BILL NUMBER: AB 2324 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Gatto
FEBRUARY 24, 2012
An act to amend Section 2982 of the Civil Code, relating to
vehicle sales contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 2324, as introduced, Gatto. Vehicle sales contracts.
Existing law imposes specified licensing and regulatory
requirements on dealers of motor vehicles and requires that specified
fees and charges be disclosed in a conditional sales contract for
the purchase of a motor vehicle, including, among other things, an
itemization of any insurance included as part of the amount financed,
as specified.
This bill would make a nonsubstantive change to those provisions.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2982 of the Civil Code, as added by Section 4
of Chapter 329 of the Statutes of 2011, is amended to read:
2982. A conditional sale contract subject to this chapter shall
contain the disclosures required by Regulation Z, whether or not
Regulation Z applies to the transaction. In addition, to the extent
applicable, the contract shall contain the other disclosures and
notices required by, and shall satisfy the requirements and
limitations of, this section. The disclosures required by subdivision
(a) may be itemized or subtotaled to a greater extent than as
required by that subdivision and shall be made together and in the
sequence set forth in that subdivision. All other disclosures and
notices may appear in the contract in any location or sequence and
may be combined or interspersed with other provisions of the
contract.
(a) The contract shall contain the following disclosures, as
applicable, which shall be labeled "itemization of the amount
financed":
(1) (A) The cash price, exclusive of document processing charges,
charges to electronically register or transfer the vehicle, taxes
imposed on the sale, pollution control certification fees, prior
credit or lease balance on property being traded in, the amount
charged for a service contract, the amount charged for a theft
deterrent system, the amount charged for a surface protection
product, the amount charged for an optional debt cancellation
agreement, and the amount charged for a contract cancellation option
agreement.
(B) The charge to be retained by the seller for document
processing authorized pursuant to Section 4456.5 of the Vehicle Code.
(C) The fee charged by the seller for certifying that the motor
vehicle complies with applicable pollution control requirements.
(D) A charge for a theft deterrent device.
(E) A charge for a surface protection product.
(F) Taxes imposed on the sale.
(G) The charge to electronically register or transfer the vehicle
authorized pursuant to Section 4456.5 of the Vehicle Code.
(H) The amount charged for a service contract.
(I) The prior credit or lease balance remaining on property being
traded in, as required by paragraph (6). The disclosure required by
this subparagraph shall be labeled "prior credit or lease balance
(see downpayment and trade-in calculation)."
(J) Any charge for an optional debt cancellation agreement.
(K) Any charge for a used vehicle contract cancellation option
agreement.
(L) The total cash price, which is the sum of subparagraphs (A) to
(K), inclusive.
(M) The disclosures described in subparagraphs (D), (E), and (K)
are not required on contracts involving the sale of a motorcycle, as
defined in Section 400 of the Vehicle Code, or on contracts involving
the sale of an off-highway motor vehicle that is subject to
identification under Section 38010 of the Vehicle Code, and the
amounts of those charges, if any, are not required to be reflected in
the total price under subparagraph (L).
(2) Amounts paid to public officials for the following:
(A) Vehicle license fees.
(B) Registration, transfer, and titling fees.
(C) California tire fees imposed pursuant to Section 42885 of the
Public Resources Code.
(3) The aggregate amount of premiums agreed, upon execution of the
contract, to be paid for policies of insurance included in the
contract, excluding the amount of any insurance premium included in
the finance charge.
(4) The amount of the state fee for issuance of a certificate of
compliance, noncompliance, exemption, or waiver pursuant to any
applicable pollution control statute.
(5) A subtotal representing the sum of the amounts described in
paragraphs (1) to (4), inclusive.
(6) The amount of the buyer's downpayment itemized to show the
following:
(A) The agreed value of the property being traded in.
(B) The prior credit or lease balance, if any, owing on the
property being traded in.
(C) The net agreed value of the property being traded in, which is
the difference between the amounts disclosed in subparagraphs (A)
and (B). If the prior credit or lease balance of the property being
traded in exceeds the agreed value of the property, a negative number
shall be stated.
(D) The amount of any portion of the downpayment to be deferred
until not later than the due date of the second regularly scheduled
installment under the contract and that is not subject to a finance
charge.
(E) The amount of any manufacturer's rebate applied or to be
applied to the downpayment.
(F) The remaining amount paid or to be paid by the buyer as a
downpayment.
