CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2471

Author:(Maienschein)

As Amended Ver:August 25, 2020

Majority vote

SUMMARY:

Extends, from three to five business days, the right to cancel certain consumer contracts for persons 65 years of age and older.

Major Provisions

1. Defines a senior citizen as an individual who is 65 years of age or older.
2. Extends the buyer's right to cancel a home improvement contract to five business days if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
3. Extends the buyer's right to cancel a service and repair contract to five business days if the buyer is a senior citizen, unless specified emergency conditions exist. Prescribes the form and content of a notice of this right to cancel.
4. Extends the buyer's right to cancel a home solicitation contract to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
5. Extends the buyer's right to cancel a seminar sales solicitation contract or offer to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
6. Extends a senior citizen property owner's right to cancel a Property Assessed Clean Energy (PACE) assessment contract to within five business days of the latest of a) the date on which the contract was signed, b) the date on which the property owner received a statutorily-prescribed Financing Estimate or Disclosure, or c) the date on which the property owner received the notice of their right to cancel. Prescribes the form and content of a notice of this right to cancel.
7. Applies the extended right to cancel set forth in 2) through 6) to contracts entered into on or after January 1, 2021.

The Senate Amendments:

Add language to address conflicts with AB 1551 (Arambula) of the current legislative session for the purpose of chaptering and several small technical adjustments.

COMMENTS:

This bill seeks to address consumer protection concerns by extending the right to cancel certain contracts for people of 65 years of age or older. Specifically addressed in this bill are home solicitation contracts, home improvement contracts, PACE assessment contracts, service or repair contracts, and seminar sales contracts. Current law already allows a consumer three business days to cancel these types of contracts. This bill would expand this right to cancel from three to five business days for older consumers to take into consideration their increased vulnerability to financial exploitation.

Under existing law there is a right to cancel for specified contracts. California law has specifically provided all consumers with a three-day right to cancel for the following types of contracts: 1) home solicitation contracts; 2) home improvement contracts; 3) "PACE" assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. These transactions, in which the consumer is directly engaging with the contractor, require a higher level of contractual and financial competency on the part of the consumer. These transactions also often occur in non-traditional business environments (i.e., the consumer's home or seminars) and may involve high-pressure or intimidating sales tactics. Because of the typically non-traditional business setting in which these contracts are often negotiated, there is an increased risk of unfair or predatory business practices. These factors when combined make it much more likely that a consumer will enter into a contract that they misinterpret, do not fully understand, or would simply not choose to enter under normal circumstances. Further, several of these contract types use the consumer's home as security and may open up the homeowner both to significant financial obligation and potential loss of their home through foreclosure. As a result, the Legislature has provided additional consumer protections in the form of a three-day right to cancel these contracts. The goal of these rights to cancel is to provide consumers with the opportunity to review and reevaluate the terms of the contract before fully committing. To ensure the right to cancel is meaningful, California law requires these contractors to provide notice to buyers of their right to cancel.

Similarly, federal law protects consumers with a three-day right to cancellation for any federally-insured loan used to finance home improvement (Truth in Lending Act of 1968).

Additional consumer protections needed for senior citizens. Current law gives all consumers the same three-day period to review and cancel these contracts, which the author argues does not adequately take into consideration the differing needs and abilities of consumers 65 years of age or older. This bill's proposed expansion of the right to cancel, as with the other laws protecting elders from potential financial abuse, reflects the fact that some senior citizens may have difficulty understanding complex financial transactions, may be vulnerable to high pressure sales tactics, particularly if they occur in the senior's home, and may need more time to consult with family members or others about the implications of their financial decisions. Needless to say, many senior citizens have a better understanding of financial transactions than many younger consumers, but it is well-documented that advanced age is associated with changes in cognitive ability and this may affect their capacity to understand and evaluate complex contracts. Justice in Aging, a national non-profit legal advocacy organization, specifically cites concerns about transactions or agreements that are damaging to elderly clients, stating that "rescission or a reversal can be sought when your client was 'induced' into a contract by a misrepresentation or undue influence by the perpetrator or if the client lacked necessary capacity at the time of the transaction." (Justice in Aging, Financial Exploitation of Older Adults, (2018), https://www.justiceinaging.org/wp-content/uploads/2018/11/California-Financial-Exploitation-Guide.pdf)

One of the sponsors of this bill, the San Diego County District Attorney, reports a rash of elder abuse cases resulting from the contract types named in this bill. The victims in these cases entered into contracts which they did not fully understand or were the result of unfair business practices, including high-pressure sales tactics or intentional miscommunication of the terms of the written contract. By providing an additional two days for senior citizens to consult with family or other advisors, this bill should decrease the likelihood that senior consumers will experience the negative financial impacts of entering into damaging, ill-advised contracts.

This bill is consistent with previous legislative efforts to protect vulnerable seniors. California legislation has previously addressed similar concerns about the vulnerability of older consumers in the Reverse Mortgage Elder Protection Act of 2009. AB 329 (Feuer), Chapter 236 Statutes of 2009. Among other protections, that bill extended the right of senior citizen, reverse mortgage borrowers to rescind the agreement from three days to 30 days. Similarly, seniors 65 years of age or older have a 30-day examination period in which to cancel an insurance contract. (Insurance Code section 786.) California also recognizes the vulnerability of this population by providing enhanced damages or penalties for unfair business practices perpetrated against senior citizens. (Civil Code Section 1780 (b)(1); Business & Professions Code section 17206.1 (a) (1); Business & Professions Code Section 7159.2 (e).) Additionally, the Elder Abuse and Dependent Adult Civil Protection Act also recognizes and guards against abuse, including financial abuse, of elderly and dependent adults. (See Welfare and Institutions Code Section 15600 et seq.)

According to the Author:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. … This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts.

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney's Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

Arguments in Support:

In support of this bill, the San Diego County District Attorney writes:

Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many senior citizens have – their home – which can be placed at risk or even lost to foreclosure as a result of contracts which were misrepresented or misunderstood. The California State Licensing Board ("CSLB"), which is tasked with protecting consumers by licensing and regulating the state's construction industry, keeps track of complaints involving consumers 65 years old or older. According to CSLB statistics, in 2018, there were 12,775 home improvement complaints filed with the Board. Of that total number, 2,057 complaints were filed by consumers who checked the box 'over 64' on the complaint form. Thus, senior citizens represented approximately 16% of home improvement contract complainants. … These numbers demonstrate, at a minimum, dissatisfaction or financial injury sufficient to cause the senior citizen, or their representative, to file a complaint.

Senior citizens have also suffered devastating consequences as a result of ill-advised PACE assessment contracts. Last year, our office, as a member of a statewide task force, sued Renovate America, Inc., one of California's largest PACE administrators, for unfair business practices and false advertising. As part of the settlement of that civil law enforcement action, Renovate America agreed to certain injunctive provisions specifically designed to protect senior citizens, including an extended right to cancel for a number of energy efficient home improvement projects from three (3) business days to five (5) business days. AB 2471 simply codifies what is already being done to protect seniors from aggressive sales tactics before it is too late.

