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All Your Escrow is Belong To Us
...or why not to do business with escrow companies registered in China, Cuba and California. (It's a little thing that's red and sounds like communion.)
California? Surely that's the economic bedrock of a very non-communist economy! That's what I always thought till I read Sections 17000 - 17305 of the California Financial Code. Before you go judging me and all, let me state that this is not normally the type of material I'd be caught dead with: no mammary photos, no bikinis, no graphic wardrobe malfunctions. But in the interest of research I plugged on. It's gripping stuff and I fell asleep 305 times, but for any of you who use escrow services like escrow.com, I've got some news:
I'm probably never going to use another escrow company based in California ever again. Not even if it's escrow.com.
Because what California calls Sections 17000-17305 is in reality a protection racket; a protection racket that you in Australia, me in the UK and poor old Viktor in Stalingrad are all paying for. But it's a lot more than an expensive, protection racket - it's got serious teeth, a humungous appetite and the ability to pour ketchup all over you and me and the aforesaid Viktor before settling down to a Californian sized meal.
And every escrow company in the world is expected to subscribe to Californian regulation.
Here's what Californian law says
Any company anywhere in the world needs to be licenced to operate in California if they are ever going to take on a transaction that involves a person or company based in California. If they don't, they've breached Californian law. Note that pretty much every internet escrow company in the world accepting normal transactions is going to have one party to a transaction have a Californian address at some point. So, yes, California expects every escrow company in the world to be licenced in California.
Now, there's nothing wrong with regulation, and financial companies should be regulated till their eyes bleed. I'm all for the US authorities keeping an eagle eye on American companies - or any company operating in the US - and for the UK's FSA to similarly scrutinise such companies in the UK. After all, these companies handle our hard earned money and if nobody was keeping an eye on them they'd do a Robert Maxwell.
But, what's special about California? What if every other US state, foreign state and tin-pot dictatorship required every escrow company everywhere in the world to be licenced in each and every one of their dominions?
Now California has the right to protect its citizens just like any other government. I accept that. But California has gone way beyond protection and firmly into mafia territory. What would you say if I told you they have given themselves the power to stop anyone, anywhere in the world, saying anything critical about them, or "in reference to the licensing or escrow supervision by the State of California"? Further, it doesn't need to be a negative comment. They can tell you to stop even if they just don't like your tone. (Section 17210.2(c))
Ridiculous?! I can't be serious!?
Trust me, California considers itself very special indeed.
It's cheaper to buy China than to register an escrow company in California.
But cost isn't all.
This is what escrow companies need to do if they wish to register in California:
(in brackets are the relevant sections of the California Financial Code for the lawyers among you. I'll spell Commissioner with a capital "C" and maybe it'll deter the Present Respected Incumbent Commissioner from ever suing me)
Companies need to:
1. Have one person with at least five years of experience in the escrow business.
How are customers like you and me affected?
The Californian Commissioner can't restrict himself to Controlling Just Escrow Companies. What are the implications for buyers and sellers of websites? Particularly those of us to may at some point end up buying from or selling to someone living in California?
1. If you use your local escrow to do business with anyone resident in California and there is ever a dispute, you're in serious trouble: Your problem is not with that person anymore, it's with the Commissioner. He automatically appropriates the mantle of attorney for your (non-"licenced") escrow company and your opponent can submit papers to the Commissioner and consider them served on you. And it's not obligatory on the Commissioner to forward those papers to you. (as 99.9% of us don't qualify under the exemptions in section 17009). So there's a case running in California and you can't represent yourself because you don't even know about it. What are the chances you'll win?
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