BILL ANALYSIS �
AB 2667
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Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Susan A. Bonilla, Chair
AB 2667 (Bloom) - As Amended: April 24, 2014
SUBJECT : Rental-purchase agreements: electronic devices:
monitoring technology.
SUMMARY : Prohibits the installation or use of geophysical
location (GPS) tracking or monitoring technology on electronic
devices by lessors under a "rent to own" contract without prior
notice and consent to the consumer, subject to certain
exceptions. Specifically, this bill :
1)Requires a lessor to provide clear and prominent notice to a
consumer and obtain express consent from the consumer at the
time the lessor and the consumer enter into a rental-purchase
agreement for an electronic device if that device has GPS
tracking technology installed, and at any time the GPS
tracking technology is activated.
2)Prohibits a lessor from installing GPS tracking technology on
an electronic device without first providing clear and
prominent notice to the consumer and obtaining express
consent.
3)Prohibits a lessor from using, selling, or sharing GPS
tracking technology on an electronic device for any purpose
other than the prevention of fraud or loss.
4)Requires an electronic device to display a clear and prominent
notification if GPS tracking technology is activated.
5)Requires a lessor to provide that any GPS tracking technology
that has been installed on an electronic device, or can be
activated by the lessor, expires following the lease period,
or upon completion of purchase of the electronic device.
6)Prohibits a lessor from using or installing monitoring
technology on an electronic device for any purpose.
7)Requires a lessor to provide clear and prominent notice to a
consumer and obtain express consent from the consumer for the
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installation of any software that permits the use of remote
technical assistance and upon the activation and deactivation
of any remote technical assistance when requested by the
consumer.
8)Prohibits a lessor from acquiring any data when providing
remote technical assistance beyond what is necessary to
provide assistance to the user and consented to by the user.
Any data acquired during the period of consumer consented
technical assistance shall not be retained, used or sold for
any purpose.
9)Defines the following specialized terms "electronic device,"
"clear and prominent notice," "geophysical location tracking
technology," "monitoring technology," "remote technical
assistance," "express consent," and "fraud".
10)Provides that no reimbursement is required by this bill
because the only costs that may be incurred by a local agency
or school district will be incurred because this bill creates
a new crime or infraction, eliminates a crime or infraction,
changes the penalty for a crime or infraction, or changes the
definition of a crime.
EXISTING LAW:
1)Implements the Karnette Rental-Purchase Act, which among other
things, requires lessors in rental-purchase agreements to
provide price-tag disclosures and a sample rental-purchase
contract, and requires that any rental-purchase advertisement
states the total number of payments necessary to acquire
ownership. (Civil Code (CIV) Section 1812.620 et seq.)
2)Provides that the lessor of a piece of personal property must
keep a copy of the agreement and evidence of the "cash price"
of the personal property leased for two years following
termination of the agreement. The "cash price" is defined as
the price at which retail sellers are selling and consumers
are buying the same or similar property for cash in the same
trade area as the lessor's place of business. (CIV 1812.623.)
3)Requires that a lessor in a rental purchase agreement, upon
request, provide the consumer with a copy of the proposed
rental-purchase agreement prior to its execution. (CIV
1812.629(c).)
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4)Provides that a consumer who is damaged by the lessor's
violation of the Karnette Rental-Purchase Act is entitled to
recover actual damages; twenty-five percent of the total
amount of payments required to obtain ownership, but not less
than $100 or more than $1,000; exemplary damages for
intentional or willful violations of the Act; reasonable
attorney's fees and court costs; and equitable relief as the
court deems proper. (CIV 1812.636(a).)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill generally prohibits the use
of GPS tracking technology by lessors under "rent-to-own"
agreements without consumer notice and consent, and bars
monitoring technology for any purpose. It would, however,
provide narrow exemptions for the provision of remote
technical assistance and for preventing fraud or loss. This
bill is sponsored by the Consumer Federation of California.
2)Author's statement . According to the author, "AB 2667
addresses the inappropriate and undisclosed use of monitoring
and tracking technologies by Rent-to-Own companies.
"In 2012, the Federal Trade Commission (FTC) took action
against [a] rent-to-own franchise, Aaron's Inc., an Atlanta
based company operating nearly 1,800 U.S. stores with dozens
in California. The FTC found that Aaron's had violated the
provisions of the Federal Trade Commission Act by using 'PC
Rental Agent,' a monitoring and tracking software, to
inappropriately collect data, including photos, of consumers
who had rented home computers or laptops. 'PC Rental Agent' is
used for the warranted purpose of tracking down rent-to-own
computers that have been stolen or had delayed payments,
however, this technology has also been used to secretly
monitor and track user's keystrokes, take screenshots or
photographs of customers using the computers webcam, and use
fake pop-up registrations prompts to collect user's data?.
"This bill puts into CA statute a 2012 ruling by the [FTC] and
prohibits the use of any monitoring technology on rent-to-own
electronic devices. The bill also prohibits the use of [GPS]
software except in cases of fraud or loss. The bill does allow
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the technical assistance software if express consent is given
by the lessee."
