BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 180 (Corbett)
As Introduced
Hearing Date: April 26, 2011
Fiscal: No
Urgency: No
TW
SUBJECT
Consumer Transactions: Public Social Services: Unreasonable
Fees
DESCRIPTION
Existing law, the Consumer Legal Remedies Act, provides
consumers with a civil cause of action against individuals or
entities charging or receiving unreasonable fees to prepare,
aid, or advise consumers regarding public social services aid.
This bill would add to the definition of "public social
services" activities and functions administered or supervised by
the United States Department of Veterans Affairs and the
California Department of Veterans Affairs.
BACKGROUND
In 2003, the Senate Insurance Committee held an informational
hearing entitled "Financial Planning or Fleecing of Seniors?:
Insurance Products and Investments." This hearing highlighted
many instances where senior citizens were preyed upon by
"Medi-Cal advocates," who would convince seniors to spend down
their assets through the purchase of annuities so that the
seniors would qualify for Medi-Cal. These "advocates" received
a commission for the sale of the annuity, and the senior
purchased a product that may not be appropriate for their life
expectancy and financial circumstances.
To combat this financial predatory scheme, in 2008, the
Legislature extended consumer protections under the Consumer
Legal Remedies Act (Act) for unreasonable fees charged for the
preparation, aid, or advice regarding applications for public
(more)
SB 180 (Corbett)
Page 2 of ?
social services. (SB 1136 (Alquist, Ch. 479, Stats. 2008).)
The Act prohibits unfair and deceptive commercial conduct, and
authorizes a consumer to commence a civil action for damages
resulting from violations of the Act. The existing definition
of public social services under the Act includes activities and
functions of state and local government administered or
supervised by the State Department of Public Health or the State
Department of Social Services.
Although existing law protects consumers in their applications
for MediCal and Medicaid, there are no similar protections for
consumers regarding their applications for veteran's benefits.
In 2007, the United States Department of Veterans Affairs
(USDVA) reported that private companies were targeting the
elderly at assisted living facilities, and these companies would
offer to assist elderly veterans qualify for veteran's benefits.
(Acting Director Bradley G. Mayes, Letter to All VA Regional
Offices and Centers, Jan. 3, 2007.) The USDVA noted that
companies were charging fees related to veteran's benefits
applications even though these companies had not been authorized
by USDVA to perform such services.
Further, veterans' associations around California are reporting
an increase in predatory practices on elderly veterans.
"Veterans advocates" are offering services to redistribute the
veteran's finances so that the veteran will qualify for the
Veterans Aid and Attendance program. As with the MediCal and
Medicaid schemes, these "advocates" reorganize a veteran's
finances through the purchase of financial products that may not
be appropriate for their life expectancy and financial
circumstances.
This bill would provide consumer protections regarding
unreasonable fees charged or received for assistance in
procuring veterans benefits provided by the United States
Department of Veterans Affairs and the California Department of
Veterans Affairs.
(This analysis reflects author's amendments to be adopted in
Committee.)
CHANGES TO EXISTING LAW
Existing federal law prohibits the preparation, presentation, or
prosecution of any claim under laws administered by the
Secretary of Veterans Affairs unless that individual has been
recognized for such purposes by the Secretary. (38 U.S.C. Sec.
SB 180 (Corbett)
Page 3 of ?
5901.) Existing federal law prohibits charging fees for the
aid, assistance, or preparation of veteran's benefits
applications. (38 U.S.C. Sec. 5904.)
Existing law provides that it is an unfair or deceptive trade
practice for any person to charge or receive an unreasonable
fee, as defined, to prepare or aid an applicant or recipient in
the procurement, maintenance, or securing of public social
services. (Civ. Code Sec. 1770(24).) Existing law defines
"public social services" as those activities and functions of
state and local government administered or supervised by the
State Department of Health Care Services, the State Department
of Public Health, or the State Department of Social Services,
and involved in providing aid or services, or both, including
health care services and medical assistance, to those persons
who, because of their economic circumstances or social
condition, are in need of that aid or those services and may
benefit from them. (Id.)
