September 13, 2010
Transactions and Regulatory Committee
Legislative Committee
[This material is for discussion purposes only and has not been reviewed or approved by the Transactions and Regulatory, Legislative or Executive Committees or by the Board of Directors]
Issue:
Should C.A.R. sponsor legislation creating a new option for discipline by DRE that would involve an unpublished citation and possible fine for relatively minor offenses?
Action:
Optional
Options:
1. Do nothing - maintain existing options for discipline of offenses
2. Explore co-sponsorship with DRE under a new commissioner in 2011.
3. Sponsor legislation in the 2011-2012 legislative session
4. Other
Status/Summary:
DRE can currently issue a (confidential) corrective action letter or a public accusation. After an administrative hearing, DRE can impose a fine under threat of license suspension, suspend or restrict a license, or even revoke a license. In order to impose a fine, DRE has to go through an administrative hearing process, and any penalty that results becomes part of the record published in the DRE Bulletin. Notes of sanctions in the Bulletin are reportedly widely read, and regarded as a serious blow to a licensee's professional credibility.
Discussion:
During discussions at C.A.R. related legal meetings, a proposal was made to examine whether C.A.R. should sponsor legislation to create for DRE a new option for relatively minor violations discovered in an examination. The proposal is to create a "civil citation and fine" authority similar to the rule recently adopted by the Board of Pharmacy, and reportedly in use by other agencies.
How would the process work? The proposed "ticket" authority would not require an administrative hearing in order to be imposed, but the licensee would have the ability (as with a traffic ticket) to demand an administrative hearing in order to contest it. If the licensee did not go to hearing (and lose), the citation would not be published as part of the DRE bulletin record of discipline. Of course, if the licensee contests the citation and wins, there would be no record, because there was no discipline imposed.
Is legislation required? An administrative agency does not have authority to act in a way not empowered by its underlying statute; in this instance, the Real Estate Law. DRE does not have the authority for this "middle ground" disciplinary mechanism under existing law, so legislation would be required. Any legislation creating the authority would grant DRE the power to issue regulations creating the citation, and would spell out the fining authority (for example, not to exceed $1000 per offense) and the offenses for which it could be imposed (for example, unauthorized access to trust funds or technical violations with no loss to clients). A civil citation would not be reported in the bulletin or license website, although it could be discovered via a public records request.
Arguments in favor. The new mechanism would allow DRE staff in the field to immediately sanction a violation without building a full-blown prosecution case, saving considerable resources and staff time. Depending on how the fine authority is drafted, the citation could serve as a "fix it" ticket that carries more weight than a corrective action letter. Also, it creates an incentive to fix administrative violations and threatens a more serious penalty if the fix is not made.
Licensees would favor the process over public discipline because they would not be exposed to public ridicule over a relatively minor infraction.
Arguments against. It is unclear how seriously it is needed - DRE does not appear to be clamoring for the change, and has not proposed it as part of the Administration's sponsored legislative program. One could argue that the threat of bad publicity (and not the possible fine) is the real deterrent to licensee violations, and that a licensee might make a calculated decision to violate the law if he or she knew the penalty limits in advance.
It could be argued that the program might create a "bounty hunter" mentality in DRE examiners if the fines resulting from the citation go into any fund that benefits the department. C.A.R. has generally been wary of any penalty mechanism that might create such an incentive. The empowering statute could direct that fines only go into the DRE Client Recovery account for victims of licensee theft, and not be available for operations.
Other considerations.
- Is this area one of great concern to REALTORs®? If it is not, is it really worth sponsoring legislation to reach the goal?
- Where will DRE be on the proposal? If the DRE cannot be enlisted as support; or even worse, if DRE opposes the proposal, the legislation is probably not viable. Should the proposal be pursued only if DRE is willing to support or co-sponsor?
What option, if any, should C.A.R. pursue?
