BILL ANALYSIS SB 427 Page 1 Date of Hearing: June 30, 2009 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Mary Hayashi, Chair SB 427 (Negrete McLeod) - As Amended: June 22, 2009 SENATE VOTE : 25-10 SUBJECT : Automotive repair: crash parts. SUMMARY : Requires an automotive repair dealer (ARD) to include the phone number of the Bureau of Automotive Repair (BAR) for consumers to contact for a free inspection if they suspect auto repair fraud or the unlawful pre-installation of auto body parts without consent, on a written estimate and repair final invoice. Specifically, this bill : 1)Redefines "Crash part" to mean any of the non-mechanical sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels and exterior lighting; and includes the airbag in a motor vehicle's inflatable restraint system. 2)Defines "Aftermarket crash part" to mean a replacement for any crash part. 3)Requires an ARD who prepares a written estimate for repairs that include the replacement of a deployed airbag that is part of an inflatable restraint system, and who fails to repair and fully restore the airbag to original operating condition, is guilty of a misdemeanor punishable by a fine of $5,000, imprisonment in the county jail for one year, or by both. 4)Requires the following statement in 12-point boldface type on a final automotive repair invoice or a written itemized estimate on or after January 1, 2011: "INSTALLING A PART, OTHER THAN A PART DESCRIBED ON THE WRITTEN ESTIMATE, WITHOUT PRIOR APPROVAL FROM THE CUSTOMER, IS UNLAWFUL. IF YOU WOULD LIKE A FREE CAR REPAIR INSPECTION, PLEASE CALL THE STATE BUREAU OF AUTOMOTIVE REPAIR AT (800) 952-5210." 5)Deletes references to repealed provisions of law and makes technical and conforming changes. EXISTING LAW : SB 427 Page 2 1)Authorizes BAR to license and regulate ARDs under the Automotive Repair Act. 2)Requires an ARD to provide a customer with an itemized written estimate for parts and labor before performing any work on the customer's vehicle. 3)Prohibits an ARD from charging a customer for work done or parts supplied in excess of the written estimate without first obtaining a customer's oral or written authorization. 4)Requires an ARD performing auto body or collision repair work to identify whether each part is new, used, rebuilt, or reconditioned on the written estimate. The written estimate must also identify whether a crash part is an original equipment manufacturer (OEM) or non-original equipment (non-OEM) manufacturer crash part. 5)Requires the ARD to obtain authorization from the customer before performing work and imposing charges. 6)Requires all work done by an ARD to be recorded on an itemized invoice that describes all service work done and parts supplied, and requires the invoice to contain specified information. 7)Establishes a misdemeanor (crime) penalty of up to six months in jail or a $1,000 fine (or both), for any person who fails to comply with the provisions of the Automotive Repair Act. 8)Defines various terms for purposes of the motor vehicle replacement parts provisions of the Business and Professions Code (BPC). 9)Establishes a misdemeanor (crime) penalty of up to one year in jail or a $5,000 fine (or both), for any person who installs or reinstalls for compensation, distributes or sells a previously deployed air bag in a vehicle, if the person knows that the air bag has been previously deployed. FISCAL EFFECT : Unknown COMMENTS : SB 427 Page 3 Purpose of the bill . According to the author's office, "While the majority of auto body repair shops comply with the law, the problem of 'parts switching' - or billing the consumer for a more expensive OEM part, but installing a less-expensive aftermarket part - remains a common area of fraud in the auto body repair industry. This bill ensures consumers are made aware of the prohibition against parts switching, and provides consumers with the means to protect themselves against this type of fraud by providing them with instructions to contract the BAR if they suspect anything wrong with the repair of the car." Background . "Crash parts" or auto body parts, are generally made of sheet metal, plastic, or glass that constitute the exterior of a motor vehicle and tend to serve a cosmetic function. Examples of crash parts include bumper reinforcements and absorbers, hoods, fenders, door shells, rear outer panels, deck and trunk lids, quarter panels, truck beds and box sides, body side panels, tailgates, and lift gates. OEM crash parts are made by the manufacturer of motor vehicles for use on that vehicle (e.g., a hood made by Ford for a Ford vehicle). Non-OEM parts, on the other hand, are generic auto parts made by an independent manufacturer that is not affiliated with the motor vehicle's manufacturer. Non-OEM manufacturers must "reverse-engineer" the replacement parts because they do not have access to the OEM manufacturer's specifications, because this information is proprietary. Non-OEM crash parts are typically 20% to 65% less expensive than OEM crash parts. Recent amendments remove the requirement that an airbag invoice be provided to the consumer, and revise the notice requirement to simply state that installing parts other than those described on repair estimates is unlawful, and advising consumers that they may obtain a free car repair inspection from the BAR. Arguments in support . According to the Center for Auto Safety, "Every year, auto crash repair fraud victimizes hundreds of thousands of California motorists at a cost over $350 million. Where the repairer fails to install a replacement airbag, consumers can even be killed in a crash. SB 427 would strengthen current law by requiring the parts invoice for any replacement airbag installed as part of the vehicle repair to be attached to the final repair invoice given to a consumer. The U.S. Department of Transportation (DOT) has found that 20% of all deaths in crashes caused by an airbag failing to deploy are SB 427 Page 4 due to the airbag not having been