Existing law requires the court to award treble damages to the
plaintiff whenever it is proven by a preponderance of the
evidence that a defendant has charged or received an
unreasonable fee for those services. (Civ. Code Sec. 1780.)
This bill would include in the definition of "public social
services" activities and functions administered or supervised by
the United States Department of Veterans Affairs and the
California Department of Veterans Affairs involved in providing
aid or services to veterans, including pension benefits.
COMMENT
1. Stated need for the bill
The author writes:
The Aid and Attendance Program administered by the federal
Veterans Administration (VA) is a safety net for low wealth
veterans and their spouses who cannot afford to pay for
medical supplies or in-home healthcare.
Financial predators target high wealth veterans who otherwise
would not qualify for the �Aid and Attendance Program] and
counsel them how to move their assets into "safe harbors" such
as irrevocable trusts and deferred annuities. These advisors
charge $10,000 or even more for their services.
SB 180 (Corbett)
Page 4 of ?
SB 180 prohibits anyone from charging an unreasonable fee for
assisting a person to qualify for a federal pension benefit
program, such as Veterans Aid and Attendance. SB 180
diminishes the incentive of financial advisors who counsel
seniors to artificially impoverish themselves to qualify for a
government benefit.
California Advocates for Nursing Home Reform (CANHR), the
sponsor of this bill, writes:
The Veterans Aid and Attendance Pension was designed to assist
low wealth veterans and their spouses to pay for in-home care
or for care in an assisted living facility. This is a needs
based program and the Veteran Administration does not charge
seniors to apply for the benefits. Financial predators are
targeting high wealth veterans who otherwise will not qualify
for the benefit. . . . The advice given by these financial
predators results in the seniors artificially impoverish�ing]
themselves by moving their assets into irrevocable trusts or
deferred annuities. Often these advisors make commissions on
the annuities they counsel the seniors to purchase.
SB 180 diminishes the incentive of financial advisors who
counsel seniors to artificially impoverish themselves to
qualify for a government benefit. . . . SB 180 is an important
senior consumer bill that protects the interest of seniors and
the state.
2. Expanding consumer protections for veterans and veteran's
spouses
This bill would prohibit unreasonable fees charged to veterans
and their spouses in the preparation, aid, or advice regarding
veteran's benefits applications. Existing federal law allows
authorized agents and attorneys to charge reasonable fees for
representation of veteran's benefit applicants before the Board
of Veteran's Appeals, but prohibits charging any fee for
services related to veteran's benefits applications. (38 U.S.C.
Sec. 5904.) Yet, the sponsor argues, "veterans advocate"
companies are charging veterans and their spouses $10,000 or
more for assistance in preparing and qualifying for needs-based
veteran's benefits, including the Veterans Aid and Attendance
program. The Veterans Aid and Attendance program, administered
by the United States Department of Veterans Affairs, provides
supplemental income to veterans or their surviving spouses if
SB 180 (Corbett)
Page 5 of ?
their combined income is less than $15,493 per year and they own
assets less than $80,000, excluding a residence. Veterans or
their surviving spouses may also qualify for placement in
assisted living facilities operated by the California Department
of Veterans Affairs.
Existing law prohibits charging unreasonable fees in connection
with the preparation, aid, or advice regarding public social
services benefits such as Medicaid and MediCal. (Civ. Code Sec.
1770.) Proponents of this bill argue that the same predatory
companies that were charging unreasonable fees for Medicaid and
MediCal applications are now charging veterans and their spouses
unreasonable fees associated with veteran's benefits
applications. These companies, the proponents argue, sell to
veterans or their spouses financial services and products such
as irrevocable trust preparation and deferred annuities for the
purpose of hiding the veteran's assets to qualify for veteran's
benefits. In addition to the application assistance fee, the
"veterans advocate" may receive a commission on the sale of
deferred annuities. This bill would provide veterans and their
surviving spouses with civil protections against unscrupulous
"veterans advocates" charging exorbitant fees for assistance
with veteran's benefit applications.
