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.