BILL ANALYSIS Ķ
AB 287
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Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Mike Gatto, Chair
AB 287
(Gordon) - As Amended March 23, 2015
SUBJECT: Vehicle safety: recalls
SUMMARY: Enacts the Consumer Automotive Recall Safety Act
(Act), which requires a motor vehicle dealer or rental car
company to obtain a recall database report within 30 days before
sale or offer of a car, and generally requires the car to be
repaired prior to transfer or accepted by the consumer
unrepaired after providing informed consent. Specifically, this
bill:
1) 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.
2) 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.
3) 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 franchise of the dealer, until the recall
repair has been made.
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4) 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 franchise of the
dealer if the following conditions are satisfied:
a) The dealer provides the recall database report to
the consumer disclosing the manufacturer's recall prior
to sale or lease; and,
b) The consumer signs a disclosure agreement
acknowledging the manufacturer's recall, and that the
consumer can get the recall repaired at no cost to the
consumer at a new motor vehicle dealer of the vehicle's
line make.
5) 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.
6) Prohibits a rental car company from renting a vehicle
unless the company has obtained a recall database report
within 30 days of the offer.
7) 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.
8) 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
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acknowledging the manufacturer's recall, as specified.
9) 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 an
acknowledgement form to the Department of Motor Vehicles
(DMV) indicating the buyer has received all recall
information in order to transfer vehicle registration, as
specified, and authorizes the DMV to refuse transfer or
registration without that acknowledgement.
10) Requires a vehicle manufacturer to clearly and
conspicuously display all recall notifications on its
website.
11) Requires a vehicle manufacturer to provide, upon
request, a consumer seeking to repair a recalled vehicle a
rental or loaner vehicle at no cost until the parts and/or
procedures become available, as specified.
12) Requires a vehicle manufacturer to adequately and fairly
compensate a dealer for costs associated with providing a
rental or loaner vehicle and storing a recalled vehicle
waiting to be repaired, as specified.
13) Provides that a dealer, rental car company, or private
seller are not legally responsible for any errors,
inaccuracies or omissions contained in the recall database
report, nor do such parties have any legal duty to provide
information added to a recall database after the dealer,
franchisee, rental car company, or private seller obtained
the required recall database report.
14) Establishes a claims and appeals process, as specified,
between vehicle dealers and manufacturers regarding payment
requirements and obligations identified in the Act.
15) Directs the DMV's New Motor Vehicle Board (Board) to
hear and decide on disputes between vehicle dealers and
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manufacturers related to the Act's payment requirements and
obligations.
16) Authorizes the DMV to refuse to accept the initial,
renewal, or transfer of a vehicle registration if the buyer
fails to provide the DMV with a recall disclosure statement
as specified in the Act.
17) 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.
18) Defines the terms "dealer," "manufacturer's recall,"
"new motor vehicle dealer," "recall database," "recall
database report," "rental car company," "Stop Sale - Stop
Drive recall," and "vehicle manufacturer."
19) Declares that the consumer-related provisions of this
bill are severable.
20) Excludes recreational vehicles, motorcycles, off-highway
motor vehicles, vehicles sold by a salvage pool, and
non-repairable vehicles as excluded from the provisions of
this bill, as specified.
21) Declares that the consumer-related provisions of this
bill shall become operable as of July 1, 2016, as
specified.
22) Makes legislative findings and declarations pertaining
to the increasing number of vehicle recalls, the safety and
economic impacts associated with vehicle recalls, and the
importance of reimbursing auto dealers for the costs
associated with recalls.
23) Makes other technical or non-substantive amendments.
24) Declares that no reimbursement is required by this bill
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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, or changes the penalty for a crime or
infraction, or changes the definition of a crime.
EXISTING 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.
(Vehicle Code (VC) Section 11700)
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 care should be known, to be untrue or misleading,
as specified. (VC 11713(a))
3)Establishes the Car Buyer's Bill of Rights and prohibits a car
dealer from selling or advertising for sale a used car as
"certified" under certain conditions, including if 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, or if 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 to sell a vehicle or service at a price other than
advertised in accordance with the VC, or the unfair
competition laws contained in the Business and Professions
Code. (VC 11713.18.)
