Contributors

Christian Scali

Founder and Managing Shareholder

The 2021 legislative session touched on a wide array of business topics. Changes in the law include regulating debt collection, automatically renewing service contracts, and privacy. These laws do not affect all businesses, but are nonetheless worth every business owner’s attention, as they may shape you conduct business in California in the future.

AB 1221 – Consumer Warranties

What the law currently requires

Existing law, the Song-Beverly Consumer Warranty Act, provides consumer warranty protection to buyers of consumer goods, including motor vehicles, home appliances, and home electronic products. The act requires a service contract, as defined, to include certain elements, including a clear description and identification of the covered product.

How this bill changes the law

This bill will allow month-to-month or continue until canceled service contracts and will require a service contract that continues until canceled by the buyer or service contractor to, among other things, disclose to the buyer in a clear and conspicuous manner that the service contract shall continue until canceled by the buyer or service contractor and provide a toll-free number, email address, postal address, and, if one exists, internet website the buyer can use to cancel the service contract.

This bill exempts vehicle service contracts from the above-described provisions.

AB 390 – Automatic Renewal Programs

What the law currently requires

Existing law regulates automatic renewal offers and continuous service offers that businesses make to California consumers by requiring that the these terms must be clear and conspicuous.

How this bill changes the law

This law, beginning July 1, 2022, revises and recasts these rules to make it unlawful to fail to provide a consumer with a notice containing specific information if the consumer accepted a free gift or trial included in an automatic renewal offer.

This bill will also require the notice if the consumer accepted an automatic renewal offer or continuous service offer with an initial term of one year or longer that automatically renews for a subsequent term that is longer than one month, unless the consumer cancels the contract. The notice should be provided at least 15 days and not more than 45 days before the automatic renewal offer or continuous service offer renews.

This bill will also requires the business to allow a consumer to terminate the automatic renewal or continuous service offer at will, and without engaging any further steps that obstruct or delay the consumer’s ability to terminate immediately.

This bill does not apply to business-to-business contracts.

SB 762 – Arbitration Fees

What the law currently requires

Existing law provides that if an employment or consumer arbitration requires the party which drafted the arbitration agreement to pay fees and costs before arbitration can proceed or during the pendency of an arbitration, the drafting party is in breach of the agreement, in default of arbitration, and waives its right to compel arbitration if it does not pay the fees within 30 days after the date they are due.

How this bill changes the law

This bill will require the arbitration provider to provide invoices for the fees and costs described above, in their entirety, to all parties to the arbitration on the same day and by the same means. The bill will require those invoices to be issued as due upon receipt unless the arbitration agreement expressly provides a different time for payment. For fees and costs due during the pendency of the arbitration, the bill will require any extension of time for the due date to be agreed upon by all parties to the arbitration.

SB 461 – Unfair Competition Law Enforcement

What the law currently requires

The Unfair Competition Law (UCL) makes various practices unlawful and provides that a person who engages, has engaged, or proposes to engage in unfair competition is liable for a civil penalty, as specified. For actions for relief prosecuted under the UCL, existing law authorizes those actions to be brought by certain public attorneys, including the Attorney General, a city attorney of a city having a population in excess of 750,000, and a county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance.

How this bill changes the law

This bill will additionally authorize an action under the UCL to be brought by a county counsel of a county within which a city has a population in excess of 750,000 people.

SB 531 – Consumer Debt

What the law currently requires

The Rosenthal Fair Debt Collection Practices Act, regulates the collection of a consumer debt by a debt collector. A “debt collector” is a person who, in the ordinary course of business engages in debt collection, including any person who composes and sells, or offers to compose and sell, forms, letters, and other collection media used or intended to be used for debt collection. Starting January 1, 2022, the Debt Collection Licensing Act prohibits a person from engaging in the business of debt collection in this state without first obtaining a license from the Commissioner of Financial Protection and Innovation. Existing law prohibits a debt buyer from making a written statement to a debtor in an attempt to collect a consumer debt unless the debt buyer possesses specified information, including the date of default or the date of the last payment, and requires the debt buyer to include specified information in the written statement to the debtor. Existing law also defines “debt buyer” to mean a person or entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether it collects the debt itself, hires a third party for collection, or hires an attorney-at-law for collection litigation.

How this bill changes the law

This bill will require a debt collector who has accepted the assignment of a debt to provide to the debtor, upon the debtor’s request, a written statement that includes certain information, including the date the debt became delinquent or the date of the last payment, within 30 calendar days of receipt of a debtor’s written request for information regarding the debt or proof of the debt, as specified. The bill will require a debt collector to which delinquent debt has been assigned to include in its first written communication with the debtor a specified notice, and will require a debt collector to provide a debtor an active postal address to which a debtor may send a request for the information. The bill will provide that a debt buyer who complies with the written statement requirements under the Debt Collection Licensing Act is deemed to comply with this new requirement on a debt collector, to which a delinquent debt has been assigned, to provide a written statement to the debtor upon the debtor’s request. The bill will prohibit a debt collector to which a delinquent debt has been assigned from making a written statement to a debtor in an attempt to collect a delinquent consumer debt, except if the debt collector has access to specified information, as provided. The bill will provide that these provisions become operative on July 1, 2022.

SB 343 – Environmental Advertising

What the law currently requires

Existing law declares that it is the public policy of the state that environmental marketing claims, whether explicit or implied, should be supported by competent and reliable evidence to prevent deceiving or misleading consumers about the environmental impact of plastic products. Further, it is unlawful for any person to make any untruthful, deceptive, or misleading environmental marketing claim, whether explicit or implied.

