BILL ANALYSIS Ó
AB 1215
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1215 (Blumenfield) - As Amended: April 28, 2011
As Proposed to be Amended
SUBJECT : VEHICLE FEES, LICENSING AND REGISTRATION
KEY ISSUES :
1)SHOULD OPTIONAL PARTICIPATION IN DMV'S EXISTING ELECTRONIC
VEHICLE REGISTRATION AND LICENSING PROGRAM FOR NEW CARS BE
MADE MANDATORY IN ORDER TO REDUCE DELAYS, COSTS AND TOLL
EVASION?
2)SHOULD NEW CAR DEALERS BE PERMITTED TO INCREASE UNRELATED
DOCUMENT PREPARATION CHARGES FOR SALES AND LEASES?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This measure provides that new car licensing and registration
with the Department of Motor Vehicles be handled electronically.
Doing so is expected to reduce the time it takes for new car
buyers to receive their plates, reduce DMV costs in processing
new vehicle licensing and registration, and reduce toll evasion
that can occur when cars without license plates cannot be
properly identified and cited. On a related point, the bill
would require that new car buyers promptly display their plates
upon receipt. The electronic vehicle registration system is
currently in operation with optional participation at or about
fifty percent of dealers. The bill is supported by new car
dealers, who would also be authorized to increase an unrelated
fee for "document preparation." This provision of the bill has
attracted the opposition of Consumers for Auto Reliability and
Safety who contend that the fee is improper, and that an
increase would harm consumers without a corresponding benefit.
The Legislature has increased this fee in recent years, but
further proposed increases have not been successful. The author
and supporters are currently engaged in negotiations to address
this concern as the bill moves forward.
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SUMMARY : Requires dealers of new motor vehicles to participate
in the electronic vehicle registration program of the Department
of Motor Vehicles (DMV) and allows for the imposition of a fee
for this function, instead of the currently optional
participation, and increases the separate dealer document
preparation charge to $75. Specifically, this bill :
1)Requires a new motor vehicle dealer to use electronic programs
provided by a first-line service provider authorized by the
DMV to register a vehicle it sells or leases if DMV permits
the transaction to be processed electronically.
2)Allows a dealer to charge consumers an electronic filing fee
not to exceed the amount the dealer is charged by a first-line
provider for providing license plate processing, postage, fees
and services, and authorizes the DMV to regulate the maximum
amount a first line service provider may charge a dealer.
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.
7)Establishes an effective date of July 1, 2012, for all other
provisions noted above.
EXISTING LAW :
1)Allows a maximum document preparation charge of $55 for the
sale of a new vehicle (Vehicle Code Section 11713.1), and $45
for the lease of a new vehicle, by a vehicle dealer (Civil
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Code Section 2985.8).
2)Permits but does not require a new car dealer to
electronically register a vehicle with the DMV for an
additional fee through a qualified industry partner. (Civil
Code Section 2982.)
3)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. (Vehicle Code Section 4456.)
COMMENTS : The author explains the reason for the bill as
follows: "Fewer than 40% of new cars are registered
electronically. The manual vehicle registration system is
experiencing delays and backlog, impacting the delivery of
license plates in a timely manner. It is currently taking DMV
months to manually process vehicle registrations documents when
an electronic system would reduce this period to weeks."
This bill is actively supported by the California New Car
Dealers Association (CNCDA), which states that the currently
authorized optional electronic vehicle registration program
through the Department of Motor Vehicles' (DMV's) Business
Partner Automation (BPA) program has met with some success, but
dealer and consumer acceptance of the program have lagged behind
expectations (with only about half of all new car dealers
participating). "In the wake of budget pressure, state worker
furloughs, field office closures and reissuance of 24 million
driver's licenses under the federal REAL ID Act, DMV is under
considerable pressure to streamline business operations for
dealers and other occupational licensees."
According to CNCDA, in the current budget environment the timely
issuance of license plates has become a growing problem for
dealers, consumers (who often wait 90+ days for plates to
arrive), law enforcement agencies (that must rely on Reports of
Sale posted on windshields as vehicle "birth records" for up to
six months), and local and regional agencies relying on toll
booths and red-light cameras that cannot identify vehicles
without permanent, hard plates. CNCDA states, "All interested
parties acknowledge that requiring EVR by making the BPA program
mandatory for new registrations would alleviate many or all of
these concerns - including reducing the time without permanent
plates from months to about a week, and improving the accuracy
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of DMV registration records (since BPA program participants
guarantee a near perfect level of accuracy). The net fiscal
benefit to the state of imposing an EVR requirement for new car
dealers is well over $10 million per year. Additional positive
budget impacts will be felt if used car dealers also join the
program, which the bill permits but does not require."
CNCDA goes on to state:
To offset the new EVR requirement and to account for the
dozens of documentary burdens already imposed on dealers,
AB 1215 increases to $75 the statutory cap on the document
processing charge (which is a negotiable, non-governmental
charge). At this level, 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). None of these changes result in the imposition
of a new or higher government fee.
According to CNCDA, AB 1215 also addresses the need to encourage
consumers, once they receive their license plates, to put them
on their vehicle. The bill reduces the period that consumers
may legally drive without permanent plates from six months to 90
days. Some have argued that this time period could be reduced
even further since electronic registration will occur in the
vast majority of cases in a matter of days, rather than weeks.
