BILL ANALYSIS Ó
AB 287
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Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 287
(Gordon) - As Amended March 23, 2015
SUBJECT: Vehicle safety: recalls
SUMMARY: Establishes the Consumer Automotive Recall Safety Act
(Act) and prohibits a motor vehicle dealer or rental car company
from displaying, selling, or renting a used or rental vehicle
unless specific conditions are met. Further establishes
additional requirements and procedures to the Department of
Motor Vehicles (DMV) and vehicle manufacturers relative to
implementation of the Act. Specifically, this bill:
1)Makes legislative findings and declarations regarding the
increasing number of vehicle recalls and the safety and
economic impacts associated with vehicle recalls.
2)Requires the provisions specified in the Act to commence on or
after July 1, 2016.
3)Establishes a claims and appeals process, as specified,
between vehicle dealers and manufacturers regarding payment
requirements and obligations identified in the Act.
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4)Directs the DMV's New Motor Vehicle Board (Board) to hear and
decide on disputes between vehicle dealers and manufacturers
related to the Act's payment requirements and obligations.
5)Prohibits DMV from accepting the initial, renewal, or transfer
of a vehicle registration if the applicant fails to provide
DMV with a recall disclosure statement as specified in the
Act.
6)Proclaims that it is unlawful and a misdemeanor violation for
a manufacturer, as specified, to unfairly discriminate against
a dealer based on certain provisions specified in the Act.
7)Provides clarifying definitions for a variety of terms
relative to how they are applied in the Act.
8)Prohibits a dealer from displaying or offering for sale a used
vehicle unless the dealer has obtained a recall database
report within 30 days of the display of offer.
9)Prohibits a dealer from selling or leasing a used vehicle if
the recall database report indicates the vehicle is subject to
a "Stop Sale-Stop Drive" recall until the recall repair has
been made.
10)Prohibits a dealer from selling or leasing a used vehicle if
the recall database report indicates the vehicle is subject to
a manufacturer's recall and the line make is the same as the
dealer, until the recall repair has been made.
11)Allows a dealer to sell or lease a used vehicle that is
subject to a manufacturer's recall, as specified, if the
vehicle is not the same line make as the dealer if the
following conditions are satisfied:
a) The dealer provides the recall database report to the
consumer disclosing the manufacturer's recall; and,
b) The consumer signs a disclosure agreement acknowledging
the manufacturer's recall, as specified.
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12) Specifies that a recall database report and the disclosure
agreement provided and signed by the consumer are to be
provided separate from the conditional sales contract or other
vehicle purchase agreement.
13)Prohibits a rental car company from renting a vehicle unless
the company has obtained a recall database report within 30
days of the offer.
14) Prohibits a rental car company from renting a vehicle if the
recall database report indicates the vehicle is subject to a
"Stop Sale-Stop Drive" recall until the recall repair has been
made.
15) Allows a rental car company to rent a vehicle that is
subject to a manufacturer's recall, as specified, if the
following conditions are satisfied:
a) The rental car company discloses the recall database
report to the consumer disclosing the manufacturer's
recall prior to rental; and,
b) The consumer signs a disclosure agreement acknowledging
the manufacturer's recall, as specified.
1)Requires the seller of a motor vehicle, including private
party sales, to disclose all recalls related to the vehicle
being sold and requires the buyer to provide the an
acknowledgement form to DMV indicating they have received all
recall information in order to transfer vehicle registration,
as specified.
2)Requires a vehicle manufacturer to provide all recall
notifications on its website, as specified, and whether a
vehicle is subject to a Stop Sale-Stop Drive recall.
3)Requires a vehicle manufacturer to provide a consumer, upon
request, a rental or loaner vehicle when the consumer's
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vehicle is subject to a recall and the parts and/or procedures
are not available, as specified.
4) Requires a vehicle manufacturer to compensate a dealer for
costs associated with providing a rental or loaner vehicle and
the storage of a recalled vehicle waiting to be repaired, as
specified.
5)Provides that a dealer, rental car company, or private seller
is not legally responsible for any errors or inaccuracies
contained in the recall database report, as specified.
Further identifies several vehicles not subject to provisions
of the Act, as specified.
EXISTING LAW:
1)Requires DMV to oversee motor vehicle registrations.
2)Prohibits any person from acting as a dealer, remanufacturer,
manufacturer, or transporter, as specified, without having
first been issued a license or temporary permit from DMV, as
specified.
