BILL ANALYSIS �
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|Hearing Date:June 23, 2014 |Bill No:AB |
| |2740 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 2740Author:Bonilla
As Amended: April 24, 2014Fiscal: Yes
SUBJECT: Bureau of Electronic and Appliance Repair, Home Furnishings
and Thermal Insulation.
SUMMARY: Subjects the powers and duties of the Bureau of Electronic
and Appliance Repair, Home Furnishings and Thermal Insulation (Bureau)
to review by the appropriate policy committees of the Legislature as
if these provisions were scheduled to be repealed on January 1, 2019;
requests the Bureau to report on specified issues by March 1, 2015.
Existing law:
1)Establishes the Bureau of Electronic and Appliance Repair, Home
Furnishings, and Thermal Insulation within the Department of
Consumer Affairs (DCA), and places the Bureau under the supervision
and control of the DCA Director. (Business and Professions Code
(BPC) � 9810)
2)Establishes a Chief of the Bureau who is appointed by the Governor,
subject to confirmation of the Senate, and provides that the Chief
shall serve under the direction and supervision of the Director and
at the pleasure of the Governor, and authorizes the Chief to carry
out every power or duty imposed upon the Director relative to the
Bureau's activities. (BPC � 9810)
3)Licenses and regulates electronic and appliance repair dealers and
service contract sellers and administrators under the Electronic and
Appliance Repair Dealer Registration Law (EARDRL) by the Bureau.
(BPC � 9800 et seq.)
4)Licenses and regulates manufacturers, sellers, importers,
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Page 2
upholsterers, and sanitizers of home furnishings, including
upholstered furniture and bedding and thermal insulation under the
Home Furnishings and Thermal Insulation Act (HFTIA) by the Bureau.
(BPC � 19000 et seq.)
This bill:
1)Subjects the powers and duties of the Bureau to review by the
appropriate policy Committees of the Legislature as if these
provisions were scheduled to be repealed on January 1, 2019.
2)Makes findings and declarations relating to the Bureau's creation,
jurisdiction, and the joint sunset oversight hearing, and to issues
and recommendations that were raised regarding the Bureau,
including:
a) Reporting on the Bureau's long-term fiscal outlook and any
planned efforts to increase revenues and reduce expenditures;
b) Advising the Committees on its pro rata costs and whether the
Bureau could achieve cost savings by handling more consumer
complaints in house;
c) Examining the pros and cons of biennial license renewals for
licensees of the Bureau;
d) Conducting market condition assessments for the electronic and
appliance repair and home furnishings and thermal insulation
markets to determine if current law reflects the needs of the
markets, where risk to consumers is greatest, where resources
could be refocused or expanded, and whether continued regulation
is necessary across all segments of these markets;
e) Considering whether the Bureau should consolidate any of its
license categories, and whether it should continue to regulate,
or issue, standalone sanitizer and custom upholsterer licenses;
f) Reexamining product testing protocols to ensure it has the
information it needs to identify areas of highest risk to
consumers, and reexamining product standards to determine if some
standards could be relaxed, when there is no appreciable impact
on consumer safety, or if standards should be better clarified or
advertised, or if penalties for violations are too low to act as
a proper deterrent;
g) Updating the Committees on implementation of DCA's BreEZe
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Page 3
system.
3)States that it is the intent of the Legislature that the Bureau
examine and respond to the issues and recommendations identified in
the sunset background paper, and report back to the Committees by
March 1, 2015, with its findings.
FISCAL EFFECT: This measure has been keyed "fiscal" by Legislative
Counsel. The April 30, 2014 Assembly Committee on Appropriations
analysis cites one-time minor costs to the Bureau (special funds) to
respond to the issues and recommendations in the sunset review
Background Paper and report back to the Legislature by March 1, 2015.
The bill recommends, but does not require, the Bureau to respond.
COMMENTS:
1.Purpose. This bill is one of three "sunset review bills" authored by
the Chair of the Assembly Business, Professions and Consumer
Protection Committee. This bill provides for the Bureau to be
reviewed by the appropriate policy committees of the Legislature,
and requests the Bureau to report to the Legislature on specified
issues. The other bills are AB 2741, relating to the Professional
Fiduciaries Bureau, and AB 1147, relating to massage therapy.
