BILL ANALYSIS Ó
AB 1743
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Date of Hearing: April 19, 2016
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Ed Chau, Chair
AB 1743
(Dababneh) - As Introduced February 1, 2016
SUBJECT: Electronic transactions: motor vehicle finance
SUMMARY: Allows motor vehicle sales transactions to be conducted
electronically. Specifically, this bill:
1)Removes the Automobile Sales Finance Act and California
Vehicle Leasing Act from the exclusion clauses of the Uniform
Electronic Transactions Act (UETA); and
2)Applies all UETA requirements to motor vehicle sales
transactions.
EXISTING LAW:
1)Provides, under the federal Electronic Signatures in Global
and National Commerce Act (E-SIGN), for the transmission of
electronic signatures, but does not apply to a contract or
other record that is governed by: a statute, regulation, or
other rule of law governing the creation and execution of
wills, codicils, or testamentary trusts; a state statute,
regulation, or other rule of law governing adoption, divorce,
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or other matters of family law; or the Uniform Commercial
Code, as in effect in any state, as specified. (15 United
States Code (U.S.C.). Secs. 7001, 7003(a))
2)Excludes, under E-SIGN, the following specific transaction
types from electronic transmission: court orders or notices,
or official court documents for court proceedings; notices of
cancellation or termination of utility services; notices of
default, acceleration, repossession, foreclosure, or eviction,
or the right to cure, under a credit agreement secured by, or
a rental agreement for, a primary residence; cancellations or
terminations of health insurance or benefits or life insurance
benefits; recalls of a product, or material failure of a
product, that risks health or safety; and documents required
to accompany transportation or handling of hazardous
materials, pesticides, or other toxic or dangerous materials.
(15 U.S.C. Sec. 7003(b))
3)Generally authorizes, under California's UETA, the transaction
of business, commerce and contracts by electronic means,
except for transactions that are subject to certain laws, such
as laws governing the creation and execution of wills,
codicils, or testamentary trusts, and specific transactions
described under various statutes, including conditional sale
contracts for the sale of a motor vehicle between a buyer and
a seller (Civil Code (CC) Section 1633.1, 1633.3)
4)Sets forth principles that govern the legal effect of
electronic transactions, including that: a record or signature
may not be denied legal effect or enforceability solely
because it is in electronic form; a contract may not be denied
legal effect or enforceability solely because an electronic
record was used in its formation; if a law requires a record
to be in writing, an electronic record satisfies the law; and
if a law requires a signature, an electronic signature
satisfies the law. (CC 1633.7)
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5)Provides that an electronic record or electronic signature is
attributable to a person if it was the act of the person,
which may be shown in any manner, including a showing of the
efficacy of any security procedure applied to determine the
person to which the electronic record or electronic signature
was attributable. (CC 1633.9)
6)Specifies that all parties must agree to conduct the
transaction electronically; that an agreement in a standard
form contract may not be conditioned on an agreement to
conduct transactions by electronic means; and that a party
that agrees to conduct a transaction electronically may refuse
to conduct other transactions by electronic means (CC 1633.5)
7)Provides that if a law other than UETA requires that a notice
of the right to cancel be provided or sent, then an electronic
record may not substitute for a writing under that other law
unless, in addition to satisfying the requirements of that
other law and UETA, the notice of cancellation may be returned
by electronic means. (CC 1633.16.)
8)Sets forth in the Rees-Levering Motor Vehicle Sales Finance
Act requirements with regard to disclosures required in a
conditional sale contract for the sale of a motor vehicle,
including specified disclosures regarding finance charges, and
sets forth the permissible fees and charges in an automobile
conditional sale contract for the sale of a motor vehicle.
