The Alarm Company Act provides for the licensure and regulation of alarm company operators and the certification and registration of employees of alarm companies, including alarm agents, by the Bureau of Security and Investigative Services within the Department of Consumer Affairs. That act requires that specified installation agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, and service agreements relating to those installation agreements, be in writing. The Uniform Electronic Transactions Act (UETA) generally allows parties to contract to conduct transactions by electronic means, imposes specified requirements on electronic transactions in order to comply with the act, and provides specified protections for electronic transactions conducted pursuant to the act. UETA does not apply to certain transactions, including, among others, home solicitation contracts, as defined. Existing law provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts.

This bill would provide that contracts for services or other activities relating to installation agreements for alarm systems may be conducted by electronic means. The bill would provide that the provisions of UETA would apply to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company Act, for purposes of those installation agreements, as specified. The bill would require those electronic contracts for services or other activities relating to installation agreements to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts, and would authorize signatures, disclosures, and documents required by those provisions to be provided and transmitted electronically.

This bill would incorporate changes to Section 1633.3 of the Civil Code proposed by both this bill and AB 1131, which would become operative only if both bills are enacted and become effective on or before January 1, 2016, and this bill is chaptered last.

The Alarm Company Act provides for the licensure and regulation of alarm company operators and the certification and registration of employees of alarm companies, including alarm agents, by the Bureau of Security and Investigative Services within the Department of Consumer Affairs. That act requires that specified installation agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, and service agreements relating to those installation agreements, be in writing. The Uniform Electronic Transactions Act (UETA) generally allows parties to contract to conduct transactions by electronic means, imposes specified requirements on electronic transactions in order to comply with the act, and provides specified protections for electronic transactions conducted pursuant to the act. UETA does not apply to certain transactions, including, among others, home solicitation contracts, as defined. Existing law provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts.

This bill would provide that contracts for services or other activities relating to installation agreements for alarm systems may be conducted by electronic means. The bill would provide that the provisions of UETA would apply to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company Act, for purposes of those installation agreements, as specified. The bill would require those electronic contracts for services or other activities relating to installation agreements to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts, and would authorize signatures, disclosures, and documents required by those provisions to be provided and transmitted electronically.

This bill would incorporate changes to Section 1633.3 of the Civil Code proposed by both this bill and AB 1131, which would become operative only if both bills are enacted and become effective on or before January 1, 2016, and this bill is chaptered last.

The Alarm Company Act provides for the licensure and regulation of alarm company operators and the certification and registration of employees of alarm companies, including alarm agents, by the Bureau of Security and Investigative Services within the Department of Consumer Affairs. That act requires that specified installation agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, service agreements, and and service agreements relating to those installation agreements, be in writing. The Uniform Electronic Transactions Act (UETA) generally allows parties to contract to conduct transactions by electronic means, imposes specified requirements on electronic transactions in order to comply with the act, and provides specified protections for electronic transactions conducted pursuant to the act. UETA does not apply to certain transactions, including, among others, home solicitation contracts, as defined. Existing law provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts.

This bill would provide that, notwithstanding certain provisions in UETA excluding home solicitation contracts, that contracts for services or other activities authorized by the Alarm Company Act relating to installation agreements for alarm systems may be conducted by electronic means. The bill would provide that the provisions of UETA would apply to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company Act, for purposes authorized by the Alarm Company Act, of those installation agreements, as specified. The bill would require those electronic contracts for services or other activities authorized by the Alarm Company Act relating to installation agreements to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts, and would authorize signatures, disclosures, and documents required by those provisions to be provided and transmitted electronically.

The Alarm Company Act provides for the licensure and regulation of alarm company operators and the certification and registration of employees of alarm companies, including alarm agents, by the Bureau of Security and Investigative Services within the Department of Consumer Affairs. That act requires that specified agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, service agreements, and installation agreements, be in writing. The Uniform Electronic Transactions Act (UETA) generally allows parties to contract to conduct transactions by electronic means, imposes specified requirements on electronic transactions in order to comply with the act, and provides specified protections for electronic transactions conducted pursuant to the act. UETA does not apply to certain transactions, including, among others, home solicitation contracts, as defined. Existing law provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts.

This bill would provide that, notwithstanding certain provisions in UETA excluding home solicitation contracts, contracts for services or other activities authorized by the Alarm Company Act may be conducted by electronic means. The bill would provide that the provisions of UETA would apply to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company Act, for purposes authorized by the Alarm Company Act, as specified. The bill would also exclude contracts for services or other activities authorized by the Alarm Company Act from the definition of a home solicitation contract. The bill would require those electronic contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts, and would authorize signatures, disclosures, and documents required by those provisions to be provided and transmitted electronically.

The Alarm Company Act provides for the licensure and regulation of alarm company operators and the certification and registration of employees of alarm companies, including alarm agents, by the Bureau of Security and Investigative Services within the Department of Consumer Affairs. That act requires that specified agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, service agreements, and installation agreements, be in writing. The Uniform Electronic Transactions Act (UETA) generally allows parties to contract to conduct transactions by electronic means, imposes specified requirements on electronic transactions in order to comply with the act, and provides specified protections for electronic transactions conducted pursuant to the act. UETA does not apply to certain transactions, including, among others, home solicitation contracts, as defined. Existing law provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts.

This bill would provide that, notwithstanding certain provisions in UETA excluding home solicitation contracts, contracts for services or other activities authorized by the Alarm Company Act may be conducted by electronic means. The bill would provide that the provisions of UETA would apply to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company Act, for purposes authorized by the Alarm Company Act, as specified. The bill would also exclude contracts for services or other activities authorized by the Alarm Company Act from the definition of a home solicitation contract. The bill would require those electronic contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts, and would authorize signatures, disclosures, and documents required by those provisions to be provided and transmitted electronically.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1097

Author:(Holden)

As Amended Ver:September 4, 2015

Majority vote

Original Committee Reference: B. & P.

SUMMARY: Authorizes contracts for services or other activities authorized by the Alarm Company Act relating to installation agreements to be conducted by electronic means only after receiving consent from the consumer.

The Senate amendments:

1. Specify that only contracts for services or other activities authorized by the Alarm Company Act relating to installation agreements for alarm systems may be conducted by electronic means.

2. Require a licensee to provide an identical paper copy of the signed electronic contract for services upon request of the contracting consumer.

3. Add double jointing language to address chaptering out issues with AB 1131 (Dababneh) of the current legislative session.

4. Make other technical and conforming amendments.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by ADT Security Services. According to the author, "Although most businesses and individuals selling alarm systems are legitimate, some use deceptive tactics as a core component of their sales practices and often target the elderly, coercing them into signing various contracts with different companies. With paper contracts, it is virtually impossible to know who signed a contract, when they signed, and whether or not copies of the contract and notice of cancellation were actually delivered. With e-contracts, however, it is possible to see when the actual customer logged into the e-contract system, reviewed and signed the contract, and exactly when and whether the contract and notices were electronically delivered to the customer.

"Since 1999, technology has advanced to such a degree that electronic contracts can now offer consumer protection measures that exceed those of traditional paper contracts. Therefore, at the discretion of the customer, AB 1097 would allow alarm companies in the state to fully utilize electronic contracts. These improvements will benefit California consumers, the environment and the state agencies tasked with enforcing consumer protection laws."

Background. In 1999, California adopted the Uniform Electronic Transactions Act (UETA) UETA, which gave electronic contracts (e-contracts) and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, the state excluded in-home sales from the UETA, which means that in-home sales vendors were required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of rescission with the consumer at the time of sale.

With the advancement in technology, traditional paper contracts are nearly obsolete. E-contracts which offer added consumer protection properties are a viable solution to replace paper contracts. E-contracts are reproducible, and metadata showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed, whereas paper contracts are easily misplaced and can be damaged over time. In addition, many in-home vendors use tablet devices to help assess customer needs and discuss contract terms. The author asserts that using such tablets to contract with customers would reduce environmental impact and preserve an electronic copy of the document for future reference, which could be emailed to customers for their own files, thereby providing greater transparency into the contracting process.