Unfortunately, reducing this "registration window" below 90 days
runs up against the already existing rules governing all
registrations-electronic or not-that allow dealers 20 days to
process new vehicle registrations and 30 days for used vehicles
(with additional time periods if such registrations are returned
by the DMV to correct mistakes). Shortening the period further
could impact consumers who, through no fault of their own and
for reasons beyond their control (dealer error, DMV delays,
postal service issues, etc.), don't receive plates within the
new 90 day window.
Finally, CNCDA notes, AB 1215 requires consumers to install
permanent plates immediately upon receipt. Although existing
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law requires vehicles to have two license plates, the statutory
language is vague about when consumers must affix those plates.
This has led some consumers to abuse the gap in existing law and
to drive around for up to six months with paper plates.
Scofflaws engaging in such conduct foil the technology used to
identify vehicles that pass through toll booths or through red
lights, costing local and regional agencies millions of dollars
in revenue.
Converting to Uniform Use of the Electronic Vehicle Registration
System Is Expected To Save Taxpayer Funds and Facilitate Prompt
Registrations. According to the Assembly Transportation
Committee, the DMV established an Electronic Vehicle
Registration (EVR) program in 2001. Under this EVR program,
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.)
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. On this point,
Consumers for Auto Reliability and Safety (CARS) argues that the
bill should preserve the DMV's existing $29 cap on the charge
for EVR processing, allowing dealers to recover the actual cost
imposed by the DMV's authorized business partners, or $29,
whichever is less.
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
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a toll, since the primary means of toll evasion enforcement is
through photographs taken of the license plates of offending
vehicles. Supporters of this bill note that current delays in
the delivery of license plates as well as delays in installation
by vehicle owners have led to many drivers circumventing toll
payment. The Assembly Transportation Committee noted that last
year 734,000 vehicles reportedly 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 estimated to be $2 million. The TCAs note
that the bill will not necessarily 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 there is not such a
provision in the bill, it is believed that the bill may
nevertheless be of assistance by allowing plates to be delivered
earlier and requiring their immediate installation.
Controversy Regarding "Document Preparation" Fee Increase.
While the bill is noncontroversial regarding electronic vehicle
registration and prompt display of license plates, it has
generated opposition with respect to the proposed increase in
consumer fees. Currently dealers are allowed to charge a
"document preparation fee" of $55 for new cars and $45 for lease
vehicles. This bill would raise the fee to $75 for both sales
and leases - an increase of 67 percent for leases and 36 percent
for new car sales.
Car dealers claim that the proposed fee increase 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)."
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Car dealers also note that although the fee is legally
authorized, it is optional and subject to negotiation. Consumer
advocates have long opposed the fee, contending that it is not
appropriate to impose a specific charge on consumers for car
dealer compliance with consumer protection laws. While not
denying that compliance with consumer disclosure rules may have
costs, consumer advocates argue that these costs should be
folded into the price of all vehicles and subject to
competition.
In response to prior efforts to increase the fee, consumer
groups have also complained that the fee is often tacked on
after the price of the vehicle has been negotiated, and that
most consumers are unaware of the fee or that it is an
unnecessary add-on, or unwilling to undo an agreement late in
the transaction when the fee first arises.
A number of recent bills have increased or proposed to increase
this fee. AB 1001 (Nunez) of 2005 proposed to increase 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 "Such fees are not usually discussed
with the car buyer until the purchase price has been agreed upon
and a disclosure is made on the conditional sales contract. I
recently signed the Car Buyer Bill of Rights and AB 1001 runs
contrary to that bill's worthy goal to improve consumer
protection."
SB 44 (Torlakson) 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)
initially would have raised the document preparation fee to $65
for both vehicle sales and vehicle leases. The bill was
subsequently amended to reduce the proposed fee increase to $55
for lease vehicles, but died in the Senate without having been
heard in policy committee. A Senate budget trailer bill
authored by Sen. Padilla was reportedly under consideration last
September to increase the fee to $75 for both sales and leases.
That measure was the subject of media coverage but was not
introduced.
The author is currently engaged in discussions regarding these
concerns and proposes to amend the bill to leave the amount of
any document preparation fee increase blank while these
discussions continue, as indicated below.
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Author's Amendments To Address Opposition Concerns As The Bill
Moves Forward. In light of concerns regarding the consumer fee
provisions in the bill, the author prudently proposes to amend
the bill while discussions with the opposition continue by
deleting the specified document processing charge increases and
replacing those numbers with a blank, and by clarifying that the
maximum allowable EVR fee consumers may be charged is the DMV's
existing $29 cap or the actual cost imposed by the DMV's
authorized business partners, whichever is less.
Prior/Pending Related Legislation. AB 1001 (Nunez) of 2005
proposed to increase the document preparation fee for vehicle
sales to $55 from the then-maximum level of $45. That bill was
vetoed by Governor Schwarzenegger. 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) initially
would have raised the document preparation fee to $65 for both
vehicle sales and vehicle leases. The bill was subsequently
amended to reduce the proposed fee increase to $55 for lease
vehicles, but died in the Senate without having been heard in
policy committee. A Senate budget trailer bill was reportedly
under consideration last year to increase the fee to $75 for
both sales and leases
REGISTERED SUPPORT / OPPOSITION :
Support
California New Car Dealers Association
CarMax Auto Stores
Metropolitan Transportation Commission (seeking amendments)
Opposition (prior to proposed amendments)
Consumers for Auto Reliability and Safety
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334