BILL ANALYSIS Ó
AB 753
Page 1
Date of Hearing: April 5, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 753 (Monning) - As Amended: March 22, 2011
As Proposed to be Amended
SUBJECT : RENTAL CAR SAFETY: THE RAECHEL AND JACQUELINE HOUCK
RENTAL CAR SAFETY ACT
KEY ISSUE : SHOULD CAR RENTAL COMPANIES BE PROHIBITED FROM
RENTING OR SELLING VEHICLES UPON RECEIPT OF NOTICE THAT ARE
SUBJECT TO ANY FEDERAL SAFETY RECALL?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill would prohibit car rental companies from renting or
selling cars that are subject to a recall notice under federal
motor vehicle safety standards until the necessary repairs are
made. Under current federal law, a similar rule already
prohibits car dealers from both selling and leasing vehicles
subject to a recall unless and until they are repaired. The
author and sponsor, Consumers for Auto Reliability and Safety,
argue that consumers should be able to rent a vehicle without
worrying about safety issues that should have already been
repaired. A tragic example, supporters state, occurred with the
deaths of Rachael and Jacqueline Houck after Rachael lost
steering ability on their rented PT Cruiser in the Santa Cruz
area. Their vehicle was subject to a federal recall notice for
a defective power steering hose, which their rental company had
evidently received a month before. The car rental companies and
other business groups acknowledge the tragedy involving the
Houck sisters, but suggest that the bill will not improve
safety-related issues that are already appropriately addressed
by existing common law surrounding negligence, as well as
statutory law prohibiting rental car companies from renting
unsafe vehicles. They also contend that voluntary rental car
company policies are already in place to prevent such tragedies.
Finally, rental car companies suggest that the measure is
overly broad in failing to recognize that the federal recall
notices referenced do not distinguish between safety related
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issues and non-safety defects, and that the bill inappropriately
focuses solely on rental car companies rather than covering
other vehicle fleets that are used by persons other than the
owner.
SUMMARY : Prohibits car rental companies from renting or selling
cars that are subject to federal recall notices. Specifically,
this bill :
1)Forbids car rental companies from renting or selling a vehicle
once notice has been received that the vehicle is subject to a
safety recall for a defect or noncompliance with federal
safety standards.
2)Requires car rental companies to make the required repairs to
a vehicle subject to a safety recall under federal law before
allowing the vehicle to be rented or sold to consumers.
EXISTING LAW :
1)Generally governs contracts between vehicle rental companies
and their customers and regulates an automobile renter's
liability for loss due to theft, a rental company's loss of
use, or damage or loss to a rental vehicle, a renter's credit
card liability, the submission of insurance claims, damage
waivers and damage waiver fees, and the notice to a renter
regarding financial responsibility and optional damage
waivers. (Civil Code section 1936.)
2)Provides that no person engaged in the rental of any vehicle,
for periods of 30 days or less, shall rent, lease or otherwise
allow the operation of such vehicle unless all of the
following requirements are met: (1) All necessary equipment
required by this code and regulations adopted pursuant to this
code for the operation of the vehicle upon a highway has been
provided or offered to the lessee for his or her use; (2) The
vehicle conforms to all applicable federal motor vehicle
safety standards established under the National Traffic and
Motor Vehicle Safety Act of 1966 (15 U.S.C. Sec. 1381 et seq.)
and the regulations adopted under that act; (3) the vehicle is
mechanically sound and safe to operate within the meaning of
Section 24002. (Vehicle Code section 24010(a)(2).)
3)Provides the Department of Motor Vehicles may conduct periodic
inspections, without prior notice, of the business premises of
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persons engaged in the rental of vehicles for periods of 30
days or less and of the vehicles themselves, for the purpose
of ascertaining that the vehicles are in compliance with the
foregoing section regarding vehicle safety, and that any
vehicle which is found not in compliance shall not be rented
or leased until proof of full compliance with this section is
made to the satisfaction of the department. (Vehicle Code
section 24010(b).)
4)Requires auto manufacturers to notify owners, dealers, and
distributors of motor vehicles about a defect that relates to
motor vehicle safety or is in noncompliance with a Federal
motor vehicle safety standard. (49 C.F.R. section 577.1.)
5)Requires new car dealers to be advised in the notification
that it is a violation of federal law for a dealer to deliver
a new motor vehicle under a sale or lease, or any new or used
item of motor vehicle equipment, covered by the recall
notification until the defect or noncompliance is remedied.
(49 C.F.R. section 577.13.)
