BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 686|
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THIRD READING
Bill No: SB 686
Author: Jackson (D)
Amended: 5/24/13
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-2, 4/30/13
AYES: Evans, Corbett, Jackson, Monning
NOES: Walters, Anderson
NO VOTE RECORDED: Leno
SENATE APPROPRIATIONS COMMITTEE : 4-3, 5/23/13
AYES: De Le�n, Hill, Lara, Steinberg
NOES: Walters, Gaines, Padilla
SUBJECT : Vehicles: vehicle dealers
SOURCE : Consumers for Auto Reliability and Safety
DIGEST : This bill prohibits 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.
This bill also: (1) 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; (2) makes
it a violation of the Vehicle Code (VC) 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
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correct the defect have not been performed on the vehicle; and
(3) 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.
Senate Floor Amendments of 5/24/13 provide that the prohibitions
of this bill will become operative upon the initial effective
date of the regulations adopted pursuant to the federal Moving
Ahead for Progress in the 21st Century Act, as specified.
ANALYSIS : Existing federal law sets forth the requirements
for when manufacturers must notify vehicle owners, dealers, and
distributors about a defect that relates to motor vehicle safety
or noncompliance with a federal motor vehicle safety standard.
Existing state law:
1. Prohibits any person from acting as a dealer, remanufacturer,
manufacturer, or transporter, as specified, without having
first been issued a license or temporary permit, as
specified.
2. 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.
3. Prohibits a dealer or person holding a retail seller's permit
from selling a new or used vehicle that is not in compliance
with the VC and departmental regulations, unless the vehicle
is sold to another dealer, sold for the purpose of being
legally wrecked or dismantled, or sold exclusively for
off-highway use, as specified.
4. Provides that when a federal motor vehicle standard is
established under federal law, as specified, no dealer sell
or offer for sale a vehicle to which the standard is
applicable, and no person shall sell or offer for an item of
equipment sale for use upon a vehicle to which the standard
is applicable unless: (a) the vehicle conforms to the
applicable federal standard; or (b) the vehicle or equipment
bears a certification, as specified.
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5. Provides that it is a violation of the VC for a holder of any
dealer's license to advertise or sell a used vehicle as
"certified" or use any similar descriptive term in the
advertisement or 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:
(a) the dealer knows or should have known that the odometer
does not indicate actual mileage; (b) the dealer knows or
should have known that the vehicle was reacquired by a dealer
or manufacturer pursuant to state or federal warranty laws;
(c) the title has been inscribed with "lemon law buyback,"
"manufacturer repurchase," "salvage," "junk,"
"nonrepairable," "flood," or similar title designation; (d)
the vehicle has sustained damage, as specified, that after
repair substantially impairs the use or safety of the
vehicle; (e) the dealer knows or should have known that the
vehicle has sustained frame damage; (f) the dealer fails to
provide a completed inspection report; (g) the dealer
disclaims any warranties of merchantability; (h) the vehicle
is sold "AS IS" or (i) the term "certified" or any similar
term is used in a manner that is untrue or misleading.
This bill:
1. Prohibits a 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.
2. Provides that a dealer is deemed to have knowledge of a
manufacturer's safety recall if either: (a) the dealer
receives notification from the manufacturer; or (b) the
dealer is a franchisee of the manufacturer.
3. Provides that, in the absence of knowledge and until auto
manufacturers are required to provide vehicle safety recall
data on a publicly accessible Internet Web Site, a dealer
must obtain information about a vehicle's safety recall
status prior to completing a transaction, as specified, from
at least one of the following sources: (a) the Internet Web
site of the manufacturer; (b) a toll-free telephone, provided
that the manufacturer has made the safety recall status
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available at that number; (c) another dealer that is a
franchisee of the manufacturer; or (d) a commonly available
vehicle history report, provided that the safety recall
status of the vehicle is available.
4. Provides that, when auto manufacturers are required to
provide vehicle safety recall data on a publicly accessible
Internet Web site, as specified, a dealer will obtain
information about a used vehicle's safety recall status from
that database.
5. 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. This bill states that the provided
rights and remedies are cumulative and not be construed as
restricting any right or remedy that is otherwise available.
6. 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. This bill provides that a
rental company is deemed to have actual knowledge when it
receives notification of the manufacturer's safety recall
pursuant to federal law.
7. Makes it a violation of the VC 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.
8. Provides that the prohibitions of this bill will become
operative upon the initial effective date of the regulations
adopted pursuant to the federal Moving Ahead for Progress in
the 21st Century Act, as specified.
