BILL ANALYSIS Ó
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