Section 2757.5 - Funded Escrow Account; Defined(a) For purposes of complying with the requirements of Sections 9855.2(a)(4) and 9855.3(c)(4) of the Code, the term "a funded account held in escrow" shall mean an account held at a federal or state chartered bank or savings institution. Such account shall be held in trust for the benefit of the service contractholders and funds in such account may not be released by the trustee except as provided for in sections 2757.5 and 2757.6.(b) The escrow agreement between the service contract seller and the bank or savings institution shall at a minimum specify all of the following: (1) All escrow fees of any kind shall be paid by the service contract seller and shall not be the responsibility of the Director of the Department of Consumer Affairs.(2) The investment alternatives for deposited funds held in escrow shall be limited to the investment alternatives allowed for in Government Code Section 16430 for funds of California governmental entities that maintain deposits with banks or savings institutions.(3) The escrow agreement shall explicitly provide the Director or his or her designee the right, at any time and at his or her sole discretion, to review or audit any or all activity related to the escrow account(s) held for the purpose of meeting service contract deposit requirements.(4) The withdrawal of escrow funds, for any reason, shall require an approval signature from an escrow officer of the bank or savings institution with signature authority for the account.(5) The escrow account trustee shall notify the Director, through the Bureau, immediately, by facsimile and by letter, of any intended disbursement to be made out of the escrow account for any reason. The notification shall indicate that the Director has five (5) working days to suspend the disbursement pending the Director's review or other action, and shall indicate the last date for the Director's action. If the Director does not order the suspension of disbursements from the account before the end of the fifth working day, the escrow account trustee is authorized to make the previously notified distribution as planned.(c) The required minimum balance in such account shall be equal to a minimum of 25 percent of the deferred revenues from the service contracts in force. The minimum balance shall be calculated by multiplying the sum total of the deferred revenues from all service contracts in force as of the last business day of the calendar quarter in which the calculation is being made by the number 0.25.(d) The service contract seller shall file a statement with the funded escrow account trustee no less than once each calendar quarter, such statement shall be due by the 15th working day following the close of the calendar quarter. The statement shall indicate the escrow account aggregate ending balance from the previous calendar quarter, the number of new or renewal service contracts sold during the quarter, the aggregate sales price of the contracts sold during the quarter, the number and aggregate sales price of all service contracts expiring during the quarter, and the service contract seller's calculation of the new aggregate required balance in the funded escrow account. The statement shall be signed by an authorized representative or officer of the service contract seller. The escrow account trustee shall utilize the information contained in the statement balance of the funded escrow account to calculate the deposit amount or the amount available to refund. Such calculation shall be made no less often than once each calendar quarter within 20 working days after the close of the immediately preceding calendar quarter. The escrow account trustee shall notify the service contract seller of its findings within five working days after the trustee has completed its calculations.
The service contract seller shall then have 10 working days to deposit such additional funds as the trustee calculates are required to meet the required minimum balance required by law. Interest earned on the funded escrow account may be used to meet the minimum funding requirement. Should the service contract seller fail to deposit the required funds in the escrow account, the trustee shall immediately notify the director of the deficiency and the director shall take appropriate action, including, but not limited to, the filing of a petition for an interim order of suspension.
(e) If there is a surplus of funds in the funded escrow account, the trustee may return such surplus funds as requested by the service contract seller.(f) Prior to releasing funds from the escrow account to the service contract seller, the escrow account trustee shall notify the Director, through the Bureau, by facsimile and mail, five (5) working days prior to the day funds will be released to the service contract seller. The notice shall include the calculation made by the escrow account trustee to determine the amount of funds to be released and the pertinent data supplied by the service contract seller for the calculation. The notification shall indicate that the Director has five (5) working days to suspend the disbursement pending the Director's review or other action, and shall indicate the last date for the Director's action. If the Director does not order the suspension of disbursements from the account before the end of the fifth working day, the escrow account trustee is authorized to make the previously notified distribution as planned.Cal. Code Regs. Tit. 16, § 2757.5
1. New section filed 9-21-95; operative 10-21-95 (Register 95, No. 38). Note: Authority cited: Section 9814, Business and Professions Code. Reference: Sections 494, 9855.2 and 9855.3, Business and Professions Code.
1. New section filed 9-21-95; operative 10-21-95 (Register 95, No. 38).