BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
95 (Corbett)
Hearing Date: 05/11/2009 Amended: 05/04/2009
Consultant: Mark McKenzie Policy Vote: Jud 3-2
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BILL SUMMARY: SB 95 would enact the California Car Buyers'
Protection Act of 2009. Specifically, this bill would:
Require a motor vehicle dealer to pay off any outstanding
liens on a vehicle purchased for purposes of resale within two
business days, as specified.
Make failure to comply with the above provision regarding
dealer pay off unlawful under the Consumer Legal Remedies Act
as an unfair or deceptive act or practice.
Increase the amount of a vehicle dealer's surety bond from
$50,000 to $100,000 and establish a bond requirement of
$50,000 for dealers of trailers designed for vessel transport
as a condition for licensure by the Department of Motor
Vehicles (DMV).
Allow a person, until January 1, 2015, to recover actual
damages plus any incidental and consequential damages, rather
than an amount not to exceed the value of the vehicle
purchased from or sold to the dealer, with respect to existing
rights of action against a dealer, salespersons, and the
dealer's surety bond.
Establish the following priorities for satisfaction of claims
against a dealer's surety bond: (1) DMV; (2) persons who
bought or leased a motor vehicle; (3) finance companies,
creditors, or other commercial entities, with specified
limits. Subject to these priorities, claimants would be paid
in full if the bond is sufficient, otherwise payment would be
on a pro-rata basis.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
DMV: bond requirements $50 $150 $150 Special*
DMV: lien payoff complaints $375 $750
$750Special*
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* Motor Vehicle Account
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The DMV reports that the number of consumer complaints involving
a dealer's failure to pay off a trade-in has risen significantly
from prior years. As of the end of February 2009, the DMV
states that it is investigating 256 active cases where a dealer
has failed to pay off a consumer's trade-in and 564 additional
consumer complaints that the consumer had not yet received
verification that title to a vehicle bought from or sold to a
dealer had been transferred. This bill is intended to address
the consumer problems that have arisen from increases in
dealership closures.
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SB 95 (Corbett)
DMV indicates that provisions of the bill that increase a
dealer's bond requirements generate both one-time costs for
revisions of forms and publications and ongoing costs over a
three year period related to the impact on the dealer license
renewal process. Based upon experience when motor vehicle
bonding requirements were raised after the passage of SB 1458
(Romero), Chapter 303 of 2002, DMV estimates one-time costs of
approximately $50,000 to implement SB 95, and ongoing staffing
costs of approximately $150,000 annually over three years. DMV
renews roughly 6,000 dealer licenses each year. The changes to
the bonding requirements would likely result in a number of late
or incomplete renewal applications, adding an average of 20-30
minutes of staff time to each renewal. Furthermore, DMV
estimates that some dealers would decide not to renew the dealer
license because of the increased bonding requirements. Each
business closure requires approximately eight hours of DMV staff
time.
Provisions of the bill that require a dealer to pay off any
outstanding liens on a vehicle purchased for purposes of resale
within two business days would have an impact on the Division of
Investigations. DMV currently fields about 28,000 complaints a
year related to lien payoffs and failure of dealers to process
registration and title transfer paperwork within specified
timeframes. DMV estimates that SB 95 could generate an
additional 2000 to 4000 complaints from the sellers of trade-in
vehicles, purchasers of vehicles, lien holders, and other
dealers. Assuming an average of four hours of Investigator
staff time for each complaint, this bill could require an
additional 5-10 PY ongoing at costs in the range of $500,000 to
$1 million annually. Staff estimates that while initial
staffing pressures may be on the high end of this range,
complaints would likely taper off somewhat as the industry and
consumers adjust to the lien payoff requirements.