BILL ANALYSIS �
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|Hearing Date:June 25, 2012 |Bill No:AB |
| |1877 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 1877Author:Ma
As Amended:April 24, 2012 Fiscal:Yes
SUBJECT: Repossession agencies: exemptions.
SUMMARY: Exempts a dealer and his or her bona fide employees from
licensure as a repossession agency if they regularly sell specified
collateral that is subject to a security agreement of the manufacturer
or a manufacturer's affiliate.
Existing law:
1)Establishes the Collateral Recovery Act (Act) governing collateral
repossessions by a legal owner, lienholder, lessor or lessee, or the
agent of any of them based on written authorization and a security
agreement. (Business and Professions Code (BPC) � 7500 et seq.)
2)Defines a "repossession agency" to include any person who engages in
business or accepts employment to locate or recover collateral,
whether voluntarily or involuntarily, which is subject to a security
agreement. (BPC � 7500.2)
3)Provides for the licensing and regulation of repossession agencies by
the Bureau of Security and Investigative Services (BSIS) under the
supervision and control of the director of the Department of
Consumer Affairs (Director). (BPC � 7501.05)
4)Authorizes the Director to establish and enforce rules and
regulations for the examination and licensing of applicants, for the
conduct of licensees, and for the general enforcement of the Act.
(BPC � 7501.6)
5)Exempts the following as a repossession agency: (BPC � 7500.3)
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a) Banks under the Commissioner of Financial Institutions of the
State of California or the Comptroller of Currency of the United
States (U.S.);
b) Any person organized, chartered, or holding a license or
authorization certificate to make loan;
c) Attorneys performing their duties;
d) The legal owner of collateral that is subject to a security
agreement or a bona fide employee employed exclusively and
regularly by that legal owner, as specified;
e) An officer or employee of the U.S. or state government, or a
political subdivision;
f) A qualified certificate holder or a registrant when performing
services for, or on behalf of, a licensee.
This bill:
1)Revises and recasts the exemptions as specified in Item #5 from
above.
2)Exempts a dealer and his or her bona fide employees from licensure as
a repossession agency if they regularly sell specified collateral
that is subject to a security agreement of the manufacturer or a
manufacturer's affiliate. This bill would apply to those who sell
collateral designed for:
a) Agricultural use; lawn and garden care;
b) Specified special construction equipment;
c) Use in the production, generation, storage, or transmission of
mechanical or electric energy
3)Repeals these provisions (sunsets) on January 1, 2018.
FISCAL EFFECT: According to the Assembly Appropriations Committee,
there are no significant costs for the BSIS.
COMMENTS:
1.Purpose. This bill is co-sponsored by John Deere and the Far West
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Equipment Dealers Association (Sponsors). The Sponsors state:
"Authorized dealers of agricultural, forestry, construction and
lawn care products would like to maintain good customer
relations and save costs to both parties when a repossession
situation arises.
"California law does not allow anyone other than a repossession
agency to perform this function unless they are licensed, or are
a financial institution that holds title to the property. This
bill would only exempt products sold by an authorized dealer on
behalf of a manufacturer that is the legal owner of the property
through a security agreement, or an affiliate thereof, meaning
the financing arm of the company.
"Currently, third party repossession and hauling fees creates an
additional and unnecessary cost to the customer. Customers
would prefer to work directly with a dealer rather than an
unknown repossession agent, someone with whom they have had no
previous relationship, and to which is attached a social stigma,
both when a 'Repo Truck and Trailer' shows up at their home or
business, and local law enforcement is notified.
"Licensed repossessors are also required to notify law
enforcement after equipment has been recovered, thereby
establishing a negative public record for the customer who is
already suffering through an embarrassment of having equipment
repossessed.
"Repossession licensing requirements present hurdles for
manufacturers and authorized dealers of agricultural, forestry,
lawn care and construction equipment who sell thousands of
dollars' worth of products and whose repossessions represent a
very small portion of the dealer's overall business.
"By exempting authorized dealers and financial entities from
repossession licensing requirements, dealers are allowed to
streamline their business practices and avoid or reduce
expensive repossession and hauling fees that would have been
passed on to the farmer. More importantly, dealers want to
protect and preserve their relationships with their customers,
especially those who are subjected to circumstances outside his
or her control.
"AB 1877 would give dealers, who have established relationships
with their customers, the option to negotiate with the customer
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or the farmer directly, to avoid the potentially embarrassing
act of repossession."
2.Background. There are currently 339 licensed repossession agencies
within the State of California. In order to be eligible for
licensure as a repossession agency, the applicant must have at least
2 years (2,000 hours each year) of compensated experience totaling
not less than 4,000 hours as a registrant or a licensed repossession
agency. In addition to meeting experience requirements, applicants
must pass a written examination. Any applicant who worked for a
licensed repossession agency must have been registered as a
repossession agency employee to claim the experience.
