BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  April 26, 2016


                           ASSEMBLY COMMITTEE ON JUDICIARY


                                  Mark Stone, Chair


          AB 2051  
          (O'Donnell) - As Amended April 4, 2016


                                  PROPOSED CONSENT


          SUBJECT:  Rental passenger vehicles


          KEY ISSUE:  should the statute governing agreements between  
          rental car companies and their customers be updated and  
          reorganized IN ORDER to better reflect prevailing consumer and  
          industry practices and to eliminate duplicative and inoperative  
          sections? 

                                      SYNOPSIS


          Last year this Committee heard and unanimously passed AB 675  
          (Chapter 333, Statutes of 2015).   As heard by this Committee,  
          AB 675 made several clarifying, structural, and substantive  
          changes to Civil Code Section 1936, the statute that governs  
          agreements between rental car companies and their customers.   
          The primary purpose of AB 675, however, was to allow a rental  
          car company, when making a quote or imposing charges, to  
          separate its rental fees from any additional mandatory fees  
          imposed by government entities, allowing the customer to know  
          how much of the total charge represented the company's fees, and  
          how much represented government fees.  AB 675, as heard by this  








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          Committee, would have made other changes, as well, that were  
          later removed from the bill.  As heard and passed by this  
          Committee, AB 675 would have reduced the amount of time that a  
          company is required to wait before activating GPS to locate a  
          vehicle that had not been returned by the contract deadline;  
          allowed customers who complete their rental transactions online  
          to bypass the existing requirement that the customer receive  
          information on damage waivers orally; and eliminated a  
          duplicative rear window hangar that gives the customer a final  
          reminder of his or her right to buy or not buy a damage waiver.   
          When the bill returned from the Senate, however, it had been  
          reduced to the primary objective of authorizing the rental car  
          company to separate its own fees from government-imposed fees.   
          This bill seeks to restore some of the structural and  
          substantive provisions that were in AB 675 when it was heard by  
          this Committee.  In brief, the bill changes existing law in the  
          following ways: (1) it reorganizes the existing and unwieldy  
          Section 1936 into several more concise and logically placed  
          sections; (2) it reduces, from 7 to 3 days, the time that must  
          pass before a rental car company may activate GPS in order to  
          locate a car that has not been returned on time; (3) it requires  
          a person or entity, other than a rental car company that  
          advertises a rental rate, to clearly disclose charges and  
          provides that the rental car company is not responsible for the  
          other person's failure to disclose the charges; as specified;  
          and (4) it reorganizes provisions that authorize airport  
          facility charges and establishes the authority of the Los  
          Angeles International Airport to charge such fees for specified  
          purposes.  The bill is supported by the three major rental car  
          companies and Los Angeles Mayor Eric Garcetti.  There is no  
          registered opposition to this bill.  The bill will be referred  
          to the Assembly Committee on Privacy & Consumer Protection  
          should it pass out of this Committee. 


          SUMMARY:  Reorganizes the statute regulating rental car  
          agreements and modifies certain regulations that no longer  
          reflect prevailing practices in consumer and industry behavior.   
          Specifically, this bill:  








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          1)Repeals the existing statutory framework that governs  
            agreements between a rental car company and its customers and  
            replaces it with a new statutory framework that eliminates  
            duplicative and inoperative sections, adds and updates  
            definitions, and modifies certain substantive requirements, as  
            detailed below, relating to disclosure requirements and  
            restrictions on the use of a rental vehicle's electronic  
            surveillance technology. 


          2)Authorizes a rental car company to obtain information from a  
            rental vehicle's electronic surveillance technology if the  
            rental vehicle has not been returned within three days after  
            the contracted return date, or three days after any extension  
            of that return date. (Existing law requires the rental car  
            company to wait one week after the scheduled or extended  
            return date.)  However, the bill would authorize a rental  
            company, in connection with a "qualified business rental" to  
            use electronic surveillance technology to determine certain  
            information for the sole purposes of commencing and concluding  
            the rental.  Defines a "qualified business rental" to mean a  
            rental made under a business rental program that produces, or  
            is estimated to produce, gross rental revenues in excess of  
            $25,000 per year. 