3. Private right of action for an individual who has been charged
unreasonable fees for assistance in procuring veteran's
benefits
This bill would provide a private right of action to an
individual who has been charged unreasonable fees for assistance
in procuring veteran's benefits. Under existing law, public
social services, including veteran's benefits, are offered to
individuals in the state who are most in need of assistance from
the state and local government. These services range from
subsidies for living expenses to assisted living facilities.
Because public social services are need-based, no application
fees are charged, as that would be contrary to the purpose of
offering the services in the first place. Accordingly, any fee
that is charged to individuals for assistance in applying for
public social services should be nominal as the assistance would
largely consist of filling out necessary forms.
Consistent with the goal of helping the general public, many
local entities and non-profit organizations already provide free
services to individuals who need help in determining which
services they are eligible for and in the application process.
SB 180 (Corbett)
Page 6 of ?
However, needy individuals may not be aware of these resources
and end up paying huge sums to estate planning companies for
services they could have obtained for free.
Existing law prohibits charging unreasonable fees in connection
with the preparation, aid, or advice regarding public social
services benefits such as Medicaid and MediCal. (Civ. Code Sec.
1770.) These prohibitions currently do not extend to veteran's
benefits. Current law provides civil remedies for individuals
who have suffered damages as a result of fraud or deceit. (Civ.
Code Secs. 1572-1573 and 1709-1710.) A fraudulent
misrepresentation is one made with the knowledge that it is or
may be untrue and with the intention that the person to whom it
is made act in reliance on it. (Wilke v. Coinway, Inc. (1967)
257 Cal.App.2d 126, 136.)
Individuals who have been charged exorbitant amounts of money
for assistance in procuring veteran's benefits may be able to
proceed with a civil action on the basis of fraud or deceit. In
addition, senior veterans may also be able to pursue a cause of
action under the Elder Abuse and Dependent Adult Civil
Protection Act. (Welf. & Inst. Code Sec. 15600 et seq.)
However, the availability of these remedies would largely depend
on the specific facts of the case and, in some instances, leave
individuals with no legal recourse, particularly in those cases
where the victims are not senior citizens.
This bill would make it an unfair or deceptive trade practice
for any person to charge or receive an unreasonable fee to
assist an applicant in procuring veteran's benefits, thereby
providing a civil right of action for all individuals under the
Consumer Legal Remedies Act.
4. This bill would utilize existing factors to be considered in
determining whether a fee is unreasonable
This bill would predicate a consumer's right to a civil cause of
action based upon whether a consumer was charged an unreasonable
fee in the procurement of veteran's benefits. Because the
proportionality of a fee is largely dependent on the type of
service provided, it would be difficult to define a specific
amount that would be considered overly high in every single
circumstance.
Existing law provides criteria for determining whether or not a
fee is reasonable, including: (1) the time and effort, and
SB 180 (Corbett)
Page 7 of ?
skill required to perform the service; (2) the novelty and
difficulty of the service; (3) the nature and length of the
professional relationship; and (4) the experience, reputation,
and ability of the individual providing the services. (Civ.
Code Sec. 1770(24)(B)(ii).) These provisions allow legitimate
organizations to continue providing services to individuals in
the community so long as their fees are reasonable under the
circumstances. Similarly, these provisions would allow
legitimate organizations to continue providing services to
veterans and their spouses in connection with veteran's benefits
so long as the fees are reasonable under the circumstances.
5. This bill would provide remedies, including treble damages,
for violations proven by a preponderance of the evidence
This bill would authorize an award of treble damages whenever a
defendant is found to have violated its provisions by a
preponderance of the evidence. Under the Consumer Legal
Remedies Act (CLRA), an injured consumer is entitled to recover
actual damages, injunctive relief, restitution of property,
punitive damages, and any other relief that the court deems
proper. (Civ. Code Sec. 1780.) Existing law also provides for
treble damages for individuals charged unreasonable fees in
connection with the procurement of public social services.
(Civ. Code Sec. 1780(c).) However, there is currently no
consumer protection for unreasonable fees charged in connection
with the procurement of veteran's benefits, so treble damages
are not currently available to these victims.