How this bill changes the law

The law prohibits a person from offering for sale, selling, distributing, or importing into the state any product or packaging for which a deceptive or misleading claim about the recyclability of the product or packaging is made. It further restricts the use of the chasing arrows symbol for recyclable materials, preventing its use in a misleading manner and requiring specific documentation of the actual recyclability of materials.

This bill will also require the Department of Resources Recycling and Recovery, on or before January 1, 2024, in order to provide information to the public to evaluate whether a product or packaging is recyclable in the state and is of a material type and form that routinely become feedstock used in the production of new products and packaging, to update specified regulations to require disposal facility operators, among other operations and facilities, to provide information to the department regarding how material collected or processed by the operations and facilities was collected and what material types and forms are actively recovered, and not considered contaminants, by the operation or facility. The bill will require the department to conduct, publish on its internet website, and update as provided, a characterization study of material types and forms that are collected, sorted, sold, or transferred by solid waste facilities identified by the department for inclusion in the study. The bill will provide that, except as specified, a product or packaging is considered recyclable in the state if, based on the information published by the department, the product or packaging is of a material type and form collected for recycling by recycling programs for jurisdictions that collectively encompass at least 60% of the population of the state, among other statewide recyclability criteria.

AB 1391 – Unlawfully Obtained Data

What the law currently requires

Existing law, the California Consumer Privacy Act of 2018, authorizes a consumer whose nonencrypted and nonredacted personal information, as defined, is subject to an unauthorized access and exfiltration, theft, or disclosure as a result of a business’ violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information may institute a civil action.

How this bill changes the law

This bill will make it unlawful for a person to sell data, or sell access to data, that the person has obtained or accessed pursuant to the commission of a crime and will also make it unlawful for a person, who is not an authorized person, as defined, to purchase or use data from a source that the person knows or reasonably should know has obtained or accessed that data through the commission of a crime.

SB 41 – Genetic Information

What the law currently requires

The California Consumer Privacy Act (CCPA) regulates the collection and sharing of consumer information including biometric data.

How this bill changes the law

The bill expands current protections under the CCPA covering biometric data. It will require direct-to-consumer genetic testing companies, as defined, to provide consumers with certain information regarding policies and procedures for the collection, use, maintenance, and disclosure of genetic data, and to obtain consumers’ express consent for collection, use, or disclosure of the consumers’ genetic data.

This bill also requires direct-to-consumer genetic testing companies to honor consumers’ withdrawal of consent and to destroy these consumers’ biological sample within 30 days of revocation of consent. It further establishes reasonable security procedures and practices that these companies must maintain to protect consumers’ genetic data against unauthorized access, destruction, use, modification, or disclosure, and develop procedures and practices to enable consumers to access their genetic data, and to delete their account and genetic data, as specified.

Finally, this bill imposes civil penalties for any violation of those provisions. There is no right of private action in the bill, though; only the Attorney General, a district attorney, county counsel, city attorney, or city prosecutor may, in the name of the people of the State of California, bring an action for relief.

AB 335 – CCPA and Vessel Information

What the law currently requires

Existing law, the California Consumer Privacy Act of 2018, grants a consumer various rights with regard to personal information relating to that consumer that is held by a business, including the right to direct a business not to sell, as defined, personal information about the consumer to third parties, as defined. This right is known as the right to opt out.

How this bill changes the law

This bill exempts vessel information or ownership information retained or shared between a vessel dealer and the vessel’s manufacturer from the right to opt out if the information is shared for the purpose of effectuating or in anticipation of effectuating a vessel repair covered by a vessel warranty or a recall, as specified. This is similar language to the exemption that applies to vehicle information shared for this purpose.

SB 87 – COVID-19 Relief Grant Program

What the law currently requires

Executive Order No. E 20/21-182 allocated $500 million from the Disaster Response-Emergency Operations Account to fund the COVID-19 Relief Grant Program, in order to provide financial relief to small businesses suffering from the economic impacts of the COVID-19 pandemic.

How this bill changes the law

This bill establishes, formally, and expands the California Small Business COVID-19 Relief Grant Program, based on the initial grant program described above. This program will provide grants of up to $25,000 to qualified small businesses and nonprofits with up to $2.5 million annual gross revenue, and to eligible nonprofit cultural institutions with no limitation on annual gross revenue.

The bill specifies that grants will be allocated across at least four rounds: one closed round using the existing applicants from Rounds 1 and 2 of the previous COVID-19 Relief Grant Program (described above), one round for the eligible nonprofit cultural institutions (described below), and at least two open rounds for all qualified small businesses. Grant amounts scale with annual gross revenue (based on 2019): $5 thousand for revenue up to $100,000, $15,000 for revenue between $100,000 and $1 million, and $25,000 for revenue over $1 million.

Specifies eligibility criteria for small businesses and nonprofits, including that they must:

• have more than $1,000 and less than $2.5 million in annual gross revenue.
• have been in operation by June 1, 2019.
• have been impacted by COVID-19 and the related health and safety restrictions.
• be open or have a plan to reopen when allowed.
• provide specified documentation.
• have a physical presence in California.
• be the franchise or location with the highest revenue.

Ineligible businesses include certain political and financial industries and businesses that are unlawful under federal, state or local law, among other restrictions.

Finally, this bill will excludes, for taxable years beginning on or after January 1, 2020, and before January 1, 2030, from gross income specified California grant allocations.