On September 19, 2018, California enacted AB-3212.  The Bill amends the California Military and Veterans Code to expand the protections offered to qualifying servicemembers under state law and to impose new criminal penalties for certain violations of its provisions.  Some of the key changes, which go into effect January 1, 2019, are as follows:

Expanded Protections

• Extends most protections to 120 days after military service ends (prior provision extended protections for 60 days after the end of military service).

• Expands the 6% interest rate cap to include student loans, with the 6% rate to remain in effect for one year after the period of military service ends.

• Extends the ability to defer payments on certain obligations to include student loans.

• Clarifies that interest in excess of 6 percent per year that would otherwise be incurred but for the interest rate cap is “forgiven” and periodic payments “shall be reduced by the amount of interest forgiven”.

• Extends the right to terminate leases after entry into military service to include vehicle leases.

• Clarifies that penalties may not be imposed on the nonpayment of principal or interest during the period in which payments are deferred on an obligation pursuant to a court order.

Written Response Required

• Requires a person receiving a request for relief from a servicemember to respond within 30 days acknowledging the request, setting forth any reasons the person believes the request is incomplete or the servicemember is not entitled to the relief requested, specifying the specific information or materials that are missing from the request, and providing contact information the servicemember can use to contact the person regarding the request. If after receiving a request from the servicemember, the recipient does not respond within 30 days, the recipient waives any objection to the request and the servicemember is automatically entitled to the relief sought.

Prohibitions on Sales, Foreclosures, and Seizures of Property

• Extends the bar on sale, foreclosure, or seizure of property for non-payment to the period of military service plus one year (prior provision was for the period of nine months after the end of military service).

• Extends the bar on enforcing storage liens during the period of military service and for 120 days thereafter (prior provision was until three months after the end of military service).

• Requires a sworn statement of compliance by any person who files or completes a notice, application or certification of lien sale or certificate of repossession.

Protections Related to Court Proceedings

• Extends the ability of courts to stay proceedings involving servicemembers as a plaintiff or defendant to 120 days after the end of the military service (prior provision was until 60 days after the end of military service).

• Permits a service member who is granted an initial stay to apply for an additional stay by showing there is a “continuing military effect” on the servicemember’s ability to appear. If the court refuses to grant an additional stay, the court shall appoint counsel to represent the servicemember in the proceeding.

• Requires courts to stay for a minimum period of 90 days any proceedings in which (a) there may be a defense to the action that cannot be presented without the presence of the servicemember defendant; or (b) counsel cannot after due diligence contact the servicemember defendant to determine if a meritorious defense exists.

• Limits the ability of a court-appointed attorney to waive defenses that a servicemember may have or to otherwise bind the servicemember whenever the attorney cannot locate the servicemember through a new statutory provision.

Credit Reporting

• Prohibits a creditor or consumer reporting agency from making an annotation in the servicemember’s record that the person is on active duty status. A violation of this provision is a misdemeanor, punishable by imprisonment of not more than one year or a fine not to exceed one thousand dollars, or both.

Debt Collections

• Prevents a debt collector from falsely claiming to be a member of the military in attempting to collect any obligation. A violation of this new provision is a misdemeanor, punishable by imprisonment of not more than one year or a fine not to exceed one thousand dollars, or both.

• Expressly prohibits a debt collector from contacting the servicemember’s military unit or chain of command in connection with the collection of any obligation unless the debt collector obtains written consent from the servicemember after the obligation becomes due and payable. A violation of this new provision is a misdemeanor, punishable by imprisonment of not more than one year or a fine not to exceed one thousand dollars, or both.

Scope of Coverage

These provisions in the California Military and Veterans Code apply broadly to members of the Armed Forces (Army, Navy, Air Force, Marine Corps, and Coast Guard) who are on active duty as well as any member of the state militia (defined as the National Guard, State Military Reserve and the Naval Militia) who are on full-time active state service or full-time active federal service.  Creditors are advised to consult with counsel to determine whether these new provisions will apply to specific servicemember borrowers who have contacts with California.