BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1877|
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THIRD READING
Bill No: AB 1877
Author: Ma (D) and Olsen (R)
Amended: 4/24/12 in Assembly
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM. : 8-0, 6/25/12
AYES: Price, Emmerson, Corbett, Correa, Negrete McLeod,
Strickland, Vargas, Wyland
NO VOTE RECORDED: Hernandez
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 70-0, 5/25/12 (Consent) - See last page
for vote
SUBJECT : Repossession agencies: exemptions
SOURCE : John Deere
Far West Equipment Dealers Association
DIGEST : This bill 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.
ANALYSIS : Existing law:
1.Establishes the Collateral Recovery Act (Act) governing
collateral repossessions by a legal owner, lienholder,
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lessor or lessee, or the agent of any of them based on
written authorization and a security agreement.
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.
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.
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.
5.Exempts the following as a repossession agency:
A. Banks under the Commissioner of Financial
Institutions of the State of California or the
Comptroller of Currency of the 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; and
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
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#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 applies to those who sell
collateral designed for:
A. Agricultural use; lawn and garden care;
B. Specified special construction equipment; and
C. Use in the production, generation, storage, or
transmission of mechanical or electric energy.
1.Repeals these provisions on January 1, 2018.
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 two 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/2/12)
John Deere (co-source)
Far West Equipment Dealers Association (co-source)
California Farm Bureau Federation
Caterpillar, Inc.
Western Growers Association
OPPOSITION : (Verified 7/2/12)
California Association of Licensed Repossessors
ARGUMENTS IN SUPPORT : According to the sponsors:
"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
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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 or the farmer directly, to avoid the
potentially embarrassing act of repossession."
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
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.
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"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."
ASSEMBLY FLOOR : 70-0, 5/25/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fong, Furutani, Beth Gaines, Galgiani, Garrick,
Gatto, Gordon, Gorell, Hagman, Halderman, Harkey,
Hayashi, Roger Hern�ndez, Hill, Huber, Hueso, Huffman,
Jeffries, Jones, Lara, Logue, Bonnie Lowenthal, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, V. Manuel P�rez, Portantino,
Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Atkins, Bill Berryhill, Fletcher,
Fuentes, Grove, Hall, Knight, Ma, Perea, Silva
JJA:n 7/2/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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