BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2761|
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THIRD READING
Bill No: AB 2761
Author: Leno (D)
Amended: 8/10/04 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-1, 6/29/04
AYES: Ackerman, Cedillo, Ducheny, Kuehl
NOES: Sher
NO VOTE RECORDED: Escutia, Morrow
ASSEMBLY FLOOR : 56-5, 5/24/04 - See last page for vote
SUBJECT : Car rental contracts: unbundling of rates for
qualified
business renters
SOURCE : Cendant Car Rental Group (Avis and Budget)
Hertz
Corporation
Vanguard Car Rental USA (Alamo and National)
DIGEST : This bill permits rental car companies to
separately quote and charge additional rental fees and
charges in addition to the contract base rental rate to
qualified business renters renting under a business
program, so long as a good faith estimate of the total
charge is provided to the renter at the time the
reservation is made or when the car is picked up for
rental. This exception to current law's requirement to
quote or charge a "bundled" rental rate applies only in
cases of a "qualified business rental" where the business
CONTINUED
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renter has produced more than $25,000 in gross rental
revenue in the past year or is expected to produce that
amount of rental revenue in the upcoming year.
Senate Floor Amendments of 8/10/04 increase the monetary
threshold from $10,000 to $25,000.
Senate Floor Amendments of 7/7/04 replace language that was
inadvertently omitted with the June 28, 2004 amendments.
ANALYSIS : Existing law regulates the contents of rental
car contracts used by rental car companies, and provides
that a rental car company can only advertise, quote, and
charge a rental rate that includes the entire amount that a
renter must pay to rent a car, except for taxes, mileage
and any airport customer facility charge. This requirement
is commonly referred to as "bundling."
This bill creates an exception to that law and allows a
rental car company to quote and charge an "unbundled" rate
to a "qualified business renter" of a "business program
sponsor" under the sponsor's "business program." The bill
allows the rental car company to separately quote or impose
additional charges for a "qualified business rental," if,
at the time the quote is made or the rental commences, the
person receiving the quotation is provided a good faith
estimate of the total of all the charges for the entire
rental. The estimate may exclude mileage charges and
charges for optional items and services that cannot be
determined at the time of reservation or when the rental
commences.
The bill enacts the following definitions for the terms
"additional charges," "quote," "business renter," "business
program," "qualified business rental," and "business
program sponsor"
"Additional charges" means "charges other than a per period
base rental rate established by a business program," and
"quote" includes telephonic, in-person, and
computer-transmitted quotations.
"Business renter" means any person authorized by the
business program sponsor to rent a vehicle under the
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sponsor's business program. For example, the rental could
be by an employee for business or purely personal use. In
either event, that renter will be quoted a contract
unbundled rate and given a good faith estimate of the total
charges for the rental. A "qualified business rental,"
which covers only those situations where the car rental
revenue from a business program sponsor and its affiliates
has produced gross rental revenues in excess of $25,000 in
the preceding year, or is expected to exceed $25,000 in the
upcoming year.
However, the term "business renter" shall, in no case
include any of the following: (1) a non-employee member of
a not-for-profit organization (such as a California AAA
member), (2) the purchaser of a voucher or other prepaid
rental arrangement from a person, including a tour
operator, engaged in the business of reselling those
vouchers or prepaid rental arrangements to the general
public (the tourist given a car as part of a travel
package), and (3) a person whose car rental is a temporary
replacement car paid for by insurance or the repair shop
repairing the renter's own vehicle. In these excepted
instances, the protections of Section 1936 of the Civil
Code will continue to apply and these consumers will be
quoted and charged a bundled rate instead of the business
program's unbundled contract rate.
"Business program" means (1) a contract between a rental
company and a business program sponsor that has established
the per period base rental rate, and any other material
term relating to additional charges, on which the rental
company will rent passenger vehicles to persons authorized
by the sponsor, or (2) a plan, program, or other
arrangement established by a rental company at the request
of, or with the consent of, a business program sponsor
under which the rental company offers to rent passenger
vehicles to persons authorized by the sponsor at per period
bases rental rates, and any other material terms relating
to additional charges, that are not the same as those
generally offered by the rental company to the public.
(The June 28 amendments clarified that the base rental must
include, if applicable, any material term relating to
additional charges. Prior to the amendment, the bill
allowed for the contract to establish the rental rate, or
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any other material term, for the business rental. Senate
Judiciary Committee staff deemed that language to be too
open-ended and subject to abuse, and asked for the
clarification.)
"Business program sponsor" means a legal entity, other than
a natural person, that is a corporation, limited liability
company, or a partnership. (This language excludes state
and local governments from the bill, as well as all other
forms of businesses not specifically listed, thereby
maintaining current law's protection of a quoted,
advertised, or charged "bundled" rental rate for these
entities. This limitation also addressed concerns raised
by Consumers Union and the Assembly Judiciary Committee.)
A rental car company may, in connection with the qualified
business rental of a passenger vehicle to a business renter
of a business program sponsor under the sponsor's business
program, do both of the following:
1. Separately quote additional charges for the rental if,
at the time the quote is provided, the person receiving
the quote is also provided a good faith estimate of the
total of all the charges for the entire rental. The
estimate may exclude mileage charges and charges for
optional items and services that cannot be determined
prior to completing the reservation based upon the
information provided by the renter.
