BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: AB 1215
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  blumenfield
                                                         VERSION: 6/22/11
          Analysis by:  Carrie Cornwell                  FISCAL:  yes
          Hearing date:  June 28, 2011



          SUBJECT:

          Vehicles: electronic registration and dealer fees

          DESCRIPTION:

          This bill requires new car dealers to participate in a program 
          to electronically title and register vehicles that they sell and 
          to post specified warning notices on some used cars.  The bill 
          allows vehicle dealers to charge car buyers higher add-on fees 
          on the sale of new and used vehicles.

          ANALYSIS:

          Vehicle license plates and registration

          Existing law prohibits a person from driving, moving, or parking 
          a motor vehicle on the highway or in a public parking facility 
          unless it is registered with the Department of Motor Vehicles 
          (DMV).  When someone buys a new car, it is not yet registered, 
          nor does it display license plates.  Sometimes used cars also do 
          not have license plates, and in any case, the dealer must 
          transfer the title and registration to the buyer.  

          At the time of retail sale, the vehicle dealer is responsible 
          for applying to DMV for the registration of a new vehicle and 
          the transfer of registration for a used vehicle.  Before the 
          dealer can deliver the vehicle to the buyer, the dealer must 
          affix to the vehicle's windshield a DMV-created report-of-sale 
          showing that the vehicle is in the process of being registered.  
          The dealer then has 20 days for a new vehicle or 30 days for a 
          used vehicle to deliver to DMV the application and fees 
          necessary to register the vehicle in the buyer's name.

          Once DMV receives and processes the application, it issues and 
          mails to the new owner two license plates, a vehicle 
          registration card, and the appropriate registration stickers for 
          the vehicle's rear license plate.  The two license plates must 




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          remain affixed to a vehicle, but the vehicle may be operated for 
          180 days after purchase while displaying a report-of-sale rather 
          than license plates with registration stickers.

          In 2001, under SB 46 (Polanco), Chapter 127 of that year, DMV 
          established an Electronic Vehicle Registration (EVR) program in 
          which motor vehicle dealers may enter into contracts to act as 
          DMV business partners for vehicle registration and titling 
          purposes.  A business partner either directly, or through a 
          service provider, communicates electronically with DMV to 
          register a vehicle it has sold and then mails license plates, 
          registration cards, and registration stickers to the buyer.  DMV 
          estimates that less than half of new car dealers participate in 
          this voluntary EVR program.


          Document processing fee

          Existing law requires any person acting as a dealer of motor 
          vehicles subject to registration to be licensed by the 
          Department of Motor Vehicles (DMV).  Among other requirements 
          and prohibitions, a motor vehicle dealer must advertise the 
          total price of a vehicle, but may exclude taxes, registration 
          and smog check fees, finance charges, and document preparation 
          fees.  In addition, the dealer must sell the vehicle at the 
          advertised price, exclusive of the mentioned taxes and fees.  
          Existing law caps dealer document preparation fees at $45 for a 
          leased vehicle and $55 for a purchased vehicle.  While existing 
          law does not define what this fee is, generally vehicle dealers 
          assert that the fee is meant to cover the cost to the dealer of 
          processing paperwork, including that required to register the 
          motor vehicle with the state.

          National Motor Vehicle Title Information Service (NMVTIS)

          The Federal Anti-Car Theft Act of 1992 provided for the 
          establishment of a national information system to enable states 
          and others to access vehicle titling information.  In 1996, 
          Congress reauthorized the act and gave U.S. Department of 
          Justice (US DOJ) responsibility for implementation and 
          development of the system, which is known as the National Motor 
          Vehicle Title Information Service (NMVTIS). 

          The federal government created NMVTIS to:

               Prevent the introduction or reintroduction of stolen 




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              vehicles into interstate commerce;
               Protect states, consumers, and others from fraud;
               Reduce the use of stolen vehicles for illicit purposes, 
              including fundraising for criminal enterprises; and
               Provide consumer protection from unsafe vehicles, 
              including showing when a vehicle title has been branded in a 
              jurisdiction.  (A "brand" is a descriptive label that states 
              assign to a vehicle to identify the vehicle's current or 
              prior condition, such as "junk," "salvage," or "flood.")

          For a consumer to access NMVTIS information about a particular 
          vehicle's title and history, the consumer pays a small fee 
          (typically $5 to $8) to one of several private companies that 
          provide access to NMVTIS records. 

           This bill  :

             1.   Requires that a new motor vehicle dealer register motor 
               vehicles -- new or used -- that it sells or leases using 
               the EVR program.  This provision does not apply to 
               motorcycles, off-highway vehicles, or recreational 
               vehicles.  To this end, the bill makes any new car dealer 
               that has not signed up as a business partner in DMV's EVR 
               program by October 1, 2012 to be in violation of statutory 
               dealer licensing requirements.

             2.   Changes the name of the document preparation fee to the 
               "document processing charge" and expressly authorizes 
               dealers to charge a purchaser or lessee the charge.  The 
               bill states that the document processing charge is "for 
               preparation and processing of documents, disclosures, and 
               titling, registration, and information security obligations 
               imposed by state and federal law" but prohibits a dealer 
               from representing it as a governmental fee. 