4)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
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is sold to another dealer, sold for the purpose of being
legally wrecked or dismantled, or sold exclusively for
off-highway use, as specified. (VC 24007 (a)(1))
5)Provides that when a federal motor vehicle standard is
established under federal law, as specified, no dealer shall
sell or offer for sale a vehicle to which the standard is
applicable, and no person shall sell or offer an item of
equipment for 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. (VC 24011)
6)Establishes the Board within DMV and requires the Board to
hear and decide on certain appeals and protests presented by a
motor vehicle franchisee pertaining to a dispute with a
vehicle manufacturer. (VC 3050)
7)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). (Public Law 112-141, 112th Congress, Section
31301)
8)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. (49 Code of Federal Regulations 577.1 et seq.)
FISCAL EFFECT: Unknown
COMMENTS:
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1)Purpose of this bill . This bill is intended to provide a
comprehensive solution to the dangers of recalled automobiles
by requiring used car dealers and rental car companies to
check for outstanding recalls, and then either repair the car
before transfer, if the car is the same line make as the
dealer or if the defect is particularly dangerous, or allow
the consumer to provide informed consent and take the
unrepaired car if it is a different line make or a rental car.
Supporters generally argue that this bill improves consumer
protection by taking the most dangerous cars off the road
while increasing consumer awareness, while opponents claim the
bill misleads consumers about the dangers of the remaining
automobiles while shifting other burdens and risks onto the
consumer. AB 287 is sponsored by the California New Car
Dealers Association.
2)Author's statement . According to the author, "Federal
regulations now require most vehicle manufacturers to provide
recall information applicable to the vehicles they manufacture
on the Internet and available to the public. While federal
law prohibits the sale of a new vehicle subject to a recall,
neither federal nor California law addresses used vehicles
subject to a recall. Unfortunately, studies have shown that
about one-third of all recalled vehicles are never repaired by
the vehicle's owner?
"AB 287, the Consumer Automotive Recall Safety Act (CARS Act)
would help address problems related to the sale, lease or
rental of used cars subject to recall in [the following ways]:
AB 287 would require auto manufacturers to conspicuously
display on their website and in all recall notifications to
consumers when a vehicle is subject to a Stop Drive/Stop Sale
recall. AB 287 would prohibit new car dealers, used car
dealers, and rental car companies from selling, leasing, or
renting any used car in California subject to a Stop
Drive/Stop Sale recall. For recalls not designated as Stop
Drive/Stop Sale by either NHTSA or the auto manufacturer, AB
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287 would require new and used car dealers and rental car
companies to check a qualified recall database within 30 days
prior to selling, leasing or renting any used vehicle to
consumers. For all used vehicle sales, if a vehicle is of the
same line make as a dealer's franchise, AB 287 would prohibit
new car dealers from selling/leasing a vehicle at retail until
the recall issue is repaired.
"For recalls not designated as Stop Drive/Stop Sale: If a
vehicle is not of the same line make as the dealer's franchise
or the dealer does not have a franchise, AB 287 would require
the dealer to take the following steps prior to sale or lease
of a used vehicle subject to recall: Disclose the recall to
the consumer; Provide a copy of the recall notice to the
consumer; Inform the consumer that he or she can get the
recall repaired at no cost at a car dealer of the vehicle's
line make. AB 287 would require rental car companies to
disclose the recall to consumers prior to renting the used
vehicle subject to recall and to provide a copy of the recall
notice to the consumer. AB 287 would [also] require private
party sellers to inform potential buyers of any and all
recalls prior to sale, similar to the current odometer
disclosure.
"[Finally,] AB 287 would require auto manufacturers to provide
consumers with a loaner vehicle at their request and at no
cost, when consumers seek to get a recall corrected and the
parts or procedures are not available for repair."