2. Separately impose additional charges for the rental, if
the rental contract, or another document provided to the
business renter at the time and place the rental
commences, clearly and conspicuously discloses the total
of all the charges for the entire rental, exclusive of
charges that cannot be determined at the time the rental
commences.
The bill provides that a renter may bring an action against
a rental company for the recovery of damages and
appropriate equitable relief for a violation of this
section. The prevailing party shall be entitled to recover
reasonable attorney's fees and costs.
Any waiver of any of the provisions of this section shall
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be void and unenforceable as contrary to public policy.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/8/04) (As of previous version)
Cendant Car Rental Group (Avis and Budget) Hertz
Corporation (co-source)
Vanguard Car Rental USA (Alamo and National) (co-source)
California Association of Bed and Breakfast Inns
California Conference of Machinists
California Hotel and Lodging Association
California Teamsters Public Affairs Council
Oakland International Airport
Port of Oakland
San Francisco International Airport
Teamsters Joint Council 42
OPPOSITION : (Verified 7/8/04) (As of previous version)
Enterprise Rent-A-Car
Center for Public Interest Law at San Diego University
ARGUMENTS IN SUPPORT : The sponsors of the bill assert:
"Current law prohibits rental car companies from
quoting, advertising or charging customers for most
items not included in the advertised price. This
provision had been created for the protection of retail
customers who, prior to the law's enactment, could book
a car based on advertised rates, only to learn about
additional charges and fees at the counter. AB 2761
does not, in any way, alter this protection for retail
consumers. AB 2761 does, however, adjust those
provisions by bringing California into conformity with
47 other states in regards to the pricing of corporate
and other commercial contracts. In all those states,
the rental company and the business entity have agreed
upon a contract that establishes a discounted rental
rate for employees and certain others associated with
the business.
"In those states, the rate, by the consent of both
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parties, is usually supplemented, through additional
charges (such as airport concession fees, vehicle
license fees, rental car surcharges, and stadium
construction fees) imposed upon the rental company or
its customers. Existing California law does not allow
those extra charges - even when the charges are part of
the agreed commercial contract.
"AB 2761 would permit the financial arrangements
mutually agreed to by the parties in these commercial
contracts to be implemented in California by permitting
the pass-through of these kinds of charges to the
business entity. This flexibility would allow the
rental company to grant certain benefits that a
business desires, in exchange for other charges.
Further, there are provisions in the bill that ensure
the employee-renter knows of the terms and conditions
of the contract that their employer has established for
them."
ARGUMENTS IN OPPOSITION : Enterprise Rent-a-Car opposes
the bill, stating that the company is "unique, in that
unlike the primarily airport based companies which depend
on the out-of-state business and pleasure traveler, over 85
percent of Enterprise's renters reside in California."
Enterprise also argues that this bill creates two classes
of car renters, allows rental car companies to "unbundle"
and separately charge airport concession fees to business
renters, and creates a statutorily authorized un-level
playing field among competitors. The company writes:
"Twenty-four states have statutes regulating car rental
agreements, including nine with laws very similar to
California's. None of these states have any type of
exemption for business travelers. Under AB 2761,
California would become the first state with a statute
similar to California's to create two classes of car
renters - one with bundled rates and one without
them... Most importantly, AB 2761 would allow car
rental companies to un-bundle and separately charge
airport 'concession' fees...to their eligible business
renter customers. AB 2761 would also permit car rental
companies to pass-through the currently bundled vehicle
license fee to eligible renters..."
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Professor Fellmeth, of the Center for Public Interest Law,
writes:
"We regretfully oppose AB 2761, which represents yet
another attempt by the large car rental firms to
undermine historical reforms enacted by this
Legislature following well-documented consumer abuses."
He argues that the current law that requires bundling of
charges has a rationale that extends to both personal and
business rental customers, and that bundling enables both
types of customers to compare prices between companies.
The bill's unbundling of the base rental rate from other
potential charges, such as vehicle license fee and airport
concession fees, that are now part of the bundled rate,
will lead to increased costs for those consumers and, at
the very least, make comparisons difficult.
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Bermudez, Calderon,
Campbell, Canciamilla, Chan, Chu, Cogdill, Cohn, Correa,
Daucher, Diaz, Dutra, Dutton, Firebaugh, Frommer, Garcia,
Harman, Haynes, Jerome Horton, Shirley Horton, Houston,
Keene, La Malfa, Laird, Leno, Leslie, Levine, Lowenthal,
Maldonado, Maze, McCarthy, Montanez, Nakanishi, Nakano,
Oropeza, Parra, Pavley, Plescia, Reyes, Richman, Runner,
Samuelian, Simitian, Spitzer, Steinberg, Strickland,
Vargas, Wesson, Wiggins, Wolk, Wyland, Yee, Nunez
NOES: Bogh, Cox, La Suer, Matthews, Mountjoy
NO VOTE RECORDED: Berg, Chavez, Corbett, Dymally,
Goldberg, Hancock, Jackson, Kehoe, Koretz, Lieber, Liu,
Longville, Maddox, Mullin, Nation, Negrete McLeod,
Pacheco, Ridley-Thomas, Salinas
RJG:mel 8/11/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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