6)Prohibits new car dealers from selling or leasing a vehicle
subject to a safety recall notice until repairs have been
made. (49 U.S.C. section 30120(i).)
COMMENTS : The author explains the purpose of the bill as
follows:
Existing federal and state laws permit rental car companies
to rent out cars that are being recalled due to safety
defects, or that fail to comply with federal safety
standards. Federal law already prohibits auto dealers from
selling new cars that are being recalled.
AB 753 is needed to ensure that the Houck tragedy does not
occur again. A consumer should be able to rent a car
without worrying about safety issues that should have
already been repaired. We need to ensure that rental car
companies don't become complacent with their policies and
rent out recalled car, as well as ensure that smaller
rental car companies who do not have policies do not rent
out recalled cars to retain their smaller customer base.
The bill's sponsor, Consumers for Auto Reliability and Safety
(CARS), likewise argues for consistency in the treatment of the
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sale or rental of recalled autos, adding "It shouldn't matter if
you're buying or renting - the car should be safe."
The Need For This Bill Arises From A Tragic Accident. According
to the author, all the major rental car companies have a record
of renting out or selling vehicles that are under federal safety
recalls, placing their customers at potential risk of serious
injury or death, and posing a threat to other drivers. By
contrast, the author notes, car dealers are prohibited from
selling or leasing new cars that are under a recall notice. As
explained below, the industry contends that its existing
practices are adequate to the standard needed to guard against
undue safety risks.
The author states that a tragic example of this risk occurred in
the Santa Cruz area when sisters Raechel and Jacqueline Houck
were killed while driving a recalled PT Cruiser rented from
Enterprise. Approximately one month before the Houck sisters
were killed, Enterprise received notice from Chrysler that the
PT Cruiser had a defective steering component that was prone to
catch fire, the author reports. Despite the warning, Enterprise
reportedly rented out the car to three other customers before
renting the PT Cruiser to the Houck sisters.
According to the author, while some rental car companies claim
they have voluntarily changed their policies as a result of the
Houck case, legislation is necessary to ensure that rental car
customers are not placed in unknown danger when renting a car
under a manufacturer's safety recall notice.
According to a recent article in the Los Angeles Times, federal
lawmakers are also considering but have not introduced
legislation to require rental car companies to immediately take
cars off the road that have been recalled for safety defects.
Sen. Charles Schumer (D-N.Y.) cited the death of the Houck
sisters as a reason Congress should adopt a bill to bar agencies
from renting out cars that have been recalled because of safety
issues. Current law prohibits car dealers from selling a
recalled vehicle, but the law doesn't address rental car
agencies. It also prohibits a rental car company from renting
an unsafe vehicle.
According to the Times:
Schumer also pointed to a study by the National Highway
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Traffic Safety Administration that is still underway.
Looking at 10 recalls by General Motors and Chrysler from
2006 to 2010, the study showed:
Hertz Rent-a-Car fixed only 34% of its vehicles affected by
those recalls within 90 days. Avis Car Rental and Budget
Rent a Car fixed 53% and Enterprise fixed 65% in the same
time frame.
"The study suggests that tens of thousands of rental car
drivers have unknowingly rented vehicles under recall,
posing a serious threat to safety on the roadway," Schumer
said in a statement this month when he offered his bill,
the Safe Rental Car Act.
An Enterprise spokeswoman said her company believes that
the law would be unnecessary, adding that Enterprise
already fixes recalled cars quickly.
Five major car rental firms - Alamo, Avis Budget,
Enterprise, Hertz and National - dispute the NHTSA study.
In a letter to the agency, they said the repair rates cited
on its website were based on inaccurate information
submitted by auto manufacturers.
The rental car companies sent NHTSA letters showing much
higher repair rates for the recalled cars.
Enterprise told NHTSA that in one GM recall last year, for
example, it fixed 72% of its affected cars within 30 days
and 93% within 90 days.
A spokesman for NHTSA declined to comment, saying the study
was ongoing.
(Controversy Builds Over Renting Out Recalled Cars, Los Angeles
Times (March 14, 2011)
(latimes.com/business/la-fi-0314-travel-briefcase-20110314,0,9152
05.storylatimes.com.)
Background on Federal Recall Rules - Debate Regarding Whether
The Recall Notice Standard Is The Appropriate Standard By Which
To Determine Rental Safety In Light of Industry Contention That
Existing Negligence Principles Are Sufficient To Guide Rental
Company Behavior. The sponsor reports that auto manufacturers
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are required by federal law to recall vehicles when they meet
one of two criteria: they pose an unreasonable risk to safety;
or they fail to comply with the minimum federal safety
standards.
