BILL NUMBER: SB 95 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Corbett
JANUARY 22, 2009
An act to amend Section 1770 of the Civil Code, and to amend
Sections 3050, 11710, and 11711 of, and to add Sections 4456.5 and
11713.05 to, the Vehicle Code, relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
SB 95, as introduced, Corbett. Car Buyers' Protection Act of 2009.
(1) Existing law makes it unlawful, punishable as a misdemeanor,
for the holder of a dealer's license to do, or fail to do, specified
actions with regard to the advertising, transfer, and sale of motor
vehicles.
This bill would enact the California Car Buyers' Protection Act of
2009, which, among other things, would make it unlawful for a dealer
who acquires a used vehicle with a balance due to a secured party to
fail to pay off the entire balance prior to advertising the vehicle
for sale or transferring or selling the vehicle and would increase
the amount of a dealer's bond from $50,000 to $250,000 for a
franchisee of new motor vehicles and to $100,000 for independent
dealers.
(2) Existing law creates within the Department of Motor Vehicles a
New Motor Vehicle Board, which adjudicates disputes between new
motor vehicle franchisees and their respective franchisors and hears
appeals on decisions of the department affecting new motor vehicle
dealers. The board also mediates disputes between members of the
public and new motor vehicle dealers, distributors, and
manufacturers.
This bill would exclude disputes involving motor vehicle
purchasers and lessees from this authority of the board to mediate
disputes.
(3) Existing law requires, among other things, that if any person
suffers any loss or damage by reason of a specified violation of law
by the dealer or his or her salesperson, then that person has a right
of action against the dealer, the salesperson, and the surety upon
the dealer's bond, in an amount not to exceed the value of the
vehicle purchased from or sold to the dealer.
This bill would instead require that if a person suffers any loss
or damage by reason of any fraud or contract or statutory violation
practiced on him by a licensed dealer or one of the dealer's
salespersons acting for the dealer, in his or her behalf, or within
the scope of the employment of his or her salesperson in connection
with the purchase or lease of a motor vehicle, then that person shall
have a right of action against the dealer, his or her salesperson,
and the surety upon the dealer's bond for actual damages plus any
incidental and consequential damages and reasonable attorneys fees.
The bill would also make technical and conforming changes to these
provisions.
By creating new crimes, the bill would impose a state-mandated
local program.
(4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known and may be cited as the
California Car Buyers Protection Act of 2009.
SEC. 2. (a) The Legislature finds and declares all of the
following:
(1) Many car buyers have lost confidence in the automotive
marketplace, resulting in a reduction of revenues for sellers, local
and county governments, and the state, contributing to job losses and
the state's overall economic downturn.
(2) During the past year at least 480 licensed and used auto
dealerships have gone out of business in California, far more than in
any other state, and it is projected that the numbers will continue
to accelerate for the foreseeable future.
(3) When consumers choose to purchase vehicles from auto
dealerships that are licensed by the Department of Motor Vehicles,
they have a reasonable expectation that the dealerships have
sufficient resources to honor their contractual commitments.
(4) Car buyers have no reliable way to know in advance whether an
auto dealer is on the brink of insolvency or is on a sound financial
footing.
(5) When licensed auto dealerships go out of business they often
fail to pay off liens, as agreed, and also fail to honor warranties,
service contracts, and other services for which car buyers have paid
in advance, costing thousands of car buyers millions of dollars in
losses.
(6) The current federal assistance contemplated by the Bush
Administration fails to provide any relief for car buyers, while
providing taxpayer dollars to assist the auto manufacturers, dealers,
and workers who are seeking assistance from the American public; yet
it is ultimately car buyers who will determine the fate of our
domestic auto industry by buying cars.
(7) When licensed auto dealerships go out of business without
honoring their obligations, car buyers often face ruinous
consequences, through no fault of their own, resulting in harm to
their credit, repossessions that remain on their credit reports for
seven to 10 years, job losses due to a lack of transportation, home
foreclosures, and bankruptcy.
