BILL NUMBER: AB 1447	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 23, 2012
	PASSED THE ASSEMBLY  AUGUST 27, 2012
	AMENDED IN SENATE  AUGUST 20, 2012
	AMENDED IN SENATE  AUGUST 6, 2012
	AMENDED IN SENATE  JUNE 25, 2012
	AMENDED IN ASSEMBLY  MAY 22, 2012
	AMENDED IN ASSEMBLY  MAY 1, 2012

INTRODUCED BY   Assembly Member Feuer
   (Principal coauthor: Senator Lieu)
   (Coauthors: Assembly Members Atkins and Dickinson)
   (Coauthor: Senator Evans)

                        JANUARY 4, 2012

   An act to add Sections 1795.51 and 2983.37 to the Civil Code, and
to add Sections 241 and 241.1 to the Vehicle Code, relating to
automobile sales.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1447, Feuer. Automobile sales finance: sellers.
   The Rees-Levering Motor Vehicle Sales and Finance Act regulates
conditional sales contracts for motor vehicles, and, among other
things, requires a person selling or leasing a motor vehicle under a
conditional sale contract to disclose certain information to the
buyer of the vehicle. A willful violation of those provisions is a
misdemeanor and may render the contract unenforceable. A seller who
violates the provisions of the act may also be liable to the buyer
for monetary damages.
   This bill would require a buy-here-pay-here dealer, as defined, to
issue a 30-day or 1,000-mile warranty to the buyer or lessee of a
used vehicle bought or leased at retail price, and would require the
warranty to cover the engine, transmission, drive axle, front and
rear wheel drive components, engine cooling system, brakes, front and
rear suspension systems, steering, seatbelts, inflatable restraint
systems, catalytic converter or other emissions components, heater,
seals and gaskets, electrical, electronic, and computer components,
alternator, generator, starter, and ignition system. The bill would
require the buy-here-pay-here dealer to either repair those covered
parts that fail or, at the buy-here-pay-here dealer's election, to
cancel the sale or lease and reimburse the buyer or lessee, as
specified. The bill would require the buy-here-pay-here dealer to pay
100% of the cost of labor and parts for any repairs under the
warranty. The bill would void an agreement for the purchase or lease
of a vehicle that waives, limits, or disclaims these requirements.
The bill would provide that a warranty is deemed to have been issued
if a buy-here-pay-here dealer fails to issue a warranty pursuant to
these provisions. The bill would prohibit a buy-here-pay-here dealer
from requiring the buyer to make payments in person, with the
exception of the downpayment for the vehicle, would prohibit the
buy-here-pay-here dealer from repossessing the vehicle or charging a
penalty following timely payment of a deferred downpayment, as
specified, would prohibit the buy-here-pay-here dealer from, after
the sale of the vehicle, tracking the vehicle using electronic
tracking technology and from disabling the vehicle with starter
interrupt technology, except as specified, and would make a violation
of these prohibitions a misdemeanor punishable by a fine of up to
$1,000. By creating a new crime, this bill would impose a
state-mandated local program. The bill would also make findings and
declarations related to buy-here-pay-here dealers, and would
authorize the Department of Motor Vehicles to promulgate any
necessary regulations.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) A growing number of Californians need cars to get to work but
cannot qualify for conventional automobile loans and have little or
no negotiating leverage when purchasing a vehicle.
   (b) Some used car dealers, known as buy-here-pay-here, operate a
business model under which they stock and sell older, high-mileage
vehicles to consumers that cannot otherwise qualify for conventional
automobile loans. Unlike traditional new and used car dealers,
buy-here-pay-here dealers do not assign sales and lease contracts
they generate to third-party finance or lease sources. Because
buy-here-pay-here dealers maintain and administer their own sales and
lease contract portfolios, they do not have to comply with
underwriting and loan policies set by traditional lenders and are
free to set financial terms that are significantly higher than
conventional automobile loans or leases, often including large
downpayments.
