Code Section Group

Business and Professions Code - BPC

DIVISION 3. PROFESSIONS AND VOCATIONS GENERALLY [5000 - 9998.11]

  ( Heading of Division 3 added by Stats. 1939, Ch. 30. )

CHAPTER 20. Electronic and Appliance Repair Dealers [9800 - 9874]

  ( Heading of Chapter 20 amended by Stats. 1978, Ch. 1161. )

ARTICLE 4.5. Service Contractors [9855 - 9855.9]
  ( Article 4.5 added by Stats. 1993, Ch. 1265, Sec. 7. )

9855.
  

The definitions used in this section shall govern the construction and terms as used in this chapter:

(a) “Service contract” means a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance, replacement, or repair of an electronic set or appliance, as defined by this chapter, and their accessories or of furniture, jewelry, lawn and garden equipment, power tools, fitness equipment, telephone equipment, small kitchen appliances and tools, optical products, or home health care products, and may include provisions for incidental payment of indemnity under limited circumstances, including, but not limited to, power surges, food spoilage, or accidental damage from handling. “Service contract” shall not include a contract in writing to maintain structural wiring associated with the delivery of cable, telephone, or other broadband communications services. “Service contract” shall not include a contract in which a consumer agrees to pay a provider of vision care services for a discount on optical products or contact lenses for a specified duration.

(b) “Service contract administrator” or “administrator” means a person who performs or arranges the collection, maintenance, or disbursement of moneys to compensate any party for claims or repairs pursuant to a service contract, and who also performs or arranges any of the following activities on behalf of service contract sellers:

(1) Providing service contract sellers with service contract forms.

(2) Participating in the adjustment of claims arising from service contracts.

(3) Arranging on behalf of service contract sellers the insurance required by Section 9855.2.

A service contract administrator shall not be an obligor on a service contract unless all service contracts under which the service contract administrator is obligated to perform are insured under a service contract reimbursement insurance policy.

(c) (1) “Service contract seller” or “seller” means a person who sells or offers to sell a service contract to a service contractholder, including a person who is the obligor under a service contract sold by the seller, manufacturer, or repairer of the product covered by the service contract.

(2) “Service contract seller” or “seller” also means a third party, including an obligor, who is not the seller, manufacturer, or repairer of the product. However, a third party shall not be an obligor on a service contract unless the obligor obtains a service contract reimbursement insurance policy for all service contracts under which the third party is obligated under the terms of a service contract.

(3) “Service contract seller” or “seller” shall not include the following:

(A) A bank or bank holding company, or the subsidiary or affiliate of either, or a financial institution, licensed under state or federal law, selling or offering to sell a service contract unless that entity is financially and legally obligated under the terms of a service contract.

(B) An electrical device manufacturer or electrical contractor who constructs, installs, or services electrical devices, which include any unit of an electrical system intended to carry electrical energy as part of a building’s electrical system, including raceways, conductors, invertors, conduit, wires, switches, or other similar devices.

(d) “Service contractholder” means a person who purchases or receives a service contract from a service contract seller.

(e) “Service contractor” means a service contract administrator or a service contract seller.

(f) “Service contract reimbursement insurance policy” means a policy of insurance issued by an insurer admitted to do business in this state providing coverage for all obligations and liabilities incurred by a service contract seller under the terms of the service contracts sold in this state by the service contract seller to a service contractholder. The service contract reimbursement insurance policy shall either cover all service contracts sold or specifically cover those contracts sold to residents of the State of California.

(g) “Obligor” is the entity financially and legally obligated under the terms of a service contract.

(h) “Optical products” means prescription and nonprescription eyewear. “Optical products” shall not include contact lenses of any kind.

(i) The terms “consumer goods,” “manufacturer,” “retail seller,” “retailer,” and “sale” shall have the same meanings ascribed to them in Section 1791 of the Civil Code.

(Amended by Stats. 2013, Ch. 421, Sec. 1. (AB 480) Effective January 1, 2014. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.05.
  

On and after January 1, 2000, for the purposes of this chapter, “service contract” also includes a service contract as described in subdivision (e) of Section 12741 of the Insurance Code.

(Added by Stats. 1998, Ch. 1075, Sec. 1. Effective January 1, 1999. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.1.
  

(a) It shall be unlawful for any person to act as a service contractor in this state unless that person first registers with the bureau in accordance with the provisions of this chapter and maintains a valid registration.

(b) Except as expressly provided in this chapter, service contractors registered in accordance with the provisions of this chapter shall be exempt from all provisions of the Insurance Code.

(Amended by Stats. 2010, Ch. 543, Sec. 2. (AB 2111) Effective January 1, 2011. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.15.
  