2.Oversight Hearings and Sunset Review of Licensing Boards and
Commission of DCA. In 2014, the Senate Business and Professions
Committee and the Assembly Business, Professions and Consumer
Protection Committee (Committees) conducted joint oversight hearings
to review 9 regulatory entities: Bureau of Automotive Repair;
Bureau of Home Furnishings and Thermal Insulation; Bureau for
Private Postsecondary Education (BPPE); California Massage Therapy
Certification program; California Board of Acupuncture; California
Tax Preparers Program; Dental Hygiene Committee of California;
Professional Fiduciaries Bureau; and Structural Pest Control Board.
This Committee also reviewed the performance and effectiveness of
the Community Interest Development Manager's Certification Program.
The Committees began their review of the licensing agencies in March
and conducted two days of hearings and then more recently held a
hearing on the BPPE. This bill, and the accompanying sunset bills,
are intended to implement legislative changes as recommended by
staff of the Committee's and which are reflected in the Background
Papers prepared by Committee staff for each agency and program
reviewed by the Committees for this year.
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3.Review of the Bureau of Electronic and Appliance Repair, Home
Furnishings, and Thermal Insulation, (Bureau), Issues Identified and
Recommended Changes. The following are some of the major issues
pertaining to the Bureau or areas of concern reviewed and discussed
by the Committee during the review of the Bureau, along with
background information concerning each particular issue.
Recommendations were made by Committee staff regarding the
particular issues or problem areas which needed to be addressed.
a) Issue : Long-Term Deficits.
Background : The Bureau expects the Electronic and Appliance Repair
Fund to have 8.6 months in reserve in FY 2013/14, 6.9 months in
reserve in FY 2014/15, and only 0.8 month in reserve in FY
2017/18. According to the Bureau, projected revenues for the
Electronic and Appliance Repair Fund will hover around $2.39M
through FY 2017/18, while expenditures are projected to increase
from $2.16M in 2012/13 to $2.92M in FY 2017/18.
Similarly, the Bureau expects the Home Furnishings and Thermal
Insulation Fund to have 6.9 months in reserve in FY 2013/14, 4.9
months in reserve in FY 2014/15, 0.6 months in reserve in FY
2016/17, and a negative 1.7 month deficit in FY 2017/18.
According to the Bureau, projected revenues for the Home
Furnishings and Thermal Insulation Fund will stay around $3.9M
through FY 2017/18, while expenditures are projected to increase
from $4.37M in FY 2012/13 to $4.73M in FY 2016/17 to $4.83M in FY
2017/18. The increase in expenditures is due to a general
increase in costs, such as retirement and medical benefits and
overhead expenses.
As a Special Fund agency, the Bureau receives no General Fund
support, relying solely on fees set by statute and collected from
licensing and renewal fees. The Bureau has not changed fees
within the last 10 years for its licensing categories, and is not
currently requesting a statutory fee increase.
The Bureau reports that to bridge its future budget gap, it intends
to: (1) increase enforcement against unlicensed activity in order
to generate additional revenues through initial licenses and
renewal licenses; (2) increase its citation and fine authority to
the statutory limit of $5,000, which it expects to implement in
2015; and, (3) if necessary increase its fees for importers,
manufacturers, and thermal insulation up to the statutory caps.
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Recommendation : Bureau should elaborate on any planned efforts to
increase its revenues and reduce its expenditures, including
timelines and estimated amounts, and also explain any regulatory
changes to increase the amount of penalties that are under
consideration. The Bureau should also discuss its thinking as to
whether and when it might seek a statutory fee increase in the
future.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
b) Issue : Pro Rata.
Background : Through its various divisions, DCA provides
centralized administrative services to all boards and bureaus in
the Department. Most of these services are funded through a pro
rata calculation that is based on "position counts" and charged
to each board or bureau for services provided by personnel,
including budget, contract, legislative analysis, cashiering,
training, legal, information technology, and complaint mediation.
The chart below shows the DCA Pro Rata Expenditures for the last
four fiscal years charged to the Electronic and Appliance Repair
Fund, which is expected to spend roughly 37% of its budget on pro
rata for FY 2013/14, and the Home Furnishings and Thermal
Insulation Fund, which is expected to spend roughly 19% of its
budget on pro rata for FY 2013/14. According to the Bureau, a
big portion of its pro rata, especially for the Electronic and
Appliance Repair side, goes to investigating complaints. In FY
2010/11, DCA handled 1,156 complaints for the Bureau, in FY
2011/12 it handled 1,242 complaints, and in FY 2012/13 it handled
1,108 complaints.