Arguments in Opposition:

None on file

FISCAL COMMENTS:

None

VOTES:

ASM JUDICIARY: 10-0-1

YES: Mark Stone, Gallagher, Chau, Chiu, Gonzalez, Holden, Kalra, Kiley, Obernolte, Reyes

ABS, ABST OR NV: Maienschein

ASSEMBLY FLOOR: 78-0-1

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Megan Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Quirk

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Melendez, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

ABS, ABST OR NV: Jones

UPDATED:

VERSION: August 25, 2020

CONSULTANT: Emily Wonder and Jith Meganathan / JUD. / (916) 319-2334 FN: 0002789

 THIRD READING  

Bill No: AB 2471

Author: Maienschein (D)

Amended: 8/25/20 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 9-0, 7/30/20

AYES: Jackson, Borgeas, Durazo, Lena Gonzalez, Melendez, Monning, Stern, Umberg, Wieckowski

ASSEMBLY FLOOR: 78-0, 6/10/20 - See last page for vote

SUBJECT: Senior citizens: rescission of contracts

SOURCE: California District Attorneys Association

San Diego County District Attorney

DIGEST:

This bill provides senior citizens with a five-day right to cancel various contracts and agreements.

Senate Floor Amendments of 8/25/20 address potential chaptering out issues raised by AB 1551 (Arambula, 2020), which also makes changes to Section 5898.17 of the Streets and Highways Code.

ANALYSIS:

Existing law:

1. Defines a “home improvement contract” to include an agreement between a contractor and an owner or between a contractor and a tenant for the performance of a home improvement, or an agreement between a salesperson and an owner or a tenant, which provides for the sale, installation, or furnishing of home improvement goods or services, as specified. (Bus. & Prof. Code § 7159(b).)
2. Identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in or attached to the contract. (Bus. & Prof. Code § 7159.)
3. Affords consumers the right to cancel home improvement contracts within three days, as specified. (Bus. & Prof. Code § 7159.)
4. Governs the use and contents of “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. (Bus. & Prof. Code § 7159.10.)
5. Requires, except as provided, contractors or their salespeople to include contractual terms that afford consumers the right to cancel service and repair contracts any time before a signed contract is received by the consumer or before works begins, or within three days of signing a normal service and repair contract or within seven days in the event of certain emergency conditions, where the following conditions are met:
   1. the contract price is above $750;
   2. the consumer did not initiate the contract with the contractor;
   3. the contractor sold the consumer goods or services beyond those reasonably necessary to take care of the underlying problem; or
   4. the payment was due or the contractor accepted any money before the work was complete. (Bus. & Prof. Code § 7159.10(e)(12).)
6. Regulates a “home solicitation contract or offer,” defined to mean any contract 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. It does not include any contract under which the buyer is afforded certain federal rights to rescind. (Civ. Code § 1689.5(a).) “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).)
7. Provides a buyer, except as provided, and in addition to any other right to revoke, the right to cancel a home solicitation contract or offer until midnight of the third business day after the buyer signs a compliant agreement or offer to purchase or after the buyer receives a signed and dated copy of the contract or offer to purchase, as specified. (Civ. Code § 1689.6(a).) The right to rescind the contract must be clearly disclosed in the underlying contract or offer. (Civ. Code § 1689.7.)
8. Provides the terms under which a seminar sales solicitation contract can be entered into. (Civ. Code § 1689.20 et seq.) “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more, including any interest or service charges. “Seminar sales solicitation contract” does not include any contract under which the buyer has certain federal rights to rescission.
9. Provides the buyer, in addition to any other right to revoke an offer, the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)
10. Regulates contractual assessments, including Property Assessed Clean Energy (PACE) financing, as specified. (Streets & Highways Code § 5898.10 et seq.) As a requirement of the financing agreements, property owners must be given the right to cancel the contractual assessments within three days of specified events, including the signing of the assessment, the date the required Financing Estimate and Disclosure is received, or the date notice of the right to cancel was received by the property owner.

This bill:

1. Defines a “senior citizen” as an individual who is 65 years of age or older for purposes of the above statutes.
2. Extends the three-day right to cancel provisions in the above statutes to five years for customers, buyers, or property owners who are senior citizens and provides the requisite forms and disclosures.
3. Makes conforming changes.
4. Incorporates amendments made to Section 5898.17 of the Streets and Highways Code by AB 1551 (Arambula, 2020), which will take effect if both bills are enacted and become effective on or before January 1, 2021, amend such section, and this bill is enacted after AB 1551.

Background

Executive Summary

Given the dynamics that are often involved in the formation of certain contracts and the stakes that may be involved, California law affords consumers a number of protections in connection with them. Relevant examples are home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements. Many of the protections afforded in connection with these contracts are triggered where the contract is not initiated by the consumer or takes place in certain premises that might lead to high-pressure situations. The statutory schemes regulating these contractual arrangements all include a three-day right to cancel the underlying agreement.

This bill amends the above statutes to extend the period to cancel from three days to five days for senior citizens. The new right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021.

This bill is sponsored by the California District Attorneys Association and the San Diego County District Attorney. There is no known opposition.

Comments

According to the author:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. Specifically, AB 2471 grants senior citizens an extended right to cancel: 1) home solicitation contracts; 2) home improvement contracts; 3) Property Assessed Clean Energy (“PACE”) assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts. These five specific types of contracts were selected for an extended right to cancel because: 1) they can involve high-pressure or intimidating sales tactics -- often taking place in the senior citizen’s home; and/or 2) they involve a large financial commitment which senior citizens are ill equipped to recover from should the financial obligation prove to be too much.

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney’s Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

Three-day right to cancel: protecting consumers and property owners

California law meticulously lays out the parameters for the formation of various consumer contracts and provides a number of important protections in connection with these contracts, agreements, and offers. One right afforded consumers in connection with many of these consumer agreements is a statutorily mandated three-day right of rescission. This period provides customers who may have felt pressured during sales pitches or discovered additional information in the wake of purchases or contracting for certain services the right to cancel the agreement without penalty or obligation. The following statutes govern various contractual arrangements, include this three-day right to cancel, and are amended by this bill.

First, Business and Professions Code Section 7159 regulates “home improvement contracts,” which include agreements between contractors and homeowners or between contractors and tenants for the performance of a home improvement. It also includes agreements between salespeople and owners or tenants, which provides for the sale, installation, or furnishing of home improvement goods or services. The law specifically identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in the contract, or may be provided as an attachment. One right afforded customers, with certain exceptions, is the ability to cancel a qualifying home improvement contract within three business days by the methods specified; contractors must notify customers of this right.

