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  : 








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          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  :  









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           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  








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          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
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          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  








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          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