California Attorney General Rob Bonta and Assemblymember Brian Maienschein, D-San Diego, announced Friday legislation intended to protect victims of predatory businesses in violation of consumer protection laws.
Assembly Bill 1366 would establish a Victims of Consumer Fraud Restitution Fund in the state Treasury paid into with penalties from businesses found in violation of those laws. This differs from the current system, which allows victims to be eligible for restitution after a judgment has been reached, but oftentimes leaves victims without a cent when the businesses collapse or become insolvent.
"When a predatory business takes advantage of a consumer, it's only right that the proceeds gained from illegal conduct should go towards compensating victims rather than remaining in the bank accounts of bad actors," said Maienschein, author of the bill. "AB 1366 will ensure that victims can and will receive restitutions for the wrongdoings they endure by crooked businesses on the brink of collapse."
Specifically, AB 1366 would allow the Attorney General to seek the "remedy of disgorgement" in actions brought under the Unfair Competition Law and False Advertising Law. Disgorgement would require companies that have violated the law to give up the profits that they made through their illegal conduct. These funds would then be held in the new fund to help provide restitution to victims.
"True justice is not served when victims are left behind," Bonta said Friday morning in San Diego. "While our office continues to hold predatory businesses accountable for misconduct, the success feels hollow when we know that the consumers who were defrauded cannot be made whole because the business has no money left to compensate its victims for their losses.
"This legislation would create a mechanism to help compensate victims in such situations. I urge our legislature to join the states that have already implemented this simple and commonsense protection for victims."
According to Bonta, attorneys general in some other states — including New York and Arizona — can obtain disgorgement under their consumer protection laws, but this is not the case under California law. Additionally, the federal government has established the Civil Penalty Fund to compensate victims who haven't received full compensation for their harm through the defendant.
