every advertisement or promotional material and recited at
the beginning of every oral solicitation or broadcast advertisement:
"THIS ASSESSMENT REDUCTION FILING SERVICE IS NOT ASSOCIATED WITH
ANY GOVERNMENT AGENCY. IF YOU DISAGREE WITH THE ASSESSED VALUE OF
YOUR PROPERTY, YOU HAVE THE RIGHT TO AN INFORMAL ASSESSMENT REVIEW,
AT NO COST, BY CONTACTING THE ASSESSOR'S OFFICE DIRECTLY. IF YOU
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AND THE ASSESSOR CANNOT AGREE TO THE VALUE OF THE PROPERTY OR IF YOU
DO NOT WISH TO CONTACT THE ASSESSOR YOU CAN OBTAIN AND FILE AN
APPLICATION FOR CHANGED ASSESSMENT WITH THE COUNTY BOARD OF
EQUALIZATION OR ASSESSMENT APPEALS BOARD ON YOUR OWN BEHALF. AN
APPEALS BOARD HAS THE AUTHORITY TO RAISE PROPERTY VALUES (BUT IN NO
CASE HIGHER THAN THE PROPOSITION 13 PROTECTED VALUE) AS WELL AS TO
LOWER PROPERTY VALUES." (Id).
7)Makes it unlawful for a person offering assessment reduction filing
service to charge, demand or collect any money until after a request
for review is filed with an assessor (Id).
8)Makes it unlawful for a person offering assessment reduction filing
service to charge, demand or collect any money until after an
assessment appeal is filed with the clerk of the assessment appeals
board (Id).
9)Makes it unlawful for a person offering assessment reduction filing
service to file a request or application for reduction in assessment
without written authorization from the property owner (Id).
10)Authorizes proof of the execution of an instrument by certain
persons and prescribes the form for that proof. (Civil Code (CC) �
1180-1183)
11)Prohibits a proof of execution of any of several types of specified
documents, including a grant deed, mortgage, deed of trust,
quitclaim deed, or security agreement as it relates to the recording
of transfers of property, by use of a "subscribing witness." (CC
�1195)
12)Provides that a protest is a certificate of dishonor made by a
United States consul or vice consul, or a notary public or other
person authorized to administer oaths by the law of the place where
dishonor occurs. (Commercial Code � 3505)
13)Prescribes the duties of a notary public, including the duty to
demand acceptance and payment of foreign and inland bills of
exchange, or promissory notes, to protest them for nonacceptance or
nonpayment, and to exercise any other powers and duties that by the
law, may be performed by notaries. (Government Code (GC) � 8205)
14)Prescribes the maximum fees a notary public may charge for
specified services. (GC � 8211)
15)Establishes fees the Secretary Of State (SOS) is authorized to
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charge for the provision of specified business services. (GC �
12182- 12197)
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.
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)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.
6)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
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h) Committee
i) Department
j) Division
aa) Recorder
bb) Unit
cc) Federal
dd) State
ee) County
ff) City
gg) Municipal
hh) The name or division of any government agency
8)Specifies that a solicitation cannot outline a date or time period
when payment to the soliciting entity is due unless the solicitation
also displays the date or time period specified, how the information
being solicited will be used, a description of the service that is
to be provided or how the solicited funds or membership fees will be
used. Specifies that a solicitation cannot use any of the following
terms to indicate a date or time period when payment is due,
including, but not limited to:
a) Due date
b) Due now
c) Remit by
d) Remit immediately
e) Payment due
f) Pay now
g) Pay immediately
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h) Pay no later than
9) 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.
10)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.
11)Establishes remedies up to three times the amount solicited for any
person harmed as a result of a violation.
12)Adds a power of attorney to the types of instruments for which a
proof of the execution is prohibited and prohibits a proof of the
execution for any instrument requiring a notary public to obtain a
thumbprint from the party signing the document in the notary
public's journal.
13)Specifies that certain provisions of existing law apply only to a
notary public employed by a financial institution.
14)Deletes the prescribed maximum fees a notary public may charge for
specified services.
15)Authorizes the SOS to refuse to perform a service or refuse a
filing based on a reasonable belief that the service or filing is
being requested for an unlawful, false, or fraudulent purpose, to
promote or conduct an illegitimate object or purpose, or is being
requested or submitted in bad faith or for the purpose of harassing
or defrauding a person or entity.
FISCAL EFFECT: According to the May 4, 2011 Assembly Committee on
Appropriations analysis, any additional costs for the SOS would be
minor and absorbable. The analysis also notes that to the extent this
legislation would reduce fees paid by entities attempting bogus
filings, that loss would be offset by savings achieved by staff not
being required to process those bogus filings. The analysis states
that the bill 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. The Author is the Sponsor of this bill. According to the
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Author, the measure strengthens the law to prevent deceptive
business solicitations and reduces the potential for document fraud
by closing significant loopholes affecting notary services and
solicitation disclosures.
