BILL ANALYSIS SENATE COMMITTEE ON BILL NO.: AB 171 BUSINESS AND PROFESSIONS AUTHOR: Conroy Senator Daniel Boatwright, Chairman As Proposed to be amended HEARING DATE: June 27, 1994 FISCAL: Yes SUBJECT: Consumer protection: goods and services - commercial mail receiving agencies (CMRAs) and private mailbox receiving service. DIGEST: Existing law, the Business and Professions Code, provides for the šgeneral regulation of business practices in this state. Existing law makes it a misdemeanor for any person, in the sale šof consumer goods or services, to use a post office box address, šor street address as a site for receipt of mail, or as a štelephone answering service without disclosing on all advertising šand promotional materials, the legal name of the business and šcomplete street address from which business is conducted. Existing law makes certain exemptions from these provisions, šincluding individuals licensed by a state or local agency which šhas the individual's current business street address or home šaddress on file, and which is authorized to reveal that address što inquiring persons. Existing federal law provides that an individual or business may šauthorize the delivery of mail through a third party agent by šcompleting and signing an "Application for Delivery of Mail šThrough Agent," U. S. Postal Service (USPS) Form 1583. Federal šlaw provides that the information contained in USPS Form 1583 šshall not be available to the public, but permits the names and šaddresses of postal customers to be furnished to federal, state šor local government agencies. Existing state law (B&P Code 22780) prohibits any commercial šmail receiving agency (CMRA) from accepting USPS Form 1583, until špositive identification has been established for the person šfiling the form, and requires CMRAs to maintain a copy of any šUSPS Form 1583, and make the copy available upon request to any šlaw enforcement agency conducting an investigation for purpose of šthat investigation and copying. AB 171 Page 2 This bill would: 1. State the Legislature's intent that the commercial mail receiving agency (CMRA) industry is the most appropriate party to establish self-regulation and identification policies to provide consumer confidence, and there is a need for the CMRA industry to have a statewide registry system available to governmental agencies for inspection. 2. Include within the current misdemeanor provision any person conducting a business in the state who uses a private mailbox receiving service. 3. Exempt from the current requirement to disclose the š street address from which business is conducted on advertising and promotional materials those who conduct their business from their residence who have: (1) filed their current business street address or home address with the USPS on USPS Form 1583, and (2) signed a form which, among other things, authorizes the CMRA to act as that person's agent for service of process. The requirement to disclose the legal name of the business would still apply. 4. Require that a CMRA obtain two pieces of identification š from every mail receiving service customer, and provide the customer with a notice that: (1) acknowledges the customer's obligation to advise the CMRA of any address change, (2) irrevocably authorizes the CMRA to act as the customer's agent for service of process until two years after termination of service, and (3) informs the customer of prohibitions against unfair business practices and false advertising. 5. Require that a CMRA maintain a copy of the customer's two š pieces of identification and USPS Form 1583 for two years after termination of service to the customer, and make them available to any governmental agency upon request for the purposes of inspection and copying. 6. Require that a CMRA shall be authorized to act as agent š for service of process on behalf of its mail receiving service customers, and for two years after termination of a customer's mail receiving service agreement. 7. Require that when a CMRA receives a complaint or inquiry š concerning any CMRA mail receiving service customer, the CMRA shall inform the person making the complaint or inquiry that the CMRA is an authorized agent for service of process on the CMRA service customer. AB 171 Page 3 8. Require that when presented with a judgment against a š mail receiving service customer, the CMRA shall give the judgment creditor the last known address of that customer. 9. Provide that a CMRA who contacts a law enforcement agency š regarding suspected illegal or fraudulent activities by a mail receiving service customer is immune from civil liability related to that contact. 10. Provide that, based on the sole fact that it provides š mail receiving services, no CMRA, shall be liable for the illegal acts of a mail receiving service customer if it keeps a copy of the customer's USPS Form 1583 and complies with specified customer identification disclosure provisions. FISCAL EFFECT: Unknown. This is a fiscal bill. According to the Assembly Ways šand Means Committee analysis, this bill contains no state costs, šbut could contain potential costs to district attorneys in šhandling consumer complaints against mail order businesses. COMMENTS: 1. This analysis was written based upon the proposed author's šamendments. 