BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 1981
          Author:   Brown (D)
          Amended:  7/1/14 in Senate
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  7-0, 6/24/14
          AYES:  Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak

           ASSEMBLY FLOOR  :  64-3, 5/23/14 - See last page for vote


           SUBJECT  :    Rental vehicles:  contracts

           SOURCE  :     Enterprise Holdings


           DIGEST  :    This bill removes the manufacturers suggested retail  
          price (MSRP) as one of the criteria for determining the rate of  
          a damage waiver sold by a rental company, and instead sets the  
          rate of damage waivers according to the vehicle's classification  
          using criteria set by the 2014 Association of Car Rental  
          Industry Systems Standards for North America.  This bill  
          increases the maximum rate of the damage waiver to $11 per  
          rental day for vehicles designated as an "economy car," "compact  
          car," or another term denoting the two smallest categories of  
          vehicles described by the standards.  This bill also increases  
          the maximum rate of the damage waiver to $17 per rental day for  
          vehicles in the next 3 body-size categories of vehicles  
          designated in the standards.  However, vehicles that are older  
          than the previous year's model year are capped at $11.

           ANALYSIS  :    Existing law: 
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           1.Defines a "damage waiver" as a rental car company's agreement  
            not to hold a renter liable for damage to or loss of the  
            rental car, any loss of use of the rental car, or any storage,  
            impound, towing, or administrative charges. 
          2.Specifies that a damage waiver must provide that a renter has  
            no liability for damage, loss, loss of use, or a related cost  
            or expense.

          3.States that a rental car company may provide that a damage  
            waiver does not apply in certain circumstances, including,  
            among others, when the damage or loss results from the  
            authorized driver's intentional, willful, wanton, or reckless  
            conduct or from that driver's operation of the vehicle under  
            the influence of drugs or alcohol. 

          4.Provides that a damage waiver is optional and a consumer may  
            not be required to purchase a damage waiver.  A rental car  
            company must also provide a consumer with specified notices  
            regarding the damage waiver.

          5.Provides that a rental car company may sell a damage waiver  
            subject to the following rate limitations for each full or  
            partial 24-hour rental day and provides that the MSRPs  
            described below shall be adjusted annually to reflect changes  
            from the previous year in the Consumer Price Index: 
          
             A.   $9 per day for rental vehicles that the rental car  
               company designates as an "economy car," "subcompact car,"  
               "compact car," or another term having similar meaning, or  
               another vehicle having an MSRP of $19,000 or less; and 

             B.   $15 per day for rental vehicles that have an MSRP from  
               $19,001 to $34,999, and that are also either vehicles of  
               next year's model, or not older than the previous year's  
               model.  If the vehicle is older than the previous year's  
               model-year, the rate for a damage waiver may not exceed $9.  
                
          
          This bill provides, in place of the damage waiver fee caps and  
          calculation methodologies above, that a rental car company may  
          sell a damage waiver subject to the following rate limitations  
          for each full or partial 24-hour rental day:


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             1.   For rental vehicles that the rental company designates  
               as an "economy car," "compact car," or another term having  
               similar meaning to the two smallest body-size categories of  
               vehicles established by the Association of Car Rental  
               Industry Systems Standards for North America, as of January  
               1, 2014, when offered for rental, the rate shall not exceed  
               $11.

             2.   For rental vehicles, that the rental company designates  
               as an "intermediate car," "standard car," or "fullsize  
               car," or another term having similar meaning to the next  
               three body-size categories of vehicles established by the  
               Association of Car Rental Industry Systems Standards for  
               North America, as of January 1, 2014, and that are also  
               either vehicles of the next model year or not older than  
               the previous year's model, when offered for rental, the  
               rate shall not exceed $17.  For rental vehicles that are  
               older than the previous year's model year, the rate shall  
               not exceed $11.

           Background
           
          A damage waiver is an optional product offered by most rental  
          car companies to their customers.  The damage waiver is a  
          contractual agreement between a rental car company and a renter  
          in which the company, in exchange for a fee, agrees to waive the  
          renter's liability for damage to or loss of the car during the  
          rental period.  Damage waivers do not relieve a renter of all  
          liability, however.  For example, a renter may still be liable  
          if the damage or loss results from the authorized driver's  
          intentional, willful, wanton, or reckless conduct.