(CC 2982)
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9)Requires all car dealers to provide a document indicating the
price of specified items purchased, (including, among other
things, any service contract, insurance product, debt
cancellation agreement, or theft deterrent device) and stating
the cost of the monthly installment payments with and without
the items listed. (CC 2982.2)
10)Requires a car dealer selling a used vehicle for a purchase
price under $40,000 to offer the buyer a two-day contract
cancellation option agreement, priced as specified, and under
which the buyer may return the vehicle without cause so long
as certain conditions are met. (Vehicle Code (VC) Section
11713.21)
11)Defines a "buy-here-pay-here" car dealer as one that enters
into conditional sale or lease contracts and assigns less than
90% of such contracts to unaffiliated third party finance or
leasing sources within 45 days of consummation. (VC 241)
12)Requires, pursuant to federal regulation, a car dealer,
before offering a used vehicle for sale to a consumer, to
display a window sticker called the "Buyer's Guide" that must,
among other things, disclose whether any warranty is offered
and the basic terms of any warranty. If no express warranty
is provided, then the Buyer's Guide must indicate that the
vehicle is being offered for sale "as is" (with no express or
implied warranties), or with only the applicable "implied
warranties" required by state law. (16 Code of Federal
Regulations (C.F.R.) 455.3)
13)Requires, pursuant to federal regulation, used car dealers,
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at the time of sale, to give the buyer the original Buyers
Guide displayed on the vehicle or an accurate copy that
contains all of the required disclosures and reflects the
final warranty terms agreed on between the buyer and seller.
(16 C.F.R. 455.3)
FISCAL EFFECT: None. This bill is keyed nonfiscal by the
Legislative Counsel.
COMMENTS:
1)Purpose of this bill . This bill is intended to streamline the
vehicle sales process for consumers and car dealerships by
permitting consumers to choose to sign vehicle purchase and
lease contracts electronically. This measure is sponsored by
the California New Car Dealers Association.
2)Author's statement . According to the author's office,
"Assembly Bill 1743 would remove restrictions within
California's Automobile Sales Finance Act & the California
Vehicle Leasing Act that prohibit consumers from purchasing or
leasing a vehicle with an electronic signature. For consumers
who choose to sign these documents electronically, this bill
will streamline and expedite the car buying process. All
existing consumer protections afforded in existing law for
both the automobile sales and lease contracts will be
maintained under the bill. AB 1743 simply brings California
in line with federal law to allow consumers to have a better,
more modernized and streamlined vehicle buying or leasing
process, while still maintaining consumer protections afforded
in existing law, by allowing consumers to purchase or lease a
vehicle with an electronic signature."
3)Electronic transactions . In 2000, E-SIGN was enacted to
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establish federal law governing electronic transactions.
Generally speaking, UETA (adopted by California in 1999)
provides that the law should be construed to facilitate
electronic transmissions and that any transaction not
specifically exempted from UETA may be conducted
electronically, subject to specific rules including:
a) All parties must "opt-in" and may "opt-out" from
conducting further transactions electronically at any time.
b) A record or signature cannot be denied legal effect
because it is in electronic form.
c) If a law requires a person to provide information in
writing to another, that requirement is satisfied if the
information is provided in an electronic record that the
recipient can preserve and access for future reference.
d) If a sales transaction occurs electronically, then a
consumer must be given the right to exercise his or her
cancellation rights electronically.
While UETA prohibits the use of electronic contracts and
signatures on automobile sales and lease contracts, federal
law (E-SIGN) permits car sales to be conducted electronically.
The author contends that all across the country the
automotive financing industry and new car dealers have begun
to move to electronic contracts as a way to modernize the car
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buying process, improve sales record retention, and help
expedite the vehicle financing process.
Electronic transactions have a number of significant
advantages including faster service and consumer choice. Many
consumers prefer to conduct transactions small and large
electronically, yet the law prohibits car purchase
transactions from being completed electronically. The author
contends the car buying experience would be a faster, more
convenient experience for consumers if the transaction itself
could be conducted using computers or tablets rather than
stacks of paper.
4)Concerns about electronic transactions in car buying .
Opponents contend that allowing car sales to be conducted and
signed electronically puts the consumer at a disadvantage in
the bargaining process because if the consumer never receives
paper in their hand until the sale is over - or perhaps never
receives paper at all because they only receive an emailed
copy of the final contract - then two bad things happen: a)
the consumer cannot leave the dealership with a written offer
in hand that they can review on their own and perhaps even use
to comparison shop at other car dealerships; and b) the
consumer does not have an opportunity to compare what they saw
on a scrolling computer screen with a paper printout of the
contract - in a literal sense they do not have the ability to
see on paper in "black and white" what they are agreeing to
before they are bound by the contract.
