BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 68|
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THIRD READING
Bill No: AB 68
Author: Montanez (D), et al
Amended: 6/30/05 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-1, 6/14/05
AYES: Dunn, Ackerman, Cedillo, Escutia, Figueroa, Kuehl
NOES: Morrow
SENATE APPROPRIATIONS COMMITTEE : 9-1, 6/27/05
AYES: Migden, Alarcon, Alquist, Ashburn, Battin, Dutton,
Murray, Ortiz, Romero
NOES: Aanestad
NO VOTE RECORDED: Escutia, Florez, Poochigian
ASSEMBLY FLOOR : 45-4, 5/5/05 - See last page for vote
SUBJECT : Car Buyers Bill of Rights
SOURCE : Author
DIGEST : This bill, which becomes effective on July 1,
2006, enacts the Car Buyers Bill of Rights. This bill
requires a car dealer selling a used vehicle for a purchase
price under $40,000 to offer the buyer a two-day contract
cancellation option agreement, priced as specified, and
under which the buyer may return the vehicle without cause
so long as certain conditions are met, including that the
vehicle has not been driven more than 250 miles and is in
the same condition, except as specified, as when it was
CONTINUED
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purchased. This bill prohibits a car dealer from
advertising a used vehicle as "certified" or any similar
descriptive term that implies the vehicle has been
certified to meet the terms of a used vehicle certification
program, if, among other things, the odometer has been
rolled back, the vehicle was reacquired under a warranty
law, or the vehicle has sustained damage that after repair
prior to sale substantially impairs its use or safety.
This bill provides that when a seller assigns or sells a
conditional sale contract, the amount of money the seller
is allowed to receive from the assignment, with specified
exceptions, is limited as specified. This bill requires
car dealers who finance a motor vehicle sale to disclose to
the buyer the price of additional products, services, or
other items, if the sales contract includes a charge for
those items. This bill defines certain of those items.
This bill requires car dealers who finance a motor vehicle
sale to disclose the buyer's credit score, the range of
possible credit scores established by the credit reporting
agency, and provide the buyer a written notice regarding
credit scores. The provisions of this bill do not apply to
motorcycles, recreational vehicles, or off-road vehicles,
as specified.
ANALYSIS : Existing law, the Lemon Law, generally
requires a car dealer to replace or refund the purchase
price of a new vehicle which experiences multiple instances
of mechanical difficulties within 18 months or 18,000 miles
of purchase, whichever comes first.
Existing law, the Rees-Levering Motor Vehicle Sales and
Finance Act, sets forth numerous requirements with regard
to disclosures required in an automobile conditional sale
contract, including, among other things, that California
law does not provide for a "cooling off" or other
cancellation period for vehicle sales.
This bill provides that "There is no cooling off period
unless you obtain a contract cancellation option."
This bill requires a car dealer selling a used vehicle for
a purchase price under $40,000 to offer the buyer a two-day
contract cancellation option agreement, under which the
buyer may return the vehicle without cause, pursuant to the
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following parameters.
This bill provides that the purchase price for the contract
cancellation option agreement could not exceed the
following:
1. $75 for a vehicle with a cash price of $5,000 or less.
2. $150 for a vehicle with a cash price of more than
$5,000, but not more than $10,000.
3. $250 for a vehicle with a cash price of more than
$10,000, but not more than $30,000.
4. One percent of the purchase price for a vehicle with a
cash price of more than $30,000, but not more than
$40,000.
The above provisions do not apply to a used car having a
purchase price of $40,000 or more, a motorcycle,
recreational vehicle, or an off-highway vehicle, as
specified.
This bill defines "cash price" as defined in Section
2982(a)(1)(A) of the Civil Code [i.e., exclusive of
document preparation fees, taxes, pollution control
certification fees, prior credit or lease balance on
property being traded in, and amount charged for service
contract]. This bill also provides that "cash price"
excludes registration, transfer, titling, license, and
California tire and optional business partnership
automation fees.
This bill provides that a contract cancellation option
agreement will be contained in a document separate from the
conditional sale contract or other vehicle purchase
agreement and will have to contain, at a minimum, among
other things, the following:
1. A statement specifying the time within which the buyer
must exercise the right to cancel the purchase under the
contract cancellation option and return the vehicle to
the dealer. The time specified would be no earlier than
the dealer's close of business on the second day
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following the day the vehicle was delivered to the
buyer. The time specified would be the last date and
time by which the option to cancel may be exercised.
2. A statement that clearly and conspicuously specifies the
dollar amount of any restocking fee the buyer must pay
to exercise the right to cancel the purchase under the
contract cancellation option.
3. A statement specifying the maximum number of miles that
the vehicle maybe driven after its original delivery to
the buyer to remain eligible for cancellation under the
contract cancellation option, which shall be no fewer
than 250 miles.
4. A statement that the contract cancellation option gives
the buyer the right to cancel the purchase and obtain a
full refund, minus the purchase price of the contract
cancellation option agreement (and restocking fee, if
any is charged), as specified.