The sponsor (CARS) argues that manufacturers are required by law
to recall unsafe vehicles. Although some wait for a federal
order, CARS reports that manufacturers almost always agree with
National Highway Traffic Safety Administration (NHTSA), which
has regulatory authority over auto manufacturers, if NHTSA
determines that a vehicle is not safe. Auto manufacturers are
required by federal law to provide the repairs to customers,
including rental car companies, for free.
According to CARS, typical safety recalls include seat belts
that fail to buckle or unlatch during impact; components prone
to catch fire; wheels that fall off; steering that fails,
causing loss of vehicle control; brake failure; intermittent
stalling in traffic; doors that fail to unlock, trapping
occupants inside; fuel tanks that don't meet federal standards;
air bags that fail to deploy when needed.
If a defect is not sufficiently serious to justify a safety
recall, CARS states, federal law allows manufacturers to
petition NHTSA. Manufacturers have on occasion filed such
petitions and NHTSA on occasion has agreed that a recall is not
necessary.
Auto manufacturers are required to send safety recall notices to
the registered owners, including rental car companies. If the
recall notice is sent to an individual, they are at liberty to
research information on the NHTSA website or in publications, in
order to assess the risk. However, renters are in a different
position, as they usually lack access to information about the
level of risk represented in a safety recall.
If parts may be delayed, CARS states, auto manufacturers and
NHTSA generally coordinate the scheduling of recall notices, and
stagger when they are sent out, in order to avoid lengthy repair
delays after a recall has been issued.
The recall notice states the manufacturer's estimate of the time
needed to perform the labor to correct the problem, often a
matter of hours. Manufacturers must replace or buy back
vehicles that are not repaired within a reasonable time.
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Failure to repair a vehicle within 60 days of its presentation
for repair is presumed to be unreasonable.
As set out in more detail below, the car rental industry
responds that automakers issue recall notices for a wide variety
of problems that do not necessarily affect the safe operation of
the vehicle at all. They note, for example, that recall notices
generally do not prohibit or advise owners against driving their
cars. Rather, the industry contends, recall notices are issued
for problems that often merely "relate to" safety - a standard
that, they argue, may cover a wide variety of relatively minor
problems that may cause the car to be defective as a product --
and therefore necessitating correction -- but simply do not
warrant grounding the vehicle. They add that existing
negligence principles appropriately guide rental industry
practices, and that negligence principles have resulted in the
adoption of internal policies that have proven to be largely
effective to ensure rental car safety.
The bill's supporters disagree with the industry's contention.
They argue that the bill is limited to safety recall notices.
If a vehicle is subject to a recall that is not safety related,
they contend, it is not subject to the bill. Those lesser
problems identified by the industry, supporters argue, are dealt
with via a service campaign or a Technical Service Bulletin.
When a defect or noncompliance rises to the level where a
vehicle falls under a safety recall, they contend, those
vehicles are by definition unsafe. Moreover, supporters note, a
manufacturer that believes a defect does not rise to the level
that makes a safety recall appropriate, may petition NHTSA not
to make a safety determination.
However as noted more fully below, rental car company opponents
contend that federal safety notices are simply not a rational
proxy for them to be governed by as measure of safety. They
contend they remain open to working with the author, his sponsor
and committee staff to try to develop an alternate statutory
approach to address the concern that unsafe vehicles be removed
from rental car company fleets.
ARGUMENTS IN OPPOSITION : As noted below, several large car
rental companies have registered opposition to this bill.
The car rental companies state, "the vast majority of all rental
cars which experience a recall are fixed before being rented as
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a matter of policy." The point to recent statistics provided to
the NHTSA, which they argue demonstrate the speed of repair in
the car rental industry. Enterprise Holdings in a letter to the
NHTSA dated March 4, 2011, reported that the company has already
placed additional attention on responding to recall notices as
quickly as possible. Based on Enterprise's internal numbers of
vehicles in the rental fleet, 92.75% were repaired within 30
days and 98.99% were repaired within 90 days during their last
fiscal year.
The industry's first main concern is that the proposed bill is
too broad by addressing all safety recalls. According to the
car rental companies, not all safety issues are created equal.