Second, Business and Professions Code Section 7159.10 regulates “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. There are clear guidelines for the costs of such contracts and the specific elements that must be included in these contracts. Relevant here, Section 7159.10 provides that service and repair contracts must make clear that consumers can cancel them at any time before a signed and dated contract is received by the consumer or before the work has begun. Additionally, the consumer can cancel within three days of signing the contract (seven days under certain emergency conditions) where certain conditions are met, including where the costs rise above a certain level or the consumer is sold unnecessary good or services or where the consumer did not initiate the contract.

Third, Civil Code Section 1689.5 et seq. regulates “home solicitation contracts or offers,” defined to mean any contract 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. “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).) Similar to above, buyers are afforded the right to cancel home solicitation contracts or offers within three days, as specified, in addition to any other right to revoke.

Fourth, Civil Code Section 1689.20 et seq. provides the terms under which a seminar sales solicitation contract can be entered into. “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more. Again, buyers are afforded the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)

Finally, Streets and Highways Code Section 5898.10 et seq. regulates contractual assessments, including PACE financing, as specified. As a requirement of the program, property owners must be given the three-day right to cancel the contractual assessments, including the signing of the assessment.

Extending existing protections for senior citizens

This bill amends the above statutes to provide stronger protections to senior citizens, defined as persons who are 65 years of age or older. The bill extends the three-day right to cancel home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements to five days for senior citizens. This bill provides for conforming contractual terms and conditions. This extension of the law further protects these older consumers from the inherent pitfalls and consequences of these particular contractual arrangements.

The new five-day right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021. Therefore, no previously existing contracts should be impacted by the bill.

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

SUPPORT: (Verified 8/26/20)

California District Attorneys Association (co-source)

San Diego County District Attorney (co-source)

AFSCME, AFL-CIO

Ageless Alliance

Alzheimer’s Association - San Diego

Association of California Caregiver Resource Centers

California Association of Realtors

California Commission on Aging

California Low-Income Consumer Coalition

California Retired Teachers Association

Center for Public Interest Law, University of San Diego School of Law

Consumer Attorneys of California

Contra Costa Senior Legal Services

Contractors State License Board

County of San Diego

Housing and Economic Rights Advocates

Institute on Aging

International Network for the Prevention of Elder Abuse

Los Angeles City Attorney Michael Feuer

OPPOSITION: (Verified 8/26/20)

None received

ARGUMENTS IN SUPPORT: The co-sponsor of this bill, the California District Attorneys Association writes: “Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many seniors have – their home – which can be significantly encumbered or even lost to foreclosure as a result of contracts which were either misrepresented or not fully understood by the senior. Extending by two days the opportunity to cancel these specified contracts will alleviate some of the pressure sometimes felt during a sales presentation and allow for a more thoughtful and informed choice while working very little hardship on the companies seeking to enter into these contracts.”

ASSEMBLY FLOOR: 78-0, 6/10/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Megan Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Quirk

Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113

8/26/20 15:05:29

**** END ****

 THIRD READING 

Bill No: AB 2471

Author: Maienschein (D)

Amended: 5/21/20 in Assembly

Vote: 21

SENATE JUDICIARY COMMITTEE: 9-0, 7/30/20

AYES: Jackson, Borgeas, Durazo, Lena Gonzalez, Melendez, Monning, Stern, Umberg, Wieckowski

ASSEMBLY FLOOR: 78-0, 6/10/20 - See last page for vote

SUBJECT: Senior citizens: rescission of contracts

SOURCE: California District Attorneys Association

San Diego County District Attorney

DIGEST:

This bill provides senior citizens with a five-day right to cancel various contracts and agreements.

ANALYSIS:

Existing law:

1. Defines a “home improvement contract” to include an agreement between a contractor and an owner or between a contractor and a tenant for the performance of a home improvement, or an agreement between a salesperson and an owner or a tenant, which provides for the sale, installation, or furnishing of home improvement goods or services, as specified. (Bus. & Prof. Code § 7159(b).)
2. Identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in or attached to the contract. (Bus. & Prof. Code § 7159.)
3. Affords consumers the right to cancel home improvement contracts within three days, as specified. (Bus. & Prof. Code § 7159.)
4. Governs the use and contents of “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. (Bus. & Prof. Code § 7159.10.)
5. Requires, except as provided, contractors or their salespeople to include contractual terms that afford consumers the right to cancel service and repair contracts any time before a signed contract is received by the consumer or before works begins, or within three days of signing a normal service and repair contract or within seven days in the event of certain emergency conditions, where the following conditions are met:
   1. the contract price is above $750;
   2. the consumer did not initiate the contract with the contractor;
   3. the contractor sold the consumer goods or services beyond those reasonably necessary to take care of the underlying problem; or
   4. the payment was due or the contractor accepted any money before the work was complete. (Bus. & Prof. Code § 7159.10(e)(12).)
6. Regulates a “home solicitation contract or offer,” defined to mean any contract 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. It does not include any contract under which the buyer is afforded certain federal rights to rescind. (Civ. Code § 1689.5(a).) “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).)
7. Provides a buyer, except as provided, and in addition to any other right to revoke, the right to cancel a home solicitation contract or offer until midnight of the third business day after the buyer signs a compliant agreement or offer to purchase or after the buyer receives a signed and dated copy of the contract or offer to purchase, as specified. (Civ. Code § 1689.6(a).) The right to rescind the contract must be clearly disclosed in the underlying contract or offer. (Civ. Code § 1689.7.)
8. Provides the terms under which a seminar sales solicitation contract can be entered into. (Civ. Code § 1689.20 et seq.) “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more, including any interest or service charges. “Seminar sales solicitation contract” does not include any contract under which the buyer has certain federal rights to rescission.
9. Provides the buyer, in addition to any other right to revoke an offer, the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)
10. Regulates contractual assessments, including Property Assessed Clean Energy (PACE) financing, as specified. (Streets & Highways Code § 5898.10 et seq.) As a requirement of the financing agreements, property owners must be given the right to cancel the contractual assessments within three days of specified events, including the signing of the assessment, the date the required Financing Estimate and Disclosure is received, or the date notice of the right to cancel was received by the property owner.

This bill:

1. Defines a “senior citizen” as an individual who is 65 years of age or older for purposes of the above statutes.
2. Extends the three-day right to cancel provisions in the above statutes to five years for customers, buyers, or property owners who are senior citizens and provides the requisite forms and disclosures.
3. Makes conforming changes.

Background

Executive Summary

Given the dynamics that are often involved in the formation of certain contracts and the stakes that may be involved, California law affords consumers a number of protections in connection with them. Relevant examples are home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements. Many of the protections afforded in connection with these contracts are triggered where the contract is not initiated by the consumer or takes place in certain premises that might lead to high-pressure situations. The statutory schemes regulating these contractual arrangements all include a three-day right to cancel the underlying agreement.

This bill amends the above statutes to extend the period to cancel from three days to five days for senior citizens. The new right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021.

This bill is sponsored by the California District Attorneys Association and the San Diego County District Attorney. There is no known opposition.