   (c) Older, high-mileage vehicles are more likely to have
mechanical problems than newer vehicles. The typical inventory of
buy-here-pay-here dealers consists of vehicles with 90,000 to 130,000
miles.
   (d) Consumers throughout California have complained about the
mechanical problems that they have had with vehicles purchased from
buy-here-pay-here dealers. These problems have often emerged within
days or weeks of the consumer purchasing the vehicle.
   (e) As detailed in media reports, it is not uncommon for
buy-here-pay-here dealers to sell 25 percent or more of their cars
multiple times following repossession. The practice of selling older,
high-mileage vehicles for large downpayments and at exorbitant
interest rates, followed by repossession and a new sales opportunity,
may be particularly profitable for buy-here-pay-here dealers but can
represent a financial danger for consumers.
   (f) The costs of repairs for many consumers with buy-here-pay-here
vehicles often approach or exceed the cost of the vehicle itself.
   (g) The absence of any minimum warranty requirements on
buy-here-pay-here dealers leaves California consumers vulnerable to
financial harm.
   (h) While buy-here-pay-here dealers claim that they help
financially struggling consumers to reestablish their credit and
become financially independent by providing them with financing and a
reliable mode of transportation, the reality is that approximately
25 percent of buy-here-pay-here vehicles are repossessed, and those
repossessions are often the result of consumers ceasing payment
because the vehicle has fundamentally failed to perform as a reliable
mode of transportation.
   (i) Buy-here-pay-here dealers often employ the use of electronic
tracking technology and starter interrupt technology to increase the
ease with which they repossess vehicles. Yet inadequate protections
are in place to ensure that consumers are aware of the use of this
technology and to ensure that the utilization of this technology does
not jeopardize the safety and privacy of the consumer.
   (j) It is the intent of the Legislature in enacting this act to
curb unfair and deceptive practices by buy-here-pay-here dealers and
to protect the consuming public.
  SEC. 2.  Section 1795.51 is added to the Civil Code, to read:
   1795.51.  (a) No buy-here-pay-here dealer, as that term is defined
in Section 241 of the Vehicle Code, shall sell or lease a used
vehicle, as defined in Section 665 of the Vehicle Code, at retail
price without giving the buyer or lessee a written warranty that
shall have a minimum duration of at least 30 days from the date of
delivery or when the odometer has registered 1,000 miles from what is
shown on the contract, whichever occurs first.
   (b) The written warranty shall provide that if the buyer or lessee
notifies the buy-here-pay-here dealer that the vehicle does not
conform to the written warranty, the buy-here-pay-here dealer shall
either repair the vehicle to conform to the written warranty,
reimburse the buyer or lessee for the reasonable cost of repairs, or
cancel the sale or lease contract and provide the buyer or lessee
with a full refund, less a reasonable amount for any damage sustained
by the vehicle after the sale or lease, excepting damage caused by
any nonconformity with the written warranty.
   (c) The written warranty shall provide that the buy-here-pay-here
dealer shall pay 100 percent of the cost of labor and parts for any
repairs pursuant to the warranty, and may not charge the buyer or
lessee for the cost of repairs or for inspecting the vehicle, tearing
down the engine or transmission or other part, or for any
deductible. Any person performing repairs pursuant to this
subdivision shall comply with the requirements of an automotive
repair dealer pursuant to Chapter 20.3 (commencing with Section 9880)
of Division 3 of the Business and Professions Code.
   (d) The buy-here-pay-here dealer or its agent may elect to refund
the buyer or lessee a full refund, less a reasonable amount for any
damage sustained by the vehicle after the sale or lease, excepting
damage caused by any nonconformity with the written warranty, rather
than performing a repair. In the event that the buy-here-pay-here
dealer cancels the sale or lease, all of the following shall apply:
   (1) The buy-here-pay-here dealer shall give written notice to the
buyer or lessee of the election to cancel the sale or lease by
personal delivery or first-class mail.
