BILL NUMBER: SB 95 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 4, 2009
AMENDED IN SENATE APRIL 14, 2009
AMENDED IN SENATE MARCH 16, 2009
INTRODUCED BY Senator Corbett
JANUARY 22, 2009
An act to amend Section 1770 of the Civil Code, and to amend
Sections 11710 , 11711, and 11722 of, to amend
and repeal Section 11711 of, and to add Section 4456.5 to, the
Vehicle Code, relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
SB 95, as amended, Corbett. California Car Buyers' Protection Act
of 2009.
(1) Existing law makes it unlawful, punishable as a misdemeanor,
for the holder of a dealer's license to do, or fail to do, specified
actions with regard to the advertising, transfer, and sale of motor
vehicles.
This bill would enact the California Car Buyers' Protection Act of
2009, which, among other things, would make it unlawful for a dealer
who purchases a used vehicle for purposes of
resale with a an outstanding lien or
balance due to a secured party to fail to pay off the
entire balance prior to transferring or selling the vehicle and
tender in good faith full payment on the outstanding
lien or balance no later than the 2nd business day, as specified. The
bill would also increase the amount of a dealer's
bond from $50,000 to $100,000 and would require dealers of
trailers designed and used exclusively to transport vessels to procu
re and file a bond in the amount of $50,000 .
(2) Existing law requires, among other things, that if any person
suffers any loss or damage by reason of a specified violation of law
by the dealer or his or her salesperson, then that person has a right
of action against the dealer, the salesperson, and the surety upon
the dealer's bond, in an amount not to exceed the value of the
vehicle purchased from or sold to the dealer.
This bill would instead require , until January 1, 2015,
that if a person who purchased or leased a motor vehicle or a
motorcycle at retail suffers any loss or damage related to the
purchase or lease of that vehicle by reason of any fraud or contract
or statutory violation practiced on him or her by a licensed dealer
or one of the dealer's salespersons acting for the dealer, on his or
her behalf, or within the scope of the employment of his or her
salesperson in connection with the purchase or lease of that vehicle,
or by reason of the violation by the dealer or salesperson of any of
the provisions in the Vehicle Code relating to registration of
vehicles and certificates of title, then that person shall have a
right of action against the dealer, his or her salesperson, and the
surety upon the dealer's bond for actual damages plus any incidental
and consequential damages.
(3) Existing law requires that claims against the surety upon a
dealer's bond of a financing agency that has loaned money to a
licensee or assignee be allowed only to the extent that the claims of
any other person or entity with respect to the dealer's bond are
satisfied first and are entitled to preference over the claims of the
financing agency with respect to the dealer's bond, except as
specified.
This bill would instead require that claims against the surety
upon a dealer's bond , of a financing agency, including
claims based on conditional sales agreements, or the purchase of
conditional sales agreements or of any other agreement entered into
with a licensee, be allowed only to the extent that the claims of any
persons who purchased or leased a motor vehicle or a motorcycle at
retail with respect to the dealer's bond be satisfied first and are
entitled to preference over the claims of the financing agency and
other persons or entities, except the Department of Motor Vehicles,
with respect to the dealer's bond be entitled to
specified priorities and would require that claimants be paid in full
if the proceeds of the bond are sufficient and or on a pro rata
basis if the funds are insufficient .
(4) The bill would also make technical and conforming changes to
these provisions.
By creating new crimes, the bill would impose a state-mandated
local program.
(5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known and may be cited as the
California Car Buyers' Protection Act of 2009.
SEC. 2. The Legislature finds and declares all of the following:
(a) Many car buyers have lost confidence in the automotive
marketplace, resulting in a reduction of revenues for sellers, local
and county governments, and the state, contributing to job losses and
the state's overall economic downturn.
(b) During the past year at least 480 new and used licensed auto
dealerships have gone out of business in California, far more than in
any other state, and it is projected that the numbers will continue
to accelerate for the foreseeable future.
(c) When consumers choose to purchase vehicles from auto
dealerships that are licensed by the Department of Motor Vehicles,
they have a reasonable expectation that the dealerships have
sufficient resources to honor their contractual commitments.
(d) Car buyers have no reliable way to know in advance whether an
auto dealer is on the brink of insolvency or is on a sound financial
footing.
(e) When licensed auto dealerships go out of business they often
fail to pay off liens, as agreed, and also fail to honor warranties,
service contracts, and other services for which car buyers have paid
in advance, costing thousands of car buyers millions of dollars in
losses.