          3)Eliminates an existing requirement, applicable to renters  
            enrolled in a rental car company's membership program, that  
            the rental car company place a hangar on the rental vehicle's  
            rearview mirror notifying the renter that that damage waiver  
            offered by the rental car company may be duplicative of the  
            coverage that the customer maintains under his or her own  
            insurance policy, and providing the renter with a final  
            opportunity to either decline a damage waiver that was  
            previously accepted or accept a damage waiver that was  
            previously declined.  Requires, however, that the rental car  
            company provide the same information that was previously on  








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            the hangar on a printed notice provided on the rental record  
            or the folder into which it is inserted. 


          4)Provides that if a person or entity other than a rental  
            company, including a passenger carrier or travel service,  
            advertises a rental rate for a vehicle that includes  
            additional mandatory charges, that person or entity shall  
            clearly disclose the existence and amount of the charges.  If  
            a rental company provides the person or entity with a rental  
            rate and additional mandatory charges information, the rental  
            car company is not responsible for the failure of that person  
            or entity to comply with the disclosure requirement. 


          5)Authorizes the Los Angeles International Airport to require  
            rental car companies to collect a customer facility fee for  
            purposes related to the design, construction, operation,  
            maintenance, and improvement of a consolidated rental vehicle  
            facility, any common-use transportation system, and terminal  
            modifications based on evidence presented at a hearing.   
            Requires the airport to complete audits prior to the initial  
            collection of the airport facility fee and prior to any  
            increase in the fee, and every three years thereafter, and to  
            submit copies of these audits to specified legislative  
            committees. 


          EXISTING LAW:  


          1)Sets forth general rules governing contracts between rental  
            car companies and their customers on a variety of matters,  
            including, but not limited to, the manner in which rental car  
            companies advertise and quote rental charges and additional  
            fees, the renter's liability or lack thereof for damages to a  
            rental vehicle, the amount that rental car companies may  
            charge for damage waivers and the manner in which they are  
            offered, and the conditions under which a rental car company  








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            may access, obtain, and use geo-location and other information  
            from the rental vehicle's electronic surveillance technology.   
            (Civil Code Section 1936; subsequent citations refer to the  
            Civil Code unless otherwise indicated.) 


          2)Requires a rental company that offers a damage waiver to  
            disclose specified information to the renter in a prescribed  
            manner, including an oral disclosure at the counter informing  
            the renter that the damage waiver may be duplicative of  
            coverage that the customer maintains under his or her own  
            motor vehicle insurance policy.  Provides that a rental  
            company's disclosure requirements shall be satisfied for  
            renters who are enrolled in its membership program if certain  
            conditions are met, including by placing on the rental  
            vehicle's rearview mirror a hangar that notifies the renter  
            that the damage waiver may be duplicative of the coverage that  
            the customer maintains under his or her own insurance policy  
            and provides the renter a final opportunity to either decline  
            a damage waiver that was previously accepted or accept a  
            damage waiver that was previously declined.  (Section 1936 (g)  
            and (s).) 


          3)Provides that when providing a quote, or imposing charges for  
            a rental company, 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.  Prohibits the rental car company from charging  
            any fee other than the quoted rental rate, additional  
            mandatory charges, or mileage charges.  (Section 1936 (m).)


          4)Permits the rental company to collect an authorized customer  
            facility charge at specified airports if certain conditions  
            are met and the fees are used for purposes of maintaining a  
            consolidated rental car facility and a common-use  
            transportation system.  Requires the airports to conduct  








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            audits as specified.  (Section 1936 (l).) 


          5)Prohibits a rental company from using, accessing, or obtaining  
            any information relating to the renter's use of the rental  
            vehicle that was obtained using electronic surveillance  
            technology, unless the technology is used to locate a stolen,  
            abandoned, or missing rental vehicle after one of the  
            following:


             a)   The renter or law enforcement has informed the rental  
               car company that the vehicle is missing or has been stolen  
               or abandoned.


             b)   The rental vehicle has not been returned following one  
               week after the contracted return date, or one week  
               following the end of an extension of that return date.


             c)   The rental car company discovers that the vehicle has  
               been stolen or abandoned and, if stolen, reports the  
               vehicle stolen to law enforcement by filing a stolen  
               vehicle report.  (Section 1936 (n) (1) (i)-(iii).) 


          FISCAL EFFECT:  As currently in print this bill is keyed  
          non-fiscal. 