(8) The Department of Motor Vehicles projects that the current
funding available for the Consumer Recovery Fund (CRF) established by
enactment in 2007 of Senate Bill 729 (Padilla) will not be
sufficient to meet all the demands made upon the CRF by car buyers
with legitimate complaints. Even if sufficient funds were available,
there is no authority to provide restitution from the CRF for losses
incurred involving prepaid products, warranties, or services or to
restore the credit of consumers whose credit is harmed by dealer
insolvencies lost jobs, lost income, or other damages consumers
suffer due to a lack of transportation when vehicles are repossessed
because auto dealers failed to pay off liens as promised.
(9) Honest dealers are also adversely impacted when unscrupulous
auto dealers siphon off business and then harm the credit of their
customers by going out of business without paying liens, as promised,
shrinking the automotive market at precisely the time when it is
sound public policy to expand the market and accelerate sales of
newer, safer, cleaner motor vehicles.
(10) California has established the New Motor Vehicle Board which
has the authority to overrule decisions rendered by the Department of
Motor Vehicles to discipline licensees in matters of resolving
disputes between dealers and manufacturers.
(11) The New Motor Vehicle Board lacks the authority to require
licensees to provide any actual relief to car buyers, except for
mediating disputes between the public and licensees, which is at best
redundant with a function of the Department of Consumer Affairs.
(12) Most auto manufacturers voluntarily participate in dispute
resolution programs overseen and certified by the Department of
Consumer Affairs as complying with minimum standards promulgated by
the Federal Trade Commission, unlike the process offered by the New
Motor Vehicle Board, which sometimes leads to lengthy delays.
SEC. 3. Section 1770 of the Civil Code is amended to read:
1770. (a) The following unfair methods of competition and unfair
or deceptive acts or practices undertaken by any
a person in a transaction intended to result or
which that results in the sale or lease of goods
or services to any a consumer are
unlawful:
(1) Passing off goods or services as those of another.
(2) Misrepresenting the source, sponsorship, approval, or
certification of goods or services.
(3) Misrepresenting the affiliation, connection, or association
with, or certification by, another.
(4) Using deceptive representations or designations of geographic
origin in connection with goods or services.
(5) Representing that goods or services have sponsorship,
approval, characteristics, ingredients, uses, benefits, or quantities
which that they do not have or that a
person has a sponsorship, approval, status, affiliation, or
connection which that he or she does
not have.
(6) Representing that goods are original or new if they have
deteriorated unreasonably or are altered, reconditioned, reclaimed,
used, or secondhand.
(7) Representing that goods or services are of a particular
standard, quality, or grade, or that goods are of a particular style
or model, if they are of another.
(8) Disparaging the goods, services, or business of another by
false or misleading representation of fact.
(9) Advertising goods or services with intent not to sell them as
advertised.
(10) Advertising goods or services with intent not to supply
reasonably expectable demand, unless the advertisement discloses a
limitation of quantity.
(11) Advertising furniture without clearly indicating that it is
unassembled if that is the case.
(12) Advertising the price of unassembled furniture without
clearly indicating the assembled price of that furniture if the same
furniture is available assembled from the seller.
(13) Making false or misleading statements of fact concerning
reasons for, existence of, or amounts of price reductions.
(14) Representing that a transaction confers or involves rights,
remedies, or obligations which that it
does not have or involve, or which that
are prohibited by law.
(15) Representing that a part, replacement, or repair service is
needed when it is not.
(16) Representing that the subject of a transaction has been
supplied in accordance with a previous representation when it has
not.
(17) Representing that the consumer will receive a rebate,
discount, or other economic benefit, if the earning of the benefit is
contingent on an event to occur subsequent to the consummation of
the transaction.
(18) Misrepresenting the authority of a salesperson,
representative, or agent to negotiate the final terms of a
transaction with a consumer.
