BILL ANALYSIS �
AB 964
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 964 (Bonta) - As Amended: April 15, 2013
As Proposed to be Amended
SUBJECT : USED VEHICLES: DISCLOSURES
KEY ISSUES :
1)SHOULD USED VEHICLES BE ADVERTISED AND SOLD AS "CERTIFIED" IF
THEY ARE SUBJECT TO A MANUFACTURER'S SAFETY RECALL?
2)SHOULD ALL USED VEHICLES BE SOLD SUBJECT TO DISCLOSURE
REGARDING CONDITIONS THAT CURRENTLY PERTAIN ONLY TO CERTIFIED
USED VEHICLES?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
Used vehicles may be advertised and sold under existing law only
if certain criteria apply regarding the condition of the vehicle
- for example, that the odometer has not been altered or
replaced to show fewer miles, and that the vehicle has not been
salvaged or have other specified safety problems. This bill
would include manufacturer's safety recalls on the list of
prohibited conditions for certified vehicles. It would also add
a required pre-sale disclosure for all used vehicles (i.e.,
non-certified) regarding manufacturer's recalls and the other
safety and warranty issues. These disclosures parallel the
safety and warranty conditions applicable to certified used
vehicles. Supporters argue that the bill will improve consumer
awareness and safety. Opponents contend that the bill is
unnecessary, burdensome and difficult if not impossible to
comply with.
SUMMARY : Regulates used vehicle sales. Specifically, this
bill :
1)Prohibits a vehicle from being advertised or sold as certified
if the dealer knows or should have known that the vehicle is
subject to an open or unaddressed recall.
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2)Requires dealers to provide buyers with written disclosure
identifying which, if any, of the following conditions are
present, if the dealer knows or should know of its presence:
a) The odometer on the vehicle does not indicate actual
mileage, has been rolled back or otherwise altered to show
fewer miles, or replaced with an odometer showing fewer
miles than actually driven.
b) The vehicle was reacquired by the vehicle's manufacturer
or a dealer pursuant to state or federal warranty laws.
c) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar
title designation required by this state or another state.
d) The vehicle has sustained damage in an impact, fire, or
flood, that after repair and prior to sale substantially
impairs the use or safety of the vehicle.
e) The vehicle has sustained frame damage.
f) The dealer disclaims any warranties of merchantability
on the vehicle.
g) The vehicle is sold "AS IS."
h) The vehicle is subject to an open or unaddressed recall.
EXISTING LAW provides that it is a violation of law for the
holder of any dealer's license to advertise for sale or sell a
used vehicle as "certified" or use any similar descriptive term
in the advertisement or the sale of a used vehicle that implies
the vehicle has been certified to meet the terms of a used
vehicle certification program if any of the following apply:
1)The dealer knows or should have known that the odometer on the
vehicle does not indicate actual mileage, has been rolled back
or otherwise altered to show fewer miles, or replaced with an
odometer showing fewer miles than actually driven.
2)The dealer knows or should have known that the vehicle was
reacquired by the vehicle's manufacturer or a dealer pursuant
to state or federal warranty laws.
3)The title to the vehicle has been inscribed with the notation
"Lemon Law Buyback," "manufacturer repurchase," "salvage,"
"junk," "nonrepairable," "flood," or similar title designation
required by this state or another state.
4)The vehicle has sustained damage in an impact, fire, or flood,
that after repair and prior to sale substantially impairs the
use or safety of the vehicle.
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5)The dealer knows or should have known that the vehicle has
sustained frame damage.
6)The dealer disclaims any warranties of merchantability on the
vehicle.
7)The vehicle is sold "AS IS."
8)The term "certified" or any similar descriptive term is used
in any manner that is untrue or misleading or that would cause
any advertisement to be in violation of subdivision (a) of
Section 11713 of this code or Section 17200 or 17500 of the
Business and Professions Code. (Civil Code section 11713.18.)
COMMENTS : The author explains the reason for the bill as
follows:
Purchasing a car is a major investment for most
hard-working Californians and we must have laws in place
that will best protect consumers from potentially unsafe
vehicles. Currently, the 2006 Car Buyers Bill of Rights
has helped protect millions of Californians from purchasing
a lemon or a potentially unsafe car. Unfortunately, the
current protections do not apply to all used cars.
