Articles of Interest
Calif. title licensing legislation passes Senate
September 4, 2008
Legislation that would create a statewide licensing system for title insurance sales representatives took one step closer to reality when it was approved by the Senate on Aug. 21, just a week after the California Assembly approved the bill on Aug. 13. Read on for the full provisions of the newly passed legislation.
Legislation that would create a statewide licensing system for title insurance sales representatives took one step closer to reality when it was approved by the Senate on Aug. 21, just a week after the California Assembly approved the bill on Aug. 13.
Under the provisions of SB 133, title insurance sales representatives would register with the California Department of Insurance. These sales reps would be subject to suspension by the department in the event they participated in prohibited activities. In addition, SB 133 requires that the department provide clarity through the regulatory process regarding reasonable marketing expenditures and activities.
According to the bill sponsor, Senator Sam Aanestad ( R-Grass Valley), SB133 is the result of several years of discussion and negotiation between the title insurance industry and DOI regarding the most effective and appropriate ways in which to stop illegal rebates by title marketing representatives.
The California Land Title Association (CLTA) and the California Escrow Association (CEA) actively supported the legislation. CLTA believes that the bill will significantly reform how title insurance may be marketed by clarifying what is and is not an allowable marketing practice for the title industry, and will increase competition in the title insurance marketplace.
“The strict licensing requirements provided by SB 133 enhance consumer protection while maintaining the healthy competitive title insurance marketplace in California,” said Craig Page, executive vice president of the California Land Title Association in announcing his support for the legislation last year. “The CLTA acknowledged concerns regarding the interpretation and enforcement of laws regulating marketing practices in the title insurance industry.”
In offering its support for the legislation, the CEA highlighted the longstanding nature of the debate over illegal rebates, and said, “Questions concerning unlawful rebates in the title industry have existed literally for decades. SB 133 is an important step to resolving these questions and creating a structure for addressing the issues in the future.”
CEA believes that the bill resolves longstanding ambiguities relating to marketing expenses by title companies and establishes a responsible approach to regulating the activities of sales representatives.
The new law establishes procedures for obtaining and renewing a certificate of registration as a title marketing representative, as specified; prohibits a person from marketing, offering, soliciting, negotiating, or selling title insurance California without a valid certificate of registration as a title marketing representative; and places limits on the value of items that title marketing representatives are allowed to provide to those in a position to refer business to the title insurers they represent.
The law deletes the provision of law that allows those who solicit title insurance business to make reasonable expenditures for food, beverages, entertainment, educational programs, and promotional items, as specified, and would instead do the following, with respect to those who solicit title insurance business:
a. Prohibit advertising or paying for the advertising in any newspaper, newsletter, magazine, or publication that is produced by, or on behalf of a person, or that results in a direct or indirect subsidy to a person;
b. Prohibit expenditures for food, beverages, and entertainment for a person;
c. Allow expenditures for promotional items with a permanently affixed company logo of the underwritten title company, title insurer, or controlled escrow company, and with a value of not more than $10 each, but provide that promotional items do not include gift certificates, gift cards, or other items with a specific monetary value on their face or items that may be exchanged for other items having a specific monetary value;
d. Allow the furnishing of education or educational materials exclusively related to the business of title insurance for a person, if continuing education credits are not provided;
e. Allow other expenditures for a person, as permitted by DOI, by regulation.
The bill defines a title marketing representative as a natural person employed by a title insurer, underwritten title company, or controlled escrow company, whose primary duty is to market, offer, solicit, negotiate, or sell title insurance, and would provide that a title marketing representative does not include a person whose primary duties directly involve the creation, production, or issuance of the title policy or the performance of escrow services.
It prohibits any person from being employed as a title marketing representative in California, unless the person holds a valid certificate of registration as a title marketing representative, issued by the IC, and authorizes the IC to issue a cease and desist order, if he or she becomes aware of any person who knowingly markets title insurance without having applied for or obtained a certificate of registration.
The proposed law specifies the items that must be included on an application for a certificate of registration as a title marketing representative; documents the process that must be followed, and specifiesthe authority granted to the IC, when he or she reviews an application; authorizes the IC to impose a filing fee, not to exceed $200 per application; and establishes procedures for denying, restricting, suspending or revoking a certificate of registration, and appealing any such action by the IC.
Each certificate of registration will be valid for a three-year period.
An applicant for a certificate of registration will be permitted to solicit, sell or market title insurance on a provisional basis while his or her application is pending with the IC, but provisional title marketing representatives will be required to adhere to the same compliance requirements as those who hold certificates of registration.
Title companies will be required to notify DOI within 30 days of the hiring and/or termination of a title marketing representative, and are also required to provide the representatives with training regarding Article 6 (relating to rebates and commissions) within 60 days of their hiring.
In addition to, or in lieu of, any other penalty that may be imposed under existing law by the IC against a title marketing representative, under the proposed law, the IC may bring an administrative action against a title marketing representative for any violation of Article 6 (relating to rebates and commissions), and provides that if the title marketing representative is determined by the IC to have committed a violation of Article 6, the IC may require the surrender of, or may temporarily or permanently suspend or revoke the representative's certificate of registration and impose a monetary penalty.
If a monetary penalty is imposed, the payment of such penalty must be made from the title marketing representative's personal funds, and not by his or her employer, either directly or indirectly, through the title marketing representative.
A title marketing representative who has had his or her certificate of registration revoked by DOI will be prohibited from reapplying for another certificate of registration for five years from the date of revocation.
A title marketing representative who is issued a certificate of registration is also prohibited from engaging in any activity that is otherwise prohibited through a separate entity controlled by the title marketing representative or by the company or entity that employs him or her.
