BILL ANALYSIS �
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THIRD READING
Bill No: AB 1981
Author: Brown (D)
Amended: 8/20/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 7-0, 6/24/14
AYES: Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak
ASSEMBLY FLOOR : 64-3, 5/23/14 - See last page for vote
SUBJECT : Rental vehicles: contracts
SOURCE : Enterprise Holdings
DIGEST : This bill removes the manufacturers suggested retail
price (MSRP) as one of the criteria for determining the rate of
a damage waiver sold by a rental company, and instead sets the
rate of damage waivers according to the vehicle's classification
using criteria set by the 2014 Association of Car Rental
Industry Systems Standards for North America. This bill
increases the maximum rate of the damage waiver to $11 per
rental day for vehicles designated as an "economy car," "compact
car," or another term denoting the two smallest categories of
vehicles described by the standards. This bill also increases
the maximum rate of the damage waiver to $17 per rental day for
vehicles in the next 3 body-size categories of vehicles
designated in the standards. However, vehicles that are older
than the previous year's model year are capped at $11.
Senate Floor Amendments of 8/20/14 add double-jointing language
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to prevent chaptering-out issues with AB 2747 (Senate Judiciary
Committee).
ANALYSIS : Existing law:
1.Defines a "damage waiver" as a rental car company's agreement
not to hold a renter liable for damage to or loss of the
rental car, any loss of use of the rental car, or any storage,
impound, towing, or administrative charges.
2.Specifies that a damage waiver must provide that a renter has
no liability for damage, loss, loss of use, or a related cost
or expense.
3.States that a rental car company may provide that a damage
waiver does not apply in certain circumstances, including,
among others, when the damage or loss results from the
authorized driver's intentional, willful, wanton, or reckless
conduct or from that driver's operation of the vehicle under
the influence of drugs or alcohol.
4.Provides that a damage waiver is optional and a consumer may
not be required to purchase a damage waiver. A rental car
company must also provide a consumer with specified notices
regarding the damage waiver.
5.Provides that a rental car company may sell a damage waiver
subject to the following rate limitations for each full or
partial 24-hour rental day and provides that the MSRPs
described below shall be adjusted annually to reflect changes
from the previous year in the Consumer Price Index:
A. $9 per day for rental vehicles that the rental car
company designates as an "economy car," "subcompact car,"
"compact car," or another term having similar meaning, or
another vehicle having an MSRP of $19,000 or less; and
B. $15 per day for rental vehicles that have an MSRP from
$19,001 to $34,999, and that are also either vehicles of
next year's model, or not older than the previous year's
model. If the vehicle is older than the previous year's
model-year, the rate for a damage waiver may not exceed $9.
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This bill provides, in place of the damage waiver fee caps and
calculation methodologies above, that a rental car company may
sell a damage waiver subject to the following rate limitations
for each full or partial 24-hour rental day:
1. For rental vehicles that the rental company designates
as an "economy car," "compact car," or another term having
similar meaning to the two smallest body-size categories of
vehicles established by the Association of Car Rental
Industry Systems Standards for North America, as of January
1, 2014, when offered for rental, the rate shall not exceed
$11.
2. For rental vehicles, that the rental company designates
as an "intermediate car," "standard car," or "fullsize
car," or another term having similar meaning to the next
three body-size categories of vehicles established by the
Association of Car Rental Industry Systems Standards for
North America, as of January 1, 2014, and that are also
either vehicles of the next model year or not older than
the previous year's model, when offered for rental, the
rate shall not exceed $17. For rental vehicles that are
older than the previous year's model year, the rate shall
not exceed $11.
3. Contains double-jointing language to prevent
chaptering-out issues with AB 2747 (Senate Judiciary
Committee).
Background
A damage waiver is an optional product offered by most rental
car companies to their customers. The damage waiver is a
contractual agreement between a rental car company and a renter
in which the company, in exchange for a fee, agrees to waive the
renter's liability for damage to or loss of the car during the
rental period. Damage waivers do not relieve a renter of all
liability, however. For example, a renter may still be liable
if the damage or loss results from the authorized driver's
intentional, willful, wanton, or reckless conduct.
