BILL ANALYSIS �
AB 964
Page 1
ASSEMBLY THIRD READING
AB 964 (Bonta)
As Amended May 20, 2013
Majority vote
JUDICIARY 7-3 BUSINESS & PROFESSIONS
7-4
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|Ayes:|Wieckowski, Alejo, Chau, |Ayes:|Gordon, Bocanegra, |
| |Dickinson, Garcia, | |Dickinson, Holden, |
| |Muratsuchi, Stone | |Mullin, Skinner, Ting |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Gorell, |Nays:|Jones, Hagman, |
| |Maienschein | |Maienschein, Wilk |
| | | | |
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APPROPRIATIONS 10-5
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|Ayes:|Gatto, Bocanegra, | | |
| |Bradford, | | |
| |Ian Calderon, Eggman, | | |
| |Gomez, Rendon, Pan, | | |
| |Quirk, Weber | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Bigelow, | | |
| |Donnelly, Linder, Wagner | | |
| | | | |
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SUMMARY : Regulates used vehicle sales. Specifically, this
bill :
1)Prohibits a vehicle from being advertised or sold if the
dealer knows or should have known that the vehicle is subject
to a manufacturer's safety recall. This provision becomes
operative 180 days after the adoption of certain federal
regulations.
2)Allows, despite the foregoing prohibition against
advertisement and sale of recalled vehicles, non-certified
used vehicles to be sold if accompanied by a written
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disclosure.
3)Requires dealers who sell vehicles at retail 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.
4)Exempts, despite the required disclosure for "salvage" and
comparable titles, from the disclosure obligation all used
vehicles for which the evidence of ownership is a salvage or
similar certificate.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Minor increased costs to the Department of Motor Vehicles
(DMV) for additional investigations of licensed dealers
regarding potential violations of the bill's requirements.
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2)Potential non-reimbursable costs to local governments for
enforcement, offset to some extent by fine revenues from
misdemeanor judgments.
COMMENTS : 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.
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, with the exception of safety recalls,
instead of a prohibition against the sale of the vehicle, the
bill would allow the vehicle to be sold at retail if the buyer
were first provided a written disclosure regarding the
conditions the dealer knows or should have known are present.
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
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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 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
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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
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
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liability."
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0000643