          In 1988, in order to address concerns that rental car customers  
          were being subjected to coercive damage waiver sales techniques  
          at the rental counter, California enacted a $9 cap on the amount  
          that rental car companies could charge for the product.  (AB  
          3006, Connelly, Chapter 1523, Statutes of 1988.)  This cap  
          applied to all rental vehicles.  AB 3006 was sponsored by  
          Attorney General John Van de Kamp and initially proposed to  
          prohibit damage waivers entirely.  At the time, the sponsor  
          argued that damage waivers were a "complex and unfair scheme"  
          that was "adhesive in nature, contrary to public policy, and  
          violative of the common law allocation of lessors' and lessees'  
          respective responsibilities."  As a result of a "carefully  

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          negotiated compromise" between the author, the Attorney General,  
          consumer groups, and industry, the bill was amended to provide  
          for a comprehensive scheme regulating damage waivers.

          Since then, there have been several attempts, supported by the  
          rental car industry, to either increase or eliminate entirely  
          the cap on the amount that a rental car company may charge for a  
          damage waiver.

          In 1998, AB 2314 (Papan, 1998) would have repealed the $9 damage  
          waiver cap for the rental of any vehicle above the compact car  
          class.  That bill died in this Committee.  The next year, AB 966  
          (Papan, 1999) would have, among other things, eliminated the $9  
          cap and required a rental car company to clearly disclose the  
          existence and amount of a damage waiver in any advertisement.   
          That bill also died in this Committee.  In 2001, AB 491  
          (Frommer, Chapter 661, Statutes of 2001) provided that rental  
          cars with an MSRP of $19,000 or less were subject to the $9 cap.  
           That bill also increased the $9 cap to $15 for new rental cars  
          with an MSRP of between $19,001 and $34,999.  AB 491 also  
          eliminated the cap for rental cars over $35,000.  In 2009, the  
          introduced version of AB 833 (Perez) would have increased the  
          damage waiver cap to $22 for all rental cars.  That provision  
          was subsequently removed from the bill when the bill was pending  
          in the Assembly Judiciary Committee.  AB 1731 (Tran, 2010) would  
          have kept the $9 and $15 per day caps intact, but would have  
          changed which rental cars were subject to each rate limitation  
          by deleting the MSRP references and providing instead that the  
          damage waivers for rental cars in the rental company's lowest  
          two rental classes would be capped at $9 per day.  For  
          intermediate, standard, full, and premium class vehicles, rental  
          car companies would have been permitted to charge $15 per day.   
          That bill died in this Committee.  Two years later, AB 2379  
          (Huber, 2012) would have increased the $9 and $15 caps to $11  
          and $18, respectively, and would have automatically allowed  
          those caps to adjust in line with the Consumer Price Index.   
          That bill died in the Assembly Judiciary Committee.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  7/1/14)

          Enterprise Holdings (source) 

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          Avis Budget Group, Inc.
          California Travel Association
          Hertz

           ARGUMENTS IN SUPPORT  :    According to the author:
          
               It has been 26 years since the [rental vehicle damage  
               waiver] rate caps [were] established and 13 years since  
               they [were last] adjusted.  As vehicles become more  
               technologically sophisticated, they also become more costly  
               to fix when a collision or other damage occurs.  California  
               is one of the few states that cap the rate.  In fact, there  
               are 47 states that allow damage waiver[s] to be offered,  
               but do not cap the rate. Maintaining a rate cap does not  
               incentivize rental companies from offering competitive  
               rates.

               For purposes of clarity for consumers, AB 1981 will  
               eliminate MSRP as the measure of vehicle class/value and  
               substitute it with the Association of Car Rental Industry  
               Systems Standards (ACRISS) car classification code  
               (economy, compact, intermediate, standard, fullsize)?.  In  
               addition, AB 1981 will increase the rate cap for damage  
               waivers by two dollars.  The rate for the first tier  
               (economy and compact) will be changed from $9 to $11 per  
               day.  The second tier (intermediate, standard, and  
               fullsize) will be increased from $15 to $17 per day.


           ASSEMBLY FLOOR  :  64-3, 5/23/14
          AYES: Achadjian, Allen, Ammiano, Bigelow, Bloom, Bocanegra,  
            Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,  
            Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly,  
            Dickinson, Fong, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez,  
            Gordon, Gorell, Gray, Grove, Hagman, Holden, Jones,  
            Jones-Sawyer, Linder, Logue, Lowenthal, Maienschein, Medina,  
            Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,  
            Patterson, Perea, John A. Pérez, Quirk, Quirk-Silva, Rendon,  
            Ridley-Thomas, Rodriguez, Skinner, Stone, Ting, Wagner,  
            Waldron, Wieckowski, Williams, Yamada, Atkins
          NOES: Fox, Levine, Wilk
          NO VOTE RECORDED: Alejo, Bonilla, Donnelly, Eggman, Frazier,  
            Hall, Harkey, Roger Hernández, Mansoor, V. Manuel Pérez,  
            Salas, Weber, Vacancy

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          AL:nl  7/2/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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