BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 686 (Jackson) - Vehicles: vehicle dealers.
Amended: May 7, 2013 Policy Vote: Judiciary 4-2
Urgency: No Mandate: Yes
Hearing Date: May 20, 2013 Consultant: Jolie Onodera
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 686 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 a manufacturer's safety
recall, unless the repairs required to correct the defect have
been performed. In addition, this bill:
Applies the above prohibitions to a rental company when
the company is also a licensed dealer and is selling or
transferring ownership of a used vehicle.
Makes it a violation of the Vehicle Code for a dealer to
advertise or sell a vehicle as "certified" if the dealer
knows or should have known that the vehicle is subject to a
manufacturer's safety recall, and the repairs required to
correct the defect have not been performed on the vehicle.
Provides that a violation of the above prohibitions is
actionable under the Consumer Legal Remedies Act, the
Unfair Competition Law, or any other applicable statute or
federal law.
Fiscal Impact:
Increased annual costs potentially in excess of $150,000
(Motor Vehicle Account) to the Department of Motor Vehicles
(DMV) for ongoing inspections and enforcement activities.
Potential increase in annual court costs for actions
brought by violations under the provisions of this bill. For
every 100 limited civil filings, costs to the courts of
approximately $46,000 (General Fund*).
*Trial Court Trust Fund
Background: Under federal law, franchised new car dealers are
prohibited from selling or leasing new vehicles that are under a
safety recall, however, new and used-car dealers are not
prohibited from selling, loaning, renting, or leasing used cars
SB 686 (Jackson)
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that have outstanding, unrepaired safety recalls pending. The
Government Accountability Office (GAO) study, NHTSA Has Options
to Improve the Safety Defect Recall Process (June 2011)
indicated that one of the challenges affecting the completion
rate of safety recalls was the lack of federal authority to
require manufacturers to notify used-car dealerships of recalls
and to require used-car dealerships to notify potential buyers
of the existing defect. With regard to limited authority, the
report stated, in part:
Under federal law, NHTSA can order a manufacturer
to give notification of a defect or noncompliance
with motor vehicle safety standards to the owners,
purchasers, and franchised dealers, as well as
order the manufacturer to remedy the defect.
However, NHTSA cannot require used-car dealers (or
franchised dealerships that sell used vehicles) to
notify potential buyers of an outstanding safety
defect or require that they get the defect
remedied prior to sale. Used-car dealerships we
spoke with told us that when they become aware of
a vehicle defect, they either remedy the defect
before the sale of the vehicle or notify potential
buyers of the safety defect because it is a good
business practice. Nevertheless, in some
instances, a used-car dealer may not be aware that
an outstanding safety defect exists in a vehicle.
In particular, a used-vehicle dealer association
with over 20,000 members told us that because
used-car dealers do not have a franchise agreement
with the manufacturers, they do not receive the
defect notices that manufacturers send to
franchised dealers. Moreover, used-car dealers we
spoke with told us that generally they do not
receive defect notices from manufacturers, except
in certain cases, such as when a used-car dealer
purchases previously leased vehicles directly from
a manufacturer.
In response to concerns about the sale of recalled vehicles,
this bill seeks to generally prohibit the sale, lease, rental,
loan, or transfer of ownership of a used vehicle that is subject
to a manufacturer's safety recall.
SB 686 (Jackson)
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Proposed Law: This bill would prohibit a vehicle dealer from
selling, leasing for a term of less than four months, renting,
loaning, or otherwise transferring ownership of a used vehicle
if the dealer knows or should have known that the vehicle is
subject to a manufacturer's safety recall, unless the repairs
required to correct the defect have been performed on the
vehicle. In addition, this bill:
Provides that in the absence of knowledge and until auto
manufacturers are required to provide vehicle safety recall
data on a publicly accessible Internet website, a dealer
shall obtain information about a vehicle's safety recall
status prior to completing a transaction, as specified,
from at least one of the following sources: (1) the
Internet website of the manufacturer; (2) a toll-free
telephone number; (3) another dealer that is a franchisee
of the manufacturer; or (4) a commonly available vehicle
history report, as specified.
Provides that when auto manufacturers are required to
provide vehicle safety recall data on a publicly accessible
Internet website, as specified, a dealer shall obtain
information about a used vehicle's safety recall status
from that database.
States that a violation of the above prohibition is
actionable under the Consumer Legal Remedies Act, the
Unfair Competition Law, Business and Professions Code
Section 17500 (relating to false advertising), or any other
applicable statute or federal law.
Applies the above prohibitions to a rental company, as
defined under existing law, only when the rental company is
also a licensed dealer and is selling or transferring
ownership of a used vehicle.
Makes it a violation of the Vehicle Code for a dealer to
advertise or sell a vehicle as "certified" if the dealer
knows or should have known that the vehicle is subject to a
manufacturer's safety recall, as specified.
Related Legislation: AB 753 (Monning) 2011 would have expressly
prohibited a rental car company from renting a vehicle that is
subject to a recall notice unless the vehicle has been repaired
as specified in the notice. This bill was held without a hearing
in this committee at the request of the author.
Staff Comments: This bill would prohibit a vehicle dealer from
selling, leasing, renting, loaning, or otherwise transferring
SB 686 (Jackson)
Page 3
ownership of a used vehicle, if the dealer knows or should have
known that the vehicle is subject to a manufacturer's safety
recall. This bill would similarly prohibit a rental company that
is a dealer from selling or transferring ownership of a used
vehicle that is subject to a manufacturer's safety recall. Those
prohibitions would not apply if the defect was repaired as
required.
This bill would require a dealer that does not have knowledge of
a recall to stake specified steps to obtain the vehicle's safety
recall status. This bill would deem rental companies to have
knowledge of a manufacturer's safety recall if they receive
notification of the recall pursuant to federal law. Once auto
manufacturers are required to provide vehicle safety status on a
publicly accessible Internet website, this bill would require
both dealers and rental companies to check that database to
obtain the safety recall status of a vehicle.
The Department of Motor Vehicles (DMV) could incur increased
costs potentially in excess of $150,000 (Motor Vehicle Account)
for inspections and enforcement activities related to the
provisions of this bill.
By making a violation of the prohibitions of this bill
actionable under the Consumers Legal Remedies Act and the Unfair
Competition Law, as specified, this bill could result in
increased court costs. For every 100 limited civil filings,
costs to the courts of approximately $46,000 (General Fund)
could be incurred.