Background
The National Highway Traffic Safety Administration (NHTSA) has
the authority under federal law to issue vehicle safety
standards and to require manufacturers to recall vehicles that
have safety defects or do not meet safety standards. If a safety
defect is identified, manufacturers are required to notify the
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NHTSA, owners, dealers and distributors, and, correct the defect
at no charge (unless the vehicle is more than 10 years old).
Recently, concerns have been raised about the risks of
purchasing a car subject to a safety recall and, as a result,
steps that could be taken to reduce those risks.
As an example of the serious risks posed by safety recalls, a
2012 article published on Edmunds.com entitled "Recalled but
Unrepaired Cars Are a Safety Risk to Consumers," reported:
In April 2009, General Motors [(GM)] began sending
registered letters to owners of more than 1.4 million of its
cars equipped with 3.8-liter V6 engines, notifying them of a
recall for 1997-2003 V6-equipped Chevrolets, Buicks,
Oldsmobiles and Pontiacs to address a potential engine fire
hazard. The previous year, the company had sent letters to
owners of 207,000 Buicks and Pontiacs with turbocharged
versions of the same engine for the same problem.
By the time the 2009 recall was issued, there had been
reports filed with the [NHTSA] of almost 250 fires in such
cars. The problem was thought to be caused by oil that had
spilled or leaked onto heated exhaust manifold surfaces. In
some cases, the oil caught fire and the flames spread to
plastic parts, including the spark plug wiring channel and
the upper intake manifolds and engine covers.
As almost all car-fire warnings do, the letters also urged
owners not to park the cars in their garages or near homes
or other flammable structures until the recall work had been
completed.
But not every owner of a fire-prone GM vehicle has seen that
letter. Although the rate of incidents is steadily
declining, there have been at least 250 additional engine
fires since the recall was announced three years ago,
according to reports filed with NHTSA.
In many cases, the owners of the burned-up cars said they
were not aware that there had been a recall. Most had
purchased the vehicles used. Many didn't know if the
required repair work had ever been done. Some of the cars
that were parked in garages are believed in several cases to
have caused structural damage or damage to other vehicles as
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flames spread.
Prior 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 a specified in the
notice. The bill died in the Senate Appropriations Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Increased annual costs potentially in excess of $150,000
(Motor Vehicle Account) to the Department of Motor Vehicles
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
SUPPORT : (Verified 5/28/13)
Consumers for Auto Reliability and Safety (source)
California Nurses Association
California Public Interest Research Group
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumer Watchdog
Consumers Union
Enterprise Holdings
Hertz Corporation
Trauma Foundation
OPPOSITION : (Verified 5/28/13)
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California Chamber of Commerce
California Financial Services Association
California New Car Dealers Association
CARMAX
Civil Justice Association of California
Independent Automobile Dealers Association of California
ARGUMENTS IN SUPPORT : According to the author's office, the
sales of unrepaired recalled used vehicles to unsuspecting used
car buyers is a serious problem that has been documented by the
U.S. Governmental Accountability Office (GAO) [in] a recent June
2011 report, as well as numerous news reports, including widely
reported investigations by CBS (NY) and news organizations
throughout California. In some cases, consumers have
experienced life-threatening defects that were subject to safety
recalls, and became manifest shortly after purchase. For
example, some vehicles caught fire. Another had an axle that
broke and caused the vehicle to flip over.
This bill prohibits car dealers from selling, leasing,
displaying, renting, loaning or offering for sale a new or used
vehicle is the vehicle has a defect subject to the
manufacturer's recall, unless repairs to correct the defect have
been performed on the vehicle. It also prohibits car dealers
from selling vehicles with open safety recalls as "certified."
This bill will protect consumers from potentially harmful
vehicle defects by helping to ensure that the vehicles they
purchase are free from outstanding, unrepaired safety recalls.
ARGUMENTS IN OPPOSITION : The Independent Automobile Dealers
Association of California (IADAC), in opposition, states that
"[w]hile we laud your efforts to help the consumer, the
legislation is impossible to comply with and puts the used car
dealers in jeopardy and open to numerous lawsuits if an honest
mistake was made by the dealer." IADAC asserts that there
currently is no database available for a dealer to quickly
access and retrieve reliable information to determine if a
vehicle has a recall on it. The California New Car Dealers
Association (CNCDA), in opposition, notes that Congress passed
legislation last year requiring the creation of a free Internet
database containing information about each recall and whether it
has been completed for each vehicle, and asserts that "unless
and until this database is operational, compliance with SB 686
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would be impossible."
AL:d 5/28/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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