BILL ANALYSIS Ó
AB 1777
Page 1
Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 1777
(Lackey) - As Amended March 28, 2016
SUBJECT: Used vehicle sales: salespersons' licenses
SUMMARY: Includes used car salespersons in the class of
applicants required to complete a preliminary educational
program before receiving an occupational license from the
Department of Motor Vehicles (DMV). Specifically, this bill:
1)Requires an applicant for a DMV occupational license or
renewal of that license who is employed by a dealer that sells
only used vehicles for retail sale to complete a specific
educational program required of certain other license
applicants.
2)Requires a salesperson to provide evidence of completion of
the educational requirements to the motor vehicle dealer that
employs the salesperson.
3)Requires the dealer to maintain a copy of the evidence of
completion at the location where the salesperson is employed,
subject to inspection by DMV.
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4)Exempts from these requirements an applicant who is employed
by a dealer with a minimum of ten branches in the state who
provides a minimum of ten hours of training per year to its
salespersons.
EXISTING LAW:
1)Prohibits any person from acting as a dealer, manufacturer,
distributor, transporter, or salesperson of motor vehicles
without first procuring a license or temporary permit issued
by DMV.
2)Requires a person applying for a dealer's license for the
purpose of selling used vehicles to complete a written
examination and an educational program covering specified
topics before being issued that license, and to successfully
complete, every two years after that license is issued, a
four-hour educational program in order to maintain or renew
that license.
FISCAL EFFECT: Unknown
COMMENTS: In order to receive a license to act as a used motor
vehicle dealer, an applicant must complete an educational
program covering topics including, but not limited to, motor
vehicle financing, truth in lending, sales and use taxes,
advertising, unlawful dealer activities, and handling,
completion, and disposition of DMV forms. The applicant must
then successfully complete a written examination prepared and
administered by the DMV covering these same topics. Once
licensed, the dealer must then complete a four-hour educational
program every two years to maintain or renew the license. The
educational course can be provided by DMV or a number of
third-party entities provided that their curriculum is approved
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by DMV. The course can range from an online offering to
in-person classroom instruction, with the cost varying depending
on the mode of instruction.
If a dealer sells even a single used vehicle, they must comply
with the requirement to complete the educational program and the
written examination before being licensed, meaning virtually all
dealers must complete the program. Even a dealer who would
conventionally be referred to as "a new car dealer" must comply
with the DMV educational requirements if they sell any number of
used vehicles on their lot. A vehicle salesperson, at a new or
used dealership, must also obtain a license from DMV, but does
not need to complete the educational program or written
examination.
This bill would require a salesperson employed by a dealer that
sells only used vehicles to complete the same educational
program and written examination that dealers must complete,
before receiving a license from DMV, and every two years
thereafter to maintain or renew the license.
According to the author, vehicle salespeople are typically the
first point of contact at a car dealership, and consumers often
rely on salespeople for accurate and factual information that
will go into making a significant financial decision.
Sometimes, salespeople at a used vehicle dealership handle the
entire vehicle purchase transaction from introduction to
delivery. While the owner of a used vehicle dealership is
required to complete an educational program and successfully
pass a written examination, the salespeople at that dealership
are not. As such, the author believes there is an inconsistency
in the expectations and standards placed on dealers and on
salespeople.
According to the Independent Automobile Dealers Association of
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California (IADAC), the sponsor of this bill, penalties for
dealers who either intentionally or unintentionally fail to
provide a fair transaction for the consumer can be great, and
can include revocation of a license from DMV and civil
penalties. The significant financial impact of mishandling
transactions at a new vehicle dealer, which could include the
loss of a franchise agreement at the cost of millions of dollars
due to the high volume of transactions conducted by the dealer,
encourages new vehicle dealers to ensure compliance with proper
consumer transaction standards. Similarly due to the high
volume of transactions conducted by new vehicle dealers, new
vehicle sales transactions are often conducted by different
employees at different stages, to ensure each function is
carried out properly and in compliance with the law.
Franchisors typically require salespersons at their franchisees
to complete their own form of training and education to ensure
compliance. For a used vehicle dealer, generally conducting a
smaller volume of transactions, if a salesperson fails to comply
with consumer transaction standards, it is the dealer that will
be penalized through civil penalties or the revocation of a
license from DMV.
IADAC argues that adequately educating dealers and salespeople
would have a positive effect on consumer transactions by
minimizing the number of consumer complaints and minimizing the
chance of a used vehicle salesperson making a mistake due to
lack of training.
This bill also specifically exempts a salesperson employed by a
dealer with more than ten locations in the state who provides a
minimum of ten hours of training per year to its salespersons.
This exemption would apply to large used vehicle dealer chains
that operate in the state with more locations and employees than
the typical independent used vehicle dealer. These chains have
expressed confidence in their own training practices and
procedures and believe they are effective beyond what would be
required in the existing DMV educational program.
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Committee concerns: As noted above, salespersons at new car
dealership are typically subject to significant franchise
training requirements because of the financial risk to the
dealer of losing their license. While such a risk seems to
provide sufficient incentive to new car dealers to train their
employees, it is unclear why it is not sufficient to compel used
car dealers to do the same. Requiring the completion of a
training course at a cost to an applicant, simply to insulate
dealers from responsibility to properly comply with consumer
transaction standards, seems to be an unreasonable burden to
place on salespersons.
Furthermore, it is unclear what problem is solved by the
Legislature mandating completion of an educational course for
used vehicle salespersons. Insufficient data has been presented
to demonstrate a deleterious effect on consumer protection
associated with the lack of state-mandated education for
salespersons. To the extent such a negative impact exists, it
is unclear why dealers cannot train their own employees to gain
a competitive advantage over competitors whose salespersons are
not trained.
REGISTERED SUPPORT / OPPOSITION:
Support
Independent Automobile Dealers Association of California
(Sponsor)
AB 1777
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Opposition
None on file
Analysis Prepared by:Justin Behrens / TRANS. / (916) 319-2093