BILL NUMBER: SB 956 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 1, 2012
AMENDED IN SENATE APRIL 9, 2012
AMENDED IN SENATE MARCH 26, 2012
INTRODUCED BY Senator Lieu
( Coauthors: Assembly Members
Alejo and Wieckowski )
JANUARY 9, 2012
An act to add Chapter 1b (commencing with Section 18500) to
Division 8 of the Business and Professions Code, and to amend Section
22054 of the Financial Code, relating to automobile sellers and
lenders.
LEGISLATIVE COUNSEL'S DIGEST
SB 956, as amended, Lieu. Buy-here-pay-here automobile sellers and
lenders.
(1) Existing law prohibits a person from acting as a dealer in
vehicles, as specified, without a license issued by the Department of
Motor Vehicles. Existing law governs conditional sales
sale contracts, as defined, for the purchase of
motor vehicles, including the enforceability of those contracts.
Existing law also governs lease contracts, as defined, for the lease
of motor vehicles, including the enforceability of those contracts.
Existing law, the California Finance Lenders Law, the violation of
which is a crime, provides for the licensure and regulation of
finance lenders by the Commissioner of Corporations, but exempts from
its provisions a bona fide conditional contract of sale involving
the disposition of personal property when that form of agreement is
not used for the purpose of evading provisions of that law.
This bill would enact the Buy-Here-Pay-Here Automobile Dealers
Act. The bill would identify define a
"buy-here-pay-here automobile dealer" as a person
seller who is required to obtain a license from
the Department of Motor Vehicles to act as a dealer in vehicles and
who also enters into a specified number of
conditional sales sale
contracts, as defined, or lease contracts, as defined,
within a certain time period does not routinely assign
those contracts to an unaffiliated third-party finance or leasing
source, and collects payments on or otherwise services those
contracts . This bill would require those dealers to obtain a
finance lender license and subject them to specified other provisions
of the California Finance Lenders Law. The bill would also define a
"buyer-borrower" as a person who enters into a conditional
sales sale contract or lease contract with a
buy-here-pay-here automobile dealer.
This bill would govern the terms and conditions of contracts
entered into by a buy-here-pay-here automobile dealer and the rights
of the parties, including, but not limited to, requiring a notice to
a buyer-borrower of specified rights under the contract.
(2) Existing law, the Collateral Recovery Act, provides for the
licensure and regulation of repossession agencies, as defined, and
their employees by the Bureau of Security and Investigative Services
within the Department of Consumer Affairs.
This bill would impose additional requirements on a
buy-here-pay-here automobile dealer seeking to repossess a vehicle,
including, but not limited to, prohibiting a dealer from commencing
repossession proceedings due to failure to make a scheduled loan
payment prior to the 11th day following the day on which that payment
was due, requiring a dealer to hire a licensed repossession agency
to repossess the vehicle on the dealer's behalf, and prohibiting the
dealer from charging the buyer-borrower a fee exceeding $500 for the
dealer's costs in connection with the repossession. The bill would
also establish a cap on interest rates that could be charged under a
conditional sales sale or lease
contract and require a buy-here-pay-here automobile dealer to allow a
buyer-borrower 45 days to repay any penalties, fees, and other
charges imposed by the dealer on the buyer-borrower in connection
with past due payments that have been brought current.
(3) The bill would require that any additional costs to the
Department of Corporations in administering the provisions of the
bill be borne by buy-here-pay-here automobile dealers through fees
charged by the department.
(4) Because this bill would expand the scope of a crime, the bill
would create a state-mandated local program.
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. Chapter 1b (commencing with Section 18500) is added to
Division 8 of the Business and Professions Code, to read:
CHAPTER 1b. BUY-HERE-PAY-HERE AUTOMOBILE DEALERS ACT
18500. This chapter shall be known, and may be cited, as the
Buy-Here-Pay-Here Automobile Dealers Act.
18501. As used in this chapter:
(a) "Dealer of vehicles" is one within the meaning of Section
11701 of the Vehicle Code, subject to the provisions of Article 1
(commencing with Section 11700) of Chapter 4 of Division 5 of the
Vehicle Code.
(b) "Conditional sales sale contract"
is one within the meaning of subdivision (a) of Section 2981 of the
Civil Code, subject to the provisions of Chapter 2b (commencing with
Section 2981) of Title 14 of Part 4 of Division 3 of the Civil Code.
(c) "Lease contract" is one within the meaning of subdivision (d)
of Section 2985.7 of the Civil Code, subject to the provisions of
Chapter 2d (commencing with Section 2985.7) of Title 14 of Part 4 of
Division 3 of the Civil Code.
(d) "Buyer-borrower" means a person who enters into a conditional
sales sale contract or lease contract
with a buy-here-pay-here automobile dealer.
(e) "Licensed repossession agency" means a "repossession agency"
as defined in Section 7500.2 that is licensed pursuant to the
Collateral Recovery Act (Chapter 11 (commencing with Section 7500) of
Division 3).
18502. (a) On or before January 31, 2013, and annually
thereafter, every dealer of vehicles that entered into one or more
conditional sales contracts or lease contracts during the preceding
calendar year shall calculate the percentage of those contracts
entered into during that year that the dealer assigned or sold to an
unaffiliated third party within 30 days of consummation.