(19) Inserting an unconscionable provision in the contract.
(20) Advertising that a product is being offered at a specific
price plus a specific percentage of that price unless (A) the total
price is set forth in the advertisement, which may include, but is
not limited to, shelf tags, displays, and media advertising, in a
size larger than any other price in that advertisement, and (B) the
specific price plus a specific percentage of that price represents a
markup from the seller's costs or from the wholesale price of the
product. This subdivision shall not apply to in-store advertising by
businesses which that are open only to
members or cooperative organizations organized pursuant to Division 3
(commencing with Section 12000) of Title 1 of the Corporations Code
where if more than 50 percent of
purchases are made at the specific price set forth in the
advertisement.
(21) Selling or leasing goods in violation of Chapter 4
(commencing with Section 1797.8) of Title 1.7.
(22) (A) Disseminating an unsolicited prerecorded message by
telephone without an unrecorded, natural voice first informing the
person answering the telephone of the name of the caller or the
organization being represented, and either the address or the
telephone number of the caller, and without obtaining the consent of
that person to listen to the prerecorded message.
(B) This subdivision does not apply to a message disseminated to a
business associate, customer, or other person having an established
relationship with the person or organization making the call, to a
call for the purpose of collecting an existing obligation, or to any
call generated at the request of the recipient.
(23) The home solicitation, as defined in subdivision (h) of
Section 1761, of a consumer who is a senior citizen where
if a loan is made encumbering the primary
residence of that consumer for the purposes of paying for home
improvements and where the transaction is part of
a pattern or practice in violation of either subsection (h) or (i) of
Section 1639 of Title 15 of the United States Code or subsection (e)
of Section 226.32 of Title 12 of the Code of Federal Regulations.
A third party shall not be liable under this subdivision unless
(A) there was an agency relationship between the party who engaged in
home solicitation and the third party or (B) the third party had
actual knowledge of, or participated in, the unfair or deceptive
transaction. A third party who is a holder in due course under a home
solicitation transaction shall not be liable under this subdivision.
(24) (A) Charging or receiving an unreasonable fee to prepare,
aid, or advise any prospective applicant, applicant, or recipient in
the procurement, maintenance, or securing of public social services.
(B) For purposes of this paragraph, the following definitions
shall apply:
(i) "Public social services" means those activities and functions
of state and local government administered or supervised by the State
Department of Health Care Services, the State Department of Public
Health, or the State Department of Social Services, and involved in
providing aid or services, or both, including health care services
and medical assistance, to those persons who, because of their
economic circumstances or social condition, are in need of that aid
or those services and may benefit from them.
(ii) "Unreasonable fee" means a fee that is exorbitant and
disproportionate to the services performed. Factors to be considered,
when appropriate, in determining the reasonableness of a fee, are
based on the circumstances existing at the time of the service and
shall include, but not be limited to, all of the following:
(I) The time and effort required.
(II) The novelty and difficulty of the services.
(III) The skill required to perform the services.
(IV) The nature and length of the professional relationship.
(V) The experience, reputation, and ability of the person
providing the services.
(C) Paragraph (24) shall not apply to attorneys licensed to
practice law in California, who are subject to the California Rules
of Professional Conduct and to the mandatory fee arbitration
provisions of Article 13 (commencing with Section 6200) of Chapter 4
of Division 3 of the Business and Professions Code, when the fees
charged or received are for providing representation in
administrative agency appeal proceedings or court proceedings for
purposes of procuring, maintaining, or securing public social
services on behalf of a person or group of persons.
(25) Failure of a dealer as defined in Section 285 of the Vehicle
Code to comply with Section 4456.5, which requires dealers who
acquire a used vehicle with a balance due to a secured party to pay
off the entire balance prior to advertising the vehicle for sale or
transferring or selling the vehicle.
