BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 956 (Lieu) - Buy-here-pay-here automobile sellers and
lenders.
Amended: May 1, 2012 Policy Vote: Banking 5-2
Judiciary 3-2
Urgency: No Mandate: Yes
Hearing Date: May 14, 2012 Consultant: Bob Franzoia
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 956 would enact the Buy-Here-Pay-Here
Automobile Dealers Act. This bill would define a
buy-here-pay-here automobile dealer and would require those
dealers to obtain a finance lender license and subject them to
provisions of the California Finance Lenders Law. This bill
would also requirements on these dealers seeking to repossess a
vehicle and would require any additional costs to the Department
of Corporations (department) in administering the provisions of
the bill by borne by buy-here-pay-here dealers through fees.
Fiscal Impact: Estimated startup costs of $327,000 from the
State Corporations Fund.
Costs annually, from the State Corporations Fund to
administer relevant provisions of the California Finance
Lenders Law as it applies to buy-here-pay-here automobile
dealers estimated at $200,000 to $250,000 per 1,000
licensees; total licensees could range from 1,000 to 10,000.
All costs offset by license and assessment fees in the
California Finance Lenders Law or by secondary fees, if
needed.
Background: Many of the automobile dealers require their
customers to return once or twice a month to make loan payments
in cash, thus the term buy-here-pay-here.
Proposed Law: This bill defines a buy-here-pay-here automobile
dealer to mean a seller who does all of the following:
- Enters in conditional sale or lease contracts.
- Does not routinely assign the conditional sale contracts or
lease contracts to an unaffiliated third party finance or
leasing source.
SB 956 (Lieu)
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- Collects payments on or otherwise services conditional sale
contracts or lease contracts.
In addition, this bill would:
- Require those dealers to obtain a finance lender license.
- Define a "buyer-borrower."
- Govern the terms and conditions of contracts entered into by a
buy-here-pay-here automobile dealer and the rights of the
parties.
- Impose requirements on a buy-here-pay-here automobile dealer
seeking to repossess a vehicle.
- Establish a cap on interest rates that could be charged under
a conditional sale or lease contract and allow a penalty
repayment period, as specified.
Staff Comments: The Finance Lenders Law provides for an initial
finance lender and broker license of $350 and an annual pro rata
assessment based on gross revenue of each licensee, with the
minimum $250 per licensed location (Financial Code 22107).
Department examinations would be conducted on a two to four year
cycle with the examination cost based on the billable hours of
the examiner.
Because the department licenses by location, the department will
need to determine the number of locations of buy-here-pay-here
automobile dealers (as opposed to, for example, the number of
dealers with potentially multiple locations) in order to fully
determine program costs.
This bill provides that any additional costs to the department
resulting from its administration of the provisions of this bill
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.
Because this bill would expand the scope of a crime, this bill
would create a state mandated local program. This is a non
reimbursable mandate.
Recommended Amendments: Staff recommends the fee authority
sunset on January 1, 2017. This will give the department
sufficient time to determine the costs of the program, which
should be borne by license fees charged under the authority of
the California Finance Lenders Law.
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