(G) The total downpayment. If the sum of subparagraphs (C) to (F),
inclusive, is zero or more, that sum shall be stated as the total
downpayment, and no amount shall be stated as the prior credit or
lease balance under subparagraph (I) of paragraph (1). If the sum of
subparagraphs (C) to (F), inclusive, is less than zero, then that
sum, expressed as a positive number, shall be stated as the prior
credit or lease balance under subparagraph (I) of paragraph (1), and
zero shall be stated as the total downpayment. The disclosure
required by this subparagraph shall be labeled "total downpayment"
and shall contain a descriptor indicating that if the total
downpayment is a negative number, a zero shall be disclosed as the
total downpayment and a reference made that the remainder shall be
included in the disclosure required pursuant to subparagraph (I) of
paragraph (1).
(7) The amount of any administrative finance charge, labeled
"prepaid finance charge."
(8) The difference between the amount described in paragraph (5)
and the sum of the amounts described in paragraphs (6) and (7),
labeled "amount financed."
(b) No particular terminology is required to disclose the items
set forth in subdivision (a) except as expressly provided in that
subdivision.
(c) If payment of all or a portion of the downpayment is to be
deferred, the deferred payment shall be reflected in the payment
schedule disclosed pursuant to Regulation Z.
(d) If the downpayment includes property being traded in, the
contract shall contain a brief description of that property.
(e) The contract shall contain the names and addresses of all
persons to whom the notice required pursuant to Section 2983.2 and
permitted pursuant to Sections 2983.5 and 2984 is to be sent.
(f) (1) If the contract includes a finance charge determined on
the precomputed basis, the contract shall identify the method of
computing the unearned portion of the finance charge in the event of
prepayment in full of the buyer's obligation and contain a statement
of the amount or method of computation of any charge that may be
deducted from the amount of any unearned finance charge in computing
the amount that will be credited to the obligation or refunded to the
buyer. The method of computing the unearned portion of the finance
charge shall be sufficiently identified with a reference to the
actuarial method if the computation will be under that method. The
method of computing the unearned portion of the finance charge shall
be sufficiently identified with a reference to the Rule of 78's, the
sum of the digits, or the sum of the periodic time balances method in
all other cases, and those references shall be deemed to be
equivalent for disclosure purposes.
(2) If the contract includes a finance charge that is determined
on the simple-interest basis but provides for a minimum finance
charge in the event of prepayment in full, the contract shall contain
a statement of that fact and the amount of the minimum finance
charge or its method of calculation.
(g) (1) If the contract includes a finance charge that is
determined on the precomputed basis and provides that the unearned
portion of the finance charge to be refunded upon full prepayment of
the contract is to be determined by a method other than actuarial,
the contract shall contain a notice, in at least 10-point boldface
type if the contract is printed, reading as follows: "Notice to
buyer: (1) Do not sign this agreement before you read it or if it
contains any blank spaces to be filled in. (2) You are entitled to a
completely filled-in copy of this agreement. (3) You can prepay the
full amount due under this agreement at any time and obtain a
partial refund of the finance charge if it is $1 or more. Because of
the way the amount of this refund will be figured, the time when you
prepay could increase the ultimate cost of credit under this
agreement. (4) If you default in the performance of your obligations
under this agreement, the vehicle may be repossessed and you may be
subject to suit and liability for the unpaid indebtedness evidenced
by this agreement."
(2) If the contract includes a finance charge that is determined
on the precomputed basis and provides for the actuarial method for
computing the unearned portion of the finance charge upon prepayment
in full, the contract shall contain a notice, in at least 10-point
boldface type if the contract is printed, reading as follows:
"Notice to buyer: (1) Do not sign this agreement before you read it
or if it contains any blank spaces to be filled in. (2) You are
entitled to a completely filled-in copy of this agreement. (3) You
can prepay the full amount due under this agreement at any time and
obtain a partial refund of the finance charge if it is $1 or more.
(4) If you default in the performance of your obligations under this
agreement, the vehicle may be repossessed and you may be subject to
suit and liability for the unpaid indebtedness evidenced by this
agreement."
(3) If the contract includes a finance charge that is determined
on the simple-interest basis, the contract shall contain a notice, in
at least 10-point boldface type if the contract is printed, reading
as follows: "Notice to buyer: (1) Do not sign this agreement before
you read it or if it contains any blank spaces to be filled in. (2)
You are entitled to a completely filled-in copy of this agreement.
(3) You can prepay the full amount due under this agreement at any
time. (4) If you default in the performance of your obligations
under this agreement, the vehicle may be repossessed and you may be
subject to suit and liability for the unpaid indebtedness evidenced
by this agreement."
(h) The contract shall contain a notice in at least 8-point
boldface type, acknowledged by the buyer, that reads as follows:
"If you have a complaint concerning this sale, you should try to
resolve it with the seller.
Complaints concerning unfair or deceptive practices or methods by
the seller may be referred to the city attorney, the district
attorney, or an investigator for the Department of Motor Vehicles, or
any combination thereof.