3)Understanding motor vehicle safety recalls . The National
Traffic and Motor Vehicle Safety Act gives the U.S. DOT's
National Highway Traffic Safety Administration (NHTSA)
authority to issue motor vehicle safety standards and to
require manufacturers to recall vehicles that have
safety-related defects or do not meet federal safety
standards.
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Manufacturers voluntarily initiate most recalls, while others
may be influenced by NHTSA investigations. If a safety defect
is discovered, the manufacturer must notify NHTSA, as well as
vehicle owners, dealers, and distributors, plan a recall
campaign to remedy it, send repair guidance to franchised
dealerships, send notices to vehicle owners, and monitor the
effectiveness of the recall campaign and provide to NHSTA data
on the status of the recall campaign. The manufacturer is
required to remedy the problem at no charge to the owner (for
vehicles sold up to 10 years before the recall). After a car
is brought to a franchised dealership for repair, the dealer
will perform the recall remedy and submit claims to the
manufacturer for reimbursement. NHTSA is responsible for
monitoring the manufacturer's corrective action to ensure
successful completion of the recall campaign. However, NHTSA
cannot require car dealers to notify potential buyers of an
outstanding safety defect or require that they get the defect
remedied prior to a sale.
Conversely, if NHTSA receives enough complaints and information
about the operation of a vehicle that it finds there is a
significant threat to public safety, then it can initiate a
mandatory recall. NHTSA can perform an investigation with a
review by engineers and experts and work with the vehicle
manufacturer to recall vehicles. These recalls are
facilitated through direct relationships between
manufacturers, franchised dealerships, and owners who
purchased the new vehicles. According to NHTSA, from 2000 to
2011, all safety defect recalls for passenger vehicles were
conducted voluntarily by manufacturers, although some of those
recalls were based on NHTSA's investigations of safety
defects.
The process of alerting owners of used vehicles is more
difficult because the vehicles may have changed hands several
times, and manufacturers may not have established
communications with used vehicle dealers who buy and sell
multiple different types of cars.
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4)GAO report finds lack of recall information for used cars a
"significant risk." According to a June 2011 U.S. Government
Accountability Office (GAO) report that examined the federal
safety recall process, "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." The report
pointed out that, with 35 million used cars sold in used and
franchised dealerships in 2009 alone, unknown recalls "could
pose a significant risk to the safety of millions of vehicle
drivers and may have a negative impact on recall completion
rates." It adds, "NHTSA also currently lacks the authority to
require manufacturers to notify used-car dealerships - which
sold 11 million cars in 2009 - of recalls or require these
dealerships to notify potential buyers of an outstanding
recall. As a result, many consumers may be unknowingly
putting their lives at risk by purchasing a defective
vehicle."
According to a February 11, 2014, press release by
private-sector vehicle information provider Carfax, "[M]ore
than 3.5 million cars were listed for sale online with an open
safety recall. Texas, California, Missouri, Florida and Ohio
led the nation with the most recalled cars for sale online
last year."
5)Substantial number of recalls announced annually . According
to the author, "[w]hile vehicles have become safer, the number
of vehicles subject to a recall has grown dramatically. Over
the past decade, the number of traffic-related deaths has
dropped significantly; however, 2014 saw a new record number
of recalls in the U.S. with more than 63.8 million recalls.
This number of recalls is more than twice as many recalls as
any previous year and is equivalent to roughly 25% of the
vehicles on the road today. Officials predict that 2015 could
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see another record year, as manufacturers face potential fines
from federal regulators, threats of increased litigation, and
as the issue receives greater coverage in mainstream media."
According to the Los Angeles Times, "[A]utomakers have issued
almost 20 million vehicle safety announcements so far this
year. No, the world's cars aren't falling apart. But
headlines and lawsuits over slow recalls have made auto
manufacturers more vigilant? Automakers that were slow to
recall defective vehicles in the past have been hit with
increasing large federal fines and costly product-liability
lawsuits. Meanwhile, [NHTSA] faces growing congressional
criticism for not forcing car companies to recall vehicles
quickly." ("Auto recalls speed up, are on track to break a
record," May 15, 2014, Los Angeles Times)
The sponsor, the California New Car Dealers Association (CNCDA),
notes that the pace of recalls continues to grow: "In 2014,
63.8 million vehicle recalls were issued in the United States,
more than two times the number of recalls issued in any
previous year. [NHTSA] expects an even higher number of
recalls to be issued this year as auto manufacturers respond
to threats of increased litigation and fines and potential
damage to their reputations. If true this means that nearly
50% of all vehicles on the road in California and throughout
the nation will have been recalled in less than two years."