Analysis Prepared by: Eunie Linden / B. & P. / (916) 319-3301 FN: 0002294

 THIRD READING 

Bill No: AB 1097

Author: Holden (D)

Amended: 5/11/15 in Assembly

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 6/15/15

AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski

SENATE JUDICIARY COMMITTEE: 6-0, 7/7/15

AYES: Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski

NO VOTE RECORDED: Anderson

ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for vote

SUBJECT: Alarm companies: electronic transactions

SOURCE: ADT security Services

DIGEST: This bill authorizes alarm companies to distribute contracts to customers by electronic means.

ANALYSIS:

Existing law:

1. Establishes the Alarm Company Act, which provides for the licensure and regulation of alarm company operators and the certification and registration of alarm company employees. (Business and Professions Code (BPC) § 7590)

2. States that every agreement by an alarm company, including but not limited to lease agreements, monitoring agreements, and service agreements, must be in writing. Additionally, each agreement must contain:

1. The name business address, business telephone number, and the license number of the alarm company operator or registration number of any alarm agent who solicited or negotiated the agreement.

2. Approximate dates when the work will begin and when it will be completed.

3. A description of the work being done and materials used.

4. A disclosure that the alarm company operators are licensed by the Bureau of Security and Investigative Services (Bureau) in the Department of Consumer Affairs.

5. A description of the alarm system and its major components.

6. Other matters agreed to by the parties in the contract.

7. Statement that upon completion, the alarm company will teach the purchaser in the system’s proper use.

8. Payments and payment schedules for initial residential sales and lease agreements totaling over $250 over the time period fixed by the agreement. (BPC § 7599.54)

3. Prohibits a licensee from making any untrue or misleading statements in connection with the business of the licensee. (BPC § 7599.55)

4. Mandates any licensee, qualified certificate holder, firearms qualification card holder, or registrant to notify the Bureau within 30 days of any change or residence or business address. (BPC § 7599.59)

5. Provides that an electronic contract (e-contract), record, or signature can satisfy a written contract or record. (Civil Code (CC) § 1633.7)

6. Defines “electronic” as relating to technology and having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. (CC § 1633.2(e))

7. Defines “electronic record” as a record created, generated, sent, communicated, received, or stored by electronic means. (CC § 1633.2(g))

8. Defines “electronic signature” as an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (CC § 1633.2(h))

9. Defines “home solicitation contract or offer” to mean any contract or offer which is subject to approval for the sale, lease, or rental of goods and/or services made at other than appropriate trade premises in an amount of $25 or more. (CC § 1689.5(a))

10. Defines “appropriate trade premises” as the premises where either the owner or seller normally carries out business or where goods are normally offered or exposed for sale. (CC § 1689.5(b))

11. Provides that a contract may be conducted by electronic means based on the context and surrounding circumstances of the agreement. A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. (CC § 1633.5)

12. States that a buyer has the right to cancel a home solicitation contract or offer until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase. (CC § 1689.6)

13. States that a home solicitation contract or offer must be: written in the same language as principally used in the oral sales presentation, dated & signed by the buyer, and contain, in conspicuous proximity to the space reserved for the buyer’s signature, the following statement: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.” (CC § 1689.7)

14. Excludes certain transactions from being conducted electronically, including the creation and execution of wills, codicils, health care powers of attorney, or testamentary trusts. (CC § 1633.3)

This bill:

1. Authorizes alarm company salespersons to use e-contracts for service in lieu of paper contracts at the discretion of the customer.

2. Extends the provisions of the Uniform Electronic Transactions Act (UETA) to cover transactions conducted by persons licensed, certified, or registered under the Alarm Company Act.

3. Requires e-contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts.

4. Authorizes any signatures, disclosures, and documents required by these home solicitation contracts to be provided and transmitted by electronic means.

Background

The UETA was first drafted by the National Conference of Commissioners on Uniform State Laws in 1999 to help set standardized state rules for creating e-contracts that would provide the same legal obligation as traditional paper transactions. Included in these standardized rules are specific definitions to e-contract terms in relation to traditional contractual agreements. The UETA defines an “electronic record” as a contract or other type of record created, generated, communicated, received, or stored by electronic means. An “electronic signature” is defined by the UETA as an electronic sound, symbol, or process attached to or logically associated with a contract or record and executed or adopted by a person with the intent to sign the record.

There are certain transactions that are not covered under the UETA. These include wills, trusts, codicils to a will, health care powers of attorney, transactions governed by the U.C.C, the Uniform Computer Information Transactions Act, and any state law exempting application. When the UETA was released, states had the option of adopting the entire UETA law or part(s) of the proposed provisions in the act.

In 1999, California became one of the first states to adopt the UETA, giving
e-contracts and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, California additionally exempted in-home sales from the UETA. Almost any consumer transaction $25 or more which takes place in the buyer’s home or away from other appropriate trade premises constitute an in-home sale. Additionally, in 2010, California passed the Consumer’s Rights to Cancel Home Solicitation Contracts through the Home Solicitation Sales Act. This Act gives consumers the ability to cancel a sale or contract made through an in-home sale without penalty or obligation if the consumer gives a proper notice within three business days. With this additional UETA exemption in the use of e-contracts and the cancellation provisions in the Home Solicitation Sales Act, in-home sales vendors are currently required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of recession with the consumer at the time of the sale.

However, advancements in technology have rendered these paper contracts including in-home sales paper contracts nearly obsolete. Paper contracts are easily misplaced and can be damaged over time. E-contracts offer added consumer protection properties because they are reproducible, and metadata (data that summarizes basic information about other data) showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed. Many in-home vendors use tablet devices to help assess customer needs and discuss contract terms, an already common practice that the author asserts will further reduce environmental impact. This common practice helps salespersons preserve an electronic copy of the document for future reference, which can be emailed to customers for their own files, providing greater transparency into the contracting process. The author further argues that this transparency with the adoption of e-contracting will give the state additional enforcement tools to ensure that the sale was a voluntary transaction with the fulfillment of all notice requirements.

This bill authorizes alarm companies in California to distribute e-contracts without requiring a separate paper copy to be generated at the discretion of the customer. Consumers who still wish to receive a paper copy of their contract will still maintain this option.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 7/9/15)

ADT Security Services (source)

California Alarm Association

California Cable & Telecommunications Association

OPPOSITION: (Verified 7/9/15)

None received

ARGUMENTS IN SUPPORT: Writing in support of the bill, ADT Security Services, the sponsor, states, “We believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Of course, electronic contracting is voluntary, and consumers must first consent.”

The California Alarm Association writes, “Electronic contracts provide better verification on whom and when a contract was signed, as well as when the contract and notice of cancelation are received. A date and time stamp appears on emails, verifying when they are sent. It is also possible to see when the customer has logged into the e-contract system. AB 1097 would still allow the customer to receive a paper contract. However, as mentioned above, an electronic contract allowed under this bill will provide additional consumer protections.”

The California Cable & Telecommunications Association writes, “The adoption of this proposal would result in greater convenience for alarm service customers by providing an immediate electronic contract access to consumers, providing for greater consumer protections and verification of customer authorization, and confirming that customers understand and review their right to cancel service.”

ASSEMBLY FLOOR: 78-0, 5/14/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Linder, Medina

Prepared by: Janelle Miyashiro / B., P. & E.D. / (916) 651-4104

9/8/15 21:01:53

**** END ****

 THIRD READING  

Bill No: AB 1097

Author: Holden (D)

Amended: 9/4/15 in Senate

Vote: 21

SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 6/15/15

AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski

SENATE JUDICIARY COMMITTEE: 6-0, 7/7/15

AYES: Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski

NO VOTE RECORDED: Anderson

ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for vote

SUBJECT: Alarm companies: electronic transactions

SOURCE: ADT Security Services

DIGEST: This bill authorizes alarm companies to distribute contracts to customers by electronic means.

Senate Floor Amendments of 9/4/15 clarify that the consumer must actively consent to the use of an electronic contract and must not withdraw consent for that electronic contract to be valid and add double jointing language to address chaptering conflicts with AB 1131 (Dababneh).

ANALYSIS:

Existing law:

1. Establishes the Alarm Company Act, which provides for the licensure and regulation of alarm company operators and the certification and registration of alarm company employees. (Business and Professions Code (BPC) § 7590)

2. States that every agreement by an alarm company, including but not limited to lease agreements, monitoring agreements, and service agreements, must be in writing. Additionally, each agreement must contain:

1. The name business address, business telephone number, and the license number of the alarm company operator or registration number of any alarm agent who solicited or negotiated the agreement.