A service contract administrator who is an obligor on a service contract and is registered as a service contract administrator may perform all the functions permitted by a seller and shall not be required to register separately as a seller.

(Added by Stats. 2010, Ch. 543, Sec. 3. (AB 2111) Effective January 1, 2011. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.2.
  

(a) A service contract seller shall not issue, sell, or offer for sale a service contract unless the obligor under the service contract has complied with one of the following requirements:

(1) Files with the director one of the following:

(A) The most recent annual report on Form 10-K required by the Securities and Exchange Commission, reflecting a net worth greater than the sum of the deferred revenues from service contracts in force. If the service contractor is a foreign corporation that files a comparable audited financial statement with its home government or with the United States government, the director may deem that statement an acceptable substitute for Form 10-K.

(B) The most recent audited financial statement reflecting a net worth of not less than one hundred million dollars ($100,000,000). The financial statement shall be certified by a certified public accountant who is licensed in the state where the service contract seller maintains its principal place of business or the seller’s state of domestic incorporation.

(2) Obtains a service contract reimbursement insurance policy.

(3) Sells service contracts that are administered by a service contract administrator who has obtained a service contract reimbursement insurance policy covering the seller’s service contracts.

(4) Maintains and annually verifies to the director a funded account held in escrow equal to a minimum of 25 percent of the deferred revenues from the service contracts in force.

(b) A service contract administrator shall not administer service contracts sold in this state unless a service contract reimbursement insurance policy covering these service contracts has been obtained.

(Amended by Stats. 2010, Ch. 543, Sec. 4. (AB 2111) Effective January 1, 2011. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.3.
  

(a) The service contract form to be issued by the service contractor shall be filed with the director by the service contractor prior to its use.

(b) Every service contract administrator shall file with its application for registration, and thereafter, with its application for registration renewal, a service contract reimbursement insurance policy.

(c) Every service contract seller shall file with his or her application for registration, and thereafter with his or her application for registration renewal, one of the following:

(1) The most recent annual report on Form 10-K required by the Securities and Exchange Commission, reflecting a net worth greater than the sum of the deferred revenues from service contracts in force. If the service contractor is a foreign corporation that files a comparable audited financial statement with its home government or with the United States government, the director may deem that statement an acceptable substitute for Form 10-K.

(2) A service contract reimbursement insurance policy.

(3) Evidence that his or her service contracts are administered by a service contract administrator who has obtained a service contract reimbursement insurance policy covering the seller’s service contracts.

(4) Evidence of a funded account held in escrow equal to a minimum of 25 percent of the deferred revenues from the service contracts in force.

(Amended by Stats. 1997, Ch. 401, Sec. 48. Effective January 1, 1998. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.4.
  

(a) The service contract reimbursement insurance policy shall cover the obligations of the service contract seller under the service contracts sold during the period of time that the service contract reimbursement insurance policy was in force. The service contract reimbursement insurance policy shall either cover all service contracts sold or specifically cover those contracts sold to residents of the State of California.

(b) A service contract reimbursement insurance policy shall contain a provision under which the insurer shall notify the bureau in writing of the termination or nonrenewal of the service contract reimbursement insurance policy.

(c) Upon the effective date of the termination or cancellation of a service contractor’s service contract reimbursement insurance policy, the registration of the service contractors whose service contracts are covered thereby shall be automatically suspended, unless the affected service contractors have filed with the director, prior to the date of the termination or cancellation of the service contract reimbursement insurance policy, a new service contract reimbursement insurance policy or otherwise meet one of the requirements of Section 9855.2. Upon receipt of a written request from the service contractor, the director may delay the suspension of a service contractor’s registration for no more than 60 days. Following the automatic suspension, an administrative hearing shall be provided upon written request to the director in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.

(Added by Stats. 1993, Ch. 1265, Sec. 7. Effective January 1, 1994. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.5.
  

A service contractor shall comply with the provisions of Sections 1794.4 and 1794.41 of the Civil Code.

(Added by Stats. 1993, Ch. 1265, Sec. 7. Effective January 1, 1994. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.6.
  

Where a service contractholder cancels a service contract in accordance with Section 1794.41 of the Civil Code and the refund due is not paid to the service contractholder or credited to his or her account within 30 days after the service contractor receives written notice of cancellation, the amount of the required refund or credit shall bear interest, payable to the service contractholder, at the rate of 10 percent per annum for each additional 30 days or fraction thereof.

(Amended by Stats. 2006, Ch. 538, Sec. 18. Effective January 1, 2007. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.7.
  