6)Improvements in accessing recall information . According to a
June 25, 2013, letter from NHTSA, "An auto dealer (or any
vehicle owner) today may easily access up-to-date, VIN
[vehicle identification number]-specific information regarding
the safety recall status of a used car. Such information may
be accessed through the manufacturer's publicly accessible
VIN-look up website, through a commercial VIN-look up service
for registered owners, or through the manufacturer's toll-free
number."
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In 2012, Congress enacted the MAP-21 Act, 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. The MAP-21 Act
required U.S. DOT to promulgate regulations by July 6, 2013,
requiring each vehicle manufacturer to provide vehicle recall
information on a public website and to car dealers.
On August 14, 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 VIN and without requiring
additional information to allow consumers to instantly
determine whether action is required to address an uncompleted
safety recall. This information will be required to be
updated at least weekly. While many automakers already make
this information available, those who do not will be required
to comply by August 14, 2014.
7)Understanding what constitutes a "recall. " According to
NHTSA, the Act defines motor vehicle safety as "the
performance of a motor vehicle or motor vehicle equipment in a
way that protects the public against unreasonable risk of
accidents occurring because of the design, construction, or
performance of a motor vehicle, and against unreasonable risk
of death or injury in an accident, and includes nonoperational
safety of a motor vehicle." A defect includes "any defect in
performance, construction, a component, or material of a motor
vehicle or motor vehicle equipment." Generally, a safety
defect is defined as a problem that exists in a motor vehicle
or item of motor vehicle equipment that poses a risk to motor
vehicle safety, and may exist in a group of vehicles of the
same design or manufacture, or items of equipment of the same
type and manufacture.
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According to the 2011 GAO report, there are two types of safety
recalls. Compliance recalls occur when vehicles or vehicle
equipment is determined to be noncompliant with applicable
federal safety standards, as identified by NHTSA or a
manufacturer. Compliance recalls range from design issues
with seatbelts to improper placement of warning labels for
airbags, and from 2000 to 2009, accounted for 18% of vehicle
recalls.
The other 82% of recalls were safety defect recalls, which occur
when a defect in a vehicle creates an unreasonable safety risk
as determined by NHTSA or a manufacturer. Examples may
include problems with ignition switches, steering components,
fuel systems, accelerator controls, air bags, wiring or child
safety seats, among other things, that have the potential to
cause harm or increase the risk of a crash. NHTSA also
provides a partial list of what would not constitute a
safety-related defect: air conditioners and radios that do not
operate properly, ordinary wear of equipment that must be
periodically maintained or repaired, nonstructural rust, paint
or cosmetic blemishes, and excessive oil consumption.
This bill makes a distinction between the standard "manufacturer
recall" (excluding service campaigns and emission recalls) and
a "Stop Sale - Stop Drive" recall, where the vehicle
manufacturer or NHTSA informs the dealer to stop the sale of
the vehicle or provides precaution advice to the owner to stop
operating the vehicle. According to CNCDA, Stop Drive, Stop
Sale recalls comprise about 6% to 8% of all safety recalls and
represent the most serious threat to the safety of the
motoring public. Consumers for Auto Reliability and Safety
(CARS) differs in this view, stating that this distinction is
subjective and made by the manufacturer, and used only in
extreme cases (approximately 1% of all recalls).
8)This bill in practice . As noted above, the primary provisions
of this bill are the requirements that all used car dealers
and rental car companies check the recall database at least
every 30 days and then either hold the car until repaired if
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the car is the same line make as the dealer, or sell/rent the
car with the consumer's informed consent if the car is a
rental or a different line make than the dealer. The only
exception is if the vehicle is subject to a much more urgent
"Stop Sale-Stop Drive" recall, in which case a car may not be
sold or rented until repaired, regardless of the nature of the
company holding the car.