(b) (1) It is an unfair or deceptive act or practice for a
mortgage broker or lender, directly or indirectly, to use a home
improvement contractor to negotiate the terms of any loan that is
secured, whether in whole or in part, by the residence of the
borrower and which that is used to
finance a home improvement contract or any portion thereof. For
purposes of this subdivision, "mortgage broker or lender" includes a
finance lender licensed pursuant to the California Finance Lenders
Law (Division 9 (commencing with Section 22000) of the Financial
Code), a residential mortgage lender licensed pursuant to the
California Residential Mortgage Lending Act (Division 20 (commencing
with Section 50000) of the Financial Code), or a real estate broker
licensed under the Real Estate Law (Division 4 (commencing with
Section 10000) of the Business and Professions Code).
(2) This section shall not be construed to either authorize or
prohibit a home improvement contractor from referring a consumer to a
mortgage broker or lender by this subdivision. However, a home
improvement contractor may refer a consumer to a mortgage lender or
broker if that referral does not violate Section 7157 of the Business
and Professions Code or any other provision of law. A mortgage
lender or broker may purchase an executed home improvement contract
if that purchase does not violate Section 7157 of the Business and
Professions Code or any other provision of law. Nothing in
this This paragraph shall have any
not effect on the application
of Chapter 1 (commencing with Section 1801) of Title 2 to a home
improvement transaction or the financing thereof.
SEC. 4. Section 3050 of the Vehicle Code is amended to read:
3050. The board shall do all of the following:
(a) Adopt rules and regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code governing those matters that are specifically
committed to its jurisdiction.
(b) Hear and determine, within the limitations and in accordance
with the procedure provided, an appeal presented by an applicant for,
or holder of, a license as a new motor vehicle dealer, manufacturer,
manufacturer branch, distributor, distributor branch, or
representative when the applicant or licensee submits an appeal
provided for in this chapter from a decision arising out of the
department.
(c) Consider any matter concerning the activities or practices of
any a person applying for or holding a
license as a new motor vehicle dealer, manufacturer, manufacturer
branch, distributor, distributor branch, or representative pursuant
to Chapter 4 (commencing with Section 11700) of Division 5 submitted
by any person. A member of the board who is a new motor vehicle
dealer may not participate in, hear, comment, advise other members
upon, or decide any matter considered by the board pursuant to this
subdivision that involves a dispute between a franchisee and
franchisor. After that consideration, the board may do any one or any
combination of the following:
(1) Direct the department to conduct investigation of matters that
the board deems reasonable, and make a written report on the results
of the investigation to the board within the time specified by the
board.
(2) Undertake to mediate, arbitrate, or otherwise resolve any
honest difference of opinion or viewpoint existing between any member
of the public , except a retail motor vehicle purchaser or
lessee, and any new motor vehicle dealer, manufacturer,
manufacturer branch, distributor branch, or representative.
(3) Order the department to exercise any and all authority or
power that the department may have with respect to the issuance,
renewal, refusal to renew, suspension, or revocation of the license
of any new motor vehicle dealer, manufacturer, manufacturer branch,
distributor, distributor branch, or representative as that license is
required under Chapter 4 (commencing with Section 11700) of Division
5.
(d) Hear and decide, within the limitations and in accordance with
the procedure provided, a protest presented by a franchisee pursuant
to Section 3060, 3062, 3064, 3065, or 3065.1. A member of the board
who is a new motor vehicle dealer may not participate in, hear,
comment, advise other members upon, or decide, any matter involving a
protest filed pursuant to Article 4 (commencing with Section 3060),
unless all parties to the protest stipulate otherwise.
(e) Notwithstanding subdivisions (c) and (d), the courts have
jurisdiction over all common law and statutory claims originally
cognizable in the courts. For those claims, a party may initiate an
action directly in any court of competent jurisdiction.
