BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2051


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          Date of Hearing:  May 3, 2016


                ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION


                                   Ed Chau, Chair


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


          SUBJECT:  Rental passenger vehicles


          SUMMARY:  Reorganizes the statutes governing rental car  
          agreements, allows rental car companies to turn on a rental  
          car's surveillance technology three days after the scheduled  
          return date, removes the existing requirement for rental cars to  
          provide certain insurance disclosures using a mirror hanger,  
          requires the advertising of rental car rates to include  
          mandatory charges, and allows Los Angeles International Airport  
          (LAX) to require rental car companies to collect a customer  
          facility fee.  Specifically, this bill:  


          1)Repeals and recasts the existing statutory framework that  
            governs agreements between a rental car company and its  
            customers, replacing it with a new framework that eliminates  
            duplicative and inoperative sections, adds and updates  
            definitions, and modifies certain substantive requirements  
            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  








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            the contracted return date, or three days after any extension  
            of that return date, instead of the seven-day waiting period  
            under current law. 


          3)Eliminates an existing requirement, applicable to renters  
            enrolled in a rental car company's membership program, that  
            the rental car company place a hanger 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 instead requires the disclosure to be  
            placed on the rental agreement or rental agreement folder  
            given to the consumer.  


          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 must  
            clearly disclose the existence and amount of the charges.  


          5)Provides that, as long as the rental company has provided the  
            person or entity with rental rate and additional mandatory  
            charges information, the rental car company shall not be  
            responsible for the failure of that person or entity to comply  
            with the disclosure requirement. 


          6)Authorizes LAX 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  








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            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  
            may access, obtain, and use geo-location and other information  
            from the rental vehicle's electronic surveillance technology.   
            (Civil Code (CC) Section 1936) 


          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 hanger 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. (CC 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  








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            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.  (CC 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  
            audits as specified.  (CC 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.  (CC 1936 (n) (1) (i)-(iii)) 









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          FISCAL EFFECT:  None.  This bill has been keyed nonfiscal by the  
          Legislative Counsel. 


          COMMENTS:  


           1)Purpose of this bill  .  This bill is intended to modernize the  
            statutes governing rental car agreements by cleaning up  
            outdated and duplicative requirements, allowing rental car  
            companies to use GPS to track vehicles if they are missing for  
            three days, requiring certain advertising of rental car rates  
            to disclose mandatory government charges, and allowing LAX to  
            require rental car companies to collect a customer facility  
            fee.  This bill is sponsored by Enterprise, Avis, and Hertz  
            rental car companies.


           2)Author's statement  .  According to the author, "Civil Code  
            section 1936, which governs rental car transactions, was  
            originally put into place in 1988.  In the past 28 years,  
            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.  Policies enacted over 28 years ago  
            have also become antiquated.  In addition to multiple verbal,  
            signage and electronic disclosures, rental car companies are  
            currently required to provide disclosure notices about damage  
            waiver, a voluntary insurance program, on a "mirror hanger"  
            which is often discarded by renters.  AB 2501 would instead  
            authorize online disclosures at the time of booking."


            The author further states, "[s]tate statute also does not  
            reflect the technological and consumer convenience  
            advancements made in today's market.  Currently, rental car  
            companies must wait one week before GPS may be used to locate  
            an unreturned vehicle, which can result in vehicles being  








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            stolen and shipped abroad.  Unfortunately these costs are  
            currently borne by consumers."


           3)Similarities to 2015 legislation  .  Most of the provisions in  
            this bill are similar or identical to earlier versions of last  
            year's AB 675 (Alejo), which passed the Assembly but was  
            narrowed in the Senate Judiciary Committee because of time  
            constraints during last year's legislative session to address  
            only one issue:  how rental car companies list fees.  AB 675,  
            as signed into law, allowed rental car companies to itemize  
            the many government-imposed extra fees on car rentals,  
            including tourism fees, airport concession and facility fees,  
            vehicle fees, and other government fees and surcharges.   
            During the Fall of 2015, the Senate Judiciary Committee worked  
            with the author and the sponsors to draft the reorganization  
            of the rental car statute for introduction in this bill.  



          While AB 675 ultimately addressed one issue, the author has  
            introduced this bill to address the more comprehensive  
            "clean-up" and reorganization that the author contends is  
            still needed in the rental car statutes.  
           4)Reorganizing the rental car statutes  .  The existing laws  
            governing agreements between rental car companies and  
            consumers touch on a wide variety of topics: 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 authorization for additional mandatory  
            fees and charges that can be imposed by government entities.  