Furthermore, private parties selling a car need only get the
informed consent of the buyer. Consumers seeking to repair a
recalled vehicle who are delayed by the lack of parts or
proper procedures must be provided a loaner/rental car by the
vehicle manufacturer. The effective date of these provisions
would also be delayed by six months, becoming operational on
July 1, 2016.
This bill also contains multiple provisions pertaining to the
franchisee/franchisor relationship between manufacturers and
dealers, and procedures for reimbursement and dispute
resolution, but as those elements of the bill are outside of
the jurisdiction of this Committee, they will not be discussed
in detail here.
1)Arguments in support . According to the sponsor, CNCDA,
"AB 287, the Consumer Automotive Recall Safety Act (CARS
Act), ?.is bipartisan, comprehensive consumer protection
legislation that would make California the first state in
the nation to comprehensively address recalls of used
cars.
"California already has the strongest consumer protection
laws in the country for car buyers, but neither California
nor federal law address[es] 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
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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.
"The CARS Act improves vehicle safety and increases recall
disclosure to consumers when buying, leasing or renting a
used car subject to recalls in three important ways.
"[First,] [u]nlike other proposals, AB 287 applies to car
dealers and rental car companies to ensure that the most
dangerous vehicles get fixed. Under the CARS Act, car dealers
and rental car companies would be prohibited from selling,
leasing or renting any used car in California subject to a
Stop Drive, Stop Sale recall.
"[Second,] [u]nder AB 287, franchised dealers of the same line
make (such as a Toyota dealer selling a used Prius) will fix
any and all recalls prior to sale. For all other vehicles,
the CARS Act increases the disclosure requirements for car
dealers, rental car companies and private sellers, so
consumers will be made aware of recalls prior to purchase or
rental. The new disclosure requirement would ensure that
consumers are told that a recall exists on the vehicle and
provide[d] a copy of the recall notice.
"[Third,] roughly 60% of all used cars sales in California are
made by private sellers, not car dealers. If private sellers
are excluded from any recall consumer protection proposal then
unsuspecting private buyers will be left unaware of the recall
status of the car they wish to purchaser. The CARS Act
addresses this problem by ensuring private sellers provide to
any potential buyer notice of all recalls on the car prior to
sale. This new consumer protection would operate similarly to
the current odometer disclosure on the certificate of
ownership.
"AB 287 comprehensively covers sales by new car dealers, used
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car dealers, rental car companies and private sellers?Finally,
AB 287 directly addresses the biggest hurdle for most
consumers in getting their recalled vehicles repaired: the
cost and inconvenience of being without their vehicle while
the recall work is being performed.?The CARS Act addresses
this issue by granting consumers with the ability to request a
loaner or rental vehicle at no cost from the automaker until
the recall repairs can be completed.
"In sum, AB 287 is groundbreaking legislation that will
enhance California's already strong consumer protection laws
by leading to more recalled vehicles getting fixed and better
informing consumers when purchasing or renting vehicles."
2)Arguments in opposition . CARS opposes the bill on a
number of major grounds, which are echoed by other
opponents as well:
Concerns about misleading distinctions between types of
safety recalls. CARS argues that the distinction between
manufacturer recalls and Stop Sale Stop Drive recalls
would lead to bad outcomes: "[T]his bill would create a
new, unprecedented, dangerous and misleading distinction
among auto safety recalls - based not on science, or any
federally-established standard, or on any other objective
criteria?.Instead, it would expressly allow dealers to
sell any used vehicle, no matter how imminent the threat
to public safety, or how many deaths and injuries the
safety defect has caused, or will cause, unless the auto
manufacturer - in its sole, subjective discretion - has
chosen to designate the recall as a "Stop Sale - Stop
Drive" recall. This would create the false, misleading,
and dangerous impression that only "Stop Sale - Stop
Drive" safety recalls need to be addressed promptly."