SEC. 5. Section 4456.5 is added to the Vehicle Code, to read:
4456.5. If a dealer acquires a used vehicle with a balance due to
a secured party, the dealer shall submit to the department evidence
in the form of a notarized receipt from the secured party that the
dealer has paid off the entire balance prior to transferring the
vehicle, or prior to the date when payment is due, whichever occurs
first. It shall be unlawful for a dealer to offer for sale, advertise
for sale, or transfer a used vehicle with a balance due to a secured
party prior to paying off the entire balance and submitting the
notarized receipt to the department.
SEC. 6. Section 11710 of the Vehicle Code is amended to read:
11710. (a) Before any dealer's or remanufacturer's license is
issued or renewed by the department to any applicant therefor, the
applicant shall procure and file with the department a bond executed
by an admitted surety insurer, approved as to form by the Attorney
General, and conditioned that the applicant shall not practice any
fraud or make any fraudulent representation which will cause a
monetary loss to a purchaser, seller, financing agency, or
governmental agency.
(b) A dealer's franchisee of new motor
vehicles' bond shall be in the amount of two hundred
fifty thousand dollars ($50,000) ($250,000)
and an independent dealer's bond shall be in the amount of one
hundred thousand dollars ($100,000) , except the bond of a
dealer who deals exclusively in motorcycles or all-terrain vehicles
shall be in the amount of ten thousand dollars ($10,000). Before the
license is renewed by the department, the franchise or the
independent dealer, other than a dealer who deals exclusively
in motorcycles or all-terrain vehicles, shall procure and file a bond
in the amount of fifty thousand dollars ($50,000)
amounts specified above . A remanufacturer bond shall be
in the amount of fifty thousand dollars ($50,000).
(c) Liability under the bond is to remain at full value. If the
amount of liability under the bond is decreased or there is
outstanding a final court judgment for which the dealer or
remanufacturer and sureties are liable, the dealer's or
remanufacturer's license shall be automatically suspended. In order
to reinstate the license and special plates, the licensee shall
either file an additional bond or restore the bond on file to the
original amount, or shall terminate the outstanding judgment for
which the dealer or remanufacturer and sureties are liable.
(d) A dealer's or remanufacturer's license, or renewal of the
license, shall not be issued to any applicant therefor, unless and
until the applicant files with the department a good and sufficient
instrument, in writing, in which the applicant appoints the director
as the true and lawful agent of the applicant upon whom all process
may be served in any action, or actions, which may thereafter be
commenced against the applicant, arising out of any claim for damages
suffered by any firm, person, association, or corporation, by reason
of the violation of the applicant of any of the terms and provisions
of this code or any condition of the dealer's or remanufacturer's
bond. The applicant shall stipulate and agree in the appointment that
any process directed to the applicant, when personal service of
process upon the applicant cannot be made in this state after due
diligence and, in that case, is served upon the director or, in the
event of the director's absence from the office, upon any employee in
charge of the office of the director, shall be of the same legal
force and effect as if served upon the applicant personally. The
applicant shall further stipulate and agree, in writing, that the
agency created by the appointment shall continue for and during the
period covered by any license that may be issued and so long
thereafter as the applicant may be made to answer in damages for a
violation of this code or any condition of the bond. The instrument
appointing the director as the agent for the applicant for service of
process shall be acknowledged by the applicant before a notary
public. In any case where the licensee is served with process by
service upon the director, one copy of the summons and complaint
shall be left with the director or in the director's office in
Sacramento or mailed to the office of the director in Sacramento. A
fee of five dollars ($5) shall also be paid to the director at the
time of service of the copy of the summons and complaint. Service on
the director shall be a sufficient service on the licensee if a
notice of service and a copy of the summons and complaint are
immediately sent by registered mail by the plaintiff or the plaintiff'
s attorney to the licensee. A copy of the summons and complaint shall
also be mailed by the plaintiff or the plaintiff's attorney to the
surety on the applicant's bond at the address of the surety given in
the bond, postpaid and registered with request for return receipt.