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|Pro Rata Expenditures | |
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|--------+----------+-----------+-----------+-----------+--------|
| | FY |FY 2010/11 |FY 2011/12 |FY 2012/13 | Totals |
| | 2009/10 | | | | |
|--------+----------+-----------+-----------+-----------+--------|
|Electron| | | | |$3,976,4|
|ic and | $670,518 | $913,730 |$1,486,332 | $905,851 |31 |
|Applianc| | | | | |
|e | | | | | |
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|Repair | | | | | |
| | | | | | |
|--------+----------+-----------+-----------+-----------+--------|
|Home | | | | |$4,044,5|
|Furnishi| $987,418 |$1,080,500 |$1,045,526 | $931,139 | 83 |
|ngs and | | | | | |
|Thermal | | | | | |
|Insulati| | | | | |
|on | | | | | |
|--------+----------+-----------+-----------+-----------+--------|
|Total |$1,657,936|$1,994,230 |$2,531,858 |$1,836,990 |$8,021,0|
| | | | | |14 |
| | | | | | |
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Recommendation : Committee staff recommended the Bureau should
advise the Committees about the bases upon which pro rata is
calculated, and the methodology for determining how the pro rata
charged will be paid from among the two funds under the Bureau's
jurisdiction. The Bureau should also discuss whether it could
achieve cost savings by dealing with more of its consumer
complaints in-house.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
c) Issue : Biennial License Renewals.
Background : Licensee renewal fees are based on the issue date, and
expire on the last day of the corresponding month. Licenses are
renewed annually for Electronic and Appliance Repair and Thermal
Insulation, and are renewed biennially for Home Furnishings.
Recommendation : Committee staff recommended that the Bureau should
examine the pros and cons of requiring biennial instead of annual
license renewals for its licensees, specifically looking at any
increased risk to consumers, any difficulty in changing renewals
to a biennial basis, and cost savings, and inform the Committees
of its findings.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
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Page 7
d) Issue : Market Assessments.
Background : In 1995, the Department assessed BHFTI's program and
licensing programs to determine whether regulatory activities
were appropriate, necessary, and should be continued. Among
other things, the 1995 report recommended simplifying licensing
for home furnishings and thermal insulation and monitoring the
home furnishings and thermal insulation market to target
resources and evaluate consumer risk and impact.
Recommendation : Committee staff recommended that the Bureau should
conduct a market condition assessment: to monitor the market and
shifts in the market; to identify where the problems currently
are for consumers and to determine where resources could be
refocused or expanded; to make sure current statutes and
regulations reflect the current needs of the market; and to
determine whether regulation is still required for all industries
or whether some level of self-regulation would be advisable in
some cases. The results of that assessment should also be
reported back to the Legislature.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
e) Issue : Consolidating License Types.
Background : Since 1995, the home furnishings program restructured
its licensing types to simplify and remove duplication for
companies who manufactured, imported, and wholesaled both
furniture and bedding; consolidated the manufacturer and
wholesaler license types; eliminated the renovator license; and
exempted businesses from holding a sanitizer license if they held
other licenses. However, the Bureau continues to maintain a
separate furniture retailer license ($120; 2,452 active licensees
in FY 2012/13), bedding retailer license ($120; 1,828 active
licensees in FY 2012/13), and combination furniture and bedding
retailer license ($240; 11,307 active licensees in FY 2012/13).
As the previous report pointed out, the larger the number of
license categories and overlap of licensee activity, the more
confusing it is for licensees and administration. Currently,
licenses for manufacturers, wholesalers, and importers apply to
both bedding and upholstered furniture.
In addition, DCA's 1995 sunset review report also determined that
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regulating sanitization was justified by the benefits to
consumers from regulation. All used mattresses are required to
be sanitized before resale and to have a special label. The
primary purpose of sanitization is to protect the public from
disease and public health risks, including bed bugs, insects,
lice, bacteria, and infectious diseases. Because used bedding
might be soiled with bodily substances, such as blood, urine or
feces, that may or may not be visible to the eye, consumers are
unable to determine whether a product is in compliance or not.
The 1995 report noted that most industry representatives support
regulation and stress the vulnerability of consumers to fraud in
the purchase of used bedding. As an example of the need for
regulation, the report pointed to an operation in 1995 when BHFTI
inspected a firm that was selling soiled and filthy used
mattresses without sanitizing them, resulting in the confiscation
of 86 mattresses. The report also noted that while violations of
sanitization regulations were not widespread, they have occurred,
and that no other laws regulate the sanitization of used bedding.