          COMMENTS:  According to the author, this bill seeks to  
          "modernize" the statute that governs rental car contracts, fees,  
          disclosures, and advertisements.  Many of the provisions in the  
          bill under consideration are similar, and in some cases  
          identical, to last year's AB 675 (Alejo), which passed out of  
          this Committee unanimously.  AB 675 was eventually chaptered,  
          but only after it was significantly amended in the Senate to  
          focus more narrowly on the issue that prompted AB 675: the  








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          rental car industry's desire to clearly distinguish the fees  
          imposed on its customers by a rental car company from the many  
          government-imposed exactions, including tourism fees, airport  
          concession and facility fees, vehicle fees, and other related  
          fees and surcharges.  Understandably, the rental car companies  
          wanted their customers to know which parts of the total charge  
          were attributable to the rental car company, and which were  
          attributable to additional mandatory fees over which the rental  
          company had no control.  This bill seeks to restore some the  
          provisions that were in AB 675 before it was pared back in the  
          Senate.  To this Committee's understanding, the Senate  
          amendments did not necessarily reflect any fundamental  
          disagreement with the other changes proposed by AB 675; rather,  
          it reflected a desire to focus the bill on the most pressing  
          change sought by the author and sponsors (separating rental  
          company fees from government-imposed fees in quotes and  
          statements) and leave a more comprehensive "clean-up" and  
          reorganization for a later date.  This bill, therefore, seeks to  
          achieve that reorganization while at the same time incorporating  
          some, but not all, of the substantive changes that were in AB  
          675.  


          Reorganization:  The existing statute governing agreements  
          between rental car companies and consumers is a long and  
          meandering one that sets forth the relative liabilities of the  
          rental car company and the consumer for damages to the vehicle;  
          the authority of the rental car company to offer damage waivers;  
          the content of required disclosures and the proper methods for  
          disclosing them; and the authorization for additional mandatory  
          fees and charges imposed by a government entity and earmarked  
          for specific purposes, including customer facility charges,  
          airport concession fees, tourism and commission assessments,  
          vehicle license recovery fees, and other government-imposed  
          taxes or fees.  Because various provisions and subdivisions of  
          this statute were added at different times, the existing statute  
          is not always logically structured or easily navigated.  For  
          example, provisions dealing with the authority of rental car  
          companies to charge airport facility fees are located in  








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          subdivision (l), in the middle of two subdivisions dealing with  
          the quoting and disclosure of various fees and charges.  In  
          other places, substantive provisions are placed within  
          subdivisions that are primarily definitional.  For lack of a  
          more technical term, the section is a mess.  This bill breaks  
          Civil Code Section 1936 into several smaller more easily  
          digestible sections, moves certain language to other sections  
          where it is more logically suited, moves subdivisions relating  
          to airport facility charges to sections of the Government Code  
          Section, and eliminates duplicative or inoperative provisions.   
          In addition to these structural changes, the bill makes a number  
          of modest and reasonable substantive changes.  These changes are  
          detailed below. 


          Use of GPS Information:  California is one of just a handful of  
          states that prohibit a rental car company from using information  
          obtained from the rental vehicle's GPS device to locate their  
          vehicles, except in a few narrowly defined situations.  A  
          high-profile court case in Connecticut involved a rental company  
          that used GPS information to charge customers extra fees for  
          "recklessly" using the vehicle, or driving a vehicle beyond a  
          contractually-restricted geographical area.  A customer subject  
          to such fees sued the company and a court found that the  
          charges, at least in that case, were unwarranted.  In response  
          to this case, a small number of states, including California,  
          passed laws that limited the ability of rental car companies to  
          use GPS information for such purposes.  Indeed, California  
          enacted a general prohibition against the use of this  
          information, unless it is to provide the customer with requested  
          services.  Otherwise, current law prohibits GPS information from  
          being accessed until the vehicle is returned, unless the vehicle  
          is missing, abandoned, or stolen, or the customer fails to  
          return the vehicle within one week of the contracted return date  
          or any extension thereof.  The author and sponsor contend, not  
          unreasonably, that one week is a long time to wait before using  
          GPS to determine the whereabouts of a vehicle that has not been  
          returned, especially in the case where the renter has failed to  
          notify the rental company or sought to extend the contracted  








