BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 1004
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          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  


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            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  

          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  


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          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  

          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  


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          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  

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