3)The rent-to-own computer market . According to the author,
electronic devices such as desktop computers, laptop computers
and tablets are increasingly being leased to consumers under
what are termed "rental-purchase" or "rent-to-own" agreements.
As an example, online retailer Aarons.com offers a "lease plus"
program for computers where a consumer can lease a computer
over a 12-24 month period with a single monthly payment and no
money down, and own the computer at the end of the contract.
Such arrangements are attractive to consumers who cannot
afford to buy the equipment outright, or who lack a credit
card or need to build their credit history.
Because the leased computers remain the property of the lessor
until the lease contract is completed and the equipment
purchased, lessors may install GPS tracking or monitoring
software on the equipment, ostensibly to track the equipment
to reclaim it if a lessee defaults on the monthly lease
payments or claims the equipment was stolen. Unfortunately,
this same tracking and monitoring equipment can - and has -
been misused by companies to spy on and even secretly
photograph unwitting customers.
4)The Federal Trade Commission Investigation into "rent-to-own"
spying . In 2012, the Federal Trade Commission (FTC) ordered
seven rental companies and a software manufacturer to cease
using monitoring technology on unsuspecting customers after
discovering that rent-to-own retailers were using technology
to spy on and photograph consumers.
In its complaint, the FTC alleged that the companies had
violated provisions of the Federal Trade Commission Act
concerning Unfair and Deceptive Gathering and Disclosure of
Consumers' Personal Information by installing software -
oftentimes with innocuous names such as "PC Rental Agent" - to
monitor consumers' information and track their behavior.
The FTC complaint revealed that Aaron's had collected "private,
confidential and personal details about consumers using rented
computers" including passwords, medical records, social
security numbers, bank and credit card statements and more.
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The complaint also exposed Aaron's collection of images,
stating that "webcams operating secretly inside computer users
homes took photographs of computer users and anyone else
within view of the camera?included images of minor children as
well as individuals not fully clothed and engaged in intimate
conduct."
The FTC consent agreement with Aaron's ordered the franchise
to stop the use of monitoring and to give clear and prominent
notice to consumers when any tracking software has been
installed on the computer or has been activated for fraud
purposes. However, there was no reported fine for Aaron's or a
number of other named companies.
Concurrent to the FTC's complaint, a civil case, Byrd v.
Aaron's Inc. , was filed in which a married couple alleges that
they discovered that Aaron's had secretly installed monitoring
software on the laptop they had purchased under a rent-to-own
plan. When Aaron's mistakenly tried to repossess the computer
they showed the wife a photo of her husband that had been
taken with the computer's webcam that morning.
According to the author, the limits of FTC's enforcement power
(particularly the fact that Aaron's was not fined for its
behavior) demonstrate the need for a statutory ban on the
targeted practices which would help prevent further violations
and make it easier for private parties to seek civil damages
in court.
5)This bill in practice . Practically speaking, this bill would
bar the installation or use of GPS tracking technology on
electronic devices under a rent-to-own contract only, unless
the consumer is provided clear and prominent notice and
consents to the installation or use. The lessor would also be
prohibited from using, selling or sharing any GPS data for any
purpose other than prevention of fraud or loss. Furthermore,
any GPS tracking technology would need to expire after the
equipment was purchased.
Monitoring technology (used for sending a picture or video feed)
would be prohibited for any purpose. Notice and consent would
be required for any activation, use or deactivation of remote
technical assistance. This bill also bans the collection of
consumer data beyond what is necessary during technical
assistance, and prohibits the retention, use or sale of that
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data.
6)Arguments in support . According to the Consumer Federation of
California, "This bill prohibits the use of invasive
monitoring software on rent-to-own computers and electronic
devices. AB 2667 protects consumers from the inappropriate
and undisclosed use of spy software on rented computers, or
other rented electronic devices that have a platform to
download, install or run any software program.
"AB 2667 prohibits the use of monitoring technologies on rented
electronic devices and restricts the use of GPS tracking
technologies to fraud prevention purposes only. The GPS
location tracking has been described as a necessary aide in
helping recover stolen property. This bill would not prohibit
the use of GPS for this purpose. However, AB 2667 ensures
that customers are notified and consent to the installation of
GPS tracking technologies for this purpose."
7)Previous legislation . AB 594 (Karnette), Chapter 410, Statutes
of 2006, revised and recast recasts a number of provisions
relating to personal property rental-purchase agreements under
the Karnette Rental-Purchase Act, including clarifying product
price caps.
AB 722 (Karnette), Chapter 1026, Statutes of 1994, enacted the
Karnette Rental-Purchase Act that set parameters, conditions,
and obligations for agreements between rent-to-own dealers and
consumers.
8)Double referral . This bill was heard in the Assembly
Judiciary Committee on April 22, 2014 and passed out on a 10-0
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Consumer Federation of California (sponsor)
American Civil Liberties Union
Opposition
None on file.
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Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916)
319-3301