BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 675 (Alejo)
Version: July 6, 2015
Hearing Date: July 14, 2015
Fiscal: No
Urgency: No
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SUBJECT
Rental Vehicles: Disclosures: Obligations
DESCRIPTION
Existing law governs contracts between rental car companies and
their customers in connection with the rental of a passenger
vehicle. Under existing law, a rental company may only quote a
rental rate that includes the entire amount, but may separately
state taxes, an increased vehicle license recovery fee, a
customer facility charge, if any, an airport concession fee, if
any, a tourism commission assessment, if any, and a mileage
charge, if any, that a renter must pay to hire or lease the
vehicle for the period of time to which the rental rate applies.
This bill would authorize a rental company, when quoting a
rental rate, to separately state the rental rate, additional
mandatory charges, if any, and a mileage charge, if any, that a
renter must pay to hire or lease the vehicle for the period of
time to which the rental rate applies. This bill would define
"additional mandatory charges" to mean any separately stated
charges that the rental car company requires the renter to pay
to hire or lease the vehicle for the period of time to which the
rental rate applies, which are imposed by a governmental entity
and specifically relate to the operation of a rental car
business, including, but not limited to, a customer facility
charge, airport concession fee, tourism commission assessment,
vehicle license recovery fee, or other government imposed taxes
or fees.
BACKGROUND
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Section 1936 of the Civil Code governs the rental of passenger
vehicles to the public. In general, existing law requires
rental car companies to bundle, or include in the rental rate,
all mandatory charges imposed by a governmental entity when
advertising or providing quotes to consumers, except for those
which the Legislature has specifically authorized to be
separately stated. Under existing law, Section 1936 authorizes
rental companies to separately state taxes, customer facility
charges, if any, and mileage charges, if any, when quoting a
vehicle rental rate. In 2006, the Legislature passed AB 2592
(Leno, Ch. 790, Stats. 2006), which authorized rental companies
to separately state airport concession fees and tourism
commission assessments in quotes provided to consumers. After
the 2009 Budget Act temporarily increased the vehicle license
fee from the rate of 0.65 percent of the value of a vehicle to
1.15 percent, the Legislature passed SB 348 (Cogdill, Ch. 156,
Stats. 2009), which authorized rental companies to separately
state the "increased vehicle license fee," defined as that
portion of the vehicle license fee above 0.65 percent of the
value of a vehicle, prorated to the length of the rental period.
Thus, current law authorizes rental companies to separately
state taxes, increased vehicle license recovery fees, customer
facility charges, airport concession fees, tourism commission
assessments, and mileage charges alongside the rental rate when
quoting or charging for the rental of a passenger vehicle.
This bill would remove the list of charges that may be
separately stated, and instead authorize rental companies to
separately state "additional mandatory charges," which are
charges imposed by a governmental entity that specifically
relate to the operation of a rental car business, including, but
not limited to, a customer facility charge, airport concession
fee, tourism commission assessment, vehicle license recovery
fee, and other government imposed taxes or fees. This bill
would repeal sections of the Civil Code governing the charges
that may be separately stated by a rental car company, and
consolidate those provisions in Civil Code Section 1936. This
bill would also require rental rate advertisements to
conspicuously disclose that "additional mandatory charges" may
be imposed, and would eliminate a sunset on rental car service
of process requirements for foreign renters.
CHANGES TO EXISTING LAW
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1.Existing law provides that a rental company shall only
advertise, quote, and charge a rental rate that includes the
entire amount except taxes, a customer facility charge, if
any, and a mileage charge, if any, that a renter must pay to
hire or lease the vehicle for the period of time to which the
rental rate applies. (Civ. Code Sec. 1936(m).)
Existing law provides that a rental company shall not charge
in addition to the rental rate, taxes, a customer facility
charge, if any, and a mileage charge, if any, any fee that is
required to be paid by the renter as a condition of hiring or
leasing the vehicle, including, but not limited to, required
fuel or airport surcharges other than customer facility
charges, nor a fee for transporting the renter to the location
where the rented vehicle will be delivered to the renter.