After this contract is signed, the seller may not change the
financing or payment terms unless you agree in writing to the change.
You do not have to agree to any change, and it is an unfair or
deceptive practice for the seller to make a unilateral change.
-------------------------------
Buyer's Signature''
(i) (1) The contract shall contain an itemization of any insurance
included as part of the amount financed disclosed pursuant to
paragraph (3) of subdivision (a) and of any insurance included as
part of the finance charge. The itemization shall identify the type
of insurance coverage and the premium charged therefor, and, if the
insurance expires before the date of the last scheduled installment
included in the repayment schedule, the term of the insurance shall
also be stated.
(2) If any charge for insurance, other than for credit life or
disability, is included in the contract balance and disbursement of
any part thereof is to be made more than one year after the date of
the conditional sale contract, any finance charge on the amount to be
disbursed after one year shall be computed from the month the
disbursement is to be made to the due date of the last installment
under the conditional sale contract.
(j) (1) Except for contracts in which the finance charge or a
portion of the finance charge is determined by the simple-interest
basis and the amount financed disclosed pursuant to paragraph (8) of
subdivision (a) is more than two thousand five hundred dollars
($2,500), the dollar amount of the disclosed finance charge may not
exceed the greater of:
(A) (i) One and one-half percent on so much of the unpaid balance
as does not exceed two hundred twenty-five dollars ($225), 11/6
percent on so much of the unpaid balance in excess of two hundred
twenty-five dollars ($225) as does not exceed nine hundred dollars
($900) and five-sixths of 1 percent on so much of the unpaid balance
in excess of nine hundred dollars ($900) as does not exceed two
thousand five hundred dollars ($2,500).
(ii) One percent of the entire unpaid balance; multiplied in
either case by the number of months (computed on the basis of a full
month for any fractional month period in excess of 15 days) elapsing
between the date of the contract and the due date of the last
installment.
(B) If the finance charge is determined by the precomputed basis,
twenty-five dollars ($25).
(C) If the finance charge or a portion thereof is determined by
the simple-interest basis:
(i) Twenty-five dollars ($25) if the unpaid balance does not
exceed one thousand dollars ($1,000).
(ii) Fifty dollars ($50) if the unpaid balance exceeds one
thousand dollars ($1,000) but does not exceed two thousand dollars
($2,000).
(iii) Seventy-five dollars ($75) if the unpaid balance exceeds two
thousand dollars ($2,000).
(2) The holder of the contract shall not charge, collect, or
receive a finance charge that exceeds the disclosed finance charge,
except to the extent (A) caused by the holder's receipt of one or
more payments under a contract that provides for determination of the
finance charge or a portion thereof on the 365-day basis at a time
or times other than as originally scheduled whether or not the
parties enter into an agreement pursuant to Section 2982.3, (B)
permitted by paragraph (2), (3), or (4) of subdivision (c) of Section
226.17 of Regulation Z, or (C) permitted by subdivisions (a) and (c)
of Section 2982.8.
(3) If the finance charge or a portion thereof is determined by
the simple-interest basis and the amount of the unpaid balance
exceeds five thousand dollars ($5,000), the holder of the contract
may, in lieu of its right to a minimum finance charge under
subparagraph (C) of paragraph (1), charge, receive, or collect on the
date of the contract an administrative finance charge not to exceed
seventy-five dollars ($75), provided that the sum of the
administrative finance charge and the portion of the finance charge
determined by the simple-interest basis shall not exceed the maximum
total finance charge permitted by subparagraph (A) of paragraph (1).
Any administrative finance charge that is charged, received, or
collected by a holder shall be deemed a finance charge earned on the
date of the contract.
(4) If a contract provides for unequal or irregular payments, or
payments on other than a monthly basis, the maximum finance charge
shall be at the effective rate provided for in paragraph (1), having
due regard for the schedule of installments.
(k) The contract may provide that for each installment in default
for a period of not less than 10 days the buyer shall pay a
delinquency charge in an amount not to exceed in the aggregate 5
percent of the delinquent installment, which amount may be collected
only once on any installment regardless of the period during which it
remains in default. Payments timely received by the seller under an
extension or deferral agreement may not be subject to a delinquency
charge unless the charge is permitted by Section 2982.3. The contract
may provide for reasonable collection costs and fees in the event of
delinquency.