3)Requires new car dealers to enroll in the DMV-administered
Business Automation Program and electronically transfer
vehicle registration and titling transactions to DMV, as
specified.
4)Establishes the New Motor Vehicle Board within DMV and
requires the Board to hear and decide on certain appeals and
protests presented by a motor vehicle franchisee pertaining to
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a dispute with a vehicle manufacturer.
5)Prescribes specific instances when DMV may refuse the initial
registration, renewal, or transfer of registration for a
vehicle, as specified.
6)Prohibits a vehicle manufacturer, manufacturer branch,
distributor, and distributor branch, as defined, from engaging
in specific practices and makes a violation of these
prohibitions a misdemeanor.
7)Sets forth in federal regulations 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.
8)At the federal level, prohibits a motor vehicle dealer from
selling a new vehicle subject to a recall, as specified,
unless and until the defect is repaired. Federal law does not
afford similar prohibitions to used vehicles.
9)At the federal level, establishes the Moving Ahead for
Progress in the 21st Century Act (MAP-21), and requires the
Secretary of the United States Department of Transportation
(U.S. DOT) to promulgate regulations by July 6, 2013,
requiring motor vehicle safety recall information to be
publicly available online and searchable by vehicle make,
model, and vehicle identification number (VIN).
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FISCAL EFFECT: Unknown
COMMENTS: In 2014, more than 60 million motor vehicles were
subject to recalls totaling more than the prior three years
combined. In total, 803 recalls were announced with 123
resulting from investigations from the Nation Highway Traffic
Safety Administration (NHTSA) and the remaining 680 recalls
initiated by auto manufacturers. These recalls encompassed a
wide variety of vehicle defects; however, two of the more
notable recalls involved faulty ignitions in General Motor
vehicles and defects in Takata airbags used in a variety of
vehicle models.
The federal government's ability to set and administer vehicle
safety standards was established in 1966 under the National
Traffic and Motor Vehicle Safety Act (NTMVSA). Specifically,
NTMVSA created NHTSA and granted the agency the authority to
investigate and require auto manufacturers to recall vehicles
that have safety-related defects or do not meet federal safety
standards. Generally, a safety-related defect is determined
when a defect poses a risk to motor vehicle safety and exists in
a group of vehicles of the same design or manufacture or items
of equipment of the same type and manufacture.
Under a NHTSA-initiated safety recall, the agency may have
received enough complaints and information about the operation
of a vehicle that it finds there is a significant threat to
public safety and initiates a mandatory recall. NHTSA may
perform an investigation with a review by engineers and experts
and work with the vehicle manufacturer to recall vehicles.
These safety recalls are facilitated through direct
relationships between manufacturers, franchised dealerships, and
owners who purchased the new vehicles. Manufacturers may
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dispute a mandatory recall by petitioning NHTSA or bringing suit
in court.
Conversely, auto manufacturers also have the ability to
voluntary initiate both safety and non-safety recalls. Auto
manufacturers carry out their own vehicle testing and inspection
procedures and run information gathering systems to evaluate
vehicle performance. If a safety defect is discovered, the
manufacturer must notify NHTSA, as well as vehicle or equipment
owners, dealers, and distributors. The manufacturer is then
required to remedy the problem at no charge to the owner (for
vehicles sold up to 10 years before the recall). NHTSA is
responsible for monitoring the manufacturer's corrective action
to ensure successful completion of the recall campaign.
Additionally, a manufacturer may administer a non-safety recall
such as a recalling a vehicle for defective air conditioners or
radios. The process is similar to safety recalls in that the
manufacturer notifies the appropriate parties, the defect is
repaired at no cost to the owner, and the manufacturer provides
information of the recall on its website.
Aside from the recall notification processes described above,
vehicle owners and consumers also have the opportunity to
research vehicles through various recall databases. In 2012,
Congress enacted MAP-21, a funding and authorization bill to
govern federal transportation spending that contains a provision
requiring motor vehicle safety recall information about
outstanding recalls to be posted online in a format that
preserves consumer privacy and is searchable by vehicle make,
model, and VIN. In August of 2013, NHTSA issued a final rule
that will require all major manufacturers (those who produce
more than 25,000 vehicles per year) to provide the public with
online access to recall information searchable by a VIN and
without requiring additional information to allow consumers to
instantly determine whether action is required to address an
uncompleted safety recall. The online database,
www.safercar.gov, is required to be updated with vehicle recall
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information on a weekly basis. Additional online recall
research tools include an auto manufacturer's website or
obtaining a vehicle history report through a variety of
providers.
