BILL ANALYSIS �
AB 2379
Page 1
Date of Hearing: May 8, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2379 (Huber) - As Amended: March 29, 2012
As Proposed to be Amended
SUBJECT : VEHICLE RENTAL CONTRACTS: CONSUMER PROTECTION
KEY ISSUE : SHOULD THE MAXIMUM COST OF RENTAL CAR DAMAGE WAIVERS
BE DISCONNECTED FROM THE RETAIL PRICE OF THE VEHICLE ON THE
GROUND THAT IT IS UNRELATED TO THE AMOUNT OF THE DAMAGE
LIABILITY WAIVED?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill is sponsored by the Enterprise Rent-A-Car Company.
Under current law, the price a rental car company may charge for
a damage waiver is capped based on the manufacturer's suggested
retail price (MSRP) of the vehicle. This bill would disconnect
the damage waiver cap from the MSRP, and link it instead to the
vehicle "class," generally based on size and amenities.
Supporters contend the link to MSRP is unnecessary and
cumbersome to administer. As proposed to be amended, the bill
is the same as provisions of a measure that was approved by the
Committee unanimously in 2010, and has no known opposition.
SUMMARY : Revises consumer protections regarding vehicle
rentals. Specifically, this bill disconnects damage waiver fee
caps from the retail price of the vehicle and ties them instead
to vehicle class.
EXISTING LAW authorizes a car rental company to sell a damage
waiver, subject to specified rate limitations related to the
class and price of the vehicle. (Civil Code section 1936(h).)
COMMENTS : The sponsor states that the purpose of this bill is
to "update the damage provisions of Civil Code section 1936 to
more accurately reflect the economic and pricing realities of
today's rental vehicle marketplace." In particular, the sponsor
contends, "Section 1936 was enacted to regulate car rental
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transactions for consumers renting for business, vacation and
insurance replacement reasons. In 1989, when section 1936 was
adopted, the exotic vehicle rental market basically did not
exist. Now it is a recognizable niche market, particularly in
the more affluent communities of California."
The bill is sponsored by the Enterprise Rent-A-Car company.
According to the sponsor, Enterprise Holdings owns and operates
more than one million cars and trucks under the Alamo
Rent-A-Car, Enterprise Rent-A-Car and National Car Rental
brands, the largest fleet of passenger vehicles in the world
today. As North America's largest and most comprehensive car
rental company, Enterprise Holdings also operates a network of
more than 7,600 car rental locations in neighborhoods and at
airports worldwide, and leads the industry with more than a
third of all airport business in the U.S. and Canada.
This Bill Deletes MSRP From the Damage Waiver Fee Caps.
Currently, the fee that rental companies can impose for the
damage waiver product they sell is $9 per day for small vehicles
below a specified retail price and $15 per day for more
expensive cars, up to a maximum MSRP of approximately $43,000.
Beyond that, there is no limit on the price rental car companies
can charge for damage waivers. This bill would revise these
rules by deleting the tie to MSRP, which the industry contends
is cumbersome to administer because it requires that the retail
price of each vehicle be tracked, rather than allowing damage
waivers to be sold for all compacts, for example, at the same
price. While MSRP may be roughly related to the cost of repair
in that the cost of repairing damage to an inexpensive car is
presumably lower than for an expensive one, MSRP does not appear
to be an essential element of damage waiver pricing because
damage waivers are sold without regard to the amount of damage
liability waived - i.e., $100 in damage (regardless of the price
of the vehicle) is waived for the same price as $10,000 in
damage.
As introduced, the bill would have raised the damage waiver
fees. Although the author's proposed amendments delete the
proposed fee increases, the sponsor indicates that it wishes to
continue to seek a fee increase as the bill moves forward.
Increasing these fees, or completely eliminating the fee caps,
has been a long-sought goal of the industry since damage waiver
fees became regulated by the enactment of AB 3306 (Connelly) of
1989. AB 833 of 2009 initially proposed to increase the fee to
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$22 for all vehicles. That proposal was not presented to this
Committee. In 1998, the same sponsor advocated for elimination
of the fee caps in AB 2314. That measure was opposed by
consumer groups, and the damage waiver fee provision was deleted
by amendments taken in this Committee.
Proposed Author's Amendments. To address concerns that there
was not sufficient justification for increasing the price of
damage waivers as the bill originally proposed, the author
proposes instead to address the issue of shifting damage waivers
prices from MSRP to class of vehicle.
Revise subdivision 1936 (h) as follows:
(h)Notwithstanding any other provision of law, a rental company
may sell a damage waiver subject to the following rate
limitations for each full or partial 24-hour rental day for the
damage waiver.
(1) For rental vehicles that the rental company designates as an
"economy car," "subcompact car," "compact car," or another term
having similar meaning when offered for rental, or another
vehicle having a manufacturer's suggested retail price of
nineteen thousand dollars ($19,000) or less, For rental vehicles
in the rental company's two lowest rental classes, the rate
shall not exceed nine dollars ($9).
(2) For rental vehicles not described in paragraph (1) that
have a manufacturer's suggested retail price from nineteen
thousand one dollars ($19,001) to thirty-four thousand nine
hundred ninety-nine dollars ($34,999), inclusive, and that are
also either vehicles of next year's model, or not older than the
previous year's model, the rate shall not exceed fifteen dollars
($15). For those rental vehicles older than the previous year's
model-year, the rate shall not exceed nine dollars
($9).
(3) The rate limitations contained in paragraphs (1) and (2)
of this subdivision shall not apply to rental vehicles with a
manufacturer's suggested retail price of sixty seventy thousand
dollars
($60,000) ($70,000) or more.
Prior Related Legislation. The provisions of this bill were
also contained in AB 1731 (Tran) of 2010, which passed this
Committee unanimously but was ultimately not enacted.
REGISTERED SUPPORT / OPPOSITION :
AB 2379
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Support
Enterprise Holdings, Inc. (sponsor)
Avis/Budget Group
Hertz Corporation
Opposition (As Proposed to be Amended)
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334