Comments

According to the author:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. Specifically, AB 2471 grants senior citizens an extended right to cancel: 1) home solicitation contracts; 2) home improvement contracts; 3) Property Assessed Clean Energy (“PACE”) assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts. These five specific types of contracts were selected for an extended right to cancel because: 1) they can involve high-pressure or intimidating sales tactics -- often taking place in the senior citizen’s home; and/or 2) they involve a large financial commitment which senior citizens are ill equipped to recover from should the financial obligation prove to be too much.

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney’s Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

Three-day right to cancel: protecting consumers and property owners

California law meticulously lays out the parameters for the formation of various consumer contracts and provides a number of important protections in connection with these contracts, agreements, and offers. One right afforded consumers in connection with many of these consumer agreements is a statutorily mandated three-day right of rescission. This period provides customers who may have felt pressured during sales pitches or discovered additional information in the wake of purchases or contracting for certain services the right to cancel the agreement without penalty or obligation. The following statutes govern various contractual arrangements, include this three-day right to cancel, and are amended by this bill.

First, Business and Professions Code Section 7159 regulates “home improvement contracts,” which include agreements between contractors and homeowners or between contractors and tenants for the performance of a home improvement. It also includes agreements between salespeople and owners or tenants, which provides for the sale, installation, or furnishing of home improvement goods or services. The law specifically identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in the contract, or may be provided as an attachment. One right afforded customers, with certain exceptions, is the ability to cancel a qualifying home improvement contract within three business days by the methods specified; contractors must notify customers of this right.

Second, Business and Professions Code Section 7159.10 regulates “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. There are clear guidelines for the costs of such contracts and the specific elements that must be included in these contracts. Relevant here, Section 7159.10 provides that service and repair contracts must make clear that consumers can cancel them at any time before a signed and dated contract is received by the consumer or before the work has begun. Additionally, the consumer can cancel within three days of signing the contract (seven days under certain emergency conditions) where certain conditions are met, including where the costs rise above a certain level or the consumer is sold unnecessary good or services or where the consumer did not initiate the contract.

Third, Civil Code Section 1689.5 et seq. regulates “home solicitation contracts or offers,” defined to mean any contract 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. “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).) Similar to above, buyers are afforded the right to cancel home solicitation contracts or offers within three days, as specified, in addition to any other right to revoke.

Fourth, Civil Code Section 1689.20 et seq. provides the terms under which a seminar sales solicitation contract can be entered into. “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more. Again, buyers are afforded the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)

Finally, Streets and Highways Code Section 5898.10 et seq. regulates contractual assessments, including PACE financing, as specified. As a requirement of the program, property owners must be given the three-day right to cancel the contractual assessments, including the signing of the assessment.

Extending existing protections for senior citizens

This bill amends the above statutes to provide stronger protections to senior citizens, defined as persons who are 65 years of age or older. The bill extends the three-day right to cancel home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements to five days for senior citizens. This bill provides for conforming contractual terms and conditions. This extension of the law further protects these older consumers from the inherent pitfalls and consequences of these particular contractual arrangements.

The new five-day right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021. Therefore, no previously existing contracts should be impacted by the bill.

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

SUPPORT: (Verified 7/31/20)

California District Attorneys Association (co-source)

San Diego County District Attorney (co-source)

AFSCME, AFL-CIO

Ageless Alliance

Alzheimer’s Association - San Diego

Association of California Caregiver Resource Centers

California Association of Realtors

California Commission on Aging

California Low-Income Consumer Coalition

California Retired Teachers Association

Center for Public Interest Law, University of San Diego School of Law

Consumer Attorneys of California

Contra Costa Senior Legal Services

Contractors State License Board

County of San Diego

Housing and Economic Rights Advocates

Institute on Aging

International Network for the Prevention of Elder Abuse

Los Angeles City Attorney Michael Feuer

OPPOSITION: (Verified 7/31/20)

None received

ARGUMENTS IN SUPPORT: The co-sponsor of this bill, the California District Attorneys Association writes: “Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many seniors have – their home – which can be significantly encumbered or even lost to foreclosure as a result of contracts which were either misrepresented or not fully understood by the senior. Extending by two days the opportunity to cancel these specified contracts will alleviate some of the pressure sometimes felt during a sales presentation and allow for a more thoughtful and informed choice while working very little hardship on the companies seeking to enter into these contracts.”

ASSEMBLY FLOOR: 78-0, 6/10/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Megan Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Quirk

Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113

8/5/20 14:50:53

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 2471 (Author:Maienschein)

Version: May 21, 2020

Hearing Date: July 30, 2020

Fiscal: No

Urgency: No

Consultant: CK

SUBJECT

Senior citizens: rescission of contracts

DIGEST

This bill provides senior citizens with a five-day right to cancel various contracts and agreements.

EXECUTIVE SUMMARY

Given the dynamics that are often involved in the formation of certain contracts and the stakes that may be involved, California law affords consumers a number of protections in connection with them. Relevant examples are home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements. Many of the protections afforded in connection with these contracts are triggered where the contract is not initiated by the consumer or takes place in certain premises that might lead to high-pressure situations. The statutory schemes regulating these contractual arrangements all include a three-day right to cancel the underlying agreement.

This bill amends the above statutes to extend the period to cancel from three days to five days for senior citizens. The new five-day right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021.

This bill is sponsored by the California District Attorneys Association and the San Diego County District Attorney. It is supported by various organizations. There is no known opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Defines a “home improvement contract” to include an agreement between a contractor and an owner or between a contractor and a tenant for the performance of a home improvement, or an agreement between a salesperson and an owner or a tenant, which provides for the sale, installation, or furnishing of home improvement goods or services, as specified. (Bus. & Prof. Code § 7159(b).)
2. Identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in the contract, or may be provided as an attachment. (Bus. & Prof. Code § 7159.)
3. Affords consumers the right to cancel home improvement contracts within three days, as specified. (Bus. & Prof. Code § 7159.)
4. Governs the use and contents of “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. (Bus. & Prof. Code § 7159.10.)
5. Requires, except as provided, contractors or their salespeople to include contractual terms that afford consumers the right to cancel service and repair contracts any time before a signed contract is received by the consumer or before works begins, or within three days of signing a normal service and repair contract or within seven days in the event of certain emergency conditions, where the following conditions are met:
   1. the contract price is above $750;
   2. the consumer did not initiate the contract with the contractor;
   3. the contractor sold the consumer goods or services beyond those reasonably necessary to take care of the underlying problem; or
   4. the payment was due or the contractor accepted any money before the work was complete. (Bus. & Prof. Code § 7159.10(e)(12).)
6. Regulates a “home solicitation contract or offer,” defined to mean any contract 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. It does not include any contract under which the buyer is afforded certain federal rights to rescind. (Civ. Code § 1689.5(a).) “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).)