2. Approximate dates when the work will begin and when it will be completed.

3. A description of the work being done and materials used.

4. A disclosure that the alarm company operators are licensed by the Bureau of Security and Investigative Services (Bureau) in the Department of Consumer Affairs.

5. A description of the alarm system and its major components.

6. Other matters agreed to by the parties in the contract.

7. Statement that upon completion, the alarm company will teach the purchaser in the system’s proper use.

8. Payments and payment schedules for initial residential sales and lease agreements totaling over $250 over the time period fixed by the agreement. (BPC § 7599.54)

3. Prohibits a licensee from making any untrue or misleading statements in connection with the business of the licensee. (BPC § 7599.55)

4. Mandates any licensee, qualified certificate holder, firearms qualification card holder, or registrant to notify the Bureau within 30 days of any change or residence or business address. (BPC § 7599.59)

5. Provides that an electronic contract (e-contract), record, or signature can satisfy a written contract or record. (Civil Code (CC) § 1633.7)

6. Defines “electronic” as relating to technology and having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. (CC § 1633.2(e))

7. Defines “electronic record” as a record created, generated, sent, communicated, received, or stored by electronic means. (CC § 1633.2(g))

8. Defines “electronic signature” as an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (CC § 1633.2(h))

9. Defines “home solicitation contract or offer” to mean any contract or offer which is subject to approval for the sale, lease, or rental of goods and/or services made at other than appropriate trade premises in an amount of $25 or more. (CC § 1689.5(a))

10. Defines “appropriate trade premises” as the premises where either the owner or seller normally carries out business or where goods are normally offered or exposed for sale. (CC § 1689.5(b))

11. Provides that a contract may be conducted by electronic means based on the context and surrounding circumstances of the agreement. A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. (CC § 1633.5)

12. States that a buyer has the right to cancel a home solicitation contract or offer until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase. (CC § 1689.6)

13. States that a home solicitation contract or offer must be: written in the same language as principally used in the oral sales presentation, dated and signed by the buyer, and contain, in conspicuous proximity to the space reserved for the buyer’s signature, the following statement: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.” (CC § 1689.7)

14. Excludes certain transactions from being conducted electronically, including the creation and execution of wills, codicils, health care powers of attorney, or testamentary trusts. (CC § 1633.3)

This bill:

1. Authorizes alarm company salespersons to use e-contracts for service in lieu of paper contracts at the discretion of the customer.

2. Extends the provisions of the Uniform Electronic Transactions Act (UETA) to cover transactions conducted by persons licensed, certified, or registered under the Alarm Company Act.

3. Requires e-contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts.

4. Authorizes any signatures, disclosures, and documents required by these home solicitation contracts to be provided and transmitted by electronic means.

5. Clarifies that the consumer must actively consent to the use of an e-contract and must not withdraw consent for that e-contract to be valid.

Background

The UETA was first drafted by the National Conference of Commissioners on Uniform State Laws in 1999 to help set standardized state rules for creating e-contracts that would provide the same legal obligation as traditional paper transactions. Included in these standardized rules are specific definitions to e-contract terms in relation to traditional contractual agreements. The UETA defines an “electronic record” as a contract or other type of record created, generated, communicated, received, or stored by electronic means. An “electronic signature” is defined by the UETA as an electronic sound, symbol, or process attached to or logically associated with a contract or record and executed or adopted by a person with the intent to sign the record.

In 1999, California became one of the first states to adopt the UETA, giving
e-contracts and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, California additionally exempted in-home sales from the UETA. Almost any consumer transaction $25 or more which takes place in the buyer’s home or away from other appropriate trade premises constitute an in-home sale. Additionally, in 2010, California passed the Consumer’s Rights to Cancel Home Solicitation Contracts through the Home Solicitation Sales Act. This Act gives consumers the ability to cancel a sale or contract made through an in-home sale without penalty or obligation if the consumer gives a proper notice within three business days. With this additional UETA exemption in the use of e-contracts and the cancellation provisions in the Home Solicitation Sales Act, in-home sales vendors are currently required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of recession with the consumer at the time of the sale.

However, advancements in technology have rendered these paper contracts including in-home sales paper contracts nearly obsolete. Paper contracts are easily misplaced and can be damaged over time. E-contracts offer added consumer protection properties because they are reproducible, and metadata (data that summarizes basic information about other data) showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed. Many in-home vendors use tablet devices to help assess customer needs and discuss contract terms, an already common practice that the author asserts will further reduce environmental impact. This common practice helps salespersons preserve an electronic copy of the document for future reference, which can be emailed to customers for their own files, providing greater transparency into the contracting process. The author further argues that this transparency with the adoption of e-contracting will give the state additional enforcement tools to ensure that the sale was a voluntary transaction with the fulfillment of all notice requirements.

This bill authorizes alarm companies in California to distribute e-contracts without requiring a separate paper copy to be generated at the discretion of the customer. Consumers who still wish to receive a paper copy of their contract will still maintain this option.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 9/4/15)

ADT Security Services (source)

California Alarm Association

California Cable & Telecommunications Association

OPPOSITION: (Verified 9/4/15)

None received

ARGUMENTS IN SUPPORT: Supporters believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Supporters note that e-contracts provide better verification on whom and when a contract was signed, as well as when the contract and notice of cancelation are received.

ASSEMBLY FLOOR: 78-0, 5/14/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Linder, Medina

Prepared by: Janelle Miyashiro / B., P. & E.D. / (916) 651-4104

9/8/15 23:21:45

**** END ****

 CONSENT  

Bill No: AB 1097

Author: Holden (D)

Amended: 5/11/15 in Assembly

Vote: 21

SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 6/15/15

AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski

SENATE JUDICIARY COMMITTEE: 6-0, 7/7/15

AYES: Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski

NO VOTE RECORDED: Anderson

ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for vote

SUBJECT: Alarm companies: electronic transactions

SOURCE: ADT Security Services

DIGEST: This bill authorizes alarm companies to distribute contracts to customers by electronic means.

ANALYSIS:

Existing law:

1. Establishes the Alarm Company Act, which provides for the licensure and regulation of alarm company operators and the certification and registration of alarm company employees. (Business and Professions Code (BPC) § 7590)

2. States that every agreement by an alarm company, including but not limited to lease agreements, monitoring agreements, and service agreements, must be in writing. Additionally, each agreement must contain:

1. The name business address, business telephone number, and the license number of the alarm company operator or registration number of any alarm agent who solicited or negotiated the agreement.

2. Approximate dates when the work will begin and when it will be completed.

3. A description of the work being done and materials used.

4. A disclosure that the alarm company operators are licensed by the Bureau of Security and Investigative Services (Bureau) in the Department of Consumer Affairs.

5. A description of the alarm system and its major components.

6. Other matters agreed to by the parties in the contract.

7. Statement that upon completion, the alarm company will teach the purchaser in the system’s proper use.

8. Payments and payment schedules for initial residential sales and lease agreements totaling over $250 over the time period fixed by the agreement. (BPC § 7599.54)

3. Prohibits a licensee from making any untrue or misleading statements in connection with the business of the licensee. (BPC § 7599.55)

4. Mandates any licensee, qualified certificate holder, firearms qualification card holder, or registrant to notify the Bureau within 30 days of any change or residence or business address. (BPC § 7599.59)

5. Provides that an electronic contract (e-contract), record, or signature can satisfy a written contract or record. (Civil Code (CC) § 1633.7)

6. Defines “electronic” as relating to technology and having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. (CC § 1633.2(e))

7. Defines “electronic record” as a record created, generated, sent, communicated, received, or stored by electronic means. (CC § 1633.2(g))

8. Defines “electronic signature” as an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (CC § 1633.2(h))

9. Defines “home solicitation contract or offer” to mean any contract or offer which is subject to approval for the sale, lease, or rental of goods and/or services made at other than appropriate trade premises in an amount of $25 or more. (CC § 1689.5(a))

10. Defines “appropriate trade premises” as the premises where either the owner or seller normally carries out business or where goods are normally offered or exposed for sale. (CC § 1689.5(b))

11. Provides that a contract may be conducted by electronic means based on the context and surrounding circumstances of the agreement. A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. (CC § 1633.5)

12. States that a buyer has the right to cancel a home solicitation contract or offer until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase. (CC § 1689.6)

13. States that a home solicitation contract or offer must be: written in the same language as principally used in the oral sales presentation, dated & signed by the buyer, and contain, in conspicuous proximity to the space reserved for the buyer’s signature, the following statement: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.” (CC § 1689.7)

14. Excludes certain transactions from being conducted electronically, including the creation and execution of wills, codicils, health care powers of attorney, or testamentary trusts. (CC § 1633.3)

This bill:

1. Authorizes alarm company salespersons to use e-contracts for service in lieu of paper contracts at the discretion of the customer.