This bill provides that the price paid for the contract
cancellation option will be applied to any restocking fee
and a restocking fee may not exceed (1) $175 if the
vehicle's cash price is $5,000 or less, (2) $350 if the
vehicle's cash price is less than $10,000, and (3) $500 if
the vehicle's cash price is $10,000 or more.
This bill provides that a buyer who exercises a contract
cancellation option will have to personally deliver the
following to the dealer:
1. Written notice exercising the contract cancellation
option.
2. Any restocking fee, as specified, minus the purchase
price of the contract cancellation option.
3. The original vehicle purchase, titling and registration
documents if the seller gave them to the buyer.
4. The vehicle, free of all liens and encumbrances, other
than any lien or encumbrance created by or incident to
the conditional sale contract, any loan arranged by the
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dealer, or any loan obtained by the buyer from a third
party.
5. The vehicle in the same condition as when it was
delivered to the buyer, reasonable wear and tear and any
defect or mechanical problem that manifests or becomes
evident after delivery that was not caused by the buyer
excepted.
This bill provides the following if the buyer exercises the
contract cancellation option:
1. No later than the day following the day on which the
buyer exercises the right to cancel the purchase, the
dealer will be required to provide the buyer a full
refund (minus any restocking fee the dealer charges).
2. If the buyer was not charged for the contract
cancellation option agreement, the dealer will be
required to return to the buyer any motor vehicle the
buyer left with the dealer as a down payment or
trade-in. If the dealer has sold the vehicle, the full
refund will include the fair market value of the
trade-in or, its purchase contract or order value,
whichever is greater.
3. If the buyer was charged for the contract cancellation
option agreement, the dealer will be required to retain
any motor vehicle the buyer left with the dealer as a
down payment or trade-in until the buyer exercises the
right to cancel or the right to cancel expires. If the
buyer exercises the right to cancel, the dealer will be
required to return the buyer's trade-in. If the dealer
inadvertently sold the vehicle as the result of a bona
fide error, notwithstanding reasonable procedures
designed to avoid that error, the inadvertent sale will
not be deemed a violation of these provisions, and the
full refund will include the retail market value of the
trade-in or, its purchase contract or order value,
whichever is greater.
Existing law prohibits the use of untrue or misleading
statements in advertisements.
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Existing law, the Consumer Legal Remedies Act, prohibits a
business from representing that goods and services are of a
particular standard, if they are of another.
This bill prohibits a car dealer from advertising or
selling a used vehicle, as defined, as "certified" or any
similar descriptive term that implies that the vehicle has
been certified to meet the terms of a used vehicle
certification program, if any of the following apply:
1. The dealer knows or should know that the odometer does
not indicate actual mileage, has been rolled back, or
otherwise altered or replaced to show fewer miles than
actually driven.
2. The dealer knows or should know that the vehicle was
reacquired by the manufacturer or dealer under a state
or federal warranty law.
3. The vehicle's title has been inscribed with the notation
"Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar
designation.
4. The vehicle has sustained damage in impact, fire, or
flood, that after repair prior to sale substantially
impairs its use or safety.
5. The dealer knows or should know that the vehicle has
sustained frame damage.
6. Prior to sale, the dealer fails to provide the buyer
with a completed inspection report indicating all the
components inspected.
7. The dealer disclaims any warranties of merchantability.
8. The vehicle is sold "AS IS."
9. The term "certified" or any similar descriptive term is
used in any manner that is untrue or misleading or that
will cause any advertisement to be in violation of law,
as specified.
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This bill provides that a violation of its provisions is
actionable under the Consumer Legal Remedies Act, the
Unfair Competition Law, false advertising statutes, or any
other applicable state or federal law, and that the rights
and remedies provided are cumulative and may not be
construed to restrict any right or remedy otherwise
available.
Existing law, the Rees-Levering Motor Vehicle Sales and
Finance Act, sets forth numerous requirements with regard
to disclosures required in an automobile conditional sale
contract, including disclosures regarding finance charges,
and sets forth the permissible fees and charges in an
automobile conditional sale contract for the sale of a
motor vehicle. Existing law limits the permissible finance
charge for contracts of $2,500 or less, but does not
regulate the finance charge on contracts in excess of
$2,500, so long as the charge is computed on a simple
interest basis.
Existing federal law requires creditors to prominently
disclose the cost of credit as a dollar amount and as an
annual percentage rate. [Truth in Lending Act, 15 U.S.C.
1601 et seq.; Regulation Z, 12 CFR Part 226.]
This bill requires that when a seller assigns or sells a
conditional sale contract, the amount of money the seller
is allowed to receive from the assignment is limited to 2.5
percent for up to 60-month contracts and to two percent for
contracts that exceed 60 months. This bill provides
specified exceptions to these limitations.
This bill requires car dealers who finance a motor vehicle
sale to disclose the buyer's credit score, the range of
possible credit scores established by the credit reporting
agency, and provide the buyer a written notice regarding
credit scores.