Essentially, the law right now does not allow car dealers
to "certify" a used vehicle if they know it has certain
damage, such as any open recalls, previous flood or fire
damage, frame damage or an odometer rollback.
The problem is this: A car dealer does not have any
obligation to inform consumers about a used car's history
that is not certified.
Many working families cannot afford a certified used car
and so they are placed at risk when purchasing a used car
that may have costly and potentially life threatening
problems such as an open recall, flood, fire or frame
damage, or odometer fraud. Open recalls are something
that dealers not only should disclose but also can easily
have fixed by the manufacturer. A recent study reported
that nearly 100,000 used cars with open recalls were for
sale online in California. Open recalls could include
problems with the brakes, steering wheels, airbags, or even
the electrical system that could cause a fire.
In addition to open recalls, other issues that are not
disclosed for used cars like flood or frame damage not only
could be dangerous, but could cost hard-working
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Californians thousands of dollars that they may not have
available to fix the car. This is all critical information
that consumers should know prior to purchasing a used car -
regardless if it is certified or not.
I am authoring AB 964 to improve consumer protection. All
Californians - regardless of whether they can afford a
certified car or not - have a right to know all of the
information available on the used car they are purchasing,
including any reported damage or defects. Without such
safeguards, hundreds of thousands of California consumers
are at risk every day.
This Bill Adds Safety Recalls To The List Of Conditions That
Prohibit The Sale Of A Vehicle As A "Certified" Used Vehicle.
Existing law, established by the Car Buyer's Bill of Rights in
2005, prohibits car dealers from advertising or selling a used
vehicle as "certified" under certain conditions, including
odometer rollbacks, salvage title, and damage that
substantially impairs the use or safety of the vehicle. This
bill would add another prohibited condition: The dealer knows or
should have known that the vehicle is subject to a
manufacturer's safety recall.
In Addition To Prohibiting The Sale Of Recalled Vehicles As
"Certified," The Bill Would Apply The Certified Used Car
Prohibitions As Disclosures To All Used Cars. Only used cars
sold as "certified" are currently subject to the specified
statutory requirements and prohibitions. This bill would extend
those rules - including safety recalls - to all used vehicles.
However, instead of a prohibition against the sale of the
vehicle, the bill would allow the vehicle to be sold if the
buyer were first provided a written disclosure regarding the
conditions the dealer knows or should have known are present.
Specifically, the dealer would be required to disclose which, if
any, of the following conditions the dealer knows or should know
are present:
(1) The odometer on the vehicle does not indicate actual
mileage, has been rolled back or otherwise altered to show fewer
miles, or replaced with an odometer showing fewer miles than
actually driven.
(2) The vehicle was reacquired by the vehicle's manufacturer or
a dealer pursuant to state or federal warranty laws.
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(3) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar title
designation required by this state or another state.
(4) The vehicle has sustained damage in an impact, fire, or
flood, that after repair and prior to sale substantially impairs
the use or safety of the vehicle.
(5) The vehicle has sustained frame damage.
(6) The dealer disclaims any warranties of merchantability on
the vehicle.
(7) The vehicle is sold "AS IS."
(8) The vehicle is subject to an open or unaddressed recall.
ARGUMENTS IN SUPPORT : The bill is supported by the Latin
Business Association, which argues:
This is important legislation because it improves
protections for consumers who cannot afford purchasing a
new or certified used car. The current law - the 2006 Car
Buyers Bill of Rights - has protected millions of car
consumers. However, there is one area that it did not
address - used cars that are not certified. Specifically,
the current law does not allow car dealers to "certify" a
used vehicle if they know it has certain damage such as
previous flood and fire damage, frame damage and an
odometer rollback. However a dealer does not have any
obligations to inform consumers about a vehicle's history -
beyond the basic information NMVTIS provides - when they
sell a used car that is not certified.
Our organization wants to ensure that when anyone buys a
car - whether they can afford a certified used car or not -
has as many facts about the car that is available. That's
why we support AB 964 as it will improve consumer
protections on ALL USED CARS.
