BILL ANALYSIS SB 1004 Page 1 SENATE THIRD READING SB 1004 (Huff) As Amended August 16, 2010 Majority vote SENATE VOTE : 34-0 TRANSPORTATION 11-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Bonnie Lowenthal, |Ayes:|Fuentes, Conway, | | |Jeffries, | |Bradford, | | |Bill Berryhill, | |Charles Calderon, Coto, | | |Blumenfield, Buchanan, | |Davis, | | |Furutani, Hayashi, | |De Leon, Gatto, Hall, | | |Miller, Niello, | |Harkey, Miller, Nielsen, | | |Portantino, Solorio | |Norby, Skinner, Solorio, | | | | |Torlakson, Torrico | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Updates statutes regarding salespersons licenses. Specifically, this bill : 1)Allows motor vehicle dealers and salespersons to post exact copies of their licenses, in lieu of the actual licenses, at the dealer's place of business. 2)Allows a salesperson to work for more than one dealer if all of the dealers for whom he or she works have common controlling ownership, which is defined as when more than 50% of the ownership interests in each dealer are held by the same person or persons, either directly or through one or more wholly owned subsidiary entities. 3)Requires the salesperson's license, or license copy, to be posted at each dealership where he or she is employed. 4)Requires any copy of the salesperson's license to be destroyed by the dealer upon termination of the salesperson's employment with that dealer. 5)Allows the Department of Motor Vehicles (DMV) to refund a dealer's cash deposit that has been submitted in lieu of a dealer bond after five years from the date a bond is secured SB 1004 Page 2 and maintained, if the DMV is satisfied there are no outstanding claims against that deposit. 6)Requires a motor vehicle dealer, for each credit report he or she obtains for use in connection with a consumer's credit application, to provide that consumer a summary of the information from the credit report that corresponds to the current federal credit score reporting requirements that apply to vehicle dealers. 7)Provides that this requirement does not limit or restrict any rights or remedies otherwise available under existing law. EXISTING LAW : 1)Requires vehicle dealers to post in a conspicuous, public place in each and every location where the dealer does business the dealer's license as well as the sales license of each salesperson employed by that dealer at that location. 2)Prohibits a salesperson from working for more than one dealer, although he or she can work at different locations of a single dealer, provided each location has identical ownership and structure. 3)Allows DMV to refuse to issue or to revoke or suspend a vehicle salesperson's license if, among other things, the salesperson has acted as a salesperson for more than one licensed dealer. 4)Allows DMV to refund a dealer's cash deposit that has been submitted in lieu of a dealer bond after three years from the date the dealer has ceased to do business or from the date the dealer has ceased to be licensed, if DMV is satisfied that there are no outstanding claims against the deposit. 5)Requires a motor vehicle dealer who obtains a credit report for use in connection with a consumer's credit application to provide that consumer a summary of the information from the credit report in a format specifically described in statute. FISCAL EFFECT : Unknown. This bill was withdrawn from the Senate Appropriations Committee pursuant to Senate Rule 28.8. COMMENTS : The author has introduced this bill to update SB 1004 Page 3 California law governing motor vehicle dealers and salespersons to reflect changes in the operation and structure of companies selling motor vehicles. The bill specifically recognizes that dealerships today are organized in a wide variety of structures from sole proprietorships to publicly traded corporations. State law governing dealers' employment of salespersons dates from an earlier era. This bill changes that law to allow dealers to post copies, rather than originals, of occupational licenses. It also allows a salesperson to work for multiple dealerships so long as 50% the ownership of each of those dealerships is the same. It is unclear why existing law precludes a salesperson from working for more than one vehicle dealer. This provision dates from at least the 1950s. DMV staff has speculated that the prohibition was put into the law to avoid a salesperson having conflicting allegiances and thus being tempted to steer business one way or another between competing dealers for whom the salesperson worked. The sponsor, the California New Car Dealers Association, notes that corporate structures for individual stores may differ for tax or business reasons, "but so long as the controlling owner is the same, a dealer should have the ability to shift a salesperson from one store to another. Under current law, in order to move between dealerships, a salesperson would likely be forced to resign his or her employment and be "rehired" at the second store unless both the ownership and structure are identical. For large dealer groups, including publicly traded companies, this rule is a serious impediment, yet serves no particular purpose. Dealers should have the flexibility to move salespeople to stores under common controlling ownership where sales potential is the greatest at any particular time." An alternative to allowing the posting of duplicates of a salesperson's license would be to have the salesperson take the license down and with him or her when going to work at another location or dealer. The sponsor explains that the salespersons' licenses are frequently kept under a locked glass cover and that moving licenses could create needless problems, including licenses getting left behind at the wrong location upon occasion. The bill also addresses the instance of a dealer who initially posts with DMV a cash deposit in lieu of the $50,000 bond that SB 1004 Page 4 is required to protect against fraud and monetary loss to a purchaser, seller, financing agency, or government agency. If such a dealer subsequently obtains a bond, he or she can only have the deposit refunded by waiting for three years after having ceased to do business. This has the unintended consequence of requiring the dealer to close his or her shop in order to secure the return of that deposit. The bill therefore allows a refund of the deposit five years after the dealer has secured and maintained a bond, provided DMV is satisfied that there are no outstanding claims against the deposit. Finally, this bill allows dealers to use the federally-mandated credit report disclosure form, rather than one specified in state statute, when they obtain credit reports on customers who apply to finance their vehicle purchases. Analysis Prepared by : Howard Posner / TRANS. / (916) 319-2093 FN: 0005990