The authorization of treble damages permits a court to triple
the amount of the actual/compensatory damages to be awarded to a
prevailing plaintiff, generally in order to punish the losing
party for willful conduct. Treble damages are a multiple of,
and not an addition to, actual damages. Thus, where a person
received an award of $100 for an injury, a court applying treble
damages would raise the award to $300.
Generally, punitive damages are awarded when it is proven by
clear and convincing evidence that the defendant has been guilty
of oppression, fraud, or malice. (Civ. Code Sec. 3294(a).)
However, the Legislature is free to provide for additional
statutory remedies where it deems appropriate. These statutory
damages may, for example, take the form of civil penalties or
provide for the doubling or trebling of actual damages found by
the trier of fact.
SB 180 (Corbett)
Page 8 of ?
The Civil Code authorizes additional remedies in actions brought
by, on behalf of, or for the benefit of senior citizens or
disabled persons, but these remedies are not available to
veterans who are not senior citizens or disabled. For example,
under Civil Code Section 1780(a), any consumer who is a senior
citizen or a disabled person may seek and be awarded, in
addition to the other statutory remedies provided, up to $5,000.
Before making that award, the trier of fact must do all of the
following: (1) find that the consumer has suffered substantial
damages from the defendant's conduct; (2) make an affirmative
finding in regard to one or more of the factors set forth in
Civil Code Section 3345(b); and (3) find that an additional
award is appropriate. (Civ. Code Sec. 1780(b)(1).)
Further, Civil Code Section 3345 provides for increasing any
applicable fine, penalty, or other remedy up to three times the
amount authorized or to be imposed in actions brought by, on
behalf of, or for the benefit of senior citizens or disabled
persons to redress unfair or deceptive practices or unfair
methods of competition. Before imposing additional damages, the
trier of fact must make at least one affirmative finding with
respect to: (1) whether the defendant's conduct was directed to
senior citizens or disable persons; (2) whether the defendant's
conduct caused such persons to suffer losses; and (3) whether
the plaintiff(s) was more vulnerable to defendant's conduct than
other members of the public. (Civ. Code Sec. 3345(b).) While
these additional statutory remedies would cover a significant
portion of the intended beneficiaries of this bill, they would
not be available to victims who are not senior citizens or
disabled persons.
Treble damages under the CLRA would appear to be appropriate for
victims of overcharging for the procurement of veteran's
benefits. Staff notes that Civil Code Section 1782 provides the
potential defendant a right to cure. Consumers who believe they
have been wrongfully overcharged for assistance with veteran's
benefits must provide notice of the overcharge at least 30 days
prior to filing an action to the potential defendant. The
potential defendant then has the ability to correct the
overcharge within 30 days after receipt of the consumer's notice
and if the potential defendant has corrected the problem, no
civil action can be maintained. (Civ. Code Sec. 1782(b).) This
bill would provide mandatory trebling of compensatory damages in
all cases where, after failing to correct the overcharge prior
to commencement of the case, it is proven by a preponderance of
the evidence that a defendant has charged unreasonable fees for
SB 180 (Corbett)
Page 9 of ?
assistance in procuring veteran's benefits.
6. Amendments to be adopted in Committee
When this bill was heard in the Senate Committee on Veterans
Affairs, the author agreed to accept an amendment to provide
consumer protections for activities and functions administered
or supervised by the California Department of Veterans Affairs.
Because of timing constraints, that amendment needs to be put in
the bill in this Committee. Additionally, the author has agreed
to accept a technical correction to this bill.
Author's amendments:
1. On page 4, line 31, after "Affairs" add "or the
California Department of Veterans Affairs".
2. On page 4, line 32, after "services" add ", or both,".
Support : Consumer Attorneys of California
Opposition : None Known
HISTORY
Source : California Advocates for Nursing Home Reform
Related Pending Legislation : None Known
Prior Legislation : See Background.
Prior Vote : Senate Committee on Veterans Affairs (Ayes 8, Noes
0)
**************