Consumer advocates contend that it is not uncommon for
consumers to be confused about certain elements of a car sale,
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including the cost of additional services, such as rust
protection, or the trade-in value they are actually receiving
for their old car. Next to the purchase of a home, a car
purchase is by far the most expensive product most consumers
buy and the purchase typically involves a financial commitment
in the form of a loan that requires monthly payments for years
to come. Consumer advocates argue that as with house
purchases, car purchases should be completed on paper with wet
signatures, so that consumers understand the weight of their
decision to sign the contract.
5)Should this bill incorporate consumer and privacy protections
from the author's 2015 e-signature bill? AB 1131 (Dababneh)
of 2015, which was signed into law and went into effect this
year, permits electronic signatures for life insurance and
annuity product sales. In addition to removing the UETA
exclusion for life insurance and annuities, AB 1131 included
additional consumer protections, such as requiring insurers
to:
a) Obtain opt-in consent from the consumer to transact
business electronically and to gather that consent either
on the initial application or in a separate document that
is part of the insurance policy with the consent language
bolded or otherwise made conspicuous.
b) Allow consumers to opt out of using the electronic
process at any time and create a process or system for the
person to opt out.
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c) Not charge a person who declines to opt in to an
electronic transaction and not provide a discount or
incentive to any person to opt in to an electronic
transaction. (Insurance Code Section 38.6, subdivisions
(b)(1)-(3), (11))
The author and Committee may wish to consider whether it would
be appropriate to carry over similar protections from last
year's AB 1131 into this bill so that they apply to automobile
purchases.
In addition, while current law generally requires car sales to
occur on site at the car dealer's established place of
business, the author has expressed a willingness to add a
provision to this bill, which would clarify that vehicle sales
transactions using electronic signatures, as permitted under
this bill, must completed and signed electronically at the car
dealer's established place of business.
6)Existing consumer protections, such as a right to cancel,
would be left intact . UETA requires that if notice of a right
to cancel has to be provided or sent to a consumer, then doing
so is only permissible electronically if the consumer is
allowed to exercise his or her right to cancel by electronic
means as well. Under current law, consumers are given certain
rights to cancel car sales contracts, and this bill would not
change or limit those rights. In fact, it would keep
consumers on the same playing field as car dealers by allowing
consumers to cancel by electronic means if the car dealer had
chosen to provide them notice of their right to cancel
electronically.
This bill would also not change other consumer protections in
current law, such as the right to a single contract document
containing detailed and itemized costs for the purchase of the
car an any additional products or services, and the federal
law requirement to give the buyer the original Buyers Guide
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displayed on the vehicle or an accurate copy that contains all
of the required disclosures and reflects the final warranty
terms between the buyer and seller.
7)Arguments in support . According to the California New Car
Dealers Association, "AB 1743 will allow car buyers to
electronically sign a contract, and does not change any of the
strong existing consumer protections available. In sum, AB
1743 will modernize and improve the car buying process for
consumers while maintaining the strong existing consumer
protections provided for in California law."
8)Related legislation . AB 2591 (Dababneh)
allows a consumer who opts-in to initiate changes to their
automobile insurance policy online, receive non-renewal and
cancellation notices for homeowner's and automobile policies
electronically, and repeals the sunset dates on existing
statutes permitting electronic notices and transactions for
both property/casualty and life insurance policies. AB 2591
passed the Assembly Insurance Committee 12-0 on April 12,
2016, and is currently pending on the Assembly Floor.
9)Prior legislation . AB 1131 (Dababneh), Chapter 638, Statutes
of 2015, permitted life insurance carriers, agents and brokers
to send documents and conduct transactions related to life
insurance and annuities electronically.
AB 1097 (Holden), Chapter 439, Statutes of 2015, authorized
contracts for alarm installation to be conducted
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electronically.
10)Double-referral . This bill was double-referred to the
Assembly Judiciary Committee, where it will be heard if passed
by this Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
California New Car Dealers Association
Opposition
None on file.
Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)
319-2200
AB 1743
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