BILL ANALYSIS �
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THIRD READING
Bill No: AB 1447
Author: Feuer (D)
Amended: 8/20/12 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-1, 7/3/12
AYES: Evans, Corbett, Leno
NOES: Blakeslee
NO VOTE RECORDED: Harman
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/6/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
ASSEMBLY FLOOR : 49-25, 5/29/12 - See last page for vote
SUBJECT : Automobile sales finance: sellers
SOURCE : Author
DIGEST : This bill prohibits a buy-here-pay-here (BHPH)
dealer from selling or leasing a used vehicle at retail
price without giving the buyer or lessee a written warranty
that shall have a minimum duration of at least 30 days from
the date of delivery or when the odometer has registered
1,000 miles from what is shown on the contract, whatever
occurs first. If the dealer fails to give the buyer a
written warranty, the dealer shall be deemed to have
provided the warranty as a matter of law. This bill
additionally prohibits a BHPH dealer, after the sale of a
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vehicle, from (1) utilizing electronic tracking to obtain
or record the location of the vehicle, unless the buyer is
expressly made aware of the tracking device by the dealer,
provides written consent, and certain conditions are met,
and (2) disabling the vehicle using starter interrupt
technology, unless the dealer complies with specified
requirements. This bill also prohibits a BHPH dealer from
requiring a buyer to make payments, other than the
down-payment, to the seller in person.
Senate Floor Amendments of 8/20/12 revise findings and
declarations, downpayment provision, and definition of
buy-here-pay-here, and add coauthors.
ANALYSIS : Existing law, the Rees-Levering Act, sets
forth requirements with regard to disclosures required in a
conditional sale contract for the sale of a motor vehicle,
including specified disclosures regarding finance charges,
and sets forth the permissible fees and charges in an
automobile conditional sale contract for the sale of a
motor vehicle. (Civil Code (CIV) Section 2982)
Existing law requires all car dealers to provide a document
indicating the price of specified items purchased,
(including, among other things, any service contract,
insurance product, debt cancellation agreement, or theft
deterrent device) and stating the cost of the monthly
installment payments with and without the items listed.
(CIV Section 2982.2)
Existing federal regulation requires a car dealer, before
offering a used vehicle for sale to a consumer, to display
a window sticker called the "Buyer's Guide" that must,
among other things, disclose whether any warranty is
offered and the basic terms of any warranty. If no express
warranty is provided, then the Buyer's Guide must indicate
that the vehicle is being offered for sale "as is" (with no
express or implied warranties), or with only the applicable
"implied warranties" required by state law. (16 C.F.R.
455.3)
Existing federal regulation requires used car dealers, at
the time of sale, to give the buyer the original Buyers
Guide displayed on the vehicle or an accurate copy that
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contains all of the required disclosures and reflects the
final warranty terms agreed on between the buyer and
seller. (16 C.F.R. 455.3)
Existing law requires a car dealer selling a used vehicle
for a purchase price under $40,000 to offer the buyer a
two-day contract cancellation option agreement, priced as
specified, and under which the buyer may return the vehicle
without cause so long as certain conditions are met.
(Vehicle Code Section 11713.21)
This bill prohibits a BHPH dealer from selling or leasing a
used vehicle at retail price without giving the buyer or
lessee a written warranty that shall have a minimum
duration of at least 30 days from the date of delivery or
when the odometer has registered 1,000 miles from what is
shown on the contract, whatever occurs first. If the
dealer fails to give the buyer a written warranty, the
dealer shall be deemed to have provided the warranty as a
matter of law.
This bill requires the written warranty to provide the
following:
If the buyer or lessee notifies the BHPH dealer that the
vehicle does not conform to the warranty, the dealer must
either repair the vehicle, reimburse the reasonable cost
of repairs, or cancel the sale or lease contract and
provide a full refund, as specified; and
The BHPH dealer shall pay 100% of the cost of labor and
parts for any repairs pursuant to the warranty, and may
not charge the buyer or lessee for the cost of repairs or
inspection, as specified. Any person performing repairs
must comply with the requirements of an automotive repair
dealer, as specified.
This bill allows a BHPH dealer to provide the buyer or
lessee a full refund, less a reasonable amount for any
damage, as specified, rather than performing a repair. If
the sale or lease is cancelled, the following will apply:
The dealer must provide written notice by personal
delivery or first class mail;
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The buyer or lessee shall return the vehicle in
substantially the same condition;
The dealer shall provide the buyer or lessee with a
receipt stating the date of return; vehicle
identification number; make, model, year of vehicle;
odometer reading; statement that the sale or lease has
been cancelled; and the amount of the refund;
The dealer shall not treat the return of the vehicle
pursuant to the contract cancellation provisions;
The buyer or lessee shall execute documents to transfer
any interest in the vehicle to the BHPH dealer, as
specified; and
The dealer shall refund all amounts paid under the sale
or lease agreement, less a reasonable amount for property
damage sustained after the sale or lease, no later than
the day after the day on which the buyer or lessee
returns the vehicle.
This bill requires the written warranty to cover 14 major
types of components, including, the engine, transmission,
and braking system. Any Used Car Buyer's Guide displayed
on a vehicle offered for sale or lease shall list each of
those systems and components and specify that the dealer
will pay 100% of the cost of parts and labor for repairs
covered by the warranty.
This bill requires the BHPH dealer to make the repair or
provide a refund notwithstanding the fact that the warranty
period has expired if the buyer or lessee notified the
dealer of the failure of the covered system or part within
the warranty period.
This bill provides that the above warranty provisions do
not apply to any defect or nonconformity caused by the
unauthorized or unreasonable use of the vehicle following
the sale, or to any property damage not to the vehicle
arising out of the failure of a covered part.