2. Extends the provisions of the Uniform Electronic Transactions Act (UETA) to cover transactions conducted by persons licensed, certified, or registered under the Alarm Company Act.

3. Requires e-contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts.

4. Authorizes any signatures, disclosures, and documents required by these home solicitation contracts to be provided and transmitted by electronic means.

Background

The UETA was first drafted by the National Conference of Commissioners on Uniform State Laws in 1999 to help set standardized state rules for creating e-contracts that would provide the same legal obligation as traditional paper transactions. Included in these standardized rules are specific definitions to e-contract terms in relation to traditional contractual agreements. The UETA defines an “electronic record” as a contract or other type of record created, generated, communicated, received, or stored by electronic means. An “electronic signature” is defined by the UETA as an electronic sound, symbol, or process attached to or logically associated with a contract or record and executed or adopted by a person with the intent to sign the record.

There are certain transactions that are not covered under the UETA. These include wills, trusts, codicils to a will, health care powers of attorney, transactions governed by the U.C.C, the Uniform Computer Information Transactions Act, and any state law exempting application. When the UETA was released, states had the option of adopting the entire UETA law or part(s) of the proposed provisions in the act.

In 1999, California became one of the first states to adopt the UETA, giving
e-contracts and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, California additionally exempted in-home sales from the UETA. Almost any consumer transaction $25 or more which takes place in the buyer’s home or away from other appropriate trade premises constitute an in-home sale. Additionally, in 2010, California passed the Consumer’s Rights to Cancel Home Solicitation Contracts through the Home Solicitation Sales Act. This Act gives consumers the ability to cancel a sale or contract made through an in-home sale without penalty or obligation if the consumer gives a proper notice within three business days. With this additional UETA exemption in the use of e-contracts and the cancellation provisions in the Home Solicitation Sales Act, in-home sales vendors are currently required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of recession with the consumer at the time of the sale.

However, advancements in technology have rendered these paper contracts including in-home sales paper contracts nearly obsolete. Paper contracts are easily misplaced and can be damaged over time. E-contracts offer added consumer protection properties because they are reproducible, and metadata (data that summarizes basic information about other data) showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed. Many in-home vendors use tablet devices to help assess customer needs and discuss contract terms, an already common practice that the author asserts will further reduce environmental impact. This common practice helps salespersons preserve an electronic copy of the document for future reference, which can be emailed to customers for their own files, providing greater transparency into the contracting process. The author further argues that this transparency with the adoption of e-contracting will give the state additional enforcement tools to ensure that the sale was a voluntary transaction with the fulfillment of all notice requirements.

This bill authorizes alarm companies in California to distribute e-contracts without requiring a separate paper copy to be generated at the discretion of the customer. Consumers who still wish to receive a paper copy of their contract will still maintain this option.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 7/9/15)

ADT Security Services (source)

California Alarm Association

California Cable & Telecommunications Association

OPPOSITION: (Verified 7/9/15)

None received

ARGUMENTS IN SUPPORT: Writing in support of the bill, ADT Security Services, the sponsor, states, “We believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Of course, electronic contracting is voluntary, and consumers must first consent.”

The California Alarm Association writes, “Electronic contracts provide better verification on whom and when a contract was signed, as well as when the contract and notice of cancelation are received. A date and time stamp appears on emails, verifying when they are sent. It is also possible to see when the customer has logged into the e-contract system. AB 1097 would still allow the customer to receive a paper contract. However, as mentioned above, an electronic contract allowed under this bill will provide additional consumer protections.”

The California Cable & Telecommunications Association writes, “The adoption of this proposal would result in greater convenience for alarm service customers by providing an immediate electronic contract access to consumers, providing for greater consumer protections and verification of customer authorization, and confirming that customers understand and review their right to cancel service.”

ASSEMBLY FLOOR: 78-0, 5/14/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Linder, Medina

Prepared by: Janelle Miyashiro / B., P. & E.D. / (916) 651-4104

7/10/15 14:08:06

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 1097 (Author:Holden)

Version: May 11, 2015

Hearing Date: July 7, 2015

Fiscal: No

Urgency: No

Consultant: RD

SUBJECT

Alarm companies: electronic transactions

DESCRIPTION

This bill would, notwithstanding the existing prohibition, authorize persons licensed, certified, or registered pursuant to the Alarm Company Act (Act), to conduct transactions, electronically, for services or activities authorized under that Act, if the contracting customer consents.

This bill would provide that a notice of cancellation and copies of the contract or offer, as described under existing law, may be provided and transmitted electronically. This bill would also provide that notwithstanding the existing requirements for home solicitation contracts to be in specified form and include certain disclosures and a detachable written notice of cancellation, for contracts for services or other activities authorized by this chapter, the signatures, disclosures, and documents described in those provisions may be provided and transmitted electronically.

BACKGROUND

Enacted in 1971, California law has long governed “home solicitation” contracts with the intent to protect consumers against the types of pressures that typically can arise when a salesman appears at a buyer’s home. (See Civ. Code Sec. 1689.5 et seq.) The statute applies to any contract, or offer which is subject to approval, for the sale, lease, or rental of goods or services, over $25, which is “made at other than appropriate trade premises.” Under these provisions, the contract must be written in the same language as the oral presentation and the buyer’s right to cancel must be conspicuously stated in the agreement, in a specified form. Additionally, this law provides special requirements pertaining to personal emergency response units provided for under the Alarm Company Act. Perhaps most importantly, a detailed notice of these protections must also be set forth in the agreement and orally explained to the buyer, and the buyer must be given a copy of the contract with a detachable “Notice of Cancellation” form showing the seller’s address and the time the right to cancel expires. Until these requirements are complied with, the buyer maintains the right to cancel the contract at any time. (Civ. Code Sec. 1689.7.)

Separately, in 1999, based on the model law proposed by the National Conference of Commissioners on Uniform State Laws to set rules by which electronic commerce may be conducted across the country, California enacted the Uniform Electronic Transactions Act (UETA). (SB 820 (Sher, Ch. 428, Stats. 1999).) One of the critical motivators for enacting a law validating electronic records was the Statute of Frauds, which requires that certain contracts be in writing. In California, the Statute of Frauds is codified at Section 1624 of the Civil Code, which expressly states that certain contracts are invalid (i.e. unenforceable) unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent. Such contracts include, for example, an agreement that by its terms is not to be performed within a year from the making thereof; an agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; or specified contracts, promises, undertakings, or commitments to loan money or to grant or extend credit, in an amount greater than $100,000.

Today, California’s UETA provides that a record or signature may not be denied legal effect or enforceability solely because it is in electronic form, that a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation, and that an electronic record or signature satisfies a requirement in the law that a record be in writing or a signature be affixed or if a law provides consequences if there is no record or signature. This act, however, does not apply to all contracts. For example, expressly excluded from the UETA are transactions that are subject to a law governing the creation and execution of wills, codicils, or testamentary trusts; specified transactions in the Uniform Commercial Code, that were specifically drafted in consideration of electronic records; and transactions subject to a law that requires that specifically identifiable text or disclosures in a record or a portion of a record be separately signed, including initialed, from the record (such as real estate transactions). Most pertinent to this bill, existing law also excludes from the UETA specific transactions described under various laws, including those relating to buyers’ home solicitation contracts.

This bill now seeks to permit alarm companies, upon the consent of the contracting customer, to execute home solicitation contracts electronically, as specified. This bill would also allow for the execution of a notice of cancellation by electronic means.

CHANGES TO EXISTING LAW

Existing law establishes the Alarm Company Act, which provides for the licensure, registration, and regulation of alarm company operators and alarm agents by the Bureau for Security and Investigative Services (BSIS). (Bus. & Prof. Code Sec. 7590 et seq.)