Many underserved communities are most at-risk as these
families cannot afford a new car or a certified used car.
This means that they may be purchasing a car - without
disclosure - that has: open recalls, flood damage, fire
damage, frame damage, odometer fraud. This is not right.
We believe that AB 964 will provide more information to all
Californians - regardless of what type of car they can
afford to purchase. We believe that information is power
and AB 964 will strengthen our consumer protection laws to
help our underserved communities and all Californians.
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ARGUMENTS IN OPPOSITION : The California New Car Dealers
Association opposes the bill, stating in relevant part:
AB 68 (Monta�ez), Chapter 128 of 2005, struck a balance
between setting minimum standards for which vehicles cannot
be certified, and dictating the precise terms of dealer
certification programs.
AB 964 takes the certification statutory scheme, deletes
the inspection report requirement and adds to the list of
prohibitions whether a dealer "knows or should have known"
that the vehicle is subject to an "open and unaddressed
recall." While we appreciate the author's desire to ensure
that "certified" vehicles do not contain certain flaws, we
fail to understand the meaning of "open and unaddressed
recall" and how dealers are expected to comply when there
are serious notice and compliance issues with recalls.
AB 964 wrongly targets all car dealers for a problem that
has been brought about by the rental car industry. The
rental car industry has faced scrutiny in recent years for
renting defective vehicles to consumers despite being
informed of open safety recalls. Bills were introduced in
Sacramento and then in Congress to require rental car
companies to remove recalled vehicles from their rental
fleets until repaired. These bills failed passage. Rather
than focusing on rental car companies, AB 964 targets every
dealer seeking to "certify" a vehicle - regardless of how
minor the recall is, or whether the dealer has access to
information about the recall.
Changing the focus of regulation from rental car companies
to dealers creates more, not less, compliance issues.
While a rental car company is notified directly by the
manufacturer when a vehicle it owns is recalled, car
dealers receive no such notification (unless franchised to
sell that make). For example, a Chevrolet dealer will not
be notified by Toyota if a used Toyota in inventory is
recalled. Nor does that dealer have access to information
concerning whether the vehicle has been recalled, or, if
so, whether the defect has been repaired.
In recognition of these concerns, Congress passed
legislation last year requiring the creation of a free
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Internet database - searchable by make, model and VIN -
containing information about each recall and whether it has
been completed for each individual vehicle. See "Map-21",
PL 112-141, Section 31301. Unless and until this database
is operational, compliance with AB 984 would be impossible.
CNCDA opposes AB 964 because it would require dealers to
determine whether vehicles are subject to recall, and the
federal database necessary to do so has not been created.
California should not enact legislation that guarantees
non-compliance and needless litigation.
Unfortunately, AB 964 goes further than adding to the list
of "certification" standards by also requiring an
ill-defined "disclosure" to consumers about what the dealer
"knows or should know" about the same list of items that
would prevent a dealer from certifying the vehicle. It is
unclear whether purchasing a third party vehicle history
report is "required" to meet the "should have known"
standard that the bill seeks to impose. The problem with
such reports is that their accuracy varies considerably by
vendor, the level of information contained in any report
can be vastly different and the information in such reports
can be added after the dealer has run a report and sold the
car to a consumer, creating a huge risk of liability for
the unsuspecting and unprotected dealer. It appears AB 964
would curtail or prohibit the sale of a previously flood
damaged vehicle-even if repaired. The bill would also
expand "as is" disclosure requirements, even though such
information is available on the Used Car Buyers Guide and
the legislature just addressed the scope of "as is" sales
just last year in restricting their use for "Buy Here Pay
Here" dealers in AB 1447 (Feuer), Chapter 740 of 2012.
The California Financial Services Association representing
consumer finance lenders also opposes the bill, arguing that it
"would establish multiple private rights of action against the
seller of a vehicle if the vehicle has a defect that is subject
to a manufacturer's recall and the repairs required to correct
the defect have not been performed. Pursuant to Federal Trade
Commission Rule 433, related to Holder in Due Course, consumers
have a right to seek redress against the holder of a contract,
regardless of whether or not the contract was originated by
another party. Therefore, your bill would effectively establish
a private right of action against a financial institution that
holds the note on said vehicle. Financial institutions have no
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way to protect themselves from the strict liability called for
in [this] measure and this could have a chilling effect on the
auto lending industry. How can financial institutions loan
money, either directly or indirectly, knowing that they could be
liable for recalls that weren't addressed by a previous owner?