They offer the example of a safety recall notification sent to
owners of the Chevy Express and GMC Savannah vans due to a
potentially defective climate control knob which could crack and
limit ability to adjust the climate control, including the
defroster. "Although our companies made the repairs, a question
remains: Should customers who had reserved that car for rental
in a warm weather locale like Los Angeles in July have been
turned away because the climate control knob had not yet been
replaced?"
Secondly, the car rental companies argue that there are times
when the defect described can be temporarily fixed before a
permanent repair is made. The Toyota recall for the risk of
accelerator pedal entrapment in the driver's floor mat affected
hundreds of thousands of cars, opponents note. However, Toyota
did not present a procedure and parts to permanently address the
problem until months after the problem was identified. The
rental car industry removed the floor mats and continued to
operate the cars without the floor mats until Toyota developed a
fix and modified floor mats could be reinstalled. "It does not
make sense that, upon issuance of the recall months after the
problem is identified? rental car customers are denied the use
of a vehicle when no one asserts the vehicle represents any risk
whatsoever once the floor mats are removed," the car rental
companies argue.
Third, opponents argue, manufacturers may issue recall notices
before parts are available. In 2010, General Motors reportedly
announced a recall of over 1 million Chevy Cobalts due to
potential problems with the power steering assist motor, making
handling at slow speeds like when parking, more difficult. Due
to an assessment by the federal government that the severity was
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minimal, GM was allowed to notify Cobalt owners on a rolling
basis, opponents state. "Due to its diligence, the rental
industry was able to repair most vehicles well before the
rotational timeframes." However, as the industry contends,
under AB 753, 65,000 Cobalts would have been grounded for months
"needlessly impacting travel plans and rental costs for many
thousands."
Fourth, the car rental industry notes that AB 753 would not
affect cars owned by large fleets, such as taxi and limousine
companies, state and local governments, utilities, major
corporations, and other businesses. Because those vehicles
would still be able to operate without the repairs being made,
"it does not make sense to allow the drivers and passengers of
all the other vehicle fleets described above to operate without
regard to the existence of the recall."
Finally, the industry believes that AB 753 ignores the realities
of the car rental business. Because not all recalls are created
equal, determining the impact of the recall on whether the
vehicle should be operated pending completion of the recall work
requires "thoughtful and diligent analysis," the companies
contend. They argue that the federal government amend its
recall notification procedures to categorize safety recalls.
Other opposition has come from the California Travel Industry
Association (CalTIA), which notes that "Ýd]epending on the
circumstances surrounding the recall, requiring such a uniform
policy will needlessly impact the travel plans and rental costs
for many thousands of Californians and its visitors." The
California Chamber of Commerce also registered opposition,
stating that while it "appears reasonable on its face, it is
overly broad and will create unintended consequences for
California businesses."
Author's Proposed Clarifying Amendments. To better capture the
intent of the bill, the author proposes the following clarifying
revisions:
(u)(1) Notwithstanding any other law, a rental company
shall not rent, sell or otherwise distribute in commerce a
passenger vehicle to an authorized driver if the vehicle is
subject to a safety recall after the rental company has
received notice pursuant to federal law governing motor
vehicle defect and noncompliance notification ( Part 577
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(commencing with Section 577.1) of Title 49 of the Code of
Federal Regulations that the vehicle is subject to a safety
recall , unless the repairs necessary to correct the defect
or noncompliance required to comply with that federal law
have been performed on the vehicle.
(2) If during a rental period a rental company receives
notice pursuant to Part 577 (commencing with Section 577.1)
of Title 49 of the Code of Federal Regulations that a
vehicle is subject to a safety recall, the rental company
shall immediately contact the renter and any other
authorized driver for whom the rental company has immediate
contact information to inform the renter and authorized
driver of the recall and offer to provide a comparable
alternative vehicle, at no additional cost to the renter,
until the repairs necessary to correct the defect or
noncompliance have been performed on the vehicle. .
(3) For purposes of this subdivision, a notice of a safety
recall to a received by a parent company of a rental
company shall be deemed notice to each of its subsidiaries
and notice to any received by a subsidiary of a rental car
company shall be deemed notice to its parent company
REGISTERED SUPPORT / OPPOSITION :
Support
Consumers for Auto Reliability and Safety (sponsor)
California Nurses Association
CalPIRG
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumers Union
Consumer Watchdog
Center for Auto Safety
The Trauma Foundation
Opposition
California Chamber of Commerce
California Travel Industry Association
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Alamo
Avis
Budget
Enterprise
Hertz
National
Analysis Prepared by : Kevin G. Baker and Rachel Taylor / JUD. /
(916) 319-2334