2. Conforming amendment - previous legislation. Last year's AB 2345 (Ferguson, Chapter 636, Statutes of 1993) šadded Chapter 27.5 ( 22780) to the Business and Professions Code što regulate CMRAs. That bill, sponsored by the Department of šJustice, as of January 1, 1994, requires a CMRA to: (1) establish positive identification of any person filing USPS šForm 1583, (2) maintain a copy of any USPS Form 1583, and make šthe copy available upon request to any law enforcement agency šconducting an investigation for purpose of that investigation and šcopying. When heard by the the Senate Business and Professions Committee šAB 2345 mandated a CMRA to make a copy of USPS Form 1583 šavailable upon request to any law enforcement agency for purposes šof inspection and copying. The Committee chose to amend that šbill to specifically state "for the purposes of conducting an šinvestigation." AB 171 in its current form represents two policy changes from šthat bill. First, AB 171 mirrors the inspection language in that šbill, and in its present form, would represent a reversal of that špolicy by stating "for purpose of inspection and copying." To AB 171 Page 4 maintain a consistent policy, the Business and Professions šCommittee should amend this bill in the same way that it did AB 2345. Second, in its current form, AB 171 also would represent a šdeparture from the policy of AB 2345 by specifying that a CMRA šmay reveal certain documents to any "governmental agency" instead šof "law enforcement agency." The recommendation of Business and Professions Committee staff is što amend this bill to use language and make conforming changes šsimilar to the following: Upon the request of any law enforcement agency š conducting an investigation, the commercial mail š receiving agency shall make available to that law š enforcement agency, for purposes of that investigation š and copying... 3. This bill is sponsored by Home Office and Business šOpportunities Association, and Mail Boxes Etc. (sponsors). šAccording to the sponsors, an estimated 34 million Americans šoperate businesses out of their homes and of these businesses š12.1 million are full-time enterprises. This bill is intended to šrecognize the growth of in-home businesses, by clarifying the law što exempt all CMRA users from the requirement to disclose their šactual business address in all advertising and promotional šmaterial. The sponsors state that the bill was made a two-year bill in šorder to address the concerns raised by state and local law šenforcement agencies with the bill's provisions that would exempt šprivate box holders from disclosing their actual place of šbusiness to the general public. Supporters of the bill believe that the current requirement to šdisclose the complete street address from which business is šconducted on all advertising and promotional materials presents a šsecurity and privacy risk to operators of home-based businesses šand their families. Additionally, they argue that many city šzoning codes prohibit businesses operated in residential areas šfrom publishing their street address on promotional materials. 4. Latest amendments - former opposition. This bill was formerly opposed by the Los Angeles County District šAttorney's Office (LADA). The LADA states that mail order fraud šis one of the top five sources of consumer complaints in šCalifornia today, and has worked with the sponsor in order to šproduce a bill which protects consumers from unscrupulous persons šwho use rented mail drop boxes to hide from customers and šenforcers. AB 171 Page 5 The latest amendments to AB 171 are the product of meetings šbetween the Department of Justice, the Los Angeles County šDistrict Attorney's Office and the sponsor, 5. Opposition. The Department of Consumer Affairs (DCA) opposed the previous šversion (6/2/94) the bill based on the fact that it did not give šconsumers information as to the business' actual street address šin case a problem arises. DCA states that consumers have a švariety of legitimate reasons to contact a business (e.g., šdefective merchandise, overcharge, questions regarding service šfor goods or services purchased). DCA states that the CMRA would šnot be required to release the actual street address to šconsumers, nor does the Postal Service release it to customers š(it only releases it to law enforcement agencies, and then only šwhen they are pursuing a felony conviction. 6. Broadening of requirements. The provisions of this bill represent a substantial broadening of šthe requirements placed upon a CMRA relative to all of its mail šreceiving service customers, not just those who operate šhome-based businesses. Under this bill, all mail receiving šservice customers, including state-licensed individuals and šnon-home-based business owners, would be required to irrevocably šauthorize the CMRA to act as the customer's agent for service of šprocess. Support and Opposition: Support: Mail Boxes Etc. (sponsor) Home Office and Business Opportunities Association (sponsor) National Association for the Self-Employed Independent Workers Association A number of concerned individuals Opposition: Department of Consumer Affairs (DCA) Consultant: Glen V. Ayers