BILL ANALYSIS Ķ AB 1732 Page 1 Date of Hearing: April 22, 2014 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Susan A. Bonilla, Chair AB 1732 (Stone) - As Amended: April 10, 2014 SUBJECT : Vehicles: manufacturers, distributors, and dealers. SUMMARY : Prohibits a licensed vehicle manufacturer, transporter or dealer from advertising a vehicle's prior use or ownership history in an inaccurate manner, and prohibits licensed vehicle dealers from advertising two conflicting rebate deductions or advertising using the word 'rebate' unless the rebate is directly offered by an affiliated finance company, regulated utility or government entity. Specifically, this bill : 1)Prohibits a licensed vehicle manufacturer, transporter or dealer from advertising a vehicle's prior use or ownership history in an inaccurate manner. 2)Prohibits a licensed dealer from using the word "rebate" or similar words, including, but not limited to, "cash back," in advertising the sale of a vehicle unless the rebate is offered directly to the retail purchaser by a finance company affiliated with a vehicle manufacturer or distributor, a regulated utility, or a government entity, as specified. 3)Prohibits a licensed dealer from advertising a rebate deduction that conflicts with another advertised rebate deduction. 4)Declares that no reimbursement is required pursuant to 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, changes the penalty for a crime or infraction, or changes the definition of a crime. 5)Makes other technical or clarifying changes. EXISTING LAW 1)Prohibits any person from acting as a dealer, remanufacturer, AB 1732 Page 2 manufacturer, or transporter, as specified, without having first been issued a license or temporary permit, as specified. (Vehicle Code (VC) Section 11700) 2)Requires every manufacturer, manufacturer branch, remanufacturer, remanufacturer branch, distributor, distributor branch, transporter, or dealer of vehicles of a type subject to registration, or snowmobiles, motorcycles, all-terrain vehicles, or trailers of a type subject to identification, to be licensed, as specified. (VH 11701) 3)Imposes various requirements and restrictions on persons holding a vehicle dealer's license, including restrictions on the manner that vehicles are advertised for sale. (VH 11713) 4)Prohibits a holder of a license from, among other things, making or disseminating any statement which is untrue or misleading and which is known, or which by the reasonable exercise of case should be known to be untrue or misleading, as specified. (VC 11713(a)) 5)Establishes the Car Buyer's Bill of Rights and prohibits a car dealer from selling or advertising for sale a used car as "certified" if any of the following apply: a) The dealer knows or should have known that the odometer has been rolled back or altered to show fewer miles than actually driven; b) 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; 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 dealer knows or should have known that the vehicle AB 1732 Page 3 has sustained frame damage; f) The dealer disclaims any warranties of merchantability on the vehicle; g) The vehicle is sold "AS IS"; or, h) 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 the provisions prohibiting a car dealer from scheming not sell a vehicle or service at a price other than advertised in accordance with the Vehicle Code, or the unfair competition laws contained in the Business and Professions Code. (Civil Code Section 11713.18.) FISCAL EFFECT : Unknown COMMENTS : 1)Purpose of this bill . This bill would make three minor changes to vehicle advertising law: an expansion of the rebate types a dealer may advertise, a codification of an existing regulatory ban on misrepresentation of a used vehicle's history, and an explicit ban on advertising two conflicting rebates together. This bill is sponsored by the California New Car Dealers Association. 2)Author's statement . According to the author, "AB 1732 seeks to modernize California's advertising laws to better protect consumers and promote fair and open markets for the sale of all vehicles. California's advertising laws were created to allow consumers to have a complete understanding of their obligations when making a purchase decision on a vehicle and to accurately compare advertisements from different dealers. This bill seeks to clarify and update current laws to reflect industry's best practices." 3)Changes to vehicle advertising law . According to the sponsor, this bill is intended to work three distinct changes in vehicle advertising law. First, this bill would alter the requirement that dealers only advertise manufacturer or distributor's rebates by authorizing car dealers to advertise rebates offered by a finance company AB 1732 Page 4 affiliated with the manufacturer or distributor, a regulated utility or a government entity as well. This change is intended to permit dealers to advertise other rebate programs such as the 'Clean Vehicle Rebate Program' or 'Cash for Clunkers'. Second, this bill would codify existing regulations that overtly require that express advertisements of a vehicle's prior use or ownership history must be accurate. The sponsor states that this particular regulation is largely unknown and that its codification would help ensure compliance. Third, this bill would clarify that a dealer may not advertise a rebate deduction if it conflicts with another advertised deduction. The sponsor states that this change is necessary because of confusion among dealers and law enforcement as to how a conflicting rebate would be enforced. 4)Arguments in support . The California New Car Dealers Association (CNCDA) write, "California's vehicle advertising laws were created to allow consumers to have a complete understanding of their obligations when making a vehicle purchase or lease decision and to accurately compare advertisements from different dealers. These laws have not been updated since 2002 and over the past decade advertising on the Internet has exploded. Digital advertising now eclipses both television and print advertising, exceeding 36 percent of all dealership ads, and representing over $330 million in direct contributions to California's economy. AB 1732 is an effort to clarify and modernize various dealer advertising laws?We have been working with the Department of Motor Vehicles, law enforcement entities and other stakeholders to clarify the rules for the 21st Century and AB 1732 reflects those stakeholder discussions and the industry's best practices". 5)Related legislation . SB 686 (Jackson) of 2013 would prohibit a vehicle dealer from selling, leasing, renting, loaning, or otherwise transferring ownership of a used vehicle if the dealer knows or should have known that the vehicle is subject to an manufacturer's safety recall, and place similar restrictions on the sale or transfer of ownership of a used vehicle by a rental car company that is also a licensed dealer. This bill is currently pending in this Committee. AB 1732 Page 5 6)Previous legislation . AB 964 (Bonta) of 2013 would amend the existing Car Buyer's Bill of Rights to prohibit the advertising or selling of a used vehicle as "certified" if the dealer knows or should have known that the vehicle is subject to a manufacturer's safety recall. This bill died on the inactive file in the Assembly. AB 68 (Montaņez), Chapter 128, Statutes of 2005, enacts the Car Buyer's Bill of Rights, provided that a car dealer may not advertise of sell as "certified" a used or pre-owned motor vehicle, as defined, unless specified conditions are satisfied, and further provided that vehicles sold as "certified" may not be sold "as is," or if the dealer has disclaimed any warranties. REGISTERED SUPPORT / OPPOSITION : Support California New Car Dealers Association (sponsor) Opposition None on file. Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916) 319-3301