(Civ. Code Sec. 1936(m).)
Existing law provides, notwithstanding the above, that when
providing a quote, or imposing charges for a rental, a rental
company may separately state an airport concession fee, if
any, and a tourism commission assessment, if any, that a
renter must pay to hire or lease the vehicle for the period of
time to which the rental rate applies. (Civ. Code Sec.
1936.01(a).)
Existing law provides, notwithstanding the above, that when
providing a quote, or imposing charges for a rental, a rental
company may separately state an increased vehicle license
recovery fee, as defined, that a renter must pay to hire or
lease the vehicle for the period of time to which the rental
rate applies. (Civ. Code Sec. 1936.015(b).)
Existing law provides that at the time a quote is given, a
rental company must provide the person receiving the quote
with a good faith estimate of the rental rate and all
additional charges, as well as the total charges for the
entire rental. The total charges, if provided on an Internet
Web site page, must be displayed in a typeface at least as
large as any rental rate disclosed on that page and must be
provided on a page that the person receiving the quote may
reach by following links through no more than two Internet Web
site pages, including the page on which the rental rate is
first provided. The good faith estimate may exclude mileage
charges and charges for optional items that cannot be
determined prior to completing the reservation based upon the
information provided by the person. (Civ. Code Secs.
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1936.01(b), 1936.015(b).)
Existing law states that when a rental rate is stated in an
advertisement, quotation, or reservation in connection with a
car rental at an airport where a customer facility charge is
imposed, the rental company shall disclose clearly the
existence and amount of the customer facility charge.
Existing law provides that all rate advertisements that
include car rentals at airport destinations shall clearly and
conspicuously include a toll-free telephone number whereby a
customer can be told the specific amount of the customer
facility charge to which the customer will be obligated.
(Civ. Code Sec. 1936(m).)
This bill would state that when providing a quote, or imposing
charges for a rental, the rental company may separately state
the rental rate, additional mandatory charges, if any, and a
mileage charge, if any, that a renter must pay to hire or
lease the vehicle for the period of time to which the rental
rate applies. A rental company may not charge any other fee
that is required to be paid by the renter as a condition of
hiring or leasing the vehicle aside from the rental rate,
taxes, additional mandatory charges, if any, and a mileage
charge, if any.
This bill would provide that all rate advertisements shall
include the following disclaimer, which shall be prominently
displayed: "Additional mandatory charges may be imposed,
including, but not limited to, a customer facility charge,
airport concession fee, tourism commission assessment, vehicle
license recovery fee, or other government imposed taxes or
fees. For more information, including an estimate of your
total rental cost, visit our Internet Web site at
[www.____.com]."
This bill would define "additional mandatory charges" to mean
any separately stated charges that the rental car company
requires the renter to pay to hire or lease the vehicle for
the period of time to which the rental rate applies, which are
imposed by a governmental entity and specifically relate to
the operation of a rental car business, including, but not
limited to, a customer facility charge, airport concession
fee, tourism commission assessment, vehicle license recovery
fee, or other government imposed taxes or fees.
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This bill would define "vehicle license fee" to mean the tax
imposed pursuant to the Vehicle License Fee Law (Part 5
(commencing with Section 10701) of Division 2 of the Revenue
and Taxation Code).
This bill would define "vehicle license recovery fee" to mean
a charge that seeks to recover the amount of any vehicle
license fee and vehicle registration fee paid by a rental
company for the particular class of vehicle being rented.
This bill would define "vehicle registration fee" to mean any
fee imposed pursuant to any provision of Chapter 6 (commencing
with Section 9101) of Division 3 of the Vehicle Code.
This bill would make other technical and conforming changes.
2.Existing law requires, until January 1, 2020, a rental company
or its registered agent to accept service of a summons and
complaint and any other required documents against a renter
who resides out of this country for an accident or collision
resulting from the operation of the rental vehicle in this
state, if the rental company provides liability insurance
coverage as part of, or associated with, the rental agreement.