Under existing law, a creditor may use a collection agency to
recover loan payments in default from customers, and if that is
unsuccessful, a repossession agency will attempt to recover viable
collateral for resale and the proceeds of that will go towards the
outstanding loan amount. While many car dealers offer financing on
site at the dealership, the financing component is actually covered
by a separate subsidiary or creditor, whose employees can repossess
a vehicle. However, it is common practice for those creditors to
hire repossession agencies to recover those vehicles instead of
using its own employees.
3.Related Legislation. SB 944 (Committee on Business, Professions and
Economic Development, Chapter 432, Statutes of 2011) made several
non-controversial, minor, non-substantive or technical changes to
various miscellaneous provisions pertaining to regulatory boards of
the Department of Consumer Affairs and professions including
authorizing a person to work as a qualified repossessor certificate
holder or as a registrant.
AB 515 (Hagman, Chapter 322, Statutes of 2009) made numerous
revisions to the Collateral Recovery Act and Vehicle Code Sections
relating to the impound of vehicles.
AB 659 (Ma, Chapter 192, Statutes of 2007) specifies that the legal
owner of collateral registered under the Vehicle Code includes the
seller or lessee named on a valid conditional sales contract or
lease agreement and requires a licensed repossessor to provide
details about the incident to the person who made the assignment.
That person will then be required to notify a subsequent repossessor
of that information at the time of making another assignment to skip
trace, locate, or repossess that vehicle.
AB 2318 (Calderon, Chapter 418, Statutes of 2006) provides that a
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repossessor shall not be required to remove property that is
attached to or that is on the collateral of being repossessed if the
repossessor cannot determine whether or not the item is a "personal
effect" (i.e., property that does not belong to the legal owner of
the collateral) or a part of the collateral, except that the
repossessor shall remove and inventory all items that can be removed
without using tools, and increases the fine to $250 on a
repossession agency that does not register repossessors with the
BSIS in a timely fashion.
4.Arguments in Support. According to the Sponsors , "Repossessions
represent a very small portion of a dealer's business. Thanks to
the state's strong agricultural economy, they happen on a relatively
infrequent basis, hence requiring a dealer to become a full-time
repossession agent for this purpose makes no sense. In order to
become licensed, current law would require them to have at least two
years of experience in the field, pay an $825 licensing fee, submit
to fingerprinting, and renew their license every two years.
Further, being licensed would require the dealer to notify local law
enforcement after a product has been recovered, thereby establishing
a negative public record for the poor customer who is already
suffering the embarrassment of having equipment taken on their
property by an unknown third party in broad daylight. Customers
would prefer to work directly with a dealer because he or she is
someone they know, and there is no social stigma attached to them.
"Third party repossessions and hauling fees create an additional,
and we believe unnecessary, expense to the customer by increasing
the total amount they owe above and beyond the original cost of the
equipment. By exempting dealers from licensing requirements, they
can streamline their business practices and avoid or reduce these
costs. More importantly, dealers can protect their personal and
financial relationship with a customer in the hope they can do
business together again in the future."
5.Arguments in Opposition. According to the California Association of
Licensed Repossessors , "AB 1877 would undermine the licensed
repossession industry created by the Act as administered by the
�Department of] Consumer Affairs, which provides for the licensure
of repossession agencies. The bill, as written, would amend the
definition of a repossession agency by carving out a bona fide
authorized dealer or either the legal owner of collateral that is
subject to a security agreement or an affiliate of that legal owner.
While there may be some instances in which a John Deere dealer
might work with a farmer to arrange a time to repossess a tractor,
this bill would also allow for non-voluntary repossessions conducted
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by non-licensed individuals that could potentially have violent
felony convictions who would not pass the background check to which
all licensed repossessors are subjected to. This is one of the
primary public safeguards inherent in the Act and is an important
reason that licensure is required in California.
"AB 1877 would exempt agricultural, construction, forestry, lawn,
and grounds care equipment, dealers or an affiliate of the legal
owner, from the current repossession agency licensing requirements.
An affiliate, however, is simply a company that is related to
another company in some way, not necessarily an employee of John
Deere nor licensed and subject to any or all of the provisions of
the Act."
SUPPORT AND OPPOSITION:
Support:
Deere & Company (Co-Sponsor)
Far West Equipment Dealers Association (Co-Sponsor)
California Farm Bureau Federation
The Apex Group
Western Growers Association
Opposition:
California Association of Licensed Repossessors
Consultant:Michael Lynch