1. Provides a buyer, except as provided, and in addition to any other right to revoke, the right to cancel a home solicitation contract or offer until midnight of the third business day after the buyer signs a compliant agreement or offer to purchase or after the buyer receives a signed and dated copy of the contract or offer to purchase, as specified. (Civ. Code § 1689.6(a).) The right to rescind the contract must be clearly disclosed in the underlying contract or offer. (Civ. Code § 1689.7.)
2. Provides the terms under which a seminar sales solicitation contract can be entered into. (Civ. Code § 1689.20 et seq.) “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more, including any interest or service charges. “Seminar sales solicitation contract” does not include any contract under which the buyer has certain federal rights to rescission.
3. Provides the buyer, in addition to any other right to revoke an offer, the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)
4. Regulates contractual assessments, including Property Assessed Clean Energy (PACE) financing, as specified. (Streets & Highways Code § 5898.10 et seq.) As a requirement of the financing agreements, property owners must be given the right to cancel the contractual assessments within three days of specified events, including the signing of the assessment, the date the required Financing Estimate and Disclosure is received, or the date notice of the right to cancel was received by the property owner.

This bill:

1. Defines a “senior citizen” as an individual who is 65 years of age or older for purposes of the above statutes.

1. Extends the three-day right to cancel provisions in the above statutes to five years for customers, buyers, or property owners who are senior citizens and provides the requisite forms and disclosures.
2. Makes conforming changes.

COMMENTS

1. Three-day right to cancel: protecting consumers and property owners

California law meticulously lays out the parameters for the formation of various consumer contracts and provides a number of important protections in connection with these contracts, agreements, and offers. One right afforded consumers in connection with many of these consumer agreements is a statutorily mandated three-day right of rescission. This period provides customers who may have felt pressured during sales pitches or discovered additional information in the wake of purchases or contracting for certain services the right to cancel the agreement without penalty or obligation. The following statutes govern various contractual arrangements, include this three-day right to cancel, and are amended by this bill.

First, Business and Professions Code section 7159 regulates “home improvement contracts,” which include agreements between contractors and homeowners or between contractors and tenants for the performance of a home improvement. It also includes agreements between salespeople and owners or tenants, which provides for the sale, installation, or furnishing of home improvement goods or services. The law specifically identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in the contract, or may be provided as an attachment. One right afforded customers, with certain exceptions, is the ability to cancel a qualifying home improvement contract within three business days by the methods specified; contractors must notify customers of this right.

Second, Business and Professions Code section 7159.10 regulates “service and repair contracts,” which are defined as agreements between contractors or salespeople for contractors, as specified, and homeowners or tenants, for the performance of home improvements, as defined. There are clear guidelines for the costs of such contracts and the specific elements that must be included in these contracts. Relevant here, section 7159.10 provides that service and repair contracts must make clear that consumers can cancel them at any time before a signed and dated contract is received by the consumer or before the work has begun. Additionally, the consumer can cancel within three days of signing the contract (seven days under certain emergency conditions) where certain conditions are met, including where the costs rise above a certain level or the consumer is sold unnecessary good or services or where the consumer did not initiate the contract.

Third, Civil Code section 1689.5 et seq. regulates “home solicitation contracts or offers,” defined to mean any contract 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. “Appropriate trade premises” means 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. (Civ. Code § 1689.5(b).) Similar to above, buyers are afforded the right to cancel home solicitation contracts or offers within three days, as specified, in addition to any other right to revoke.

Fourth, Civil Code section 1689.20 et seq. provides the terms under which a seminar sales solicitation contract can be entered into. “Seminar sales solicitation contract or offer” means any contract for the sale, lease, or rental of goods or services or both, made using selling techniques on premises other than the residence of the buyer in an amount of $25 or more, including any interest or service charges. Again, buyers are afforded the right to cancel a seminar sales solicitation contract or offer until midnight of the third “business day” after the day on which the buyer signs a compliant agreement or offer to purchase. (Civ. Code § 1689.20(a).)

Finally, Streets and Highways Code section 5898.10 et seq. regulates contractual assessments, including PACE financing, as specified. As a requirement of the program, property owners must be given the right to cancel the contractual assessments within three days of specified events, including the signing of the assessment.

1. Extending existing protections for senior citizens

This bill amends the above statutes to provide stronger protections to senior citizens, defined as persons who are 65 years of age or older. The bill extends the three-day right to cancel home improvement contracts, service and repair contracts, home solicitation contracts or offers, seminar sales solicitation contracts or offers, and contractual assessment program agreements to five days for senior citizens. The bill provides for conforming contractual terms and conditions. This extension of the law further protects these older consumers from the inherent pitfalls and consequences of these particular contractual arrangements.

The new five-day right to cancel afforded in these statutes only applies prospectively to contracts entered into on or after January 1, 2021. Therefore, no previously existing contracts should be impacted by the bill.

1. Stakeholder positions

According to the author:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. Specifically, AB 2471 grants senior citizens an extended right to cancel: 1) home solicitation contracts; 2) home improvement contracts; 3) Property Assessed Clean Energy (“PACE”) assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts. These five specific types of contracts were selected for an extended right to cancel because: 1) they can involve high-pressure or intimidating sales tactics -- often taking place in the senior citizen’s home; and/or 2) they involve a large financial commitment which senior citizens are ill equipped to recover from should the financial obligation prove to be too much

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney’s Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

The cosponsor of this bill, the California District Attorneys Association writes:

Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many seniors have – their home – which can be significantly encumbered or even lost to foreclosure as a result of contracts which were either misrepresented or not fully understood by the senior. Extending by two days the opportunity to cancel these specified contracts will alleviate some of the pressure sometimes felt during a sales presentation and allow for a more thoughtful and informed choice while working very little hardship on the companies seeking to enter into these contracts.

Writing in support, the Contractors State License Board (CSLB) states:

Approximately 16% of home improvement complaints filed with CSLB are filed by individuals identifying themselves as over 64 years of age. The percentage is likely greater as CSLB does receive complaints from individuals who are over 64 but elect not to be identified by their age. Citizens in California who reach age 65 are considered a “protected party.” As the sponsors have identified, the after-the-fact remedies providing protections for vulnerable populations do not do enough on the front end to protect against those who would take advantage.

By allowing additional time for senior citizens to consider the benefit of a home improvement contract, compare the written contract terms to the verbal promises, and consult with family members or other trusted advisors before undertaking the contract’s financial obligations, AB 2471 goes a long way to protect the senior citizens of California.

SUPPORT

California District Attorneys Association (co-sponsor)

San Diego County District Attorney (co-sponsor)

Ageless Alliance

Alzheimer’s Association - San Diego

American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO

Association of California Caregiver Resource Centers

California Association of Realtors

California Commission on Aging

California Low-Income Consumer Coalition

California Retired Teachers Association

Center for Public Interest Law, University of San Diego School of Law

Consumer Attorneys of California

Contra Costa Senior Legal Services

Contractors State License Board

County of San Diego

Housing and Economic Rights Advocates

Institute on Aging

International Network for the Prevention of Elder Abuse

Los Angeles City Attorney Michael Feuer

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation: AB 2811 (Berman, 2020) requires a business that makes an automatic renewal or continuous service offer to a consumer to provide the consumer with three to seven days’ notice before the expiration of a free gift or trial, or temporary or promotional price, included with the offer, and requires these businesses to make the cancellation process more accessible. This bill is currently pending in this Committee.