(f) The current federal assistance fails to provide any relief for
car buyers, while providing taxpayer dollars to assist the auto
manufacturers, dealers, and workers who are seeking assistance from
the American public; yet it is ultimately car buyers who will
determine the fate of our domestic auto industry by buying cars.
(g) When licensed auto dealerships go out of business without
honoring their obligations, car buyers often face ruinous
consequences, through no fault of their own, resulting in harm to
their credit, repossessions that remain on their credit reports for
seven to 10 years, job losses due to a lack of transportation, home
foreclosures, and bankruptcy.
(h) The Department of Motor Vehicles projects that the current
funding available for the Consumer Recovery Fund (CRF) established by
enactment of Senate Bill 729 of the 2007-08 Regular Session will not
be sufficient to meet all the demands made upon the CRF by car
buyers with legitimate complaints. Even if sufficient funds were
available, there is no authority to provide restitution from the CRF
for losses incurred involving prepaid products, warranties, or
services or to restore the credit of consumers whose credit is harmed
by dealer insolvencies, lost jobs, lost income, or other damages
consumers suffer due to a lack of transportation when vehicles are
repossessed because auto dealers failed to pay off liens as promised.
(i) Honest dealers are also adversely impacted when unscrupulous
auto dealers siphon off business and then harm the credit of their
customers by going out of business without paying liens, as promised,
shrinking the automotive market at precisely the time when it is
sound public policy to expand the market and accelerate sales of
newer, safer, cleaner motor vehicles.
SEC. 3. Section 1770 of the Civil Code is amended to read:
1770. (a) The following unfair methods of competition and unfair
or deceptive acts or practices undertaken by a person in a
transaction intended to result or that results in the sale or lease
of goods or services to a consumer are unlawful:
(1) Passing off goods or services as those of another.
(2) Misrepresenting the source, sponsorship, approval, or
certification of goods or services.
(3) Misrepresenting the affiliation, connection, or association
with, or certification by, another.
(4) Using deceptive representations or designations of geographic
origin in connection with goods or services.
(5) Representing that goods or services have sponsorship,
approval, characteristics, ingredients, uses, benefits, or quantities
that they do not have or that a person has a sponsorship, approval,
status, affiliation, or connection that he or she does not have.
(6) Representing that goods are original or new if they have
deteriorated unreasonably or are altered, reconditioned, reclaimed,
used, or secondhand.
(7) Representing that goods or services are of a particular
standard, quality, or grade, or that goods are of a particular style
or model, if they are of another.
(8) Disparaging the goods, services, or business of another by
false or misleading representation of fact.
(9) Advertising goods or services with intent not to sell them as
advertised.
(10) Advertising goods or services with intent not to supply
reasonably expectable demand, unless the advertisement discloses a
limitation of quantity.
(11) Advertising furniture without clearly indicating that it is
unassembled if that is the case.
(12) Advertising the price of unassembled furniture without
clearly indicating the assembled price of that furniture if the same
furniture is available assembled from the seller.
(13) Making false or misleading statements of fact concerning
reasons for, existence of, or amounts of price reductions.
(14) Representing that a transaction confers or involves rights,
remedies, or obligations that it does not have or involve, or that
are prohibited by law.
(15) Representing that a part, replacement, or repair service is
needed when it is not.
(16) Representing that the subject of a transaction has been
supplied in accordance with a previous representation when it has
not.
(17) Representing that the consumer will receive a rebate,
discount, or other economic benefit, if the earning of the benefit is
contingent on an event to occur subsequent to the consummation of
the transaction.
(18) Misrepresenting the authority of a salesperson,
representative, or agent to negotiate the final terms of a
transaction with a consumer.
(19) Inserting an unconscionable provision in the contract.
(20) Advertising that a product is being offered at a specific
price plus a specific percentage of that price unless (A) the total
price is set forth in the advertisement, which may include, but is
not limited to, shelf tags, displays, and media advertising, in a
size larger than any other price in that advertisement, and (B) the
specific price plus a specific percentage of that price represents a
markup from the seller's costs or from the wholesale price of the
product. This subdivision shall not apply to in-store advertising by
businesses that are open only to members or cooperative organizations
organized pursuant to Division 3 (commencing with Section 12000) of
Title 1 of the Corporations Code if more than 50 percent of purchases
are made at the specific price set forth in the advertisement.