Under BPC19059.5, a sanitizer does not need a sanitizer's
license if he or she is licensed as a home medical device retail
facility or as an upholstered furniture and bedding manufacturer,
retail furniture and bedding dealer, retail bedding dealer, or
custom upholsterer. As a result, in FY 2012/13, only 15
sanitizers were licensed as standalone sanitizers. In FY
2012/13, one business that held a standalone sanitizer license
was inspected. According to the Bureau, there is no additional
cost to license a business as a sanitizer instead of under
another license.
Recommendation : Committee staff recommended that the Bureau should
discuss, whether or not three different license categories for
bedding and furniture retailers should still be required, or
whether those license categories should be consolidated for
retailers as it was for manufacturers and wholesalers. The
Bureau should also consider whether a standalone sanitizer
license should continue to be offered.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
f) Issue : Product Failure Rates.
Background : Nearly half of all furniture products tested under the
old Technical Bulletin (TB) 117 failed to meet the standard.
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According to the Bureau, this failure is due to the fact that TB
117 was a component standard, in that each component of a piece
of residential furniture, such as the cushion cover, the filling,
and the batting, could individually meet the TB 117 standard, but
when tested together, the piece could still fail the overall
standard because TB 117 did not focus on the interaction of the
materials (which was part of the impetus for the new TB 117-2013
standard).
In addition, over half of all feather and down products tested fail
to meet existing standards. These failure rates, however,
include small variances from the standard, such as a 1%
difference in the feather to down ratio in a product.
Moreover, labeling violations occurred in over 80% of products
tested, but include minor violations such as use of a different
font size or failing to include the word "the," that may not pose
as much of a risk to consumers. While it is difficult to discern
how many failing products had major violations or minor
violations, the average product reimbursement rate was 78%, which
means that while many products did not completely adhere to all
requirements, most failures did not rise to the level of a major
violation.
In such cases, consistently high failure rates raise three
important questions: Are the standards unrealistically stringent?
Are the standards well-known and clear to manufacturers? Are the
penalties for violations too low to be an effective deterrent?
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|Product Testing Data |FY 2010/11 | |FY 2012/13 |
| | |FY 2011/12 | |
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|-------------------------+------+------+------+------+-----+------|
|Type of Product Tested |# |% |# |% |# |% |
| |Tested|Failed|Tested|Failed|Tested|Failed|
|-------------------------+------+------+------+------+-----+------|
|Residential upholstered |109 |37% |209 |53% |132 |49% |
|furniture (TB 117) | | | | | | |
|-------------------------+------+------+------+------+-----+------|
|Mattress/mattress sets |42 |14% |34 |18% |54 |19% |
|(16 CFR 1633) | | | | | | |
|-------------------------+------+------+------+------+-----+------|
|Mattress/mattress pads |4 |0% |2 |0% |6 |17% |
|(16 CFR 1632) | | | | | | |
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|-------------------------+------+------+------+------+-----+------|
|Commercial upholstered |1 |0% |5 |0% |1 |100% |
|furniture (TB 133) | | | | | | |
|-------------------------+------+------+------+------+-----+------|
|Plumage (feather and |14 |57% |30 |60% |41 |54% |
|down) | | | | | | |
|-------------------------+------+------+------+------+-----+------|
|Thermal Insulation |101 |14% |26 |12% |33 |21% |
|-------------------------+------+------+------+------+-----+------|
|Bedding (for labeling) |9 |* |12 |* |30 |* |
|-------------------------+------+------+------+------+-----+------|
|Labeling |159 |85% |287 |91% |263 |82% |
| | | | | | | |
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Recommendation : Committee staff recommended that the Bureau
should reexamine its standards, especially its feather and down
and labeling standards, to determine if 1) some of those
standards should be relaxed so that manufacturers can meet them
more easily, presuming there is no appreciable impact on consumer
safety; 2) standards should be clarified or better advertised; or
3) its penalties for home furnishings and thermal insulation
violations, which average $500, are too low to act as a proper
deterrent.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
g) Issue : BreEZe Implementation.
Background : The BreEZe Project will provide DCA boards, bureaus,
and committees with a new enterprise-wide enforcement and
licensing computer system. BreEZe will replace the existing
outdated legacy systems with an integrated solution based on
updated technology.
BreEZe is intended to provide DCA organizations with a solution for
all applicant tracking, licensing, renewal, enforcement,
monitoring, cashiering, and data management capabilities. In
addition to meeting these core DCA business requirements, BreEZe
is intended to improve DCA's service to the public and connect
all license types for an individual licensee. BreEZe will also
be public Web-enabled, allowing licensees to complete
applications, renewals, and process payments through the
Internet. The public will also be able to file complaints,
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access complaint status, and check licensee information.