Prior Legislation: None known.

PRIOR VOTES:

Assembly Floor (Ayes 78, Noes 0)

Assembly Judiciary Committee (Ayes 10, Noes 0)

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

Date of Hearing: May 27, 2020

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 2471

Author:(Maienschein) – As Amended Ver:May 21, 2020

SUBJECT: Senior citizens: rescission of contracts

KEY ISSUE: should senior citizens be given an additIonal two days to review, evaluate, and possibly rescind certain contracts that are associated with increased risk of unfair business practices?

SYNOPSIS

This bill, sponsored by the California District Attorneys Association and the San Diego County District Attorney, seeks to protect elderly consumers from high pressure sales tactics and complex contracts by extending the right to cancel certain contracts for people 65 years of age or older from three business days to five business days. The bill applies to specific contracts that have an increased risk of unfair business practices: 1) home solicitation contracts; 2) home improvement contracts; 3) Property Assessed Clean Energy (PACE) assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. California law already provides a three-day right to cancel these contracts for all consumers, but the sponsors report a significantly greater risk to senior citizens who are entering into these contracts. The author argues that because of the increased financial and cognitive vulnerability of some senior citizens, additional consumer protections are necessary. This bill extends the right to cancel these types of contracts from three days to five days for individuals age 65 years and older. The bill is supported by California Retired Teachers Association, the Association of California Caregiver Resource Centers, California Association of Realtors, and a number of nonprofit organizations that serve elderly and indigent populations. It has no opposition.

SUMMARY: Extends, from three to five business days, the right to cancel certain consumer contracts for persons 65 years of age and older. Specifically, this bill:

1. Defines a senior citizen as an individual who is 65 years of age or older.
2. Extends the buyer’s right to cancel a home improvement contract to five business days if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
3. Extends the buyer’s right to cancel a service and repair contract to five business days if the buyer is a senior citizen, unless specified emergency conditions exist. Prescribes the form and content of a notice of this right to cancel.
4. Extends the buyer’s right to cancel a home solicitation contract to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
5. Extends the buyer’s right to cancel a seminar sales solicitation contract or offer to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
6. Extends a senior citizen property owner’s right to cancel a Property Assessed Clean Energy (PACE) assessment contract to within five business days of the latest of (a) the date on which the contract was signed, (b) the date on which the property owner received a statutorily-prescribed Financing Estimate or Disclosure, or (c) the date on which the property owner received the notice of their right to cancel. Prescribes the form and content of a notice of this right to cancel.
7. Applies the extended right to cancel set forth in 2) through 6) to contracts entered into on or after January 1, 2021.

EXISTING LAW:

1. Provides that a contract is extinguished by its rescission. (Civil Code Section 1688.)
2. Regulates home improvement contractors and home improvement contracts. (Business and Professions Code Sections 7150-7170.)
3. Provides various definitions of a “home improvement contract.” (Business and Professions Code Section 7159.)
4. Prescribes the form and content of a notice of the buyer’s right to cancel a home improvement contract within three business days. (Business and Professions Code Section 7159 (e)(6).)
5. Defines “service and repair contract” as an agreement between a homeowner or tenant and a contractor for a home improvement (a) valued at $750 or less, (b) for which the buyer initiated the contact with the contractor, (c) for which no payment is due until the work is completed, and (d) under which only good or services that are reasonably necessary are provided. (Business and Professions Code Section 7159.10 (a).)
6. Prescribes the form and content of a notice of the buyer’s right to cancel a service and repair contract within three business days if any of the conditions (a)-(d) in (5) are not met. (Business and Professions Code Section 7159.10 (e)(12).)
7. Regulates home solicitation contracts. (Civil Code Sections 1689.5-1689.14.)
8. Defines “home solicitation contract or offer” as a contract or offer that is made at a place other than business premises, for the sale, lease, or rental of goods and/or services, in an amount of $25 or more. (Civil Code Section 1689.5 (a).)
9. Provides buyers the right to cancel a home solicitation contract or offer until midnight of the third business day after the contract or offer is signed. (Civil Code Sections 1689.6 (a).)
10. Prescribes the form and content of the notice of the right to cancel a home solicitation contract or offer. (Civil Code Section 1689.7.)
11. Provides that the three-day right to cancel a home solicitation contract or offer may be waived by the buyer under circumstances requiring emergency repairs that are necessary for the immediate protection of persons or real or personal property. (Civil Code Section 1689.13.)
12. Defines “seminar sales solicitation contract or offer” as a contract or offer made using selling techniques in a seminar setting, for the sale, lease, or rental of goods and/or services in an amount of $25 or more. (Civil Code Section 1689.24.)
13. Provides buyers the right to cancel a seminar sales solicitation contract or offer until midnight of the third business day after the contract or offer is signed. (Civil Code Sections 1689.20, 1689.21.)
14. Regulates contractual assessments, including PACE financing, repaid through property taxes. (Streets and Highways Code Sections 5898.10-5899.4, 5900-5954.)
15. Requires property owners to receive a notice of their right to cancel a PACE assessment contract within three business days of the latest of (a) the date on which the contract was signed, (b) the date on which they received a statutorily-prescribed Financing Estimate or Disclosure, or (c) the date on which they received the notice of their right to cancel. (Streets and Highways Code Sections 5898.16, 5898.17.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: AB 2471 seeks to address consumer protection concerns by extending the right to cancel certain contracts for people of 65 years of age or older. Specifically addressed in this bill are home solicitation contracts, home improvement contracts, PACE assessment contracts, service or repair contracts, and seminar sales contracts. Current law already allows a consumer three business days to cancel these types of contracts. This bill would expand this right to cancel from three to five business days for older consumers to take into consideration their increased vulnerability to financial exploitation. In support of the bill, the author writes:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. … This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts.

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney’s Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

Under existing law there is a right to cancel for specified contracts. California law has specifically provided all consumers with a three-day right to cancel for the following types of contracts: 1) home solicitation contracts; 2) home improvement contracts; 3) “PACE” assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. These transactions, in which the consumer is directly engaging with the contractor, require a higher level of contractual and financial competency on the part of the consumer. These transactions also often occur in non-traditional business environments (i.e., the consumer’s home or seminars) and may involve high-pressure or intimidating sales tactics. Because of the typically non-traditional business setting in which these contracts are often negotiated, there is an increased risk of unfair or predatory business practices. These factors when combined make it much more likely that a consumer will enter into a contract that they misinterpret, do not fully understand, or would simply not choose to enter under normal circumstances. Further, several of these contract types use the consumer’s home as security and may open up the homeowner both to significant financial obligation and potential loss of their home through foreclosure. As a result, the Legislature has provided additional consumer protections in the form of a three-day right to cancel these contracts. The goal of these rights to cancel is to provide consumers with the opportunity to review and reevaluate the terms of the contract before fully committing. To ensure the right to cancel is meaningful, California law requires these contractors to provide notice to buyers of their right to cancel.