According to information provided by the Author and SOS, the
Attorney General of California has received well over 10,000
complaints from the public about these deceptive
government-look-a-like forms and cites one lawsuit brought by the
Attorney General, the defendants were charged with sending out
986,000 misleading solicitations. This bill will put a stop to
this practice by requiring third party vendors to put larger, more
obvious disclaimers on their solicitations to make it clear they
are not government documents. It also increases the penalty for
failing to put disclaimers on the solicitations. These
clarifications will provide businesses receiving these misleading
solicitations with a more readily recognizable disclaimer, as well
as make this type of deceptive practice easier to prosecute and
eliminate.
The Author also believes it is important to give the SOS the
authority to refuse to process documents that are clearly intended
for fraudulent purposes. When a notarized document is presented to
the SOS for a certificate of authentication, the SOS is only
permitted to determine the authenticity of the notary public's
signature, not the authenticity of the underlying document. If the
notary signature is valid, the SOS must authenticate the notary
public's signature. Once the SOS certificate is attached to the
document, if the underlying document is not authentic (often
referred to as "bogus") it can be used to file false financial
claims against people and to obtain fraudulent identification
implying that the holder of the document has diplomatic immunity
from prosecution. Other entities in receipt of the documents may
view the SOS certificate as proof that the underlying documents are
valid rather than simply as an authentication of the notary
public's signature. By providing the SOS the discretion to refuse
a filing that is unlawful, false or fraudulent, the Author believes
the likelihood of these occurrences will decrease.
Additionally, the Author sees benefit in prohibiting the use of a
subscribing witness when establishing a power of attorney.
Currently, if a person has signed a document, but does not
personally appear before a notary public, another person can appear
on their behalf to attest that the principal signer signed the
document. The person appearing on behalf of the principal is
called a subscribing witness. Although existing law prevents a
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subscribing witness from being used as proof of signing on specific
real property documents to be recorded, they can be used in the
proof of signing of a power of attorney document that could later
be used to fraudulently sign multiple real property deeds or impact
all aspects of a person's estate.
Information provided by the Author outlines how notaries public are
currently required to perform "protests" and issue certificates of
dishonor related to nonpayment of negotiable instruments, such as a
check or promissory note. The bill eliminates the mandate for all
notaries public, except for those that work for financial
institutions, from processing antiquated documents (i.e., protests)
that are frequently used for fraudulent purposes, as the protest
can be used to begin civil legal proceedings. This protest
procedure is archaic and is seldom performed for legitimate
purposes. The Author and SOS see this process as beyond the
expertise of most notaries public and assert that these bogus
protests have been used in tax evasion schemes, as well as a way to
harass people by asserting invalid liens.
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 SOS. 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 SOS 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
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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 SOS 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 go through another
company in order to file its documents with the Secretary of
State's office."
3. Similar and Related Previous Legislation. AB 898 (Torrico) of 2010
and AB 2654 (Hill) of 2010 were very similar to this bill. The
bills were vetoed by the Governor. In his veto messages, the
Governor indicated concern with the private right of action
provision contained in both bills and hesitancy to sign something
into law that could lead to "spurious lawsuits".
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.
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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. Secretary of State Debra Bowen writes in
support of this bill, noting that it will close significant
loopholes and eliminate methods of potential fraud.
Various Chambers of Commerce also support this bill, stating that
it strengthens disclaimer requirements and increases the penalty
for failing to put disclaimers on solicitations, making it easier
for businesses to readily recognize the disclaimers and easier to
prosecute and eliminate this type of deceptive practice.
Capitol Corporate Services, Inc ., which has over 40,000 clients
throughout the U.S. and over 1,000 entities registered or qualified
to conduct business in California, also agrees with other
supporters that this is an important bill which protects those
conducting legitimate business in California by requiring clear and
obvious disclaimers, as well as reduces the potential for document
fraud.
NOTE: Double-referral to Judiciary Committee (second).
SUPPORT AND OPPOSITION:
Support:
California Association of Realtors
Capitol Corporate Services, Inc.
Highland Area Chamber of Commerce
Law Offices of Harold S. Small
Long Beach Area Chamber of Commerce
Secretary of State Debra Bowen
Simi Valley Chamber of Commerce
South Bay Association of Chambers of Commerce
Thoits Insurance Service
TriMark Economy Restaruan Fixtures
Turner, Aubert and Friedman, LLP
Opposition:
None on file as of May 31, 2011
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Consultant:Sarah Mason