(21) Selling or leasing goods in violation of Chapter 4
(commencing with Section 1797.8) of Title 1.7.
(22) (A) Disseminating an unsolicited prerecorded message by
telephone without an unrecorded, natural voice first informing the
person answering the telephone of the name of the caller or the
organization being represented, and either the address or the
telephone number of the caller, and without obtaining the consent of
that person to listen to the prerecorded message.
(B) This subdivision does not apply to a message disseminated to a
business associate, customer, or other person having an established
relationship with the person or organization making the call, to a
call for the purpose of collecting an existing obligation, or to any
call generated at the request of the recipient.
(23) The home solicitation, as defined in subdivision (h) of
Section 1761, of a consumer who is a senior citizen if a loan is made
encumbering the primary residence of that consumer for the purposes
of paying for home improvements and the transaction is part of a
pattern or practice in violation of either subsection (h) or (i) of
Section 1639 of Title 15 of the United States Code or subsection (e)
of Section 226.32 of Title 12 of the Code of Federal Regulations.
A third party shall not be liable under this subdivision unless
(A) there was an agency relationship between the party who engaged in
home solicitation and the third party or (B) the third party had
actual knowledge of, or participated in, the unfair or deceptive
transaction. A third party who is a holder in due course under a home
solicitation transaction shall not be liable under this subdivision.
(24) (A) Charging or receiving an unreasonable fee to prepare,
aid, or advise any prospective applicant, applicant, or recipient in
the procurement, maintenance, or securing of public social services.
(B) For purposes of this paragraph, the following definitions
shall apply:
(i) "Public social services" means those activities and functions
of state and local government administered or supervised by the State
Department of Health Care Services, the State Department of Public
Health, or the State Department of Social Services, and involved in
providing aid or services, or both, including health care services
and medical assistance, to those persons who, because of their
economic circumstances or social condition, are in need of that aid
or those services and may benefit from them.
(ii) "Unreasonable fee" means a fee that is exorbitant and
disproportionate to the services performed. Factors to be considered,
when appropriate, in determining the reasonableness of a fee, are
based on the circumstances existing at the time of the service and
shall include, but not be limited to, all of the following:
(I) The time and effort required.
(II) The novelty and difficulty of the services.
(III) The skill required to perform the services.
(IV) The nature and length of the professional relationship.
(V) The experience, reputation, and ability of the person
providing the services.
(C) Paragraph (24) shall not apply to attorneys licensed to
practice law in California, who are subject to the California Rules
of Professional Conduct and to the mandatory fee arbitration
provisions of Article 13 (commencing with Section 6200) of Chapter 4
of Division 3 of the Business and Professions Code, when the fees
charged or received are for providing representation in
administrative agency appeal proceedings or court proceedings for
purposes of procuring, maintaining, or securing public social
services on behalf of a person or group of persons.
(25) Failure of a dealer as defined in Section 285 of the Vehicle
Code to comply with Section 4456.5, which requires dealers who
purchase a used vehicle with a balance due to a secured party to pay
off the entire balance prior to transferring or selling the
vehicle pursuant to Section 4456.5 .
(b) (1) It is an unfair or deceptive act or practice for a
mortgage broker or lender, directly or indirectly, to use a home
improvement contractor to negotiate the terms of any loan that is
secured, whether in whole or in part, by the residence of the
borrower and that is used to finance a home improvement contract or
any portion thereof. For purposes of this subdivision, "mortgage
broker or lender" includes a finance lender licensed pursuant to the
California Finance Lenders Law (Division 9 (commencing with Section
22000) of the Financial Code), a residential mortgage lender licensed
pursuant to the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000) of the Financial Code),
or a real estate broker licensed under the Real Estate Law (Division
4 (commencing with Section 10000) of the Business and Professions
Code).
(2) This section shall not be construed to either authorize or
prohibit a home improvement contractor from referring a consumer to a
mortgage broker or lender by this subdivision. However, a home
improvement contractor may refer a consumer to a mortgage lender or
broker if that referral does not violate Section 7157 of the Business
and Professions Code or any other provision of law. A mortgage
lender or broker may purchase an executed home improvement contract
if that purchase does not violate Section 7157 of the Business and
Professions Code or any other provision of law. This paragraph shall
not affect the application of Chapter 1 (commencing with Section
1801) of Title 2 to a home improvement transaction or the financing
thereof.