Done correctly, BreEZe represents a major opportunity to improve
the Bureau's operations to include electronic payments and
expedite processing. Staff from numerous DCA boards and bureaus
have participated in the design and development of the software.
However, due to increased project costs, SB 543 (Steinberg,
Chapter 448, Statutes of 2011) authorized the Department of
Finance (DOF) to augment the budgets of boards, bureaus and other
entities that comprise DCA for expenditure of non-General Fund
moneys to pay BreEZe project costs.
The Bureau is scheduled go live on BreEZe in Phase Three of the
roll-out, which is slated to begin in late 2015. DCA is
currently working under Phase One of BreEZe.
Recommendation : Committee staff recommended that the Bureau should
update the Committees about the current status of its
implementation of BreEZe, including expected starting dates, new
functionalities, additional costs, and any existing or expected
declines in service levels and licensing or enforcement backlogs.
[ The current language in this bill states Legislative intent for
the Bureau to report back to the Committees on this issue by
March 1, 2015. ]
h) Issue : Continued Regulation by the Bureau.
Background : In light of the substantial number of complaints still
being received and the disciplinary actions taken, as well as the
other consumer protection-related activities of the Bureau, the
health, safety and welfare of consumers continue to be protected
by the existence of a strong licensing and regulatory Bureau with
oversight over both electronic and appliance repair and home
furnishings and thermal insulation. The separate question of
whether specific products or services should continue to be
regulated will need to be answered after additional research and
discussion by the Bureau.
As such, the Bureau should be continued with a four-year extension
of its sunset date in order to protect the interests of the
public and so that the Legislature may confirm that the issues
and recommendations in the Background Paper have been fully
addressed.
Recommendation : Committee staff recommended that the Bureau be
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reviewed by the Committees again in four years.
[ The current language in this bill subjects the Bureau to review by
the appropriate policy committees of the Legislature as if the
Bureau were scheduled to be repealed on January 1, 2019.
4.Related Legislation. AB 2741 (Bonilla, 2014), a sunset bill by the
same Author, extends the sunset date on the Professional Fiduciaries
Bureau from January 1, 2015 to January 1, 2019. ( Status : AB 2741
is set for hearing before the Senate Business, Professions and
Economic Development Committee on June 23, 2014.)
AB 1147 (Bonilla) Revises, recasts and makes a number of substantive,
clarifying, conforming and technical changes to the Massage
Therapists Act as follows: deletes the preemption of ordinances and
local land use authority for "certified-only" massage
establishments; reconstitutes the California Massage Therapy Council
(CAMTC); reinforces local massage ordinances; raises professional
and educational standards for massage therapists; expands the
disciplinary authority of CAMTC; specifies requirements for
operators of massage businesses and establishment. ( Status : AB
1147 is set for hearing before the Senate Business, Professions and
Economic Development Committee on June 23, 2014.)
SB 1019 (Leno, 2014) requires an upholstered furniture manufacturer to
indicate on the product label whether or not a product contains
added flame retardant chemicals, by including a specified statement;
requires manufacturer to retain documentation, as specified, of
whether or not flame retardant chemicals were added to the product,
and provide that documentation to the Bureau of Electronic and
Appliance Repair, Home Furnishings and Thermal Insulation (Bureau)
upon request; and authorizes the Bureau to assess fines for
violations of the above provisions, as specified. ( Status : SB 1019
was heard by the Assembly Environmental Safety and Toxic Materials
Committee on June 17, 2014, and has been referred to Assembly
Business, Professions and Consumer Protection for hearing.)
AB 480 (Calderon, Chapter 421, Statutes of 2013) defines service
contracts to include contracts for the performance of services
relating the maintenance, replacement, or repair of optical
products, thereby making administrators and sellers of those
contracts subject to registration with the Bureau and the other
requirements of the Act.
AB 127 (Skinner, Chapter 579, Statutes of 2013) requires the State Fire
Marshal, in consultation with Bureau, to review the flammability
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standards for building insulation materials, including whether the
flammability standards for some insulation materials can only be met
with the addition of chemical flame retardants, and requires, if
deemed appropriate, the State Fire Marshal to propose updated
insulation flammability standards.
AB 1443 (Logue, Chapter 90, Statutes of 2012) requires the Bureau to
reimburse the manufacturer, distributer, or retailer for the actual
cost of the article or sample taken for product testing unless the
article or sample is found to be in violation of the law.
SUPPORT AND OPPOSITION:
Support:
None received as of June 18, 2014
Opposition:
None received as of June 18, 2014
Consultant:G. V. Ayers