Existing law, the Alarm Company Act, requires every agreement, including, but not limited to, lease agreements, monitoring agreements, and service agreements, including all labor, services, and materials for the installation of an alarm system, to be in writing and to contain specified information, including:

• the approximate dates when the work will begin and be substantially completed;

• a description of the work to be done, a description of the materials to be used, and the agreed consideration for the work; and

• a description of the alarm system including the major components thereof and services to be provided to the purchaser once the alarm is installed, including response or monitoring services, if any. (Bus. & Prof. Code Sec. 7599.44.)

Existing law requires that the written document also include additional information if the total cost of the agreement exceeds $250 over the time period fixed by the agreement, including the cost of all labor, service, or material to be provided by the licensee for the installation. (Bus. & Prof. Code Sec. 7499.44(i).)

Existing law, the Uniform Electronic Transactions Act (UETA), generally authorizes the transaction of business, commerce and contracts by electronic means. (Civ. Code Sec. 1633.1.) The UETA does not apply to transactions that are subject to certain laws, such as laws governing the creation and execution of wills, codicils, or testamentary trusts. In addition, the UETA does not apply to specific transactions described under various statutes, including certain provisions of the Civil Code relating to home solicitation contracts (such as home solicitation contracts conducted for purposes of activities authorized under the Alarm Company Act.) (Civ. Code Sec. 1633.3(a), (b).)

Existing law provides that the UETA applies only to a transaction between parties each of which has agreed to conduct the transaction by electronic means, as specified. (Civ. Code Sec. 1633.5(b).)

Existing law provides that, except as otherwise provided in the UETA, the effect of any of its provisions may be varied by agreement. (Civ. Code Sec. 1633.5(d).)

Existing law sets forth certain principles governing the legal effect of conducting transactions electronically. Specifically:

• a record or signature may not be denied legal effect or enforceability solely because it is in electronic form;

• a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation;

• if a law requires a record to be in writing, an electronic record satisfies the law; and

• if a law requires a signature, an electronic signature satisfies the law. (Civ. Code Sec. 1633.7.)

Existing law provides that an electronic record or electronic signature is attributable to a person if it was the act of the person, which may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable. (Civ. Code Sec. 1633.9(a).)

Existing law provides that the effect of an electronic record or electronic signature attributed to a person is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties’ agreement, if any, and otherwise as provided by law. (Civ. Code Sec. 1633.9(b).)

Existing law, the UETA, applies only to a transaction that all parties have agreed to conduct electronically. Existing law provides that agreement is determined from the context and surrounding circumstances, including the parties’ conduct. Except for a separate and optional agreement whose primary purpose is to authorize a transaction to be conducted electronically, an agreement to conduct a transaction by electronic means may not be contained in a standard form contract that is not an electronic record. An agreement in such a standard form contract may not be conditioned on an agreement to conduct transactions by electronic means. Further, an agreement to conduct a transaction electronically may not be inferred solely from the fact that a party has used electronic means to pay an account or register a purchase or warranty. Existing law provides that these provisions may not be varied by agreement. (Civ. Code Sec. 1633.5(b).)

Existing law allows a party that agrees to conduct a transaction electronically to refuse to conduct other transactions by electronic means. If a seller sells goods or services by both electronic and non-electronic means and a buyer purchases the goods or services by conducting the transaction electronically, the buyer may refuse to conduct further transactions regarding the goods or services by electronic means. Existing law provides that these provisions may not be varied by agreement. (Civ. Code Sec. 1633.5(c).)

Existing law provides that a party to an agreement to conduct a transaction electronically may satisfy a law requiring that information be provided, sent, or delivered by one person to another in writing by providing, sending, or delivering the information in an electronic record capable of retention by the recipient at the time of receipt. Existing law provides that an electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record. (Civ. Code Sec. 1633.8(a).)

Existing law provides that if a law other than the UETA requires that a notice of the right to cancel be provided or sent, an electronic record may not substitute for a writing under that other law unless, in addition to satisfying the requirements of that other law and the UETA, the notice of cancellation may be returned by electronic means. Existing law provides that this provision may not be varied by agreement. (Civ. Code Sec. 1633.16.)

Existing law provides for the general right of a consumer to cancel a home solicitation contract up to three business days after entering into the contract. Existing law further provides for the general right of a consumer to cancel a home solicitation contract or offer for the purchase of a personal emergency response unit for seven business days. Existing law, however, provides that a personal emergency response unit installed with, and as part of, a home security alarm system subject to the Alarm Company Act which has two or more stationary protective devices used to enunciate an intrusion or fire and is installed by an alarm company operator operating under a current license issued pursuant to the Alarm Company Act, is instead subject to the three day cancellation provisions. (Civ. Code Sec. 1689.6.)

Existing law requires, in a home solicitation contract or offer, that the buyer’s agreement or offer to purchase be written in the same language as principally used in the oral sales presentation, dated and signed by the buyer, and contain a conspicuous statement, as specified, stating that: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.” Existing law includes a similar disclosure requirement for a home solicitation contract or offer that is for the purchase of a personal emergency response unit. Existing law requires that the agreement or offer for purchase be accompanied by a written notice of cancellation which a buyer can return to the seller to cancel the contract, as specified. (Civ. Code Sec. 1689.7.)

Existing law generally defines “home solicitation contract or offer” as any contract, whether single or multiple, or any offer which is subject to approval, for the sale, lease, or rental of goods or services or both, made at other than appropriate trade premises in an amount of $25 or more, including any interest or service charges. Existing law defines “appropriate trade premises” to mean premises where either the owner or seller normally carries on a business, or where goods are normally offered or exposed for sale in the course of a business carried on at those premises, and also provides specific definitions of “goods” and “services.” (Civ. Code Sec. 1689.5.)

This bill would provide that notwithstanding the Alarm Company Act’s requirement for every agreement to be in writing, contracts for services or other activities authorized by the Act may be conducted by electronic means. This bill would also provide that notwithstanding the provisions exempting certain transactions relating to home solicitation contracts from the UETA, the UETA applies to electronic records and electronic signatures relating to transactions conducted by a person licensed, certified, or registered pursuant to the Alarm Company Act, for purposes of activities authorized by the Alarm Company Act. This bill would prohibit the use of an electronic contract for services or other activities authorized by the Alarm Company Act without the consent of the contracting consumer.

This bill would provide that notwithstanding specified law generally allowing a buyer the right to cancel certain home solicitation contracts or offers for up for up to 3 or 7 days, as specified, for contracts for services or other activities authorized by the Alarm Company Act, a notice of cancellation and copies of the contract or offer described in those provisions may be provided and transmitted electronically.

This bill would further specify that notwithstanding the provisions of the Civil Code requiring home solicitation contracts to be in specified form and include certain disclosures and a detachable written notice of cancellation, for contracts for services or other activities authorized by this chapter, the signatures, disclosures, and documents described in those provisions may be provided and transmitted electronically.

This bill would add a provision to the UETA to provide that notwithstanding the provisions exempting certain transactions, the UETA shall apply to electronic records and electronic signatures relating to transactions conducted by a person licensed, certified, or registered pursuant to the Alarm Company Act for purposes of activities authorized by that Act.

COMMENT

1. Stated need for the bill

According to the author:

In 1999, California adopted the Uniform Electronic Transaction Act (UETA), which gave electronic contracts (e-contracts) and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, the state [ . . . ] exempted in-home sales from UETA, which means that in-home sales vendors were required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of recession with the consumer at the time of the sale.

AB 1097 allows alarm company salespeople to use electronic contracts, at the discretion of the customer.

Although most businesses and individuals selling alarm systems are legitimate, some use deceptive tactics as a core component of their sales practices and often target the elderly. With paper contracts it is virtually impossible to know who signed a contract, when they signed, and whether or not copies of the contract and notice of cancellation were actually delivered. With e-contracts, however, it is possible to see when the actual customer logged into the e-contract system, reviewed and signed the contract, and exactly when and whether the contract and notices were electronically delivered to the customer.

The California Alarm Association (CAA) writes in support of this bill that, “[m]any alarm companies are equipping their sales people with tablet devices. Tablets allow customers to adjust font size to better read the terms and conditions of the contract. In addition, software can be used to force a customer to read and acknowledge each page of the contract before advancing to the next page. Ultimately, once the customer reviews, initials, and signs the contract[,] an electronic copy of the contract will be sent immediately to the customer. The contract can then be electronically stored on the customer’s computer, whereas paper contracts are often lost or destroyed. Electronic contracts also provide better verification on whom and when a contract was signed, as well as when the contract and notice of cancelation are received. A date and time stamp appears on emails, verifying when they are sent. It is also possible to see when the customer has logged into the e-contract system.” At the same time, CAA notes that “AB 1097 would still allow the customer to receive a paper contract.”