installed in a repair made prior to the crash. "The other major provision in SB 427 is simply printing on both the repair estimate and invoice [the] toll-free number of the BAR to call if consumers suspect parts fraud or have auto repair problems. Having the phone number on the repair estimate and invoice is essential. Consumers normally have problems with vehicle repairs after they leave the shop, so pamphlets and displays at the auto repair dealer are inadequate in informing consumers of who to call. "Thirty years ago the DOT documented that 53 cents out of every dollar consumers spend on auto repair in general was wasted. In June 2003, the BAR completed a study of auto body collision repairs by inspecting vehicles from around California. BAR's inspections showed that 42% of the vehicles inspected had parts or labor listed on the invoice that were not actually supplied or performed. "SB 427 is completely different from bills introduced in prior (sessions). Neither AB 2825 in 2008 nor AB 1483 in 2007 covered airbags that were not replaced in crash repairs. Neither bill required the BAR's toll-free number on the repair estimate or final invoice. SB 427 does not require repair dealers to sign and verify crash parts on the estimate (that) were installed in the vehicle. Nor does it require repairers to give consumers invoices for any crash part costing over $50." According to Consumers for Auto Reliability and Safety, "The efficacy of air bags is not in dispute. They have been shown to dramatically reduce the risks of death and injury in crashes? However, air bags can be expensive to replace, and some unscrupulous ARDs and rebuilders have resorted to installing fake airbag covers or stuffing the airbag compartments with rags or other materials instead of installing airbags designed for the vehicle. Some entities advertise on the Internet that they offer fake airbag covers that can masquerade as OEM airbag covers, making it difficult for consumers to detect whether an airbag was replaced or not. Some shady repair shops also disable the circuitry that monitors whether the air bag is operational, removing the visible warning (that shows) the airbag is malfunctioning." Arguments in opposition . According to the California New Car SB 427 Page 5 Dealers Association, "It is already fraud (intentional misrepresentation) to disclose on an estimate that the repair dealer will put OEM parts on a car, not do so, and then itemize that he or she did so on the invoice. If the proponents of this bill are truly concerned with preventing fraud and curtailing the practice of part switching, zealous prosecution of existing law by the BAR would accomplish that objective without the unnecessary paperwork this bill would require. The bill's flaws are compounded by requiring a new notice on the first page of a final repair invoice. Repair dealers already have signs posted in their facilities listing the 800-number of BAR; repeating the fact that BAR is available to conduct free car inspections adds little but cost to the repair dealer. Moreover, a statement "installing a part, other than a part described on the written estimate, is unlawful" by its very terms presupposes problems with the repair that could be faced by the customer at this repair dealer. The negative inference diminishes the reputation of the vast majority of law-abiding and honest repair facilities. The disclosure in 12-point font surrounded by a box, even if improved in tone, will do little to educate consumers about the practice of part switching. Working with BAR to spread the word about this nefarious practice, including dissemination of more information about the free Auto Body Inspection Program other than on the repair invoice itself when it is potentially too late, would be a much more effective strategy than adding duplicative and unnecessary disclosures. "We also fail to understand the purpose for which the definition of "aftermarket crash part" in Business and Professions Code 9875 is being modified. Over the last several years numerous bills have been proposed seeking state "certification" of aftermarket crash parts made by someone other than the OEM. None of those bills have ever been enacted. Yet, your bill which is focused on consumer disclosure changes this definition and adds others for no discernable purpose related to the central aim of the bill. We are concerned that the sponsor Certified Auto Parts Association is attempting to achieve through definitional changes what they have failed to do in the marketplace: make certified parts the equal of those made by OEMs." Prior Legislation . AB 2825 (Carter) of 2008, would have required an automotive repair dealer, once repairs are completed, to provide a written certification to the customer that the crash parts identified on the written estimate are the SB 427 Page 6 same crash parts that were installed on the vehicle during repair. The Governor vetoed the bill with the following message: "The bill is essentially similar to a bill I vetoed last year. The provisions in this measure are duplicative of existing law and therefore unnecessary. Requiring ARDs to provide additional paperwork is unnecessarily burdensome and would increase expenses that could be passed on to the consumer, with no additional benefit." AB 1483 (Carter) of 2007 was a bill similar to AB 2825. The Governor vetoed this bill. REGISTERED SUPPORT / OPPOSITION : Support Center for Auto Safety (CAS) (sponsor) Advocates for Highway and Auto Safety American Federation of State, County and Municipal Employees (AFSCME) Consumer Federation of California (CFC) Consumers for Auto Reliability and Safety (CARS) Consumers Union Personal Insurance Federation of California (PIFC) Public Citizen Opposition California Autobody Association (CAA) California New Car Dealers Association (CNCDA) Collision Repair Association of California (CRA) Fender Mender Inc. United Automobile Workers (UAW), Region 5 Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301