BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 956 (Lieu) - Buy-here-pay-here automobile sellers and 
          lenders.
          
          Amended: May 21, 2012           Policy Vote: Banking 5-2  
          Judiciary 3-2
          Urgency: No                     Mandate: Yes
          Hearing Date: May 24, 2012      Consultant: Bob Franzoia
          
          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 impose requirements on those dealers seeking to repossess 
          a vehicle.

          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 estimated to range from 1,000 to 
              3,000.
              All costs offset by license and assessment fees in the 
              California Finance Lenders Law.

          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.
          - Collects payments on or otherwise services conditional sale 
          contracts or lease contracts.








          SB 956 (Lieu)
          Page 1



          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 of Corporations (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. 

          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.