2. Bill seeks to create an exception to the general rule against electronic contracting for home solicitation contracts

Existing law, the Alarm Company Act (Act), provides for the licensure, registration, and regulation of alarm company operators and alarm agents by the Bureau for Security and Investigative Services (BSIS). (Bus. & Prof. Code Sec. 7590 et seq.) That Act requires that all agreements be in writing. Separately, existing law, the Uniform Electronic Transactions Act (UETA), generally authorizes the transaction of business, commerce and contracts by electronic means, except as specified. These exceptions include transactions subject to certain laws (such as wills and trusts), and specific transactions described under various statutes, including those related to home solicitation contracts. Separately, existing law governing home solicitation contracts, including a contract or offer for a personal emergency response unit installed with, and as part of, a home security alarm system subject to the Alarm Company Act, authorizes a buyer to cancel a contract within the applicable three or seven day statutory cooling-off period, by way returning a written notice of cancellation to the seller, as specified.

This bill now seeks to allow for home solicitation contracts to be conducted electronically when involving transactions between a consumer and a person licensed, certified, or registered pursuant to the Alarm Company Act for activities authorized by that Act.

The sponsor, ADT Alarm Services, asserts that “[t]echnology has now advanced to such a degree that e-contracts can offer consumer protection measures that exceed those of traditional paper contracts. Electronic contracts are reproducible, and metadata showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed, whereas paper contracts are easily misplaced and can be damaged over time. We believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Of course, electronic contracting is voluntary, and consumers must first consent.”

With respect to electronic contracting, concerns can arise both with the potential burdens that would be placed on consumers who do not have the same access to computers, printers, and the internet, as others might have, and as to the authenticity of the signature or the awareness of the consumer that he or she is entering into a binding contract of specified terms. This bill arguably addresses some of those concerns by seeking to ensure that electronic contracting only be utilized where the customer has consented to it. Under the UETA, whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct. Further, the UETA expressly prohibits an agreement to conduct a transaction by electronic means from being contained in a standard form contract that is not an electronic record, except for a separate and optional agreement the primary purpose of which is to authorize a transaction to be conducted by electronic means. Additionally, under the terms of the UETA, an agreement in such a standard form contract cannot be conditioned upon an agreement to conduct transactions by electronic means, nor can an agreement to conduct a transaction by electronic means be inferred solely from the fact that a party has used electronic means to pay an account or register a purchase or warranty. (Civ. Code Sec. 1633.5(b).) Significantly, just because a party agrees to conduct a transaction by electronic means, does not mean that party cannot refuse to conduct other transactions by electronic means. If a person sells goods or services by both electronic and nonelectronic means and a buyer purchases the goods or services electronically, the buyer may refuse to conduct further transactions regarding the goods or services by electronic means. (See Civ. Code Sec. 1633.5(c).)

With respect to potential concerns about the authenticity of a consumer’s signature, or unauthorized or forged signatures, under the terms of the UETA, an electronic record or signature is attributable to a person only if it was that person’s act, which can be proved by a showing of the efficacy of the security procedure applied to determine the person to which the electronic record or signature was attributable. Additionally, the effect of a record or signature under the UETA must be determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties’ agreement, if any. (See Civ. Code Sec. 1633.9.) As a practical matter, as reflected in this Committee’s analysis of the UETA’s enabling legislation, SB 820 (Sher, Ch. 428, Stats. 1999), one example of the application of the UETA’s attribution provision is a click-through transaction. “In the case where a click-through transaction includes a process and identification, the click-through would be an electronic signature covered by this Act. In the context of an anonymous click-through, this section would be relevant to establish that the resulting electronic record (no electronic signature could be used because there was no identification) would be attributable to a particular person upon the requisite proof, including the security procedures which may track the source of the click-through.” (Sen. Judiciary Com. analysis of AB 820 (1998-1999 Reg. Session) May 11, 1999, p. 8.)

In addition to the above discussed provisions, all of the UETA provisions, including those specifying the legal effect of the electronic signature or record would apply to an electronic contract created pursuant to activities authorized under the Alarm Company Act between a consumer and a registered, licensed, or certified individual. These also include the UETA’s provisions that prohibit an electronic record from substituting for a writing under a separate law that requires a notice of the right to cancel be provided or sent (Section 1689.7 of the Civil Code, in this instance), unless, in addition to satisfying the requirements of that other law and the UETA, the notice of cancellation may be returned by electronic means. (See Civ. Code Sec. 1633.16.) Thus, this bill could arguably simplify and improve the ability of consumers who have access to a computer and to the internet, to swiftly exercise their right of cancellation in the event they regret signing the contract during the statutory cooling-off period, as long as the notice of cancellation may be returned by electronic means and the other requirements of the Civil Code provisions governing cancellation of home solicitation contracts are met.

3. Notice of cancellation requirements

As noted in the Background, California law has long governed “home solicitation” contracts with the intent to protect consumers against the types of pressures that typically can arise when a salesman appears at a buyer’s home. These laws, for example, specify the right of a buyer to cancel a home solicitation contract (such as a contract for activities authorized under the Alarm Company Act) at any time within a statutory cooling-off period by returning a written notice of cancellation to the seller. (Civ. Code Sec. 1689.6.) Furthermore, existing law requires that the buyer’s agreement or offer to purchase be written in the same language as principally used in the oral sales presentation, dated and signed by the buyer, and set forth certain disclosures. Additionally, the agreement or offer for purchase must be accompanied by a written notice of cancellation which a buyer can return to the seller to cancel the contract, as specified. (Civ. Code Sec. 1689.7.) This bill would now allow the required notice of cancellation and copies of the contract or offer to be provided and transmitted electronically and would further allow the signatures, disclosures, and documents required under existing law to be provided and transmitted electronically.

As a matter of public policy, it is important that this bill does not inadvertently undermine the protections of California laws on home solicitation contracts simply in order to codify a rising business practice that can lower the cost of contracting. To that end, staff notes that even though the bill would authorize the notice of cancellation to be given electronically, the bill still requires that the underlying substantive requirements of the existing home solicitation contract provisions continue to apply. Specifically, the bill provides both that “a notice of cancellation and copies of the contract or offer described in those provisions” and “the signatures, disclosures, and documents described in those provisions” can be provided and transmitted electronically. Accordingly, the existing requirements described in those provisions that would apply to written home solicitation contracts, such as the requirement that the agreement or offer be in the language principally used in the oral presentation, disclosure requirements relating to the buyer’s right of cancellation, and the requirement for that the buyer be provided a detachable notice of cancellation, would continue to apply to their electronic counterparts.

Support: California Alarm Association; California Cable & Telecommunications Association

Opposition: None Known

HISTORY

Source: ADT Alarm Services

Related Pending Legislation: AB 1131 (Dababneh, 2015), would amend the UETA to authorize additional persons to send life insurance records by electronic transmission by providing that an insurer, agent, broker, or any other person licensed by the Department of Insurance may send electronic records. The bill would also allow these licensees to send any written record by electronic transmission if not specifically excluded and if the licensee meets specified requirements. This bill is currently awaiting hearing in the Senate Insurance Committee.

Prior Legislation:

SB 536 (Berryhill, 2014), was substantially similar to this bill, but would have also excluded contracts for services or other activities authorized by the Alarm Company Act from the definition of a home solicitation contract. That bill died in the Assembly Rules Committee.

AB 2747 (Committee on Judiciary, Ch.913, Stats. 2014), the Assembly Judiciary Committee’s omnibus bill, among other things, deleted the UETA’s prohibition against electronic transmissions of security for a rental agreement for residential property, and thereby effectively authorized electronic transfers of rental security deposits.

Prior Vote:

Senate Business, Professions and Economic Development Committee (Ayes 9, Noes 0)

Assembly Floor (Ayes 78, Noes 0)

Assembly Business and Professions Committee (Ayes 14, Noes 0)

**************

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2015 - 2016 Regular

Bill No: AB 1097 Hearing Date: June 15, 2015

Subject: Alarm companies: electronic transactions.

