BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 1534 (Wieckowski) - Used vehicle sales: labeling requirements. Amended: June 25, 2012 Policy Vote: Judiciary 3-2 Urgency: No Mandate: Yes Hearing Date: August 6, 2012 Consultant: Jolie Onodera This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1534 would require a buy-here-pay-here (BHPH) dealer to affix to and prominently and conspicuously display a label on any used vehicle offered for retail sale that states the reasonable market value of the vehicle, as specified. A violation of this provision would be an infraction. Fiscal Impact: Increased enforcement costs of $91,000 (Motor Vehicle Account) to the Department of Motor Vehicles (DMV) in 2012-13; ongoing costs of $157,000 thereafter. Minor ongoing costs to the Judicial Branch of less than $10,000 (General Fund) annually for 100 new infraction filings, offset to a degree by fine revenue. Background: Existing law regulates the accuracy of information provided to consumers during vehicle sales, including the information contained in advertising, brochures, and manuals, as specified. Existing law also requires manufacturers, as specified, to disclose certain information regarding a vehicle's engine, as specified, by affixing a label on the vehicle. Proposed Law: This bill would require a BHPH dealer to affix to and to prominently and conspicuously display a label on any used vehicle offered for retail sale that states the "reasonable market value" of the vehicle, as defined. The bill would require the label to contain specified information used to determine the vehicle's reasonable market value and the date the value was determined. The bill would require a BHPH dealer to provide to a prospective buyer of the used vehicle a copy of any information obtained AB 1534 (Wieckowski) Page 1 from a nationally recognized pricing guide (including but not limited to the Kelley Blue Book, Edmunds, the Black Book, or the National Automobile Dealers' Association Guide) that the dealer used to determine the reasonable market value of the vehicle. This bill would define "reasonable market value" as the average retail value of a used vehicle based on the condition, mileage, year, make, and model of the vehicle, as determined within the last 60 days by a nationally recognized pricing guide that provides used vehicle retail values or pricing reports to vehicle dealers or the public. This bill would define "buy-here-pay-here dealer" as a seller who does both of the following: 1) enters into conditional sales or lease contracts, as specified, and, 2) assigns less than 90 percent of all unrescinded conditional sales contracts and lease contracts to unaffiliated third-party finance or leasing sources within 60 days of the consummation of those contracts. This bill would provide that notwithstanding the aforementioned definition, a seller would not be a BHPH dealer if the seller does both of the following: 1) certifies 100 percent of its vehicles, as specified, and, 2) maintains an on-site service and repair facility that is licensed by the Bureau of Automotive Repair and employs a minimum of five master automobile technicians who are certified by the National Institute for Automotive Service Excellence. Related Legislation: SB 956 (Lieu) 2012 would enact the Buy-Here-Pay-Here Automobile Dealers Act, as specified, to regulate contract terms and other activities of entities meeting the definition of BHPH automobile dealers. This bill has been referred to the Assembly Appropriations Committee. AB 1447 (Feuer) 2012 establishes consumer protections for vehicles bought or leased from BHPH dealers, as specified. This bill is scheduled to be heard today in this Committee. Staff Comments: By creating a new infraction, the provisions of this bill will result in non-reimbursable local costs for investigation of violations, offset to a minor degree by fine revenue. The Judicial Council has indicated that based on the average cost to handle a new infraction filing of approximately $65, the estimated cost for 50 to 100 new infraction filings annually would result in increased costs of $3,250 to $6,500 AB 1534 (Wieckowski) Page 2 (General Fund) per year. Additionally, the Department of Motor Vehicles (DMV) has indicated the provisions of this bill would require DMV dealer inspections to include a review of business records to ascertain if a dealer is a BHPH dealer, as defined, and subsequently inspect for the posted valuation stickers placed on their used vehicle inventory. Investigation caseloads are also expected to increase in response to consumer complaints about compliance with the provisions of this bill. These increased activities are estimated to cost approximately $91,000 (Motor Vehicle Account) in 2012-13, and $157,000 annually thereafter.