   (2) The buyer or lessee shall return the vehicle in substantially
the same condition as when it was delivered by the buy-here-pay-here
dealer, reasonable wear and tear and any nonconformity with the
written warranty excepted.
   (3) The buy-here-pay-here dealer shall provide the buyer or lessee
with a receipt stating all of the following:
   (A) The date the vehicle was returned to the buy-here-pay-here
dealer.
   (B) The vehicle identification number.
   (C) The make, year, and model of the vehicle.
   (D) The odometer reading at the time that the vehicle was returned
to the buy-here-pay-here dealer.
   (E) A statement that the buy-here-pay-here dealer has canceled the
sale or lease.
   (F) The amount of the buyer's or lessee's refund.
   (4) The buy-here-pay-here dealer shall not treat the return of the
vehicle pursuant to the contract cancellation provisions of this
subdivision as a repossession.
   (5) The buyer or lessee shall execute the documents necessary to
transfer any interest in the vehicle to the buy-here-pay-here dealer
or to remove the buyer or lessee from any registration or title
documents.
   (6) The buy-here-pay-here dealer shall refund to the buyer or
lessee, no later than the day after the day on which the buyer or
lessee returns the vehicle and the notice of election to cancel is
given to the buyer or lessee, all amounts paid under the sale or
lease agreement, less a reasonable amount for property damage
sustained by the vehicle after the sale or lease, excepting damage
caused by any nonconformity with the warranty.
   (e) The written warranty shall cover at least the following
components:
   (1) Engine, including all internally lubricated parts.
   (2) Transmission and transaxle.
   (3) Front and rear wheel drive components.
   (4) Engine cooling system.
   (5) Alternator, generator, starter, and ignition system, not
including the battery.
   (6) Braking system.
   (7) Front and rear suspension systems.
   (8) Steering system and components.
   (9) Seatbelts.
   (10) Inflatable restraint systems installed on the vehicle as
originally manufactured.
   (11) Catalytic converter and other emissions components necessary
for the vehicle to pass a California emissions test.
   (12) Heater.
   (13) Seals and gaskets on components described in this
subdivision.
   (14) Electrical, electronic, and computer components, to the
extent that those components substantially affect the functionality
of other components described in this subdivision.
   (f) Any Used Car Buyer's Guide displayed on a vehicle offered for
sale or lease by a buy-here-pay-here dealer shall list each of the
above systems and components and shall specify that the
buy-here-pay-here dealer will pay 100 percent of the cost of parts
and labor for repairs covered by the warranty.
   (g) The buy-here-pay-here dealer shall make the repair or provide
a refund notwithstanding the fact that the warranty period has
expired if the buyer or lessee notified the buy-here-pay-here dealer
of the failure of a covered system or part within the warranty
period.
   (h) This section shall not apply to any defect or nonconformity
caused by the unauthorized or unreasonable use of the vehicle
following the sale, or to any property damage not to the vehicle
arising out of the failure of a covered part.
   (i) In any proceeding in which the exclusion of coverage permitted
by subdivision (h) or the deduction allowed by paragraph (6) of
subdivision (d) is an issue, the buy-here-pay-here dealer shall have
the burden of proof.
   (j) A buy-here-pay-here dealer shall not sell or lease any vehicle
unless the vehicle meets all of the equipment requirements of
Division 12 (commencing with Section 24000) of the Vehicle Code.
   (k) Any agreement between a buy-here-pay-here dealer and a buyer
or lessee that disclaims, limits, or waives the rights set forth in
this section shall be void as contrary to public policy.
   (l) If a buy-here-pay-here dealer fails to give a buyer a written
warranty pursuant to this section, the buy-here-pay-here dealer shall
be deemed to have provided the warranty as a matter of law.