          As is the case with many areas of law, the various provisions of  
            this statute were added at different times, and the existing  
            statute is neither logically structured nor easily navigated.   
            This bill breaks up the provisions of Civil Code Sections  








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            1936, 1936.05, 1936.1, and 1936.5 - which together are 20  
            pages long in the code book -into several smaller code  
            sections, rearranges the provisions so they are grouped more  
            logically, moves provisions relating to airport facility  
            charges to the Government Code, and eliminates duplicative and  
            inoperative provisions.   
           5)Allowing rental car companies to track missing cars after  
            three days  .  California prohibits rental car companies from  
            tracking vehicles with GPS devices, except in a few narrowly  
            defined situations.  Current law prohibits GPS information  
            from being accessed without the customer's consent unless the  
            vehicle is missing, abandoned, or stolen, or the customer  
            fails to return the vehicle within one week of the contracted  
            return date.  Considering the distance a car can drive in  
            seven days, the author contends that one week is too long to  
            wait before using GPS to find a missing vehicle.  



          This bill would reduce the waiting period from one week to three  
            days after the contracted return date.  Under current law, and  
            this bill, if the renter knows he or she will be late  
            returning the car, then the renter can ask for an extension  
            and the rental car company would not be allowed to use the GPS  
            until three days after the extended return date.  
           6)Eliminating duplicative damage waiver disclosures  .  Current  
            law requires rental car companies to inform each consumer that  
            purchasing a damage waiver through the rental car company (to  
            avoid liability for damage to the vehicle) might be  
            duplicative of a consumer's personal car insurance policy.   
            The disclosure must be included in the contract and on the  
            contract holder, and must also be made verbally at the rental  
            car counter.  In addition, current law requires that for  
            rental car company "club members" who bypass the rental  
            counter and go directly to their reserved vehicle, there must  
            be a disclosure about the damage waiver hanging on the  
            rearview mirror of the rental car.  










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          This bill keeps the verbal disclosure requirement at the  
            counter, but eliminates the rearview mirror hanger requirement  
            for members.  The author and sponsor believe that hanger is  
            wasteful and inefficient given that such information is  
            already provided in contracts and signs are posted near  
            vehicle pick up locations.  Instead of the mirror hanger, this  
            bill requires that the rental car company to provide the same  
            information on a printed notice provided on the rental record  
            or the folder into which it is inserted.     
           7)Clarifying responsibilities when other travel services  
            advertise rental cars  .  When a consumer arranges to rent a  
            vehicle through a separate service, such as an airline or  
            online travel service, this bill requires that third party to  
            disclose the additional charges that a consumer will need to  
            pay - as long as the service has received this information  
            from the rental car company.  The bill also specifies that if  
            the service fails to disclose these additional fees properly,  
            then the rental company is not responsible for that failure.   
            In other words, this provision shifts the responsibility from  
            the rental car company to the service that failed to comply  
            with requirements. 


           8)Revising the airport facility fee at LAX  .  Under current law,  
            airports that want to charge a facility fee to do capital  
            improvements must go through a public vetting process, which  
            includes an audit, a public hearing process, and submission of  
            the audit to the Assembly and Senate Committees on Judiciary,  
            the Assembly Committee on Transportation, and the Senate  
            Committee on Transportation and Housing.  Also under current  
            law, airports have two options for charging a facility fee:  
            they may charge $10 per transaction, or they may charge up to  
            $9 per day.   LAX currently charges $10 per transaction but is  
            expecting to revise that fee to a per day fee of up to $9 for  
            new infrastructure at the airport in anticipation of Los  
            Angeles' bid to host the 2024 Olympics.  The city of Los  
            Angeles is interested in using a new procurement model for the  
            capital improvements needed at LAX called  








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            design-build-finance-operate-maintain (DBFOM).  Current law  
            allows an airport to issue bonds for capital improvements, but  
            was not written with the DBFOM model in mind.  Under DBFOM,  
            the financing is provided by the builder and the resulting  
            capital improvements are then leased back to pay for the  
            financing, so no bonds are issued.  This bill retains the same  
            vetting process for airport facility fees at LAX that is in  
            existing law, but would authorize LAX  to go through the  
            vetting process and apply for an increased facility fee that  
            would cover the design, build, financing, operation and  
            maintenance of the new airport facilities to be built in  
            anticipation of the 2024 Olympics.


           9)Arguments in support  .  The three largest rental car companies  
            in California - Hertz, Enterprise, and Avis - have sponsored  
            this bill because it will "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 [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." 








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           10)Prior Legislation .  AB 675 (Alejo), Chapter 333, Statutes of  
            2015, revised statutes governing agreements between rental car  
            companies and their customers in order to allow a rental car  
            company to better distinguish rental fees from  
            government-imposed charges and achieve other relatively  
            non-controversial changes.  



           11)Double-referral  .  This bill was double-referred to the  
            Assembly Judiciary Committee where it was heard on April 26,  
            2016, and passed on a 10-0 vote.  
          REGISTERED SUPPORT / OPPOSITION:




          Support


          Avis Rental Car (co-sponsor)


          Enterprise Rental Car (co-sponsor)


          Hertz Rental Car (co-sponsor)


          Los Angeles Mayor, Eric Garcetti 




          Opposition









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          None on file. 




          Analysis Prepared by:              Jennie Bretschneider / P. &  
          C.P. / (916) 319-2200