             3.   Increases the cap on the document processing charge for 
               both purchases and leases to $75 for those dealers that 
               participate in electronic registration and $65 for those 
               dealers - who could only be used vehicle dealers - who do 
               not participate.  Beginning six months after the effective 
               date of the bill and annually thereafter, DMV will adjust 
               these two caps by the California Consumer Price Index 
               rounded to the nearest dollar amount and to a maximum of 
               $100.

             4.   Authorizes a dealer to charge an electronic filing 




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               charge not to exceed the lesser of $29 or the actual amount 
               the dealer pays to a DMV service provider for providing a 
               license plate.  The dealer may not represent this as a 
               governmental fee either.  (DMV regulations currently allow 
               a dealer who is a business partner under the EVR program to 
               charge consumers up to $29 for electronic registration.)

             5.   Shortens the period from six months to 90 days during 
               which a vehicle may be operated while displaying a 
               report-of-sale and without a license plate and registration 
               stickers.  The bill clarifies that a registered owner must 
               affix license plates to a vehicle upon receiving those 
               plates.

             6.   Prohibits a dealer from offering a used vehicle for sale 
               unless the dealer obtains an NMVTIS report on that vehicle. 
                If the report indicates that the vehicle is a junk 
               automobile or a salvage automobile, that specified parties 
               have reported it as such, or that its title contains a 
               brand, then the dealer must affix to the vehicle a 
               prescribed warning to that effect in 14 point font on a 4 
               inch by 5.5 inch, red background.  The warning shall also 
               advise the buyer that he or she may get a copy of the 
               NMVTIS report from the dealer or obtain it independently 
               and the web address at which to obtain it.  The dealer must 
               make the NMVTIS report available to the purchaser upon 
               request prior to sale.  

             7.   Takes effect on July 1, 2012.

          COMMENTS:
          
           1.Purpose  .  According to that author, vehicle dealers register 
            fewer than 40 percent of new cars electronically each year.  
            He notes that the alternative, manual vehicle registration 
            system is experiencing delays and backlog, impacting the 
            delivery of license plates in a timely manner. It takes DMV 
            weeks or even months to process vehicle registration documents 
            manually and distribute license plates and registration cards. 
             An electronic system would reduce this period to days.  The 
            timely distribution and affixing of plates to vehicles is 
            important both to law enforcement and to toll collection 
            agencies that use camera enforcement at their toll plazas.  

            Transitioning to an EVR system would result also in a 
            significant savings to DMV.  The author and DMV believe that 




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            implementing a mandatory EVR program would result in a minimum 
            net fiscal benefit to the state's Motor Vehicle Account of 
            well over $9 million per year.
          
           2.A reasonable balance  .  Historically, opposition to increases 
            in the document preparation fee cap, which this bill increases 
            by $20 for sales and $30 for leases, came from groups 
            representing consumers.  These groups see the fee as a cost 
            solely borne by consumers and increasing the cap as simply 
            increasing a fee on car buyers.  Those groups have acquiesced 
            to increases in the document preparation fee cap when 
            legislation linked the increase to improved consumer 
            protection measures for car buyers.  This bill provides such a 
            link as the NMVTIS warning provides crucial information about 
            a vehicle's history to buyers in a timely fashion.  Consumer 
            groups supporting this bill note that vehicles with a history 
            of major damage tend to be unsafe and worth far less that 
            otherwise similar vehicles.  Recent amendments that require 
            dealers to check and post information from NMVTIS moved these 
            groups from opposing to supporting the bill.

           3.Another increase  . The Legislature has raised the cap on 
            document preparation fees a number of times over the past 25 
            years.  In 1986, the cap went from $20 to $25.  Two years 
            later legislation increased it to $35, and in 1996, it reached 
            $45.  In 2006, SB 44 (Torlakson), Chapter 623, increased the 
            cap to $55 for purchased vehicles only, but left the cap for 
            leased vehicles at $45.  Adjusting simply for consumer 
            inflation, $45 in 1996 is equivalent to $65 today, and $25 in 
            1986 is equivalent to $52 today.  Thus, the $75 cap in this 
            bill is an increase far beyond that warranted by changes in 
            prices.  In addition, this bill provides that this 
            significantly higher cap will increase automatically with 
            inflation in the future.  

           4.Nonparticipating dealers get an increase, too  .   This bill 
            requires that new car dealers participate in the DMV's EVR 
            program, which saves the state money and speeds up the time in 
            which a car buyer receives license plates, registration 
            stickers, and a registration card.  Used car dealers can 
            participate at their option.  Those who participate may charge 
            up to $75 for document processing, but those who don't still 
            can charge $65.  The committee may wish to consider whether it 
            is appropriate to reward dealers that don't participate in the 
            EVR system with an increase of $10 for every vehicle they sell 
            and $20 for each they lease.




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           5.Double-referral  . The Rules Committee referred this bill to 
            both the Transportation and Housing Committee and to the 
            Judiciary Committee.  Therefore, if this bill passes this 
            committee, it will be referred to the Committee on Judiciary.
          
          Assembly Votes:
               Floor:    75-3
               Appr: 17-0
               Judic:  9-0
               Trans:    14-0

          POSITIONS:  (Communicated to the Committee before noon on 
          Wednesday,                                             June 22, 
          2011)

               SUPPORT:  California New Car Dealers Association (sponsor)
                         Consumer Action
                         Consumers for Auto Reliability and Safety

          
               OPPOSED:  None received.