BILL ANALYSIS Ó AB 1215 Page 1 Date of Hearing: April 11, 2011 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair AB 1215 (Blumenfield) - As Introduced: February 18, 2011 SUBJECT : Electronic vehicle registration SUMMARY : Requires dealers of new motor vehicle to participate in the electronic vehicle registration program of the Department of Motor Vehicles (DMV). Requires license plates to be attached upon receipt by the vehicle owner. Increases the maximum dealer document preparation charge to $75. Specifically, this bill : 1)Requires a new motor vehicle dealer to use electronic programs provided by the dealer's first-line service provider to register a vehicle it sells or leases, other than an off-highway vehicle or a recreational vehicle, if DMV permits the transaction to be processed electronically. 2)Prohibits a dealer from charging consumers an electronic filing fee in excess of the amount the dealer is charged by a first-line provider for providing license plate processing, postage, fees and services and prohibits the consumer charge from being represented as a governmental fee. 3)Limits the charge a dealer may seek from a vehicle purchaser for document preparation and associated costs to a maximum of $75 if the dealer is by contract a business partner of DMV and $65 if the dealer is not a DMV business partner. 4)Allows a vehicle displaying a copy of the sales report to be operated without license plates until the plates are received by the purchaser or upon the expiration of a 90-day period commencing from the date of sale, whichever occurs first. 5)Requires a license plate issued by California or by any other state or jurisdiction to be attached to the vehicle upon receipt. 6)Makes it unlawful, effective October 1, 2012, for a dealer to sell a new motor vehicle, other than a motorcycle or off-highway vehicle, unless that dealer is a private industry partner of DMV. AB 1215 Page 2 7)Establishes an effective date of July 1, 2012, for all the other provisions of this bill noted above. EXISTING LAW : 1)Allows a maximum document preparation charge of $55 for the sale of a new vehicle, and $45 for the lease of a new vehicle, by a vehicle dealer. 2)Allows newly sold vehicles to be operated without license plates until the plates are received or until the end of a six-month period after the date of sale, whichever occurs first. FISCAL EFFECT : Unknown COMMENTS : In 2001, DMV established an Electronic Vehicle Registration (EVR) program in which dealers who enter into contracts as DMV "business partners" may participate at their option. At this time it is estimated about half of new car dealers participate in the program and no more than 40% of new cars are registered electronically. This bill would require all new vehicle dealerships to register the cars that they sell through the EVR program, beginning July 1, 2012. This would have the effect of allowing vehicle license plates to reach consumers within weeks rather than months while potentially saving DMV millions of dollars for the cost of processing registration materials received in a paper format. (Proponents cite estimates of $14 for DMV to process a paper registration application as opposed to $7 for an electronic one.) Quicker distribution of license plates coupled with this bill's requirement for license plates to be installed by vehicle owners upon receipt might also result in a reduction in the number of vehicles riding through toll facilities without being billed for a toll, since the primary means of toll evasion enforcement is through photographs taken of the license plates of offending vehicles. DMV regulations currently allow participating dealers to levy an optional consumer charge of up to $29 per registration to recoup their costs. This bill eliminates that optional charge while at the same time allowing dealers to pass on to consumers their actual cost for processing transactions and mailing license plates, which currently ranges from $18-$20. AB 1215 Page 3 Finally, this bill also updates the maximum charge a dealer may assess on the sale of a new vehicle for the processing of documents from the current limit of $55 for vehicle sales and $45 for vehicle leases, to $75 for either a sale or a lease. Supporters of this bill note that current delays in the delivery of license plates as well as delays in their being installed by vehicle owners have "led to many drivers circumventing toll payment. In 2010, 734,000 vehicles did not pay a toll to the Bay Area Toll Authority, resulting in lost toll revenue of $3.7 million and lost toll fines totaling $22 million. In 2010, the lost toll revenue for the (Orange County) Transportation Corridor Agencies (TCAs) was $2 million." On this point, however, the TCAs contend the bill "will not solve this problem nor change scofflaw behavior." While the TCAs do not oppose the bill, they feel the toll evasion problem is more a question of willful behavior, rather than a delay in receiving new plates. Toll agencies would prefer that the bill establish a penalty for failure to install plates when they are received (it is currently a "fix-it" ticket). While such a provision is not included in AB 1215, the bill nevertheless moves in a positive direction by having plates delivered earlier and at least requiring their immediate installation. As to the bill's increase in allowable document processing charges, supporters claim that it will help offset the new EVR requirement as well as accounting for the dozens of documentary burdens already imposed on dealers. Even with this increase, they say, "the document processing charge will still be tied for the lowest in the country even though dealer costs to comply with government requirements to sell or lease a vehicle already range from $75 for a simple transaction (involving the purchase of a new car negotiated in English by a buyer and co-buyer with good credit and no trade-in) to $180 for a complex transaction (involving the purchased of a used vehicle by a foreign language buyer and co-buyer with poor credit and a trade-in)." The cap on document preparation fees has been raised a number of times over the last 25 years. In 1987, it was raised from $20 to $25. Four years later it was increased to $35. In 1996, a limit of $45 was established. Most recently, in 2006, the fee for new car sales was increased to $55, although for vehicle leases, it remained at $45. There have been a number of statutes enacted in the last several AB 1215 Page 4 years that have increased or altered dealer document requirements, including new insurance disclosures, foreign language contract translation requirements, consumer identification verification requirements, and changes to documents required by changes to the Smog Check program, among others. Significantly, the Car Buyers Bill of Rights, AB 68 (Montanez), Chapter 128, Statutes of 2005, imposed substantial new document requirements on motor vehicle dealers resulting in increased costs. AB 68 requires a car dealer selling a used vehicle for less than $40,000 to offer the buyer a two-day contract cancellation option agreement; requires car dealers who finance a sale to disclose the price of additional products, services, or other items included in the contract; and requires dealers who finance a sale to disclose the buyer's credit score. As noted above, dealers maintain that complying with all these requirements costs them $75 for a simple transaction and up to $180 for a complicated transaction. Examined in a historical context, it is probably fair to say that document preparation fees have not kept pace with the increasing cost that dealers face in meeting mandated paperwork requirements. This is certainly true in the instance of vehicle leases, whose current fee limit has been in place through 15 years of inflation and new mandates. On the other hand, one might question why the cost of document preparation is not simply built into the sale (or lease) price of a vehicle, just as any number of other costs are recovered through the price structure. Legislative history : AB 1001 (Nunez) of 2005 would have increased the document preparation fee for vehicle sales to $55 from the then-maximum level of $45. That bill was vetoed by Governor Schwarzenegger who said he did "not believe California consumers should be saddled with another hidden fee." SB 44 (Torlakson), Chapter 623, Statues of 2006, raised the document preparation fee to its present level of $55, but only for vehicle sales, not for leases - which remained at $45. AB 1939 (DeSaulnier of 2008) would have raised the document preparation fee to $65 for both vehicle sales and vehicle leases. That bill passed the Assembly floor but died in the Senate without having been heard in policy committee. Related legislation : SB 125 (Emmerson) would allow for the impoundment of a vehicle that is registered to a chronic evader of toll payments until all outstanding tolls and all required AB 1215 Page 5 penalties are paid to the issuing agency. SB 125 is scheduled to be heard in the Senate Committee on Transportation and Housing on April 26. Double referral : This bill is also referred to the Committee on Judiciary. REGISTERED SUPPORT / OPPOSITION : Support AutoNation, Inc. California Association of Highway Patrolmen California New Car Dealers Association CarMax Superstores, Inc. Opposition None on file Analysis Prepared by : Howard Posner / TRANS. / (916) 319-2093