In 1988, in order to address concerns that rental car customers
were being subjected to coercive damage waiver sales techniques
at the rental counter, California enacted a $9 cap on the amount
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that rental car companies could charge for the product. (AB
3006, Connelly, Chapter 1523, Statutes of 1988.) This cap
applied to all rental vehicles. AB 3006 was sponsored by
Attorney General John Van de Kamp and initially proposed to
prohibit damage waivers entirely. At the time, the sponsor
argued that damage waivers were a "complex and unfair scheme"
that was "adhesive in nature, contrary to public policy, and
violative of the common law allocation of lessors' and lessees'
respective responsibilities." As a result of a "carefully
negotiated compromise" between the author, the Attorney General,
consumer groups, and industry, the bill was amended to provide
for a comprehensive scheme regulating damage waivers.
Since then, there have been several attempts, supported by the
rental car industry, to either increase or eliminate entirely
the cap on the amount that a rental car company may charge for a
damage waiver.
In 1998, AB 2314 (Papan, 1998) would have repealed the $9 damage
waiver cap for the rental of any vehicle above the compact car
class. That bill died in this Committee. The next year, AB 966
(Papan, 1999) would have, among other things, eliminated the $9
cap and required a rental car company to clearly disclose the
existence and amount of a damage waiver in any advertisement.
That bill also died in this Committee. In 2001, AB 491
(Frommer, Chapter 661, Statutes of 2001) provided that rental
cars with an MSRP of $19,000 or less were subject to the $9 cap.
That bill also increased the $9 cap to $15 for new rental cars
with an MSRP of between $19,001 and $34,999. AB 491 also
eliminated the cap for rental cars over $35,000. In 2009, the
introduced version of AB 833 (Perez) would have increased the
damage waiver cap to $22 for all rental cars. That provision
was subsequently removed from the bill when the bill was pending
in the Assembly Judiciary Committee. AB 1731 (Tran, 2010) would
have kept the $9 and $15 per day caps intact, but would have
changed which rental cars were subject to each rate limitation
by deleting the MSRP references and providing instead that the
damage waivers for rental cars in the rental company's lowest
two rental classes would be capped at $9 per day. For
intermediate, standard, full, and premium class vehicles, rental
car companies would have been permitted to charge $15 per day.
That bill died in this Committee. Two years later, AB 2379
(Huber, 2012) would have increased the $9 and $15 caps to $11
and $18, respectively, and would have automatically allowed
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those caps to adjust in line with the Consumer Price Index.
That bill died in the Assembly Judiciary Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/20/14)
Enterprise Holdings (source)
Avis Budget Group, Inc.
California Travel Association
Hertz
ARGUMENTS IN SUPPORT : According to the author:
It has been 26 years since the [rental vehicle damage
waiver] rate caps [were] established and 13 years since
they [were last] adjusted. As vehicles become more
technologically sophisticated, they also become more costly
to fix when a collision or other damage occurs. California
is one of the few states that cap the rate. In fact, there
are 47 states that allow damage waiver[s] to be offered,
but do not cap the rate. Maintaining a rate cap does not
incentivize rental companies from offering competitive
rates.
For purposes of clarity for consumers, AB 1981 will
eliminate MSRP as the measure of vehicle class/value and
substitute it with the Association of Car Rental Industry
Systems Standards (ACRISS) car classification code
(economy, compact, intermediate, standard, fullsize)?. In
addition, AB 1981 will increase the rate cap for damage
waivers by two dollars. The rate for the first tier
(economy and compact) will be changed from $9 to $11 per
day. The second tier (intermediate, standard, and
fullsize) will be increased from $15 to $17 per day.
ASSEMBLY FLOOR : 64-3, 5/23/14
AYES: Achadjian, Allen, Ammiano, Bigelow, Bloom, Bocanegra,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Ch�vez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly,
Dickinson, Fong, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez,
Gordon, Gorell, Gray, Grove, Hagman, Holden, Jones,
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Jones-Sawyer, Linder, Logue, Lowenthal, Maienschein, Medina,
Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,
Patterson, Perea, John A. P�rez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Skinner, Stone, Ting, Wagner,
Waldron, Wieckowski, Williams, Yamada, Atkins
NOES: Fox, Levine, Wilk
NO VOTE RECORDED: Alejo, Bonilla, Donnelly, Eggman, Frazier,
Hall, Harkey, Roger Hern�ndez, Mansoor, V. Manuel P�rez,
Salas, Weber, Vacancy
AL:nl 8/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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