"According to a letter the Alliance of Automobile
Manufacturers submitted last November to [NHTSA], on
behalf of over a dozen leading auto manufacturers, during
the years 2000- 2013, only approximately 1% of recalled
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vehicles involved a blanket warning from the manufacturer
advising owners not to drive their cars. In some years, no
manufacturer issued such a warning. However, that does
not mean that the other recalls during those years did not
involve safety defects that pose a serious risk to the
American public. In fact, during that time, the other 99%
of recalled vehicles during included cars with obviously
life-threatening safety defects, many of which did claim
lives and cause debilitating injuries.
"Drawing this false distinction between 'do not drive'
recalls and other safety recalls would also inevitably
send a confusing, contradictory message to consumers,
telling them that, according to the state of California,
recalled cars are safe enough for a dealer to sell, while
expecting the buyers to get the recall repairs performed
themselves."
CARS also points out that the danger of driving a
potentially unsafe car extends beyond that individual to
family, and even to strangers driving on the same roads.
Concerns about shifting of the disclosure and repair
burden to the consumer. CARS and others argue that this
bill would harm consumers by burdening them with the
responsibility of managing or accepting most recall
repairs instead of imposing those costs on the dealer,
manufacturer or rental car company (although consumers
currently bear that burden under existing law). Opponents
point to the finding that roughly one-third of recalled
vehicles are never repaired, in large part because of
problems with parts shortages, technician shortages,
insufficient numbers of dealers, and the transaction costs
for consumers to arrange the repairs.
Moreover, the disclosures required for cars sold by
different line make dealers or rented by rental car
companies are viewed as ineffective at usefully informing
the consumer of the risks associated with the recall. The
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complexity of the transaction, the large amount of
paperwork written in 'technical jargon,' the lack of
accommodation for non-English language speakers, the
consumer's expectation that dealers would be prohibited by
the state from selling unsafe cars when most other
products cannot be sold once recalled, and claims by
dealers of multi-point inspections that don't include
recall checks, combine to weaken the real-world impact of
the disclosure required by this bill. CARS writes, "In
essence, the bill would require consumers - if they do
happen to see the notices and actually read them - to make
life-or-death decisions under pressure, with little time
to deliberate, on the basis of incomplete information."
Concerns that standards are lowered for rental cars. CARS
contends that this bill "would be far worse than the
prevailing practices in the rental car industry (with the
exception of Rent-a-Wreck). This bill would allow rental car
companies to rent approximately 99% of unsafe recalled cars to
consumers, regardless how unsafe the cars are, unless the
manufacturer has, in its sole discretion, chosen to warn its
customers not to drive the car, pending repairs."
CARS points to pending federal legislation (S.2819 by Senator
Boxer), that would prohibit rental car companies from renting
or selling recalled cars to the public until the safety recall
repairs have been performed. According to CARS, "the rental
car industry" supports the legislation, and that this bill
would potentially disrupt those efforts. At the same time,
"all of the major rental car companies, including Enterprise,
Hertz, Avis, Dollar-Thrifty, and many smaller rental car
companies have already voluntarily adopted policies that are
more consumer-friendly and safety-oriented than AB 287. For
years, they have been grounding recalled cars until they are
repaired, rather than renting or selling them to the public.
Therefore, AB 287 would represent a giant step backwards in
terms of safety."
Additionally, the provisions of AB 287 that would require
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manufacturers to provide loaner or rental cars to consumers
while waiting for recall repairs to be completed, do not
require that those cars be free of recall defects. As CARS
puts it, "[t]his totally defeats the entire purpose of proving
a loaner in the first place - to mitigate the risks to the
vehicle owner, their family and other passengers, and others
who share the roads." Moreover, the bill fails to ensure that
consumers are meaningfully alerted to the fact that
manufacturers are required to provide loaner/rental cars upon
request.
Concerns that AB 287's provisions are worse than existing law.
A number of opponents contend that the consumer notice and
consent provisions of this bill would actually reduce the
level of consumer protection available under existing law by
permitting manufacturers to make the argument, in future
personal injury cases, that a consumer who was injured in a
crash is partially at fault for the injury because he or she
accepted the car knowing it had an outstanding recall.