Existing law requires any plaintiff who elects to serve the
foreign renter by delivering the summons and complaint and any
other required documents to the rental company pursuant to
these provisions to agree to limit his or her recovery against
the foreign renter and rental company to the limits of the
protection of the liability insurance. (Civ. Code Sec. 1936.)
This bill would remove the sunset and extend this provision
indefinitely.
COMMENT
1.Stated need for the bill
The author writes:
The purpose of the bill is to modernize the relevant code
sections regulating the rental car industry by [making] them
more consistent with practices in other states, and to promote
transparency in pricing for consumers.
Specifically, AB 675 promotes transparency in rental car
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pricing by clearly delineating private charges imposed by the
rental car business, from the many public exactions associated
with this industry, including tourism fees, airport concession
fees, airport facility fees, vehicle license fees, and other
similar charges. However, the bill preserves the requirement
that the customer be given a "quote," which must match the
charges ultimately imposed by the contract, to continue to
protect consumer expectations.
Other states do not manage the billing practices of the rental
care industry as California currently does. The basis for the
California law's extraordinary detail is no longer wholly
needed. The basic and fundamentally important consumer
protections in relevant code, relating to provision of a
"quote" upon which the customer may rely, are preserved.
. . .
Section 1936 was originally enacted 25 years ago, to combat
misleading pricing practices wherein the advertised rate could
be appreciably less than the actual amount of the charge by
the time the customer left the counter. Since 2007, rental
car companies have been authorized to separately state
specific mandatory charges (airport facility fees, concession
fees, tourism assessments, and when the vehicle license fee
was increased, a vehicle license recovery fee), provided the
customer was provided a "bundled" out-the-door quote at the
time the car was reserved. AB 675 does not change the
disclosure requirements worked out in 2007 - but does allow
companies to separately state additional mandatory,
government-imposed charges - beyond those specifically
authorized 9 years ago. This will align California disclosure
practices with other states, and provide the industry needed
protection as new government fees . . . are imposed.
As more fees are contemplated . . . the law needs to be
revised to promote more accurate display of pricing so
consumers know which charges are private and which are public.
The requirement to "rebundle" or provide a reliable quote is
maintained.
2.Unbundling government charges
With the exception of sales tax, most businesses in California
appear to absorb taxes, fees, and other government-imposed
charges into their overhead, rather than pass them directly on
to consumers. Typically, businesses that are required to pay
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specific government charges absorb those costs into their
pricing models, and then compete with one another on essentially
a level playing field (at least as far as government charges are
concerned). There are exceptions, notably in the utility sector
where rate structures often times separately state different
taxes and fees, but on the whole it appears that the marketplace
prefers the simplicity of pricing goods and services with
government imposed charges "bundled" within the price quoted to
consumers.
Existing law governing rental car pricing permits these
companies to separately state a number of specific government
fees and charges. Some of these fees, like airport consumer
facility charges, are only collected in specific rental
situations. Others, like increased vehicle license fees, are
collected on all rental contracts. This bill would enlarge the
scope of government-imposed fees that could be separately stated
when quoting or billing for car rentals to include any charge
imposed by a governmental entity that specifically relates to
the operation of a rental car business. Thus, should this bill
become law, rental car companies in California would be
authorized to separately charge consumers for their share of a
vehicle's annual registration and licensing fees, as well as any
future vehicle-specific fees the Legislature might impose, such
as an assessment on the number of miles travelled by a vehicle.
This bill would not authorize rental car companies to separately
state other government-imposed charges levied generally against
other businesses, like real property taxes or unemployment
insurance for company employees.