SEC. 4. Section 4456.5 is added to the Vehicle Code, to read:
4456.5. If a dealer purchases a used vehicle with a balance due
to a secured party, the dealer shall submit to the department
evidence in the form of a notarized receipt from the secured party
that the dealer has paid off the entire balance prior to transferring
the vehicle, or prior to the date when payment is due, whichever
occurs first. It shall be unlawful for a dealer to sell or transfer a
used vehicle with a balance due to a secured party prior to paying
off the entire balance and submitting the notarized receipt to the
department.
4456.5. (a) If a dealer purchases a vehicle for
purposes of resale with an outstanding lien due to a secured party in
connection with the cash sale of another vehicle, the dealer shall
in good faith tender full payment on the outstanding lien or balance
no later than the second business day after the dealer takes
possession of the vehicle.
(b) If a dealer purchases a vehicle for purposes of resale with an
outstanding lien due to a secured party in connection with the
conditional sale of another vehicle, the dealer shall in good faith
tender full payment on the outstanding lien or balance no later than
the second business day after the financing for the other vehicle is
approved.
(c) The time periods specified in subdivision (a) or (b) may be
shortened if the retail purchaser and the dealer agree to a shorter
time period.
SEC. 5. Section 11710 of the Vehicle Code is amended to read:
11710. (a) Before any dealer's or remanufacturer's license is
issued or renewed by the department to any applicant therefor, the
applicant shall procure and file with the department a bond executed
by an admitted surety insurer, approved as to form by the Attorney
General, and conditioned that the applicant shall not practice any
fraud or make any fraudulent representation which will cause a
monetary loss to a purchaser, seller, financing agency, or
governmental agency.
(b) A dealer's bond shall be in the amount of one hundred thousand
dollars ($100,000), except the bond of a dealer who deals
exclusively in motorcycles or all-terrain vehicles shall be in the
amount of ten thousand dollars ($10,000). The bond amount for
dealers of trailers designed and used exclusively to transport
vessels as defined in subdivision (a) of Section 9840 shall be in the
amount of ($50,000). Before the license is renewed by the
department, the dealer, other than a dealer who deals exclusively in
motorcycles or all-terrain vehicles, shall procure and file a bond in
the amount of one hundred thousand dollars ($100,000). A
remanufacturer bond shall be in the amount of fifty thousand dollars
($50,000).
(c) Liability under the bond is to remain at full value. If the
amount of liability under the bond is decreased or there is
outstanding a final court judgment for which the dealer or
remanufacturer and sureties are liable, the dealer's or
remanufacturer's license shall be automatically suspended. In order
to reinstate the license and special plates, the licensee shall
either file an additional bond or restore the bond on file to the
original amount, or shall terminate the outstanding judgment for
which the dealer or remanufacturer and sureties are liable.
(d) A dealer's or remanufacturer's license, or renewal of the
license, shall not be issued to any applicant therefor, unless and
until the applicant files with the department a good and sufficient
instrument, in writing, in which the applicant appoints the director
as the true and lawful agent of the applicant upon whom all process
may be served in any action, or actions, which may thereafter be
commenced against the applicant, arising out of any claim for damages
suffered by any firm, person, association, or corporation, by reason
of the violation of the applicant of any of the terms and provisions
of this code or any condition of the dealer's or remanufacturer's
bond. The applicant shall stipulate and agree in the appointment that
any process directed to the applicant, when personal service of
process upon the applicant cannot be made in this state after due
diligence and, in that case, is served upon the director or, in the
event of the director's absence from the office, upon any employee in
charge of the office of the director, shall be of the same legal
force and effect as if served upon the applicant personally. The
applicant shall further stipulate and agree, in writing, that the
agency created by the appointment shall continue for and during the
period covered by any license that may be issued and so long
thereafter as the applicant may be made to answer in damages for a
violation of this code or any condition of the bond. The instrument
appointing the director as the agent for the applicant for service of
process shall be acknowledged by the applicant before a notary
public. In any case where the licensee is served with process by
service upon the director, one copy of the summons and complaint
shall be left with the director or in the director's office in
Sacramento or mailed to the office of the director in Sacramento. A
fee of five dollars ($5) shall also be paid to the director at the
time of service of the copy of the summons and complaint. Service on
the director shall be a sufficient service on the licensee if a
notice of service and a copy of the summons and complaint are
immediately sent by registered mail by the plaintiff or the plaintiff'
s attorney to the licensee. A copy of the summons and complaint shall
also be mailed by the plaintiff or the plaintiff's attorney to the
surety on the applicant's bond at the address of the surety given in
the bond, postpaid and registered with request for return receipt.