(b) Any dealer of vehicles that commenced business during a
calendar year and that entered into conditional sales contracts or
lease contracts for less than one full calendar year as of December
31st of the year in which it commenced business shall calculate the
percentage of those contracts that were assigned or sold to
unaffiliated third parties within 30 days of their consummation,
based on the number of months during which that dealer of vehicles
engaged in business during that calendar year, but shall in no event
base its calculation on fewer than three full calendar months of
data. A dealer meeting the criteria of subdivision (d) shall perform
annual calculations in accordance with subdivision (a) in subsequent
years.
(c) Any dealer of vehicles that has less than three full calendar
months of data with which to calculate a percentage of assigned
contracts pursuant to this section shall perform the required
calculation as soon as possible after acquiring three full calendar
months of data, and annually thereafter on or before January 31st of
each year.
(d) A dealer of vehicles that assigns fewer than 90 percent of all
conditional sales contracts and lease contracts to unaffiliated
third parties within 30 days of the consummation of those contracts,
as calculated pursuant to subdivision (a), (b), or (c), as
applicable, shall be deemed to be a "buy-here-pay-here automobile
dealer."
18502. "Buy-here-pay-here automobile dealer" means a seller who
does all of the following:
(a) Enters into conditional sale or lease contracts.
(b) Does not routinely assign the conditional sale contracts or
lease contracts to an unaffiliated third-party finance or leasing
source.
(c) Collects payments on or otherwise services conditional sale
contracts or lease contracts.
18503. (a) Notwithstanding Section 22054 of the Financial Code or
any other law, and except as otherwise expressly provided in this
chapter, a buy-here-pay-here automobile dealer may
shall not do business in California unless licensed by
the Department of Corporations pursuant to the California Finance
Lenders Law (Division 9 (commencing with Section 22000) of the
Financial Code).
(b) A dealer of vehicles shall obtain a California Finance Lenders
Law license no later than six months following the date on which it
meets the definition of a buy-here-pay-here automobile
dealer, pursuant to the calculations required under Section 18502.
18504. (a) Notwithstanding Section 18502 or any other law, a
buy-here-pay-here automobile dealer shall be exempt from the
provisions of Sections 22320, 22320.5, and 22330 of the Financial
Code.
(b) Notwithstanding Section 22250 of the Financial Code, a
conditional sales sale contract or a
lease contract entered into by a buy-here-pay-here automobile dealer
shall be subject to the provisions referenced in Section 22250 of the
Financial Code.
(c) Notwithstanding any other law, the annual percentage rate
charged to a buyer-borrower pursuant to a conditional sales
sale contract or lease contract with a
buy-here-pay-here automobile dealer shall not exceed the federal
funds rate in effect at the time the contract was executed plus an
additional 17 percent.
18505. (a) In lieu of the notice required by subdivision (h) of
Section 2982 of the Civil Code, a conditional sales
sale contract or lease contract entered into by
a buy-here-pay-here automobile dealer shall include the following
notice, in at least eight-point boldface type:
"If you have a complaint concerning this buy-here-pay-here
automobile dealer or the contract, you should try to resolve it with
the dealer. Complaints concerning unfair or deceptive practices or
methods by the dealer may be referred to the city attorney, the
district attorney, an investigator for the Department of Motor
Vehicles, or an investigator for the Department of Corporations, or
any combination thereof.
After this contract is signed, the dealer may not change the
financing or payment terms unless you agree in writing to the change.
You do not have to agree to any change, and it is an unfair or
deceptive practice for the dealer to make a unilateral change.
I have read and understand the terms of this notice.
_____________________Borrower's Signature"
(b) The contract shall not be binding unless the buyer-borrower
has acknowledged in writing that he or she has read and understands
the notice required by subdivision (a).
18506. (a) A buy-here-pay-here automobile dealer shall be
prohibited from commencing repossession of a vehicle subject to a
conditional sales sale contract or
lease contract due to the buyer-borrower's failure to make a
scheduled payment prior to the 11th day following the date on which
that payment was due.
(b) Following commencement of repossession proceedings against a
buyer-borrower for delinquent payments under a conditional
sales sale contract or lease contract, if the
buyer-borrower pays the delinquent amount in full, the buyer-borrower
shall be entitled for 45 days thereafter to pay the
buy-here-pay-here automobile dealer the amount of any delinquency
charges, penalty interest, and fees arising out of the delinquency
and commencement of repossession proceedings.
(c) A buy-here-pay-here automobile dealer shall not do either of
the following:
(1) Physically repossess a vehicle other than through engaging the
services of a licensed repossession agency.
(2) Charge a buyer-borrower an amount exceeding five hundred
dollars ($500) in fees or charges resulting from the commencement by
the buy-here-pay-here automobile dealer of any action to repossess a
vehicle.
(d) The provisions of subdivisions (a), (b), and (c) shall be
included in the terms and conditions of a conditional sales
sale contract pursuant to Section 2981.9 of, or
lease contract pursuant to Section 2985.8 of, the Civil Code.
SEC. 2. Section 22054 of the Financial Code is amended to read:
22054. Except as otherwise provided in Chapter 1b (commencing
with Section 18500) of Division 8 of the Business and Professions
Code, this division does not apply to bona fide conditional contracts
of sale involving the disposition of personal property when these
forms of sales agreements are not used for the purpose of evading
this division.
SEC. 3. (a) In enacting Section 1 of this act, it is not the
intent of the Legislature to affect or limit existing legal rights,
remedies, or claims available under current law.
(b) Any additional costs to the Department of Corporations
resulting from its administration of Section 1 of this act shall be
borne by buy-here-pay-here automobile dealers through fees charged by
the department, which fees shall not exceed the reasonable
regulatory costs of administering those provisions.
SEC. 4. 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.