[This] measure would essentially prohibit the sale of tens of
thousands of used vehicles on the road that have been subject to
recalls, or significantly devalue them as a result of the new
liability."
Author's Clarifying Amendments . In order to better express the
intent of the bill and reduce potential concerns, the author
proposes the following judicious amendments:
11713.18 (a) It is a violation of this code for the holder of
any dealer's license issued under this article to advertise for
sale or sell a used vehicle as "certified" or use any similar
descriptive term in the advertisement or the sale of a used
vehicle that implies the vehicle has been certified to meet the
terms of a used vehicle certification program if any of the
following apply:
(1) The dealer knows or should have known that the odometer on
the vehicle does not indicate actual mileage, has been rolled
back or otherwise altered to show fewer miles, or replaced with
an odometer showing fewer miles than actually driven.
(2) The dealer knows or should have known that the vehicle was
reacquired by the vehicle's manufacturer or a dealer pursuant to
state or federal warranty laws.
(3) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar title
designation required by this state or another state.
(4) The vehicle has sustained damage in an impact, fire, or
flood, that after repair and prior to sale substantially impairs
the use or safety of the vehicle.
(5) The dealer knows or should have known that the vehicle has
sustained frame damage
(6)Prior to sale, the dealer fails to provide the buyer with a
completed inspection report indicating all the components
inspected .
(7) The dealer disclaims any warranties of merchantability on
the vehicle.
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(8) The vehicle is sold "AS IS."
(9) The term "certified" or any similar descriptive term is used
in any manner that is untrue or misleading or that would cause
any advertisement to be in violation of subdivision (a) of
Section 11713 of this code or Section 17200 or 17500 of the
Business and Professions Code
(9) (10) The dealer knows or should have known that the vehicle
is subject to a manufacturer's safety an open or unaddressed
recall.
(b) It is a violation of this code for the holder of any
dealer's license issued under this article to sell a used
vehicle without providing the buyer written disclosure in the
languages specified in section 1632 of the Civil Code
identifying which, if any, of the following conditions are
present, if the dealer knows or should know of its presence:
(1) The odometer on the vehicle does not indicate actual
mileage, has been rolled back or otherwise altered to show fewer
miles, or replaced with an odometer showing fewer miles than
actually driven.
(2) The vehicle was reacquired by the vehicle's manufacturer or
a dealer pursuant to state or federal warranty laws.
(3) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar title
designation required by this state or another state.
(4) The vehicle has sustained damage in an impact, fire, or
flood, that after repair and prior to sale substantially impairs
the use or safety of the vehicle.
(5) The vehicle has sustained frame damage.
(6) The dealer disclaims any warranties of merchantability on
the vehicle.
(7) The vehicle is sold "AS IS."
(8) The vehicle is subject to a manufacturer's safety an open or
unaddressed recall.
(c) It is a violation of this code for the holder of any
dealer's license issued under this article to sell a used
vehicle without providing the buyer a completed inspection
report indicating all the components inspected prior to sale.
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(c) The provisions of this section are in addition to and
independent of any other rights, remedies or procedures under
any other law. Nothing in this section shall be construed to
alter, limit or negate any other rights, remedies or procedures
provided by law.
Pending Related Legislation. SB 686 (Jackson) is currently
pending in the Senate. Legislative Counsel states that bill
would prohibit a motor vehicle dealer from selling, leasing,
displaying, renting, loaning, or offering for sale at retail a
new or used vehicle, as specified, if the vehicle has a defect
that is subject to a manufacturer's safety recall, unless the
repairs required to correct the defect have been performed on
the vehicle.
REGISTERED SUPPORT / OPPOSITION :
Support
Latin Business Association (sponsor)
California Urban Partnership
Carfax
Hispanic Chambers of Commerce
Opposition
California Chamber of Commerce
California Financial Services Association
California New Car Dealers Association
Independent Automobile Dealers Association of California
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334