  SEC. 3.  Section 2983.37 is added to the Civil Code, to read:
   2983.37.  (a) After a sale of a vehicle under this chapter, a
buy-here-pay-here dealer, as defined in Section 241 of the Vehicle
Code, shall not do any of the following:
   (1)  Utilize electronic tracking technology to obtain or record
the location of the vehicle, unless the buyer is expressly made aware
of the existence and use of the tracking technology by the
buy-here-pay-here dealer, the buyer's written consent is obtained,
and either subparagraph (A) or (B), or both, apply:
   (A) The electronic tracking technology is used solely to verify
and maintain the operational status of the tracking technology, to
repossess the vehicle, or to locate the vehicle to service the loan
or keep the loan current.
   (B) The electronic tracking technology is used solely for any
optional service to the buyer and both of the following conditions
are met:
   (i) The agreement to utilize electronic tracking technology for
the optional service is separate from the purchase and sale
agreement, is not a condition of the purchase or sale agreement for
the vehicle, and is executed after the completion of the purchase or
sale agreement for the vehicle.
   (ii) The buyer is permitted to cancel the optional service at any
point in the future without affecting the sale of the vehicle, and is
informed of his or her ability to do so.
   (2) Disable the vehicle by using starter interrupt technology,
unless the buy-here-pay-here dealer complies with all of the
following provisions:
   (A) Notifies the buyer in writing at the time of the sale that the
vehicle is equipped with starter interrupt technology, which the
buy-here-pay-here dealer can use to shut down the vehicle remotely.
   (B) The written disclosure provided to the buyer at the time of
sale informs the buyer that a warning will be provided no less than
48 hours before the use of the starter interrupt technology to shut
down the vehicle remotely and discloses the manner and method in
which that warning will occur. The dealer shall offer the buyer a
choice of warning methods, including warning from the device,
telephone call, email, or text message, if available, provided that
the warning method does not violate applicable state or federal law.
   (C) In the event of an emergency, the buyer will be provided with
the ability to start a dealer-disabled vehicle for no less than 24
hours after the vehicle's initial disablement.
   (b) A buy-here-pay-here dealer shall not require the buyer to make
payments to the seller in person. For purposes of this subdivision,
"payments" does not include the downpayment. If the buyer tenders
timely payment of a deferred downpayment, the dealer shall not
repossess the vehicle or impose any other charge or penalty on the
grounds that the payment was not made in person.
   (c) A violation of this section is a misdemeanor punishable by a
fine not exceeding one thousand dollars ($1,000).
  SEC. 4.  Section 241 is added to the Vehicle Code, to read:
   241.  A "buy-here-pay-here" dealer is a dealer, as defined in
Section 285, who is not otherwise expressly excluded by Section
241.1, and who does all of the following:
   (a) Enters into conditional sale contracts, within the meaning of
subdivision (a) of Section 2981 of the Civil Code, and subject to the
provisions of Chapter 2b (commencing with Section 2981) of Title 14
of Part 4 of Division 3 of the Civil Code, or lease contracts, within
the meaning of Section 2985.7 of the Civil Code, and subject to the
provisions of Chapter 2d (commencing with Section 2985.7) of Title 14
of Part 4 of Division 3 of the Civil Code.
   (b) Assigns less than 90 percent of all unrescinded conditional
sale contracts and lease contracts to unaffiliated third-party
finance or leasing sources within 45 days of the consummation of
those contracts.
   (c) For purposes of this section, a conditional sale contract does
not include a contract for the sale of a motor vehicle if all
amounts owed under the contract are paid in full within 30 days.
   (d) The department may promulgate regulations as necessary to
implement this section.
  SEC. 5.  Section 241.1 is added to the Vehicle Code, to read:
   241.1.  The term "buy-here-pay-here" dealer does not include any
of the following:
   (a) A lessor who primarily leases vehicles that are two model
years old or newer.
   (b) A dealer that does both of the following:
   (1) Certifies 100 percent of used vehicle inventory offered for
sale at retail price pursuant to Section 11713.18.
   (2) Maintains an onsite service and repair facility that is
licensed by the Bureau of Automotive Repair and employs a minimum of
five master automobile technicians that are certified by the National
Institute for Automotive Service Excellence.
  SEC. 6.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.