The director shall keep a record of all process so served upon the
director, which record shall show the day and hour of service and
shall retain the summons and complaint so served on file. Where the
licensee is served with process by service upon the director, the
licensee shall have and be allowed 30 days from and after the service
within which to answer any complaint or other pleading which may be
filed in the cause. However, for purposes of venue, where the
licensee is served with process by service upon the director, the
service is deemed to have been made upon the licensee in the county
in which the licensee has or last had an established place of
business.
SEC. 7. Section 11711 of the Vehicle Code is amended to read:
11711. (a) If any a person
(1) shall suffer any loss or damage by
reason of any fraud or contract or statutory viol
ation practiced on him or fraudulent representation
made to him or her by a licensed dealer or one
of such the dealer's salesmen
salespersons acting for the dealer, in his
or her behalf, or within the scope of the employment of
such salesman and such person has possession of a written
instrument furnished by the licensee, containing stipulated
provisions and guarantees which the person believes have been
violated by the licensee, or (2)
if any person shall suffer any loss or damage by reason of
the violation by such dealer or salesman of any of the provisions of
Division 3 (commencing with Section 4000) of this code, or (3)
if any person is not paid for a
vehicle sold to and purchased by a licensee his or
her salesperson in connection with the purchase or lease of a motor
vehicle , then any such that
person shall have a right of action against such
the dealer, his salesman, his or
her salesperson, and the surety upon the dealer's bond
, in an amount not to exceed the value of the
vehicle purchased from or sold to the dealer for
actual damages plus any incidental and consequential damages and
reasonable attorney' s fees .
(b) If the state or any a political
subdivision thereof of the state shall
suffer any loss or damage by reason of any fraud practiced on the
state or fraudulent representation made to the state by a licensed
dealer, or one of such the dealer's
representatives acting for the dealer, in his or her
behalf, or within the scope of employment of such
the dealer's representatives, or shall suffer any loss or
damage by reason of the violation of such the
dealer or his or her representative of any of the
provisions of Division 3 (commencing with Section 4000) of this code,
or Part 5 (commencing with Section 10701), Division 2 of the Revenue
and Taxation Code, the state or any a
political subdivision thereof of the state
, through the department, shall have a right of action against
such the dealer, his or her
representative, and the surety upon the dealer's bond in an amount
not to exceed the value of the vehicles involved.
(c) The failure of a dealer upon demand to pay the fees and
penalties determined to be due as provided in Section 4456
hereof is declared to shall be a violation of
Division 3 (commencing with Section 4000) of this code, and Part 5
(commencing with Section 10701), Division 2 of the Revenue and
Taxation Code and to shall constitute
loss or damage to the state in the amounts of such
those fees and penalties determined to be due and not
paid.
(d) The claims of the state under subdivision (b) shall be
satisfied first and entitled to preference over all claims under
subdivision (a).
(e) The claims of any a person under
subdivision (a) who is not a licensee shall be satisfied first and
entitled to preference over all other claims under subdivision (a).
SEC. 8. Section 11713.05 is added to the Vehicle Code, to read:
11713.05. Notwithstanding any other provision of law, when a
dealer knew or should have known that he or she lacked sufficient
financial resources to comply with contracts entered into with motor
vehicle purchasers, and the purchasers suffer damages as a result of
the dealer going out of business, the dealer's failure to satisfy a
lien on a vehicle accepted in trade, prior to the transfer of that
vehicle, shall render null and void any otherwise applicable defense
that the dealer, its corporation, or a nonliving entity may have in
law or equity, including, but not limited to, piercing of the
corporate veil or other applicable shield from liability. Such a
violation shall result in a nonrebuttable presumptive finding of
alter-ego, if pled in an action against the dealer's corporation or
other nonliving entity.
SEC. 9. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition
of a crime within the meaning of Section 6 of
Article XIII B of the California Constitution.