The director shall keep a record of all process so served upon the
director, which record shall show the day and hour of service and
shall retain the summons and complaint so served on file. Where the
licensee is served with process by service upon the director, the
licensee shall have and be allowed 30 days from and after the service
within which to answer any complaint or other pleading which may be
filed in the cause. However, for purposes of venue, where the
licensee is served with process by service upon the director, the
service is deemed to have been made upon the licensee in the county
in which the licensee has or last had an established place of
business.
SEC. 6. Section 11711 of the Vehicle Code is amended to read:
11711. (a) If a person who bought or leased a motor vehicle or a
motorcycle at retail suffers any loss or damage related to the
purchase or lease of that vehicle by reason of any fraud or contract
or statutory violation practiced on him or her by a licensed dealer
or one of the dealer's salespersons acting for the dealer, on his or
her behalf, or within the scope of the employment of his or her
salesperson in connection with the purchase or lease of that motor
vehicle, or by reason of the violation by the dealer or salesperson
of Division 3 (commencing with Section 4000), then that person shall
have a right of action against the dealer, his or her salesperson,
and the surety upon the dealer's bond for actual damages plus any
incidental and consequential damages.
(b) If the state or a political subdivision of the state suffers
any loss or damage by reason of any fraud practiced on the state or
fraudulent representation made to the state by a licensed dealer, or
one of the dealer's representatives acting for the dealer, on his or
her behalf, or within the scope of employment of the dealer's
representatives, or suffers any loss or damage by reason of the
violation of the dealer or his or her representative of any of the
provisions of Division 3 (commencing with Section 4000) of this code,
or Part 5 (commencing with Section 10701) of Division 2 of the
Revenue and Taxation Code, the state or a political subdivision of
the state, through the department, shall have a right of action
against the dealer, his or her representative, and the surety upon
the dealer's bond in an amount not to exceed the value of the
vehicles involved.
(c) The failure of a dealer upon demand to pay the fees and
penalties determined to be due as provided in Section 4456 shall be a
violation of Division 3 (commencing with Section 4000) of this code,
and Part 5 (commencing with Section 10701) of Division 2 of the
Revenue and Taxation Code and shall constitute loss or damage to the
state in the amounts of those fees and penalties determined to be due
and not paid.
(d) The claims of the state under subdivision (b) shall be
satisfied first and entitled to preference over all claims under
subdivision (a).
(e) The claims of a person under subdivision (a) who is not a
licensee shall be satisfied first and entitled to preference over all
other claims under subdivision (a).
(d) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
SEC. 7. Section 11722 of the Vehicle Code is amended to read:
11722. Claims, against the surety upon a dealer's bond, of a
financing agency that has loaned money to a licensee or assignee
thereof, or claims based upon accepted assignments of conditional
sales agreements, or the purchase of conditional sales agreements or
of any other agreement entered into with a licensee shall be allowed
only to the extent that the claims of any persons who purchased or
leased a motor vehicle or a motorcycle at retail with respect to a
dealer's bond under Section 11711 shall be satisfied first and
entitled to preference over the claims of the financing agency and
other persons or entities, except the department, with respect to the
dealer's bond.
11722. (a) Claims against the surety upon a dealer's bond shall
be entitled to the following priorities:
(1) The claims of the state under subdivision (b) of Section 11711
shall be satisfied first and entitled to preference over all other
claims.
(2) The claims of persons who bought or leased a motor vehicle or
a motorcycle at retail shall be satisfied next and entitled to
preference over all other claims other than those of the state.
(3) The claims of finance companies, any entity in the business of
loaning money or that accepts assignments of conditional sales
contracts from licensees, other creditors of licensees, or other
commercial entities shall be next in priority, but, in any event,
these claimants may not collectively be paid more than $20,000 from
the proceeds of the dealer's bond.
(b) Subject to these priorities, claimants shall be paid in full
if the proceeds of the bond are sufficient and or on a pro rata basis
if the funds are insufficient.
SEC. 8. Nothing in this act shall be construed to limit, in any
way, the existing rights, remedies, or recourses available to any
person who purchases or leases vehicles at retail.
SEC. 9. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.