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          return date.  This bill would reduce the waiting period from one  
          week to three days after the contracted return date.  If the  
          renter knows that he or she will not be able to return the  
          vehicle on time, he or she can obtain an extension and the GPS  
          will not be activated until three days after the extended time  
          period has passed.  Knowing the whereabouts of a vehicle that  
          has not been returned three days after the contracted return  
          date or extension would not only help the rental car company  
          locate the vehicle, it may also help a renter who is lost,  
          injured, or otherwise in distress.  If a renter has not  
          contacted the rental company within three days after a scheduled  
          return date, it seems reasonable to believe that either the  
          vehicle has been stolen or that the renter is injured,  
          disoriented, in distress, or even dead.  In either case, knowing  
          the whereabouts of the vehicle, and the renter, could be  
          critically important. 


          Damage Waiver Disclosure:  A significant portion of the existing  
          statute governing rental car agreements reflects concern about  
          the industry practice of offering a "damage waiver" fee that is  
          unnecessary for most renters.  Consumer groups alleged that  
          these waivers - which supposedly relieve the renter of liability  
          for damage to the vehicle - are often quite limited in terms of  
          what they cover and, moreover, were unnecessary insofar as they  
          duplicated coverage by the renter's personal car insurance  
          policy or credit card issuer.  To address this, the law was  
          amended to require rental car companies to inform the consumer,  
          in a quite prescribed manner, that the damage waiver might be  
          duplicative of his or her personal car insurance policy.  The  
          disclosure was initially required to take a specified form and  
          to be included in the contract and on the contract holder.   
          Since 2001, existing law has mandated that this disclosure be  
          made orally at the counter and at the time when the damage  
          waiver is offered.  In addition, existing law sets forth  
          different disclosure requirements for persons who are enrolled  
          in the rental car company's membership program, a service that,  
          among other things, allows the customer to bypass the rental  
          counter and go directly to his or her reserved vehicle.  Because  








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          the member bypasses the counter, he or she cannot receive the  
          oral disclosure about the damage waiver.  Therefore, the member  
          is informed of the waiver at the time that he or she becomes a  
          member; additionally, at the commencement of each rental period,  
          the company must place a hangar on the rearview mirror of the  
          rental car that provides the required disclosure and gives the  
          member the right to accept the damage waiver if he or she had  
          previously declined it, or to decline the damage waiver if he or  
          she had previously accepted it.  Last year's AB 675 would have  
          eliminated the oral disclosure requirement for the increasing  
          number of persons who reserve and pay for a vehicle online;  
          instead, the disclosure would have been provided online at the  
          same time that the transaction is completed.  AB 675 would have  
          also eliminated the hangar requirement as unnecessarily  
          duplicative and generally ineffective.  This bill maintains the  
          requirement for an oral disclosure for non-member renters, but  
          eliminates the hangar requirement for members.  The author and  
          sponsor believe that the hangar is wasteful and inefficient  
          given that such information has already been provided to the  
          member and signs are posted near the vehicle pick up locations. 


          Advertisers Responsibility for Disclosure:  When a consumer  
          arranges to rent a vehicle from someone other than the rental  
          car company - such as an airline or travel service - this bill  
          would require that the other person or entity make specified  
          disclosures regarding any additional charges that the customer  
          will need to pay, so long as the rental car company provides  
          this information to the other person or entity.  The bill also  
          specifies that if the other person or entity has been provided  
          with that information by the rental car, but the other person or  
          entity fails to disclose it properly, the rental company is not  
          responsible for that failure.  In other words, this provision  
          apportions responsibility to the person or entity that failed to  
          comply with the requirements. 


          Facility Charges for Los Angeles Airport:  Finally, this bill  
          contains a provision that authorizes Los Angeles International  








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          Airport to require rental car companies to collect a customer  
          facility fee for purposes related to the design, construction,  
          operation, maintenance, and improvement of a consolidated rental  
          vehicle facility, any common-use transportation system, and  
          terminal modifications that will be used by airport rental car  
          customers.  The bill requires the airport to complete audits  
          prior to the initial collection of the airport facility fee and  
          prior to any increase in the fee, and every three years  
          thereafter, and to submit copies of these audits to the Assembly  
          and Senate Committees on Judiciary, the Assembly Committee on  
          Transportation, and the Senate Committee on Transportation and  
          Housing.  The bill also requires the airport to post these  
          audits on its Internet website in a manner accessible to the  
          public.  While this is a new provision, it is fully consistent  
          with past authorizations of airport facility charges. 


