BILL ANALYSIS �
AB 1447
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Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1447 (Feuer) - As Amended: May 1, 2012
Policy Committee: JudiciaryVote:8-2
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes consumer protections specifically with
regard to "buy-here-pay-here" (BHPH) automobile dealers, i.e.
one who enters into conditional sale or lease contracts and does
not routinely assign those contracts to an unaffiliated
third-party finance or lease source. Specifically, this bill:
1)Prohibits a BHPH dealer from:
a) Tracking a sold vehicle using electronic tracking
technology without the buyer's written consent.
b) From disabling a sold vehicle using ignition override
technology unless the dealer:
i) Notifies the buyer, in writing, at the time of sale
that the vehicle is equipped with this technology.
ii) Ensures the technology provides a warning that the
vehicle will become inoperable in no less than 120 hours
prior to becoming disabled. The warning must last at
least 20 seconds every time the vehicle is started within
the 120-hour period.
c) Requiring a buyer to make payments to the seller in
person, except for the down payment.
2)Makes violations of any of the above a misdemeanor, punishable
by up to six months in county jail and/or a fine of up to
$1,000.
3)Requires a BHPH dealer to provide any buyer of a used vehicle
AB 1447
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with a written warranty, as specified.
FISCAL EFFECT
1)Unknown, likely minor nonreimbursable county costs for
investigation of alleged violation of the bill's provisions,
which constitute a misdemeanor.
2)Minor court cost associated with proceedings stemming from
alleged violations of the bill's provisions.
COMMENTS
1)Background . "Buy Here, Pay Here" car dealers are so-named from
the common practice of requiring customers to return once or
twice a month to the dealership to make loan payments, usually
in cash. According to the author, the typical BHPH business
model is to stock and sell older, high-mileage vehicles to
consumers who cannot otherwise qualify for conventional auto
loans.
In a conventional auto loan, traditional new and used car
dealers merely serve as the middleman where the purchase money
is provided by a bank or finance company. BHPH dealers, on the
other hand, do not assign sale and lease contracts to third
party finance or lease sources. Instead they maintain and
administer their own sales and lease portfolios, and therefore
do not have to comply with underwriting and loan policies set
by traditional lenders, leaving them free to set financial
terms significantly higher than conventional auto loans and
leases.
2)Purpose . Recent reports by consumer advocates and the Los
Angeles Times document a number of questionable practices used
BHPH dealers that, in the author's view, should not be
permitted to continue without basic consumer protections for
the predominantly low-income car-buyers who appear to be most
frequently victimized by these practices.
3)Opposition . The bill is strongly opposed by the National
Independent Automobile Dealers Association (NIADA), who
describes itself as a close industry associate of the National
Alliance of Buy Here Pay Here Dealers (NABD). NIADA contends
that this bill "will ultimately hurt the very consumers it
seeks to protect", stating "Passing AB 1447 will create a
AB 1447
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disincentive for dealerships to continue in this business and
make it more difficult to provide reasonable automotive
financing for consumers who need reliable vehicles to get to
their jobs, schools, and doctor's appointments. It is
reasonable to think that with fewer BHPH options, these
consumers will seek other transportation solutions. "
4)Related Legislation . AB 1534 (Wieckowski), also on today's
committee agenda, requires automobile dealers to affix a
specified label on any used vehicle offered for sale stating
the reasonable market value of that vehicle.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081