This bill provides that the BHPH dealer shall have the
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burden of proof in any proceeding where the exclusion of
coverage or deduction is at issue, as specified.
This bill further prohibits a BHPH dealer from selling or
leasing a vehicle unless it meets the equipment
requirements of the Vehicle Code.
This bill provides that any agreement between a BHPH dealer
and a buyer or lessee that disclaims, limits, or waives any
of the above rights shall be void as contrary to public
policy.
This bill additionally prohibits a BHPH dealer, after the
sale of a vehicle, from:
Utilizing electronic tracking to obtain or record the
location of the vehicle, unless the buyer is expressly
made aware of the tracking technology by the dealer,
provides written consent, and either (1) the electronic
tracking technology is solely used to verify and maintain
the operational status of the tracking technology, to
repossess the vehicle, or to locate the vehicle to
service the loan or keep it current; or (2) tracking is
used solely for any optional service to the buyer, as
specified; and
Disabling the vehicle using starter interrupt technology,
unless the dealer complies with the following: (1)
notifies the buyer at the time of sale that the vehicle
is equipped with starter interrupt technology; (2)
provides written disclosure that a warning will be given
no less than 48 hours prior to the use of starter
interrupt technology; and (3) in the event of an
emergency, a buyer will be provided with the ability to
start a dealer-disabled vehicle no less than 24 hours
after the vehicle's initial disablement.
This bill provides that violation of the above tracking,
disabling and payment provisions is a misdemeanor
punishable by a fine not exceeding $1,000.
This bill defines "buy-here-pay-here dealer" as a dealer
who:
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Enters into conditional sales or lease contracts, as
specified; and
Assigns less than 90% of all unrescinded sale contracts
and lease contracts to unaffiliated third-party finance
or leasing sources within 60 days of consummation of
those contracts.
This bill states that a BHPH dealer does not include a
lessor who primary leases vehicles that are two model years
old or newer, or, a dealer that certifies 100% of used
vehicle inventory and maintains an onsite service and
repair facility.
Related Legislation
SB 956 (Lieu) enacts the Buy-Here-Pay-Here Automobile
Dealers Act, as specified, to regulate contract terms and
other activities of entities meeting the definition of BHPH
automobile dealers. The bill passed the Senate (24-12) on
May 31, 2012, and is in the Assembly Appropriations
Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
First-year enforcement costs of approximately $28,500 to
the Department of Motor Vehicles (DMV), and $56,000
(Motor Vehicle Account) annually thereafter, to the
extent the provisions of this bill result in an increase
in investigative caseloads in response to complaints
involving BHPH dealer compliance.
Potential ongoing costs of $24,000 to $48,000 (General
Fund) to the Judicial Branch for 50 to 100 new
misdemeanor court filings to the extent BHPH dealers
violate the provisions of this bill, offset to a degree
by fine revenue.
SUPPORT : (Verified 8/22/12)
Center for Responsible Lending
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City of Palmdale
Consumer Federation of California
Consumers for Auto Reliability and Safety
Navy-Marine Corps Relief Society
OPPOSITION : (Verified 8/21/12)
Independent Automobile Dealers Association of California
National Independent Automobile Dealers Association
ARGUMENTS IN SUPPORT : According to the author:
Recent reports have brought to light a number of
questionable practices utilized by "buy-here-pay-here"
automobile dealers. Practices such as requiring a buyer
to make regular payments in person, tracking their
whereabouts using GPS technology, and utilizing ignition
shutdown technology to disable a person's vehicle, are
practices that simply cannot be ignored and must not be
tolerated without some basic requirements to ensure the
protection of car buyers.
Similarly - it is commonplace that cars purchased from
buy-here-pay-here dealers are high mileage vehicles sold
at high prices, with high interest rates and, all too
frequently, prove to be inadequate as a reliable mode of
transportation. In looking into the issue of how
consumers fare with buy-here-pay-here dealers, we have
heard many, many stories of buyers who are faced with a
car that has broken down not long after the purchase and
with no clear remedy for addressing the problem - such as
an express warranty. California consumers deserve
better. AB 1447 is intended to provide California
consumers with a baseline of minimum but essential
protections from a segment of the car market that is in
dire need of reform.
ARGUMENTS IN OPPOSITION : The Independent Automobile
Dealers Association of California asserts that the warranty
poses several problems, including that:
1) �T]he dealer doesn't know in advance if he will
carry the paper or assign it to a sub-prime lender in
which there would be no warranty, and if he decided to
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carry the paper, would he declare the warranty after
the sale?
2) �T]he warranty mandate would appear to violate
federal law that requires the posting of the Used Car
Buyers Guide on every car being offered for sale
notifying the customer that the car is being sold "As
Is" or "Warranty" - the warranty could put the �BHPH]
dealer at odds with the federal requirement.
Finally, the warranty would be expensive and added to the
price of the car thus hurting the consumers who can least
afford it.
ASSEMBLY FLOOR : 49-25, 5/29/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Gatto,
Gordon, Gorell, Hayashi, Roger Hern�ndez, Hill, Huber,
Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell,
Monning, Pan, Perea, V. Manuel P�rez, Portantino,
Skinner, Solorio, Swanson, Torres, Wieckowski, Williams,
Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Donnelly, Beth
Gaines, Garrick, Grove, Hagman, Halderman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell,
Nestande, Nielsen, Norby, Olsen, Silva, Smyth, Valadao,
Wagner
NO VOTE RECORDED: Cedillo, Cook, Fletcher, Galgiani, Hall,
Hueso
RJG:m 8/23/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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