SUMMARY:

Authorizes alarm companies to distribute contracts to customers by electronic means.

Existing law:

1. Establishes the Alarm Company Act, which provides for the licensure and regulation of alarm company operators and the certification and registration of alarm company employees. (Business and Professions Code (BPC) § 7590)

2. States that every agreement by an alarm company, including but not limited to lease agreements, monitoring agreements, and service agreements, must be in writing. Additionally, each agreement must contain:

1. The name business address, business telephone number, and the license number of the alarm company operator or registration number of any alarm agent who solicited or negotiated the agreement.

2. Approximate dates when the work will begin and when it will be completed.

3. A description of the work being done and materials used.

4. A disclosure that the alarm company operators are licensed by the Bureau of Security and Investigative Services (Bureau) in the Department of Consumer Affairs (DCA).

5. A description of the alarm system and its major components.

6. Other matters agreed to by the parties in the contract.

7. Statement that upon completion, the alarm company will teach the purchaser in the system’s proper use.

8. Payments and payment schedules for initial residential sales and lease agreements totaling over $250 over the time period fixed by the agreement. (BPC § 7599.54)

3. Prohibits a licensee from making any untrue or misleading statements in connection with the business of the licensee. (BPC § 7599.55)

4. Mandates any licensee, qualified certificate holder, firearms qualification card holder, or registrant to notify the Bureau within 30 days of any change or residence or business address. (BPC § 7599.59)

5. Provides that an electronic contract, record, or signature can satisfy a written contract or record. (Civil Code (CC) § 1633.7)

6. Defines “electronic” as relating to technology and having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. (CC § 1633.2(e))

7. Defines “electronic record” as a record created, generated, sent, communicated, received, or stored by electronic means. (CC § 1633.2(g))

8. Defines “electronic signature” as an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record. (CC § 1633.2(h))

9. Defines “home solicitation contract or offer” to mean any contract or offer which is subject to approval for the sale, lease, or rental of goods and/or services made at other than appropriate trade premises in an amount of twenty-five dollars or more. (CC § 1689.5(a))

10. Defines “appropriate trade premises” as the premises where either the owner or seller normally carries out business or where goods are normally offered or exposed for sale. (CC § 1689.5(b))

11. A contract may be conducted by electronic means based on the context and surrounding circumstances of the agreement. A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. (CC § 1633.5)

12. States that a buyer has the right to cancel a home solicitation contract or offer until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase. (CC § 1689.6)

13. States that a home solicitation contract or offer must be:

1. Written in the same language as principally used in the oral sales presentation.

2. Dated & signed by the buyer.

3. Contain, in conspicuous proximity to the space reserved for the buyer’s signature, the following statement: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.” (CC § 1689.7)

1. Excludes certain transactions from being conducted electronically, including the creation and execution of wills, codicils, health care powers of attorney, or testamentary trusts. (CC § 1633.3)

This bill:

1. Authorizes alarm company salespersons to use electronic contracts for service in lieu of paper contracts at the discretion of the customer.

2. Extends the provisions of the Uniform Electronic Transactions Act (UETA) to cover transactions conducted by persons licensed, certified, or registered under the Alarm Company Act.

3. Requires electronic contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements, and disclosures that apply to home solicitation contracts.

4. Authorizes any signatures, disclosures, and documents required by these home solicitation contracts to be provided and transmitted by electronic means.

FISCAL EFFECT:

None. This bill has been keyed “nonfiscal” by Legislative Counsel.

COMMENTS:

1. Purpose. This bill is sponsored by ADT Security Services. According to the Author, “AB 1097 allows alarm company salespeople to use electronic contracts, at the discretion of the customer.”

The Author states that, “Although most businesses and individuals selling alarm systems are legitimate, some use deceptive tactics as a core component of their sales practices and often target the elderly. With paper contracts it is virtually impossible to know who signed a contract, when they signed it, and whether or not copies of the contract and notice of cancellation were actually delivered. With e-contracts, however, it is possible to see when the actual customer logged into the e-contract system, reviewed and signed the contract, and exactly when and whether the contract and notices were electronically delivered to the customer.”

2. Background. The Uniform Electronic Transaction Act (UETA) was first drafted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999 to help set standardized state rules for creating electronic contracts (e-contracts) that would provide the same legal obligation as traditional paper transactions. Included in these standardized rules are specific definitions to e-contract terms in relation to traditional contractual agreements. The UETA defines an “electronic record” as a contract or other type of record created, generated, communicated, received, or stored by electronic means. An “electronic signature” is defined by the UETA as an electronic sound, symbol, or process attached to or logically associated with a contract or record and executed or adopted by a person with the intent to sign the record.

There are certain transactions that are not covered under the UETA. These include wills, trusts, codicils to a will, health care powers of attorney, transactions governed by the U.C.C, the Uniform Computer Information Transactions Act (UCITA), and any state law exempting application. When the UETA was released, states had the option of adopting the entire UETA law or part(s) of the proposed provisions in the act.

In 1999, California became one of the first states to adopt the UETA, giving
e-contracts and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, California additionally exempted in-home sales from the UETA. Almost any consumer transaction $25 or more which takes place in the buyer’s home or away from other appropriate trade premises constitute an in-home sale. Additionally, in 2010, California passed the Consumer’s Rights to Cancel Home Solicitation Contracts through the Home Solicitation Sales Act. This Act gives consumers the ability to cancel a sale or contract made through an in-home sale without penalty or obligation if the consumer gives a proper notice within three business days. With this additional UETA exemption in the use of e-contracts and the cancellation provisions in the Home Solicitation Sales Act, in-home sales vendors are currently required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of recession with the consumer at the time of the sale.

However, advancements in technology have rendered these paper contracts including in-home sales paper contracts nearly obsolete. Paper contracts are easily misplaced and can be damaged over time. E-contracts offer added consumer protection properties because they are reproducible, and metadata (data that summarizes basic information about other data) showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed. Many in-home vendors use tablet devices to help assess customer needs and discuss contract terms, an already common practice that the Author asserts will further reduce environmental impact. This common practice helps salespersons preserve an electronic copy of the document for future reference, which can be emailed to customers for their own files, providing greater transparency into the contracting process. The Author further argues that this transparency with the adoption of e-contracting will give the state additional enforcement tools to ensure that the sale was a voluntary transaction with the fulfillment of all notice requirements.

This bill would authorize alarm companies in California to distribute electronic contracts without requiring a separate paper copy to be generated at the discretion of the customer. Consumers who still wish to receive a paper copy of their contract will still maintain this option.

3. Prior/Related Legislation. AB 1131 (Dababnah, 2015) of the current legislative session, would authorize additional persons to send life insurance records by electronic transmission by providing that an insurer, agent, broker, or any other person licensed by the Department of Insurance may send electronic records.

(Status: This bill is waiting for a hearing in Senate Insurance Committee.)

SB 536 (Berryhill, 2014) is identical to this bill except that SB 536 would have additionally excluded contracts for services or other activities authorized by the Alarm Company Act from the definition of a home solicitation contract.

(Status: This bill was held in Assembly Rules Committee.)

4. Arguments in Support. Writing in support of the bill, ADT Security Services states, “We believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Of course, electronic contracting is voluntary, and consumers must first consent.”

The California Alarm Association (CAA) writes, “Electronic contracts provide better verification on whom and when a contract was signed, as well as when the contract and notice of cancelation are received. A date and time stamp appears on emails, verifying when they are sent. It is also possible to see when the customer has logged into the e-contract system. AB 1097 would still allow the customer to receive a paper contract. However, as mentioned above, an electronic contract allowed under this bill will provide additional consumer protections.”

The California Cable & Telecommunications Association (CCTA) writes, “The adoption of this proposal would result in greater convenience for alarm service customers by providing an immediate electronic contract access to consumers, providing for greater consumer protections and verification of customer authorization, and confirming that customers understand and review their right to cancel service.”

NOTE:

Double-referral to Senate Committee on Judiciary (Second).

SUPPORT AND OPPOSITION:

Support:

ADT Security Services (Sponsor)

California Alarm Association (CAA)

California Cable & Telecommunications Association (CCTA)

Opposition:

None on file as of June 9, 2015.

-- END --

Date of Hearing: May 5, 2015

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Susan Bonilla, Chair

ABPCA Bill Id:AB 1097

Author:(Holden) – As Introduced Ver:February 27, 2015

SUBJECT: Alarm companies: electronic transactions.