Similarly, federal law protects consumers with a three-day right to cancellation for any federally-insured loan used to finance home improvement (Truth in Lending Act of 1968).

Additional consumer protections needed for senior citizens. Current law gives all consumers the same three-day period to review and cancel these contracts, which the author argues does not adequately take into consideration the differing needs and abilities of consumers 65 years of age or older. This bill’s proposed expansion of the right to cancel, as with the other laws protecting elders from potential financial abuse, reflects the fact that some senior citizens may have difficulty understanding complex financial transactions, may be vulnerable to high pressure sales tactics, particularly if they occur in the senior’s home, and may need more time to consult with family members or others about the implications of their financial decisions. Needless to say, many senior citizens have a better understanding of financial transactions than many younger consumers, but it is well-documented that advanced age is associated with changes in cognitive ability and this may affect their capacity to understand and evaluate complex contracts. Justice in Aging, a national non-profit legal advocacy organization, specifically cites concerns about transactions or agreements that are damaging to elderly clients, stating that “rescission or a reversal can be sought when your client was ‘induced’ into a contract by a misrepresentation or undue influence by the perpetrator or if the client lacked necessary capacity at the time of the transaction.” (Justice in Aging, Financial Exploitation of Older Adults, (2018), https://www.justiceinaging.org/wp-content/uploads/2018/11/California-Financial-Exploitation-Guide.pdf)

One of the sponsors of this bill, the San Diego County District Attorney, reports a rash of elder abuse cases resulting from the contract types named in this bill. The victims in these cases entered into contracts which they did not fully understand or were the result of unfair business practices, including high-pressure sales tactics or intentional miscommunication of the terms of the written contract. By providing an additional two days for senior citizens to consult with family or other advisors, this bill should decrease the likelihood that senior consumers will experience the negative financial impacts of entering into damaging, ill-advised contracts.

This bill is consistent with previous legislative efforts to protect vulnerable seniors. California legislation has previously addressed similar concerns about the vulnerability of older consumers in the Reverse Mortgage Elder Protection Act of 2009. (AB 329 (Feuer), Chap. 236 Stats. 2009.) Among other protections, that bill extended the right of senior citizen, reverse mortgage borrowers to rescind the agreement from three days to 30 days. Similarly, seniors 65 years of age or older have a 30-day examination period in which to cancel an insurance contract. (Insurance Code section 786.) California also recognizes the vulnerability of this population by providing enhanced damages or penalties for unfair business practices perpetrated against senior citizens. (Civil Code Section 1780 (b)(1); Business & Professions Code section 17206.1 (a) (1); Business & Professions Code Section 7159.2 (e).) Additionally, the Elder Abuse and Dependent Adult Civil Protection Act also recognizes and guards against abuse, including financial abuse, of elderly and dependent adults. (See Welfare and Institutions Code Section 15600 et seq.)

ARGUMENTS IN SUPPORT: In support of the bill, the San Diego County District Attorney writes:

Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many senior citizens have – their home – which can be placed at risk or even lost to foreclosure as a result of contracts which were misrepresented or misunderstood. The California State Licensing Board (“CSLB”), which is tasked with protecting consumers by licensing and regulating the state’s construction industry, keeps track of complaints involving consumers 65 years old or older. According to CSLB statistics, in 2018, there were 12,775 home improvement complaints filed with the Board. Of that total number, 2,057 complaints were filed by consumers who checked the box ‘over 64’ on the complaint form. Thus, senior citizens represented approximately 16% of home improvement contract complainants. … These numbers demonstrate, at a minimum, dissatisfaction or financial injury sufficient to cause the senior citizen, or their representative, to file a complaint.

Senior citizens have also suffered devastating consequences as a result of ill-advised PACE assessment contracts. Last year, our office, as a member of a statewide task force, sued Renovate America, Inc., one of California’s largest PACE administrators, for unfair business practices and false advertising. As part of the settlement of that civil law enforcement action, Renovate America agreed to certain injunctive provisions specifically designed to protect senior citizens, including an extended right to cancel for a number of energy efficient home improvement projects from three (3) business days to five (5) business days. AB 2471 simply codifies what is already being done to protect seniors from aggressive sales tactics before it is too late.

REGISTERED SUPPORT / OPPOSITION:

Support

California District Attorneys Association (co-sponsor)

San Diego County District Attorney (co-sponsor)

Ageless Alliance

Alzheimer’s Association - San Diego

American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO

Association of California Caregiver Resource Centers

California Association of Realtors

California Low-Income Consumer Coalition

California Retired Teachers Association

Center for Public Interest Law, University of San Diego School of Law

Consumer Attorneys of California

Housing and Economic Rights Advocates

International Network for The Prevention of Elder Abuse

Los Angeles City Attorney Michael Feuer

Opposition

None on file

Analysis Prepared by: Emily Wonder and Jith Meganathan / JUD. / (916) 319-2334

ASSEMBLY THIRD READING

ATR Bill Id:AB 2471

Author:(Maienschein)

As Amended Ver:May 21, 2020

Majority vote

SUMMARY:

Extends, from three to five business days, the right to cancel certain consumer contracts for persons 65 years of age and older.

Major Provisions

1. Defines a senior citizen as an individual who is 65 years of age or older.
2. Extends the buyer's right to cancel a home improvement contract to five business days if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
3. Extends the buyer's right to cancel a service and repair contract to five business days if the buyer is a senior citizen, unless specified emergency conditions exist. Prescribes the form and content of a notice of this right to cancel.
4. Extends the buyer's right to cancel a home solicitation contract to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
5. Extends the buyer's right to cancel a seminar sales solicitation contract or offer to midnight of the fifth business day after the contract or offer is signed if the buyer is a senior citizen. Prescribes the form and content of a notice of this right to cancel.
6. Extends a senior citizen property owner's right to cancel a Property Assessed Clean Energy (PACE) assessment contract to within five business days of the latest of a) the date on which the contract was signed, b) the date on which the property owner received a statutorily-prescribed Financing Estimate or Disclosure, or c) the date on which the property owner received the notice of their right to cancel. Prescribes the form and content of a notice of this right to cancel.
7. Applies the extended right to cancel set forth in 2) through 6) to contracts entered into on or after January 1, 2021.

COMMENTS:

This bill seeks to address consumer protection concerns by extending the right to cancel certain contracts for people of 65 years of age or older. Specifically addressed in this bill are home solicitation contracts, home improvement contracts, PACE assessment contracts, service or repair contracts, and seminar sales contracts. Current law already allows a consumer three business days to cancel these types of contracts. This bill would expand this right to cancel from three to five business days for older consumers to take into consideration their increased vulnerability to financial exploitation.

