BILL ANALYSIS Ķ AB 287 Page 1 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. AB 287 Page 2 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 AB 287 Page 3 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 AB 287 Page 4 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 AB 287 Page 5 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 AB 287 Page 6 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: AB 287 Page 7 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 AB 287 Page 8 287 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. AB 287 Page 9 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. AB 287 Page 10 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 AB 287 Page 11 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." AB 287 Page 12 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. AB 287 Page 13 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 AB 287 Page 14 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 AB 287 Page 15 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 AB 287 Page 16 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 AB 287 Page 17 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 AB 287 Page 18 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 AB 287 Page 19 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 AB 287 Page 20 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 AB 287 Page 21 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." AB 287 Page 22 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 AB 287 Page 23 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 AB 287 Page 24 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 AB 287 Page 25 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 AB 287 Page 26 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 AB 287 Page 27