This bill aims to establish a process that will prohibit the
sale of motor vehicles for the most serious safety-related
recalls, provide consumers with motor vehicle recall information
under certain circumstances, and when recall parts are not
available, provide motor vehicle owners the option of leaving
their vehicle at the dealership and using a rental vehicle.
Respectively, this bill also includes provisions that would
expand the Board's oversight obligations and prohibits DMV from
approving motor vehicle registration if specific recall
information is not provided under certain circumstances.
Created in 1967 as the New Car Dealers Policy and Appeals Board,
the Board's initial functions were limited to hearing appeals
that arose from final decisions made by the DMV. In 1973, the
Legislature passed the California Automobile Franchise Act,
which gave the Board its present name and tasked it with
regulating and settling disputes in the new motor vehicle
industry. The Board's current mission is to enhance relations
between dealers and manufactures of automobiles, RV's, and
motorcycles by resolving disputes in the industry in an
efficient, fair, and cost-effective manner. Under this bill,
the Board would additionally be authorized to hear and decide on
storage and vehicle rental reimbursement claims between dealers
and manufacturers, which is consistent with the Board's existing
practices.
Furthermore, the bill requires DMV to refuse the transfer of
motor vehicle registration if the applicant transferring the
registration fails to include, with all other required
documentation, a signed statement acknowledging all motor
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vehicle recall information was disclosed to the applicant prior
to acquiring the motor vehicle. Should this bill pass, several
implementation provisions will need to be further clarified in
the next policy committee.
Writing in support of this bill, the California New Car Dealers
Association notes, "California already has the strongest
consumer protection laws in the country for car buyers, but
neither California nor federal law address the sale, lease, or
rental of a recalled used vehicle. The CARS Act would
comprehensively enhance California's existing consumer
protections by ensuring the most pressing safety issues are
fixed in a timely manner, improving the information made
available to consumers about cars subject to recall and
providing consumers with access to loaner vehicles at no cost if
their vehicle is subject to recall and parts are not available
to repair the vehicle."
In opposition, Consumers for Auto Reliability and Safety writes,
"AB 287 would weaken existing consumer protection against
unscrupulous car dealers who sell unsafe, recalled used cars to
consumers; undermine progress being made at the federal level in
addressing rental car and used car safety; create even more
confusion among owners of recalled cars regarding the
seriousness of lethal safety defects; and set a harmful
precedent for allowing retailers to foist unsafe products onto
consumers." Additionally, "allowing for dealers to sell unsafe,
recalled cars to consumers with 'disclosure,' AB 287 fails to
recognize the broader public interest in ensuring that cars are
safe to operate on public roads. Even if a consumer happens to
see the recall notice prior to completing the sale, reads it,
fully understands the risks involved, and decides to drive the
car anyway, there is a strong public interest in protecting the
safety of their passengers, others who share the roads,
pedestrians, bicyclists, and potentially many other
individuals."
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Previous legislation: SB 686 (Jackson) of 2014, would have
prohibited a vehicle dealer from selling a used vehicle if the
dealer knew or should have known that the vehicle is subject to
a manufacturer's safety recall and failed to correct the defect.
SB 686 failed passage in the Assembly Business, Professions, and
Consumer Protection Committee.
AB 753 (Monning) of 2011, would have prohibited rental car
companies from renting a vehicle that is subject to a federal
safety recall unless specific conditions are met. AB 753 would
have also prohibited a rental car company from selling a vehicle
subject to a federal safety recall.
AB 753 was referred to the Senate Appropriations Committee but
was not heard at the request of the author.
Double referral: This bill will be referred to the Assembly
Privacy and Consumer Protection Committee should it pass out of
this committee.
REGISTERED SUPPORT / OPPOSITION:
Support
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California New Car Dealers Association (Sponsor)
Independent Automobile Dealers Association of California
Opposition
Advocates for Highway and Auto Safety
CALPIRG
California Conference of Machinists
California Rural Legal Assistance Foundation
Center for Auto Safety
Consumer Action
Consumer Attorneys of California
Consumers for Auto Reliability and Safety
Consumers Union
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Consumer Watchdog
Courage Campaign
Housing and Economic Rights Advocates
International Association of Machinists and Aerospace Workers
The Sturdevant Law Firm
The Trauma Foundation
Analysis Prepared by:Manny Leon / TRANS. / (916) 319-2093