SUMMARY: Authorizes contracts for services or other activities authorized by the Alarm Company Act to be conducted by electronic means only after receiving consent from the consumer.

EXISTING LAW:

1. Licenses and regulates alarm company operators and alarm company agents under the Alarm Company Act, administered by the Bureau of Security and Investigative Services, within the Department of Consumer Affairs. (Business and Professions Code (BPC) Section 7590 et seq.)

2. Defines “alarm company operator” to mean a person who, for any consideration, engages in business or accepts employment to install, maintain, alter, sell, monitor, or service alarm systems, or who responds to alarm systems, except for any alarm agent, as specified. (BPC Section 7590.2)

3. Defines "alarm agent" to mean a person employed by an alarm company operator whose duties include selling on premises, altering, installing, maintaining, moving, repairing, replacing, servicing, responding, or monitoring an alarm system, or a person who manages or supervises a person employed by an alarm company to perform any of those duties or any person in training for any of those duties. (BPC Section 7590.1(o))

4. Requires specified agreements entered into by an alarm company pertaining to alarm systems, including, among others, lease agreements, monitoring agreements, service agreements, and installation agreements, be in writing. (BPC Section 7599.54)

5. Enacts the Uniform Electronic Transactions Act (UETA), which provides that records, signatures, or contracts, may not be denied legal effect or enforceability solely because they are in electronic form, and that an electronic record satisfies any law that requires a record to be in writing, and that an electronic signature satisfies any law that requires a signature. (Civil Code (CIV) Section 1633.1 et seq.)

6. Exempts certain transactions from the UETA, including home solicitation contracts. (CIV Section 1633.1)

7. Defines a "home solicitation contract" to include any contract, whether single or multiple, or any offer which is subject to approval for the sale, lease, or rental of goods or services or both, made at other than appropriate trade premises in the amount of $25 dollars or more, as specified. (CIV Section 1689.5(a))

8. Provides specified time periods for consumers to cancel a home solicitation contract, and requires specified disclosures and statements, and separately executed cancellation documents in connection with the execution of those contracts. (CIV Section 1689.5 et seq.)

THIS BILL:

1. Authorizes contracts for services or other activities authorized by the Alarm Company Act to be conducted by electronic means, only with the consent of the contracting consumer.

2. Provides that the provisions of the UETA would apply to electronic records and electronic signatures relating to transactions conducted by persons licensed, certified, or registered pursuant to the Alarm Company for purposes authorized by the Alarm Company Act.

3. Excludes contracts for services or other activities authorized by the Alarm Company Act from the definition of a home solicitation contract.

4. Requires those electronic contracts for services or other activities authorized by the Alarm Company Act to comply with specified cancellation periods, statements and disclosures that apply to home solicitation contracts, and would authorize a notice of cancellation and copies of the contract or offer, and signatures, disclosures, and documents, to be provided and transmitted electronically.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by ADT Security Services. According to the author, "Although most businesses and individuals selling alarm systems are legitimate, some use deceptive tactics as a core component of their sales practices and often target the elderly, coercing them into signing various contracts with different companies. With paper contracts, it is virtually impossible to know who signed a contract, when they signed, and whether or not copies of the contract and notice of cancellation were actually delivered. With e-contracts, however, it is possible to see when the actual customer logged into the e-contract system, reviewed and signed the contract, and exactly when and whether the contract and notices were electronically delivered to the customer.

Since 1999, technology has advanced to such a degree that electronic contracts can now offer consumer protection measures that exceed those of traditional paper contracts. Therefore, at the discretion of the customer, AB 1097 would allow alarm companies in the state to fully utilize electronic contracts. These improvements will benefit California consumers, the environment and the state agencies tasked with enforcing consumer protection laws."

Background. In 1999, California adopted the Uniform Electronic Transaction Act (UETA), which gave electronic contracts (e-contracts) and signatures the same legal standing as traditional paper contracts. In an effort to further protect consumers, the state excluded in-home sales from the UETA, which means that in-home sales vendors were required to continue leaving a paper copy of the contract and two copies of the notice of three-day right of rescission with the consumer at the time of sale.

With the advancement in technology, traditional paper contracts are nearly obsolete. E-contracts which offer added consumer protection properties are a viable solution to replace paper contracts. E-contracts are reproducible, and metadata showing when the contract and other documents were signed, emailed, and even opened, can be subpoenaed, whereas paper contracts are easily misplaced and can be damaged over time. In addition, many in-home vendors use tablet devices to help assess customer needs and discuss contract terms. The author asserts that using such tablets to contract with customers would reduce environmental impact and preserve an electronic copy of the document for future reference, which could be emailed to customers for their own files, thereby providing greater transparency into the contracting process.

Current Related Legislation. AB 1131 (Dababneh), of the current legislative session, would authorize additional persons to send records by electronic transmission by providing that an insurer, agent, broker, or any other person licensed by the Department of Insurance may send electronic records. STATUS: This bill is in the Assembly Insurance Committee.

Prior Related Legislation. SB 536 (Berryhill) of 2014, was identical to this bill. NOTE: This bill was held in the Assembly Rules Committee.

ARGUMENTS IN SUPPORT:

According to the sponsors, ADT Security Services, "State law currently requires in-home sales vendors to leave a copy of the contract and two copies of the notice of three-day right of rescission with the consumer at the time of the sale. This means that millions of pages of paper contracts and notices are left with California consumers today, many of whom would gladly accept and prefer electronic versions of those documents. [This bill] would allow alarm customers to receive these copies electronically, if they choose….We believe it is time to update California statute to allow companies in the state to fully utilize e-contracts and to electronically send (email) the required contract and notice of rescission documents to the customer, without requiring that wasteful paper copies also be generated and left behind. Of course, electronic contracting is voluntary, and consumers must first consent."

The California Alarm Association writes in support, "Many alarm companies are equipping their sales people with tablet devices. Tablets allow customers to adjust font size to better read the terms and conditions of the contract. In addition, software can be used to force a customer to read and acknowledge each page of the contract before advancing to the next page. Ultimately, once the customer reviews, initials, and signs the contract; an electronic copy of the contract will be sent immediately to the customer. The contract can then be electronically stored on the customer's computer, whereas paper contracts are often lost or destroyed."

The California Cable & Telecommunications Association writes in support, "The adoption of this proposal would result in greater convenience for alarm service customers by providing an immediate electronic contract access to consumers, providing for greater consumer protections and verification of customer authorization, and confirming that customers understand and review their right to cancel services."

ARGUMENTS IN OPPOSITION:

None on file.

AMENDMENT:

In order to authorize the use of electronic contracts and the ability to satisfy documentation with electronic documents, the bill, in addition to adding this specific authorization to the Business and Professions Code, makes conforming changes in the Civil Code, which include applying the UETA to alarm company contracts. Because provisions under the Civil Code require home solicitation contracts, which frequently include these alarm company contracts, to be accompanied with paper documents, this bill exempts alarm company contracts from the definition of a home solicitation contract. Because the intent of the bill is to merely authorize the use of electronic documents in lieu of paper documents, the author should consider leaving these contracts within the definition of a home solicitation contract, and therefore subject to any other requirements relating to home solicitation contracts, and instead specifically authorize the use of electronic documents in those situations that currently require paper copies.

On page 2, line 3, strike Contracts and insert Notwithstanding Section 7599.54, contracts

On page 2, line 14, amend subdivisions (b) and (c) as follows:

(b) Contracts Notwithstanding Section 1689.6 of the Civil Code, for contracts for services or other activities authorized by this chapter, shall comply with paragraph (1) of subdivision (a) of, and subdivisions (d) and (e) of, Section 1689.6 of the Civil Code, provided however, that a notice of cancellation and copies of the contract or offer described in those provisions may be provided and transmitted electronically.

(c) Contracts Notwithstanding Section 1689.7 of the Civil Code, for contracts for services or other activities authorized by this chapter, shall comply with paragraph (1) of subdivision (a) of, and subdivision (c) of, Section 1689.7 of the Civil Code, provided however, that the signatures, disclosures, and documents described in those provisions may be provided and transmitted electronically.

Strike Section 4 of the bill.

REGISTERED SUPPORT:

ADT Security Services (sponsors)

California Alarm Association

California Cable & Telecommunications Association

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Eunie Linden / B. & P. / (916) 319-3301