BILL ANALYSIS Ó
AB 238
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CONCURRENCE IN SENATE AMENDMENTS
AB 238 (Huber)
As Amended September 2, 2011
2/3 vote. Urgency
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|ASSEMBLY: | |(April 25, |SENATE: |33-0 |(September 9, 2011) |
| | |2011) | | | |
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(vote not relevant)
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|COMMITTEE VOTE: |8-0 |(September 9, 2011) |RECOMMENDATION: |concur |
| | | | | |
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Original Committee Reference: JUD.
SUMMARY : Provides that a motor vehicle conditional sales contract
shall not be made unenforceable solely because of a violation of
requirements to disclose specified government fees and the total of
those and other fees.
The Senate amendments delete the Assembly version of this bill, and
substitute the following instead:
1)Provide that a conditional sales contract shall not be made
unenforceable solely because of a violation by the seller
regarding the disclosure of amounts paid to public officials
regarding various fees and the subtotal of those fees with other
amounts.
2)Provide that a buyer shall not be excused from payment of any
finance charge solely due to the above violation with respect to
a holder of a conditional sales contract that was acquired
without actual knowledge of the violation.
3)Provide that, in addition to any other remedies that may be
available, the buyer is entitled to any actual damages sustained
as a result of a violation of the above provisions.
4)State that nothing shall affect any legal rights, claims, or
remedies otherwise available under law, and would apply only to
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conditional sales contracts executed or entered into on or after
January 1, 2012.
5)Contain an urgency clause, allowing this bill to take effect
immediately upon enactment.
AS PASSED BY THE ASSEMBLY , this bill amended the Civil Discovery
Act.
FISCAL EFFECT : None
COMMENTS : According to the author, this bill seeks to respond to
recent lawsuits against car dealers alleging violations of existing
law regarding failure to properly disclose government fees
collected by dealers under the Automobile Sales Finance Act (ASFA).
In response to concerns expressed by the bill's sponsor,
California New Car Dealers Association (CNCDA), about the ability
of car buyers to rescind contracts when dealers fail to comply with
statutory requirements regarding disclosure of these fees, this
bill would remove rescission as a remedy for those violations.
According to the author:
AB 238 narrowly refines the ASFA's disproportionate remedy
provisions by providing that a contract shall not be
rendered unenforceable solely because of a discrepancy in
the disclosure of specified government fees. This bill does
ensure that consumers retain the right to sue dealers that
violate these disclosure requirements in Superior Court in
an effort to obtain monetary damages and attorney's fees.
This proposal is the result of a careful collaboration
between interested parties to ensure that consumers are
adequately protected from unscrupulous dealers, and that
dealers who make technical disclosure violations are held
accountable without the prospect of a business-threatening
catastrophic lawsuit.
The ASFA seeks to protect purchasers of motor vehicles from
excessive charges by requiring conditional sale contracts to
contain numerous disclosures. Relevant to this bill, section 2982
of the ASFA requires specification of amounts paid for vehicle
license, registration, title, transfer, and tire fees. The law
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also requires that the contract show a subtotal of these and other
fees.
Under the ASFA, a violation of those disclosures generally makes
the contract unenforceable, unless the violation is the result of
an accidental or bona fide error in computation. ASFA specifically
provides that when the contract is unenforceable, the buyer may
elect to retain the vehicle and continue the contract in force or
elect to rescind the contract and return the motor vehicle. From a
policy standpoint, statutory remedies such as the right of
rescission are designed to both encourage compliance with the
statute and to provide individuals with the opportunity to enforce
the obligations imposed by law.
The requirement that government fees be shown on the contract has
been a feature of the ASFA since its enactment 50 years ago.
Initially the Act provided no right of rescission if these fees
were lumped together on the contract because dealers could defend
on the ground of substantial compliance. (Stasher v.
Harger-Haldeman, 58 Cal 2d 23 (1962).) However, the Act was
subsequently revised to require the current specific itemization.
The remedy of rescission therefore appears to be available as a
remedy - and apparently the only remedy - specified in the statute
for unlawfully aggregating these fees. Attorney's fees are added
for the prevailing party. (Civil Code Section 2983.4.)
Although it eliminates the one apparent existing remedy under the
ASFA for unlawful aggregation and failure to subtotal, the bill
does not actually eliminate the underlying obligation to comply
with these disclosure requirements. Failure to comply is still
technically wrongful under the bill. Indeed, an uncodified
provision of the bill states, "It is not the intent of the
Legislature in enacting this act to relieve a seller from making
full and accurate contract disclosures ?." Moreover, the bill
makes clear that actual damages are recoverable for any such
violation, although cases involving actual damages are expected to
be rare, and may be more difficult to discern if buyers are not
shown the breakdown of fees.
The bill expressly provides that it does not "affectÝ] any legal
rights, claims or remedies otherwise available under law." This is
underscored by uncodified language stating, "It is not the intent
of the Legislature in enacting this act to ? limit other consumer
remedies for any disclosure violation."
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It is not clear what if any rights, claims or remedies there might
be under existing law. A claim would appear to lie under the
Unfair Competition Law (UCL). (e.g., Nelson v. Pearson Ford Co.,
186 Cal. App. 4th 983 (2010).) However, the UCL imposes a
heightened harm requirement for standing. A private person has
standing to sue only if he or she has suffered injury in fact and
has lost money or property as a result of such unfair competition.
These harm and causation requirements may preclude many potential
claims for failure to make the required fee and subtotal
disclosures covered by this bill, absent proof of actual damages
such as overcharging. While the UCL imposes an elevated damages
requirement, it paradoxically limits remedies to injunctive and
restitutionary relief, which moreover are discretionary with the
court under equitable principles, not mandatory. In addition,
attorney's fees are generally unavailable under the UCL, unlike the
ASFA.
A claim might also lie under the Consumer Legal Remedies Act,
although the Committee's research found no reported cases providing
authority for such a claim.
The premise underlying the bill is that this change in the law will
deter excessive litigation and unwarranted remedies without
affecting compliance with the ongoing disclosure obligations. It
is hoped that the absence of the rescission remedy will not lead to
any increase in failure to disclose, which might inadvertently put
additional burdens on the Department of Motor Vehicles, which is
responsible for administrative monitoring and enforcement of these
obligations. What may be worse, if dealers were to combine
non-tax-deductible registration and other fees on the same line of
the contract with the tax-deductible VLF fee, car buyers may
mistakenly overstate VLF tax deductions on their income tax returns
- a development that would not only cause potential difficulties
for taxpayers but could lead to reduced state revenue collection.
It may be useful to evaluate the impact of this measure in
subsequent years to ensure that it has the desired positive effect
without inadvertent costs.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0002888
AB 238
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