BILL ANALYSIS Ó
AB 2051
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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