Representative of those concerns is Consumer Attorneys of
California (CAOC), which writes: "If the consumer, after being
advised of the recall, and signing an acknowledgement, fails
to take the vehicle in for the repair, defendants will argue
that the consumer had some responsibility in any subsequent
legal action involving injury or death. While this would not
absolve the manufacturer of liability for the defect, it could
certainly reduce recovery through the legal doctrine of
comparative fault. This approach is commonly seen by CAOC
members in recall cases, in that the manufacturer presents
evidence that Notice of the Recall was sent to the registered
owner, and the owner did not take the vehicle in for the
repairs. Often there is a dispute about whether the Notice was
received. This bill would eliminate that dispute in those
instances where there was a signed acknowledgement, as
required by the bill. Therefore, in every instance where a
consumer is harmed by the product and a legal action results,
the dealer will argue that the consumer was comparatively at
fault. This may or may not be successful, but the litigation
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surrounding this issue will be expensive and drawn out,
harming the consumer's best chance of a fair result."
Furthermore, the International Association of Machinists and
Aerospace Workers argues that "For decades, California has had
a number of state laws on the books aimed at protecting used
car buyers from such practices, such as those that prohibit
dealers from violating express or implied warranties, engaging
in fraud (concealing a material fact), engaging in false
advertising, or engaging in bait-and-switch; plus, if injuries
or fatalities occur as a result of the dealer's malfeasance,
the potential of facing claims for reckless endangerment,
negligence or strict liability?.Unfortunately, instead of
improving protections for car buyers, [AB 287] would weaken
existing law, and give dealers who engage in these prohibited
practices a new 'safe harbor' under state law."
3)Questions for the Committee and proposed amendments. As
discussed above, there are a number of issues where the
Committee may wish to consider the amendments provided
below as a means to address valid concerns raised by
opponents and to improve the overall consumer protection
provided by this bill.
One concern is the differential treatment of used cars for
sale and cars for rent. While it would be ideal if all
used and rental cars were held to an identical standard
where all cars under recall are held back from consumers
until repaired, the author contends that such an approach
would cause used car dealers to buy fewer used cars with
outstanding recalls, leading to an even larger number of
recalled cars being sold on the private market with only
minimal disclosure. However, there are important
distinctions between the used car market and the rental
car market.
Opponents have argued that the major rental car companies
have already adopted voluntary policies to hold and repair
rental cars under recall. Moreover, the federal
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legislation proposed by CARS (S.2819 by Senator Boxer)
would generally require rental car companies to such
requirements, and CARS contends that those rental car
companies support that legislation. If that is true, the
Committee may wish to consider an amendment to delete the
provision authorizing rental car companies to rent
recalled cars with notice and consent, and instead hold
them to standards similar to those currently contained in
S.2819.
On page 26, strike out lines 12 through 25, and add the
following:
"rent as soon as practicable but no later than 48 hours
after receiving notice of a recall conducted pursuant to
Sections 30118 to 30120, inclusive, of Title 49 of the
United States Code, the National Highway Traffic and Motor
Vehicle Safety Act (49 U.S.C. Sec. 30101, et seq.).
(b) If a notification indicates that the remedy for the
recall is not immediately available and specifies actions
to temporarily alter the vehicle that eliminate the safety
risk posed by the recall, the rental car company, after
causing the specified actions to be performed, may rent the
vehicle. Once the remedy for the rental vehicle becomes
available to the rental car company, the rental car company
may not rent the vehicle until the vehicle has been
repaired."
In that same vein, if rental cars should be held to the
higher standard, so should the loaner and rental
replacement vehicles provided to consumers during recall
repairs to be themselves under recall at the same time.
On page 27, line 16, after the word "made." add " The
consumer shall not be provided with a rental or loaner
vehicle, as prescribed in this paragraph, subject to a
Stop Sale - Stop Drive recall or manufacturer's
recall."