The director may deny, or may suspend, revoke, or place on probation the registration of a service contractor for any act, omission, or crime that is committed by the service contractor or any employee, partner, officer, or agent of the service contractor for any of the following reasons:

(a) Any conduct that constitutes fraud or dishonest dealing.

(b) Conviction of a crime that has a substantial relationship to the qualifications, functions and duties of a registrant under this chapter, in which event the record of conviction shall be conclusive evidence thereof.

(c) Assisting in or abetting the violation of, or conspiring to violate, any provision of this article, or of regulations adopted under this article.

(Amended by Stats. 2007, Ch. 354, Sec. 55. Effective January 1, 2008. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.8.
  

(a) The director may issue a citation to the service contractor for any of the following reasons:

(1) Violation of subdivision (a) of Section 9855.3 or Section 9855.5, or any regulation adopted thereunder.

(2) Upon a determination by the director that the service contractor has committed a violation by (A) making or authorizing statements or advertisements which are untrue or misleading; or (B) making false promises of a character likely to influence, persuade, or induce a customer to purchase a service contract as provided by this chapter.

(3) For purposes of this section, a violation consists of a single publication or single course of conduct that is determined by the director to be untrue or misleading.

(b) The citation may contain an order of abatement and an order to pay an administrative fine assessed by the director.

(1) Each citation shall be in writing and shall describe with particularity the nature of the violation, including a specific reference to the provision of law determined to have been violated.

(2) Where appropriate, the citation shall contain an order of abatement fixing a reasonable time for abatement of the violation.

(3) A citation or fine assessment issued pursuant to a citation shall inform the service contractor that if he or she desires a hearing to contest the finding of a violation, that hearing shall be requested by written notice to the bureau within 30 days of the date of issuance of the citation or assessment. If a hearing is not requested pursuant to this section, payment of any fine shall not constitute an admission of the violation charged. Hearings shall be held pursuant to Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.

(4) (A) In addition to requesting a hearing as provided for herein, the service contractor may request a citation review conference with the director or his or her designee regarding the acts charged in the citation. A citation review conference shall be requested by written notice to the bureau within 20 days of the date of the issuance of the citation or assessment.

(B) The director or his or her designee shall hold a citation review conference within 60 days from the receipt of the request. At the conclusion of the citation review conference, the director or his or her designee shall state, in writing, the reasons for his or her action and transmit a copy of his or her findings and decision to the service contractor.

(5) The failure of a service contractor to pay a fine within 30 days of the date of assessment, unless the citation is being appealed, may result in disciplinary action being taken by the director. Where a citation is not contested and a fine is not paid, the full amount of the assessed fine shall be added to the fee for renewal of the registration. A registration shall not be renewed without payment of the renewal fee and fine.

(c) Where a citation includes an administrative fine, it shall be issued in accordance with the following procedures:

(1) For the first citation, the director may assess an administrative fine of not less than one hundred dollars ($100) but not more than five hundred dollars ($500).

(2) For the second citation issued during any one-year period, the director may assess an administrative fine of not less than five hundred dollars ($500) but not more than one thousand dollars ($1,000).

(3) For the third citation issued during any two-year period, the director may assess an administrative fine of not less than one thousand dollars ($1,000) but not more than two thousand dollars ($2,000).

(4) For the fourth violation of subdivision (a) of Section 9855.3 or of Section 9855.5, or any regulation adopted thereunder, during any two-year period, the director may either assess an administrative fine of not less than one thousand dollars ($1,000) but not more than two thousand dollars ($2,000) or suspend, revoke, or place on probation a registration of the service contractor.

(Amended by Stats. 2007, Ch. 354, Sec. 56. Effective January 1, 2008. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.85.
  

Unless otherwise lawfully transacting the business of insurance pursuant to a certificate of authority issued pursuant to Section 700 of the Insurance Code for the appropriate class, a service contract administrator or third-party seller acting as an obligor on a service contract without having a service contract reimbursement insurance policy covering all service contracts under which the service contract administrator or third-party seller is obligated shall be deemed to be unlawfully transacting the business of insurance and shall be subject to subdivision (b) of Section 700 and Section 12921.8 of the Insurance Code.

(Added by Stats. 2010, Ch. 543, Sec. 5. (AB 2111) Effective January 1, 2011. Repealed as of January 1, 2019, pursuant to Section 9855.9.)

9855.9.
  

This article shall remain in effect only until January 1, 2019, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2019, deletes or extends that date.

(Amended by Stats. 2014, Ch. 428, Sec. 13. (AB 2740) Effective January 1, 2015. Repealed as of January 1, 2019, by its own provisions. Note: Repeal affects Article 4.5, commencing with Section 9855.)

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