( l ) Notwithstanding any provision of a contract to
the contrary, the buyer may pay at any time before maturity the
entire indebtedness evidenced by the contract without penalty. In the
event of prepayment in full:
(1) If the finance charge was determined on the precomputed basis,
the amount required to prepay the contract shall be the outstanding
contract balance as of that date, provided, however, that the buyer
shall be entitled to a refund credit in the amount of the unearned
portion of the finance charge, except as provided in paragraphs (3)
and (4). The amount of the unearned portion of the finance charge
shall be at least as great a proportion of the finance charge,
including any additional finance charge imposed pursuant to Section
2982.8 or other additional charge imposed because the contract has
been extended, deferred, or refinanced, as the sum of the periodic
monthly time balances payable more than 15 days after the date of
prepayment bears to the sum of all the periodic monthly time balances
under the schedule of installments in the contract or, if the
contract has been extended, deferred, or refinanced, as so extended,
deferred, or refinanced. If the amount of the refund credit is less
than one dollar ($1), no refund credit need be made by the holder.
Any refund credit may be made in cash or credited to the outstanding
obligations of the buyer under the contract.
(2) If the finance charge or a portion of the finance charge was
determined on the simple-interest basis, the amount required to
prepay the contract shall be the outstanding contract balance as of
that date, including any earned finance charges that are unpaid as of
that date and, if applicable, the amount provided in paragraph (3),
and provided further that in cases where a finance charge is
determined on the 360-day basis, the payments received under the
contract shall be assumed to have been received on their respective
due dates regardless of the actual dates on which the payments were
received.
(3) If the minimum finance charge provided by subparagraph (B) or
subparagraph (C) of paragraph (1) of subdivision (j), if either is
applicable, is greater than the earned finance charge as of the date
of prepayment, the holder shall be additionally entitled to the
difference.
(4) This subdivision shall not impair the right of the seller or
the seller's assignee to receive delinquency charges on delinquent
installments and reasonable costs and fees as provided in subdivision
(k) or extension or deferral agreement charges as provided in
Section 2982.3.
(5) Notwithstanding any provision of a contract to the contrary,
if the indebtedness created by any contract is satisfied prior to its
maturity through surrender of the motor vehicle, repossession of the
motor vehicle, redemption of the motor vehicle after repossession,
or any judgment, the outstanding obligation of the buyer shall be
determined as provided in paragraph (1) or (2). Notwithstanding, the
buyer's outstanding obligation shall be computed by the holder as of
the date the holder recovers the value of the motor vehicle through
disposition thereof or judgment is entered or, if the holder elects
to keep the motor vehicle in satisfaction of the buyer's
indebtedness, as of the date the holder takes possession of the motor
vehicle.
(m) Notwithstanding any other provision of this chapter to the
contrary, any information required to be disclosed in a conditional
sale contract under this chapter may be disclosed in any manner,
method, or terminology required or permitted under Regulation Z, as
in effect at the time that disclosure is made, except that permitted
by paragraph (2) of subdivision (c) of Section 226.18 of Regulation
Z, if all of the requirements and limitations set forth in
subdivision (a) are satisfied. This chapter does not prohibit the
disclosure in that contract of additional information required or
permitted under Regulation Z, as in effect at the time that
disclosure is made.
(n) If the seller imposes a charge for document processing or to
electronically register or transfer the vehicle, the contract shall
contain a disclosure that the charge is not a governmental fee.
(o) A seller shall not impose an application fee for a transaction
governed by this chapter.
(p) The seller or holder may charge and collect a fee not to
exceed fifteen dollars ($15) for the return by a depository
institution of a dishonored check, negotiated order of withdrawal, or
share draft issued in connection with the contract if the contract
so provides or if the contract contains a generalized statement that
the buyer may be liable for collection costs incurred in connection
with the contract.
(q) The contract shall disclose on its face, by printing the word
"new" or "used" within a box outlined in red, that is not smaller
than one-half inch high and one-half inch wide, whether the vehicle
is sold as a new vehicle, as defined in Section 430 of the Vehicle
Code, or as a used vehicle, as defined in Section 665 of the Vehicle
Code.
(r) The contract shall contain a notice with a heading in at least
12-point bold type and the text in at least 10-point bold type,
circumscribed by a line, immediately above the contract signature
line, that reads as follows:
THERE IS NO COOLING-OFF PERIOD UNLESS
YOU
OBTAIN A CONTRACT CANCELLATION
OPTION.
California law does not provide for a
""cooling-off'' or other cancellation period
for vehicle sales. Therefore, you cannot
later cancel this contract simply because you
change your mind, decide the vehicle costs
too much, or wish you had acquired a
different vehicle. After you sign below, you
may only cancel this contract with the
agreement of the seller or for legal cause,
such as
fraud.
However, California law does require a seller
to offer a 2-day contract cancellation option
on used vehicles with a purchase price of
less than $40,000, subject to certain
statutory conditions. This contract
cancellation option requirement does not
apply to the sale of a recreational vehicle,
a motorcycle, or an off-highway motor vehicle
subject to identification under California
law. See the vehicle contract cancellation
option agreement for details.
(s) This section shall become operative on July 1, 2012.