Under existing law there is a right to cancel for specified contracts. California law has specifically provided all consumers with a three-day right to cancel for the following types of contracts: 1) home solicitation contracts; 2) home improvement contracts; 3) "PACE" assessment contracts; 4) service or repair contracts; and 5) seminar sales contracts. These transactions, in which the consumer is directly engaging with the contractor, require a higher level of contractual and financial competency on the part of the consumer. These transactions also often occur in non-traditional business environments (i.e., the consumer's home or seminars) and may involve high-pressure or intimidating sales tactics. Because of the typically non-traditional business setting in which these contracts are often negotiated, there is an increased risk of unfair or predatory business practices. These factors when combined make it much more likely that a consumer will enter into a contract that they misinterpret, do not fully understand, or would simply not choose to enter under normal circumstances. Further, several of these contract types use the consumer's home as security and may open up the homeowner both to significant financial obligation and potential loss of their home through foreclosure. As a result, the Legislature has provided additional consumer protections in the form of a three-day right to cancel these contracts. The goal of these rights to cancel is to provide consumers with the opportunity to review and reevaluate the terms of the contract before fully committing. To ensure the right to cancel is meaningful, California law requires these contractors to provide notice to buyers of their right to cancel.

Similarly, federal law protects consumers with a three-day right to cancellation for any federally-insured loan used to finance home improvement (Truth in Lending Act of 1968).

Additional consumer protections needed for senior citizens. Current law gives all consumers the same three-day period to review and cancel these contracts, which the author argues does not adequately take into consideration the differing needs and abilities of consumers 65 years of age or older. This bill's proposed expansion of the right to cancel, as with the other laws protecting elders from potential financial abuse, reflects the fact that some senior citizens may have difficulty understanding complex financial transactions, may be vulnerable to high pressure sales tactics, particularly if they occur in the senior's home, and may need more time to consult with family members or others about the implications of their financial decisions. Needless to say, many senior citizens have a better understanding of financial transactions than many younger consumers, but it is well-documented that advanced age is associated with changes in cognitive ability and this may affect their capacity to understand and evaluate complex contracts. Justice in Aging, a national non-profit legal advocacy organization, specifically cites concerns about transactions or agreements that are damaging to elderly clients, stating that "rescission or a reversal can be sought when your client was 'induced' into a contract by a misrepresentation or undue influence by the perpetrator or if the client lacked necessary capacity at the time of the transaction." (Justice in Aging, Financial Exploitation of Older Adults, (2018), https://www.justiceinaging.org/wp-content/uploads/2018/11/California-Financial-Exploitation-Guide.pdf)

One of the sponsors of this bill, the San Diego County District Attorney, reports a rash of elder abuse cases resulting from the contract types named in this bill. The victims in these cases entered into contracts which they did not fully understand or were the result of unfair business practices, including high-pressure sales tactics or intentional miscommunication of the terms of the written contract. By providing an additional two days for senior citizens to consult with family or other advisors, this bill should decrease the likelihood that senior consumers will experience the negative financial impacts of entering into damaging, ill-advised contracts.

This bill is consistent with previous legislative efforts to protect vulnerable seniors. California legislation has previously addressed similar concerns about the vulnerability of older consumers in the Reverse Mortgage Elder Protection Act of 2009. AB 329 (Feuer), Chapter 236 Statutes of 2009. Among other protections, that bill extended the right of senior citizen, reverse mortgage borrowers to rescind the agreement from three days to 30 days. Similarly, seniors 65 years of age or older have a 30-day examination period in which to cancel an insurance contract. (Insurance Code section 786.) California also recognizes the vulnerability of this population by providing enhanced damages or penalties for unfair business practices perpetrated against senior citizens. (Civil Code Section 1780 (b)(1); Business & Professions Code section 17206.1 (a) (1); Business & Professions Code Section 7159.2 (e).) Additionally, the Elder Abuse and Dependent Adult Civil Protection Act also recognizes and guards against abuse, including financial abuse, of elderly and dependent adults. (See Welfare and Institutions Code Section 15600 et seq.)

According to the Author:

AB 2471 extends the right to cancel certain contracts for persons 65 years of age or older from three (3) business days to five (5) business days. … This modest extension of time will help alleviate some of the pressure felt during sales presentations and allow for a more measured and informed choice, while protecting the ability of individuals and companies to negotiate and enter into mutually beneficial contracts.

Elderly consumers are at great financial risk when they enter contracts in which they do not fully understand according to National Association of Area Agencies on Aging and the San Diego County District Attorney's Office of Economic Crimes Division/Consumer Protection Unit. Many times, seniors sign contracts due to high-pressure sales tactics or they sign despite not fully comprehending the difference between the verbal presentation and the actual terms of the written contract. These contracts can have dire consequences, not only financially, but also psychologically for seniors who unknowingly place their home – their largest financial asset – at risk to foreclosure due to assessments or liens.

Arguments in Support:

In support of the bill, the San Diego County District Attorney writes:

Home improvement and PACE assessment contracts, in particular, involve the largest financial asset many senior citizens have – their home – which can be placed at risk or even lost to foreclosure as a result of contracts which were misrepresented or misunderstood. The California State Licensing Board ("CSLB"), which is tasked with protecting consumers by licensing and regulating the state's construction industry, keeps track of complaints involving consumers 65 years old or older. According to CSLB statistics, in 2018, there were 12,775 home improvement complaints filed with the Board. Of that total number, 2,057 complaints were filed by consumers who checked the box 'over 64' on the complaint form. Thus, senior citizens represented approximately 16% of home improvement contract complainants. … These numbers demonstrate, at a minimum, dissatisfaction or financial injury sufficient to cause the senior citizen, or their representative, to file a complaint.

Senior citizens have also suffered devastating consequences as a result of ill-advised PACE assessment contracts. Last year, our office, as a member of a statewide task force, sued Renovate America, Inc., one of California's largest PACE administrators, for unfair business practices and false advertising. As part of the settlement of that civil law enforcement action, Renovate America agreed to certain injunctive provisions specifically designed to protect senior citizens, including an extended right to cancel for a number of energy efficient home improvement projects from three (3) business days to five (5) business days. AB 2471 simply codifies what is already being done to protect seniors from aggressive sales tactics before it is too late.

Arguments in Opposition:

None on file

FISCAL COMMENTS:

None

VOTES:

ASM JUDICIARY: 10-0-1

YES: Mark Stone, Gallagher, Chau, Chiu, Gonzalez, Holden, Kalra, Kiley, Obernolte, Reyes

ABS, ABST OR NV: Maienschein

UPDATED:

VERSION: May 21, 2020

CONSULTANT: Emily Wonder and Jith Meganathan / JUD. / (916) 319-2334 FN: 0002789