BILL ANALYSIS
AB 2761
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CONCURRENCE IN SENATE AMENDMENTS
AB 2761 (Leno)
As Amended August 10, 2004
Majority vote
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|ASSEMBLY: |56-5 |(May 24, 2004) |SENATE: |26-5 |(August 19, |
| | | | | |2004) |
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Original Committee Reference: JUD.
SUMMARY : Seeks to provide an exception to existing law's
requirements relating to rental rate bundling laws for certain
business programs and requires that certain conditions must be
met in order for this exception to apply. Specifically, this
bill :
1)Provides that a rental car company may do the following 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:
a) 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. Provides that
this 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; and,
b) Separately impose additional charges for the rental, if
the rental contract, or another document provided to the
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.
2)Defines "additional charges" as charges other than a per
period base rental rate and specifies that "quote" includes
telephonic, in-person, and computer-transmitted quotations.
3)Defines "business program" as:
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a) A contract between a rental company and a business
program sponsor that has established the rental rate, and
any other material terms relating to additional charges, on
which the rental company will rent passenger vehicles to
persons authorized by the sponsor; or,
b) 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 base 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.
4)Defines "business program sponsor" as a legal entity other
than a natural person, that is a corporation, limited
liability company, or partnership.
5)Defines "business renter" as, for any business program
sponsor, a person who is authorized by the sponsor, through
the use of an identifying number or program name or code, to
enter into a rental contract under the sponsor's business
program. This bill specifically provides that a business
renter does not include the following:
a) A non-employee member of a not-for-profit organization;
b) 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;
c) A person whose car rental is eligible for reimbursement
in whole or in part as a result of the person being insured
or provided coverage under a policy of insurance issued by
an insurance company; or,
d) A person whose car rental is eligible for reimbursement
in whole or in part as a result of the person purchasing
passenger vehicle repair services from a person licensed to
perform such services.
6)Defines "qualified business rental" as the rental of a
passenger vehicle under the business program if either of the
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following are true and requires that the rental company has
the burden of establishing by objectively verifiable evidence
that the rental was a qualified business rental:
a) In the 12-month period ending on the date of the rental
or in the calendar year immediately preceding the year in
which the rental occurs, the rentals under all business
programs established by the rental company for the business
program sponsor and its affiliates produced gross rental
revenues in excess of $25,000; or,
b) The rental company in good faith estimates that rentals
under all the business programs established by the rental
company for the business program sponsor and its affiliates
will produce gross rental revenues in excess of $25,000 in
the 12-month period commencing with the date of the rental
or in the calendar year in which the rental occurs.
The Senate amendments make drafting changes to this bill,
clarify the definition of "business program" to provide that
"any other material terms" must relate to additional charges,
require a rental company's continued compliance with other
provisions of the "bundling" law, and revise the gross rental
revenues under the definition of "qualified business rental."
EXISTING LAW regulates the contents of car rental 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."
AS PASSED BY THE ASSEMBLY , this bill was substantially the same
as the version passed by the Senate.
FISCAL EFFECT : None
COMMENTS : In support of this bill, which is sponsored by
Cendant Car Rental Group (Avis and Budget), the Hertz
Corporation and Vanguard Car Rental USA (Alamo and National),
the author writes, "Civil Code 1936, that governs car rental
transactions, was enacted in 1988 in response to certain alleged
sales abuses by some rental car companies. That section
prohibits, with specified exceptions, any charge in addition to
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the advertised price . . . While these provisions enhance
consumer protection for 'retail customers', they are of no value
in the world of commerce where contracts are knowingly entered
between rental companies and business entities for their mutual
advantage. . . . Typically a business program sponsor would be
a corporation and the actual user of the rental car would be the
corporation's employee."
The sponsors of this bill explain that it brings "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 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." The sponsors further write
"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."
Enterprise Rent-a-Car opposes this bill arguing, among other
things, that it 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 Center
for Public Interest Law also opposes this bill, asserting that
unbundling can lead to abusive practices once again. Consumers
Union is neutral, as is the Attorney General's Office.
Analysis Prepared by : Saskia Kim / JUD. / (916) 319-2334
FN: 0007780
AB 2761
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