          This measure no longer permits online damage waiver disclosure  
          to substitute for oral disclosure.  Existing law requires all  
          renters, other than those who belong to a membership program, to  
          be informed that the damage waiver is optional and that the  
          renter's personal automobile insurance policy may already cover  
          damages.  Existing law requires that this disclosure be given  
            orally at the counter.  Renters who belong to the membership  
          program are exempted from the oral disclosure requirement  
          because one of the benefits of membership is to bypass the  
          counter and go directly to the vehicle.  An increasing number of  
          renters, however, complete the entire rental transaction online  
          and would prefer, like the members, to bypass the counter.  To  
          account for this change in renting behavior, last year's AB 675  
          would have allowed persons who rented the vehicle online to  
          receive the damage waiver disclosure online and thereby avoid  
          having to stop at the counter.  The bill under review, however,  
          still requires an oral disclosure of the damage waiver options  
          and no exemption for online transactions.  It is not entirely  
          clear if this omission was intentional or accidental.  However,  
          if the bill moves forward, the author and sponsors may consider  
          replicating the provision from last year's AB 675, because so  
          long as the online method of disclosure is sufficiently clear,  








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          conspicuous, and effective, the ability to bypass the counter  
          could be a significant convenience for both the consumer and the  
          rental car company.  


          ARGUMENTS IN SUPPORT:  According to the author, AB 2051 seeks to  
          "modernize the relevant rental car code sections by making them  
          more consistent with practices in other states and promoting  
          transparency in pricing for consumers."  The author contends  
          that since the statute was enacted in 1988, the many "changes to  
          the statute have resulted in duplicative code sections and in  
          some instances, conflicting terms and definitions.  This has led  
          to several implementation and interpretation issues."  In  
          addition to general structural problems, the author also points  
          to other problematic substantive provisions, such as a wasteful  
          and duplicative requirement that rental car companies place  
          hangars on rearview mirrors for renters who belong to a  
          membership program.  These hangars repeat the customer's option  
          to purchase or not purchase a damage waiver, even though those  
          members have already received those disclosures elsewhere and at  
          a more meaningful time.  In addition, under existing law "rental  
          car companies must wait one week before GPS may be used to  
          locate an unreturned vehicle, which can result in vehicles being  
          stolen and shipped abroad.  Unfortunately these costs are  
          currently borne by consumers."  The author contends that  
          "reducing the wait time from one week to 3 days after the  
          vehicle was supposed to be returned, [will give] rental car  
          companies . . . a better chance to locate and retrieve vehicles  
          that have not been returned by their expected date."  The author  
          concludes that "AB 2051 includes much needed statute  
          modernization and also provides rental car companies the ability  
          to better serve and protect its consumers by cleaning up  
          outdated requirements, granting the use of GPS in limited  
          circumstances and providing a clearer comprehension of the  
          requirements placed on the industry."


          The three largest rental car companies in California - Hertz,  
          Enterprise, and Avis - support this bill because it will  








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          "clarify and modernize the code sections governing rental car  
          transactions."  In addition, the sponsors - who claim to account  
          for more than 98% of the rental car market in California -  
          contend that this measure will allow them to "continue serving  
          our customers and meeting demand [by making] a few small updates  
          to the codes written nearly 30 years ago.  As technology changes  
          and the market follows, it is imperative that our code section  
          allows us to continue serving customers while maintaining the  
          critical consumer protections envisioned when originally  
          crafted."


          Los Angeles Mayor Eric Garcetti, supports this bill because the  
          provision authorizing a facility charge at Los Angeles  
          International Airport (LAX) will allow for important  
          improvements at LAX.  The most "critical improvements needed at  
          LAX," according to Mayor Garcetti, "include a consolidated  
          rental car facility and an automated people mover to facilitate  
          the flow of passengers to and from the airport."  Mayor Garcetti  
          contends that these projects "will create jobs, reduce traffic,  
          and reduce pollution."  


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Avis Rental Car 


          Enterprise Rental Car


          Hertz Rental Car 









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          Los Angeles Mayor, Eric Garcetti 




          Opposition


          None on file 




          Analysis Prepared by:Thomas Clark / JUD. / (916) 319-2334