Existing law prohibits unfair or deceptive business
practices.
This bill requires car dealers who finance a motor vehicle
sale to disclose to the buyer a description and the price
of additional products, services, or other items, if the
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contract includes a charge for the those items.
Prior Legislation
AB 1839 (Montanez, 2004), which passed the Senate with a
vote of 21-11 on 8/27/04, was substantially similar in many
respects to AB 68. AB 1839 included a three-day "cooling
off" period without an upfront charge, but that provision
was removed on the Senate Floor. The bill was vetoed.
SB 1721 (Bowen, 2004), which passed the Senate with a vote
of 22-14 on 5/3/04, prohibited the inclusion of items in a
consumer contract without the consumer's knowledge and
consent. The bill failed passage in the Assembly Business
and Finance Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2005-06 2006-07 2007-08 Fund
Department of Motor Annual increase in
investigative Special*
Vehicles costs of less than $100
Attorney General and Probably not substantial
costs, General/
district attorneys potentially offset by
awards for Local
attorney's fees
Board of Equalization Increased costs of less
than $10 General
Misdemeanors Probably not substantial, non-Local
reimbursable costs for county
jail and probation
* Motor Vehicle Account
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SUPPORT : (Verified 6/30/05)
American Federation of State, County, and Municipal
Employees Asian/Pacific American Legal Center
Attorney General's Office
Automobile Club of Southern California
California Association of Community Organizations for
Reform Now
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Motor Car Dealers Association
California Nurses Association
California Public Interest Research Group
California State Automobile Association
California Teamsters
California United Auto Dealers Association
Center for Public Interest Law, University of San Diego
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumers for Auto Reliability and Safety
Consumers Union
Engineers and Scientists of California
Gray Panthers
Greenlining Institute
Hotel Employees and Restaurant Employees International
Union
Lawyers Committee for Civil Rights, Bay Area
National Council of La Raza
Older Women's League of California
Privacy Rights Clearinghouse
Professional and Technical Engineers, Local 21
Service Employees International Union
Trauma Foundation
Union of Needletrades, Textile and Industrial Employees
United Food and Commercial Workers, Region 8 States Council
ARGUMENTS IN SUPPORT : With respect to "cooling off"
periods, "certified" used cars, deceptive and
discriminatory auto financing practices and "loan packing,"
the author writes:
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"Cooling off" periods -- While federal rules and state
laws provide for a 3-day cooling off period for many
products and services, California law fails to provide
the same protection for car buyers. Car buyers are
commonly subjected to high-pressure sales tactics,
including being worn down by lengthy negotiations with
multiple salespersons and/or managers. However, some
dealership chains and individual dealers currently
offer 3-day, 5-day, or 7-day return policies, which
they say rarely result in returns. Such policies
operate as a safety valve to encourage sales where both
parties are satisfied.
"AB 68 will encourage this best practice by requiring
that every customer who buys a vehicle under $40,000
will be given the option to have a cooling off period
of at least 2 days - even those vehicles sold "As Is,"
vehicles which often need the greater scrutiny. For
the [permitted] cost of the statutory right of return,
AB 68 will give California consumers the flexibility
they need to assure themselves the vehicle they
purchase is right for them, while giving industry the
certainty it needs to plan for inventory and finance
needs."
Proponents of the bill, the Consumers Union and Consumers
for Auto Reliability and Safety, note that the provisions
of the two-day contract cancellation option agreement are
the result of negotiated compromises and will need to be
tested in the real world of car buying. They, and other
proponents of the bill, who in general do not support
charging consumers for either the right to return purchased
goods or the charging of restocking fees for such returned
goods, support the two-day provisions because the
negotiated compromises resulted in amendments that they
believe inure to the benefit of consumers, particularly
low-income, unsophisticated car buyers.
ASSEMBLY FLOOR :
AYES: Arambula, Baca, Bass, Berg, Bermudez, Calderon,
Canciamilla, Chan, Chavez, Chu, Cohn, Coto, De La Torre,
Dymally, Evans, Frommer, Goldberg, Hancock, Shirley
Horton, Jones, Karnette, Klehs, Koretz, Laird, Leno,
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Lieber, Liu, Matthews, Montanez, Mullin, Nation, Nava,
Negrete McLeod, Oropeza, Parra, Pavley, Ridley-Thomas,
Ruskin, Saldana, Salinas, Torrico, Umberg, Vargas, Yee,
Nunez
NOES: Haynes, La Malfa, Mountjoy, Strickland
NO VOTE RECORDED: Aghazarian, Benoit, Blakeslee, Bogh,
Cogdill, Daucher, DeVore, Emmerson, Garcia, Gordon,
Harman, Jerome Horton, Houston, Huff, Keene, La Suer,
Leslie, Levine, Maze, McCarthy, Nakanishi, Niello,
Plescia, Richman, Sharon Runner, Spitzer, Tran, Villines,
Walters, Wolk, Wyland
RJG:mel 6/30/05 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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