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Finally, the possibility that a 'notice and consent' regime
for the sale or rental of used cars could potentially erode
consumers' protection under existing law and their remedies in
the event of an accident should be taken seriously. One
option suggested by CAOC would be to limit the legal effect of
the disclosure and acknowledgment. The following amendments
would be one means to explicitly limit the admissibility of
the disclosure and acknowledgment, while clarifying that the
disclosure and acknowledgement do not reduce or otherwise
negatively affect a consumer's existing rights or remedies
under law:
On page 26, line 10, after the word "agreement." Add " (f)
Transmission by dealers and receipt and signing by
consumers of the disclosures specified in subdivisions (d)
and (e) shall have no legal effect other than to
demonstrate compliance by the dealer with the requirements
prescribed in subdivisions (d) and (e). Nothing in this
article shall be interpreted to place consumers in a less
advantageous legal position for having received or signed
the disclosures provided pursuant to this chapter than if
no disclosure had been made."
On page 28, line 2, after the word "11758." add " Nothing in
this chapter shall affect any legal rights, claims, or
remedies otherwise available under law. "
12)Related legislation . AB 1178 (Achadjian) would recast the
provisions relating to export and sale-for-resale prohibitions
to prohibit taking or threaten to take any adverse action
against a dealer because the dealer sold or leased a vehicle
to a customer who either exported the vehicle to a foreign
country or resold the vehicle in violation of the prohibition
if the dealer causes the vehicle to be registered in this or
any other state, and collects or causes to be collected any
applicable sales or use tax due to this state. AB 1178 is
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currently pending in the Assembly Transportation Committee.
13)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.
SB 155 (Padilla) Chapter 512, Statutes of 2013, modified the
relationship between motor vehicle dealers and manufacturers
by, among other things, making changes regarding the use of
flat-rate time schedules for warranty reimbursement, warranty
and incentive claims, audits, protest rights, export policies,
performance standards, and facility improvements.
AB 964 (Bonta) of 2013 would have prohibited a vehicle from
being advertised or sold if the dealer knows or should have
known that the vehicle is subject to a manufacturer's safety
recall, and would have required written disclosure of
specified problems with the vehicle. AB 964 was held on the
inactive file on the Assembly Floor.
SB 990 (Vargas) of 2012 would have allowed a car dealer
selling a used car to obtain data from a commercial entity,
rather than the federal government, to provide required
information to consumers on the vehicle's title history. SB
990 failed passage in the Senate Transportation and Housing
Committee.
AB 753 (Monning) of 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. AB 753 failed passage in the Senate
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Appropriations Committee.
AB 1215 (Blumenfield), Chapter 329, Statutes of 2011, required
new car dealers to participate in a program to electronically
title and register vehicles that they sell and to post
specified warning notices on some used cars.
AB 68 (Montaņez), Chapter 128, Statutes of 2005, enacted the
Car Buyer's Bill of Rights, which provided that a car dealer
may not advertise of sell as "certified" a used or pre-owned
motor vehicle 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.
SB 114 (Bowen) of 2005 would have enhanced the process by
which attempts are made to notify an owner of a motor vehicle
of a required safety-related vehicle recall. SB 114 was held
on the suspense file in the Assembly Appropriations Committee.
14)Double referral . This bill was double- referred to the
Assembly Transportation Committee where it was heard on April
13, 2015, and passed out on a 16-0 vote.
REGISTERED SUPPORT / OPPOSITION:
Support
California New Car Dealers Association
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Independent Automobile Dealers Association of California
Opposition
Advocates for Highway and Auto Safety
Association of Global Automakers
California Conference of Machinists
California Rural Legal Assistance Foundation
CALPIRG
Center for Auto Safety
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumer Watchdog
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Consumers for Auto Reliability and Safety
Consumers Union
Courage Campaign
Housing and Economic Rights Advocates (HERA)
International Association of Machinists and Aerospace Workers,
District Lodge 190
National Association of Consumer Advocates
The Sturdevant Law Firm
The Trauma Foundation
Analysis Prepared by:Hank Dempsey / P. & C.P. / (916) 319-2200
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