BILL ANALYSIS                                                                                                                                                                                                    Ó



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 1215 (Blumenfield)
          As Amended  August 18, 2011
          Majority vote
           
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          |ASSEMBLY:  |75-3 |(June 2, 2011)  |SENATE: |30-4 |(August 30,    |
          |           |     |                |        |     |2011)          |
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           Original Committee Reference:   TRANS.  

           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 that dealers may charge.  Requires 
          dealers of used vehicles to obtain National Motor Vehicle Title 
          Information System (NMVTIS) reports.  

           The Senate amendments  :
           
           1)Make legislative findings and declarations regarding NMVTIS.  

          2)Allow an $80 document processing charge (as opposed to $60 in 
            the Assembly-passed version of this bill) for vehicles bought 
            from a DMV business partner and a $65 charge (as opposed to 
            $50 in the Assembly-passed version of the bill) for a vehicle 
            bought from a dealer who is not a DMV business partner.  

          3)Require an electronic filing fee charged by dealers to vehicle 
            purchasers to be no more than the actual amount the dealer is 
            charged by a first-line service provider.  


          4)Prohibit dealers from displaying or offering for sale at 
            retail a used vehicle unless the dealer first obtains a NMVTIS 
            vehicle history report from a NMVTIS data provider for the 
            vehicle identification number of the vehicle.  


          5)Require a dealer offering a used vehicle whose NMVTIS vehicle 
            history report indicates it is or has been a junk automobile 
            or a salvage automobile or the vehicle has been reported as a 
            junk automobile or a salvage automobile by a junk yard, 








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            salvage yard, or insurance carrier, or the certificate of 
            title contains a brand, to post a specified disclosure notice 
            on the vehicle while it is displayed for sale at retail and to 
            provide a retail purchaser with a copy of the NMVTIS vehicle 
            history report upon request prior to sale.  


          6)Specify that these requirements do not apply to a used vehicle 
            for which NMVTIS does not have a record if the dealer attempts 
            to obtain a NMVTIS vehicle history report for the vehicle.  


          7)Allow a NMVTIS data provider to include additional vehicle 
            history information obtained from resources other than NMVTIS. 
             


          8)Provide that this bill does not create any legal duty upon the 
            dealer related to the accuracy, errors, or omissions contained 
            in a NMVTIS vehicle history report that is obtained from a 
            NMVTIS data provider or any legal duty to provide information 
            added to NMVTIS after the dealer obtained the NMVTIS vehicle 
            history report.  


          9)Make the bill's NMVTIS -related requirements inoperative in 
            the event that all NMVTIS data providers cease to make NMVTIS 
            vehicle history reports available to the public and declare 
            the Legislature's intent that the United States Department of 
            Justice notify the Legislature and DMV in such an eventuality. 
             


          10)Exempt the sale of recreational vehicles, motorcycles, and 
            off-highway motor vehicles from these provisions.  


           EXISTING LAW  allows:  

          1)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)Newly sold vehicles to be operated without license plates 
            until the plates are received or until the end of a six-month 








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            period after the date of sale, whichever occurs first.  

           FISCAL EFFECT  :  The Senate Appropriations Committee analysis 
          cites annual DMV staff savings of $3.8 million and annual DMV 
          fee increases of $5.8 million, both attributable to electronic 
          registration.  The loss of data sales attributable to the NMVTIS 
          provisions will potentially cause DMV a $300-500 thousand annual 
          loss.  DMV's one-time cost for enlisting additional business 
          partners will be fully offset by fees.

           AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Required 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)Prohibited a dealer from charging consumers an electronic 
            filing fee in excess of $29, or the amount the dealer is 
            charged by a first-line provider, whichever is less, for 
            providing license plate processing, postage, fees and services 
            and prohibits the consumer charge from being represented as a 
            governmental fee.  

          3)Limited the charge a dealer may seek from a vehicle purchaser 
            for document preparation and associated costs to a maximum of 
            $60 if the dealer is by contract a business partner of DMV and 
            $50 if the dealer is not a DMV business partner.  

          4)Allowed 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)Required a license plate issued by California or by any other 
            state or jurisdiction to be attached to the vehicle upon 
            receipt.  

          6)Made 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)Established an effective date of July 1, 2012, for all the 








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            other provisions of this bill noted above. 

           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 only 
          their actual cost for processing transactions and mailing 
          license plates, which currently ranges from $18-$20.  

          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 $80 for DMV business partners and $65 for all other 
          dealers.  

          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, 








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          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 (Blumenfield), 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 
          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 
          (Montañez), Chapter 128, Statutes of 2005, imposes 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 








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          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.  

          Regarding NMVTIS, which is an electronic database that provides 
          consumers with information about a vehicle's condition and 
          history, this bill could assist consumers who are on a car lot 
          comparing two vehicles side by side.  If one vehicle has a 
          warning and one does not, the consumer is able to make an 
          informed decision after asking the dealer to see a copy of the 
          NMVTIS report.  Consumers for Auto Reliability and Safety 
          (CARS), in support, contends: "Vehicles with a history of prior 
          major damage tend to be unsafe, and worth far less than similar 
          undamaged vehicles.  For example, they may lack air bags, have 
          bent frames that make them prone to tipping over in an emergency 
          braking situation, or have electronic systems that are corroding 
          and will inevitable malfunction because the vehicle was 
          submerged in flood water.  In fact, whether a vehicle was 
          totaled or not may be the single most important piece of 
          information that car buyers need to know, in order to make an 
          informed comparison between two otherwise similar vehicles?AB 
          1215 promises to be a vitally important next step toward curbing 
          salvage and rebuilt wreck frauds and ensuring that NMVTIS 
          fulfills its potential for benefiting the public."  

          CarFax, which opposes the bill, expresses concern that 
          "mandating NMVTIS alone may provide used car consumers with a 
          false sense of security" and that this bill would offer "no 
          incentive for the seller to research beyond NMVTIS to study 
          other more inclusive vehicle history reports which would 
          disclose hazardous safety data not disclosed by NMVTIS."  To 
          address their concerns, CarFax proposes allowing dealers to 
          obtain either a NMVTIS or a commercially available vehicle 








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          history report (thus allowing dealers to use CarFax reports 
          instead of NMVTIS).  The California New Car Dealers, in response 
          assert: "While Car Fax and Experian Auto Check provide valuable 
          information that is beneficial to consumers and dealers, their 
          title database information is proprietary and not subject to 
          oversight by any governmental entity.  Commercial providers who 
          acquire vehicle title information from entities other than 
          NMVTIS purchase their information on an ad hoc basis through 
          commercial contracts with certain states, insurers and other 
          entities.  These contracts are not subject to federal review, 
          are subject to amendment, cancellation, or expiration, and do 
          not cover all entities required to report information to NMVTIS. 
           No entity is statutorily required to provide information to Car 
          Fax, Auto Check, or any other commercial vehicle history 
          database?Nothing in the bill restricts the ability of commercial 
          providers, like Car Fax, from providing the additional accident 
          and other information they obtain through their own sources 
          beyond NMVTIS."  

          Legislative history:  AB 1001 (Núñez) 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) of 2011 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 penalties are paid to the issuing agency.  At this 
          time, SB 125 remains in the Senate Committee on Transportation 
          and Housing.  

           
          Analysis Prepared by  :    Howard Posner / TRANS. / (916) 319-2093 



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