It is unclear whether this change in the law would result in
additional government-imposed charges being shifted to rental
car customers. Ostensibly, consumers already pay for these
charges as part of the "bundled" rental rate for renting a
vehicle. Further, a rental car company could not use the
ability to "unbundle" government-imposed charges in order to
attract consumers with deceptively stated rental rates. Under
existing law, rental car companies must state not only the
rental rate but also the total charges for each rental when
providing a quote to a potential customer. Existing law also
prohibits rental car companies from misleading consumers by
quoting a lower rental rate and then increasing the total
charges due on a rental with the imposition of separately stated
fees and charges after an initial quote was generated.
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At most, the changes proposed in this bill would allow rental
car companies to separately disclose the amounts attributable to
government fees and charges when quoting a rental car rate to a
consumer. As stated by the sponsors, Avis Budget Group,
Enterprise, and Hertz, this bill "represents a modest
modernization of California law by enhancing transparency in
advertising and pricing" by "allowing rental car companies to
disclose the multitude of government exactions associated with
rental car transactions and, after disclosure, rebundling all
fees and charges in one price for the consumer." Given that all
rental car companies in California would, absent collusion, be
subject to market forces and would continue to compete on rental
rates quoted to consumers, it is unclear whether this bill would
have any net effect on vehicle rental rates in the state.
3.Eliminating sunset regarding rental car accident service of
process
Existing law, until January 1, 2020, requires a rental car
company that enters into a vehicle rental agreement with a
renter who is not a resident of this country to do the following
when that renter purchases liability insurance as part of the
agreement: (1) accept service of process of any summons and
complaint against the renter for any accident resulting from the
operation of the rental car within California; and (2) mail a
copy of the summons and complaint to the renter. Existing law
specifies how process must be served on a rental car company and
requires that a plaintiff agree to limit his or her recovery to
the limits of protection provided by the insurance.
Prior to the enactment of this provision, Californians faced
difficulties when a foreign driver using a rental car recklessly
injured or killed a California resident. The foreign driver
would leave the country and return home, and the California
resident would be tasked with trying to locate and serve the
foreign resident with a civil complaint. This provision was
originally enacted with a five-year sunset by AB 621 (Calderon,
Ch. 531, Stats. 2011), and was extended to January 1, 2020, by
AB 2747 (Committee on Judiciary, Ch. 913, Stats. 2014). This
bill would eliminate that sunset date and extend this provision
indefinitely.
4.Technical Amendment
The author offers the following technical amendments to delete
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an extraneous word that was retained during the last set of
amendments to this bill, and to correct the placement of the
word "and" in a sentence.
Author's Amendment :
On page 40, line 18, strike "taxes"
On page 40, line 25, strike "if any, a mileage charge, if any,
and" and insert "if any, and a mileage charge, if any,"
Support : None Known
Opposition : None Known
HISTORY
Source : Avis Budget Group; Enterprise; Hertz
Related Pending Legislation : None Known
Prior Legislation :
AB 1981 (Brown, Ch. 417, Stats. 2014) removed the manufacturer's
suggested retail price as one of the criteria for determining
the rate of a damage waiver sold by a rental company, and
instead set the rate of damage waivers according to the
vehicle's classification using criteria set by the 2014
Association of Car Rental Industry Systems Standards for North
America. This bill increased the maximum rate of the damage
waiver to $11 per rental day for vehicles designated as an
"economy car," "compact car," or another term denoting the two
smallest categories of vehicles described by the standards.
This bill increased the maximum rate of the damage waiver to $17
per rental day for vehicles in the next 3 body-size categories
of vehicles designated in the standards, except as specified.
AB 2747 (Committee on Judiciary, Ch. 913, Stats. 2014), the
Assembly Committee on Judiciary's Omnibus Bill, extended until
January 1, 2020, a sunset provision pertaining to a requirement
for rental companies to accept service of a summons and
complaint against a renter who resides out of this country for
an accident or collision resulting from the operation of the
rental vehicle in this state, as provided.
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SB 348 (Cogdill, Ch. 156, Stats. 2009) See Background.
AB 2592 (Leno, Ch. 790, Stats. 2006) See Background.
Prior Vote :
Assembly Floor (Ayes 77, Noes 1)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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