BILL ANALYSIS Ķ
AB 964
Page 1
Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
AB 964 (Bonta) - As Amended: April 25, 2013
SUBJECT : Vehicle dealers.
SUMMARY : Prohibits a licensed car dealer from selling or
advertising for sale as "certified" a used vehicle if the dealer
knows or should have known that the vehicle is subject to a
safety recall, and prohibits a dealer from selling a used car
without providing a completed inspection report and certain
written disclosures in specified languages. Specifically, this
bill :
1)Prohibits a vehicle from being advertised or sold as certified
if the dealer knows or should have known that the vehicle is
subject to a manufacturer's safety recall.
2)Prohibits a car dealer from selling a used car without
providing the buyer a written disclosure in Spanish, Chinese,
Tagalog, Vietnamese, or Korean if that sale is conducted
primarily in that language, of the present car conditions the
dealer knows or should know of, including:
a) The odometer has been rolled back or altered to show
fewer miles than actually driven;
b) The vehicle was reacquired by the vehicle's manufacturer
or a dealer pursuant to state or federal warranty laws;
c) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar
title designation required by this state or another state;
d) The vehicle was damaged in an impact, fire, or flood,
that after repair and prior to sale, substantially impairs
the use or safety of the vehicle;
e) The vehicle has sustained frame damage;
f) The dealer disclaims any warranties of merchantability
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on the vehicle;
g) The vehicle is sold "AS IS"; or,
h) The vehicle is subject to a manufacturer's safety
recall.
3)Prohibits the sale of a used vehicle without providing the
buyer with a completed inspection report indicating all the
components inspected prior to sale.
4)Provides that the rights, remedies, and procedures provided
for in this bill and the provisions of law relating to the
sale of certified and non-certified vehicles by car dealers,
are in addition to, and independent of, any other rights,
remedies, or procedures available under any other law.
5)Provides that nothing in this bill shall be construed to
alter, limit, or negate any other rights, remedies, or
procedures provided for by law.
6)Makes technical and clarifying changes.
7)States that no reimbursement is required by this bill pursuant
to Section 6 of Article XIIIB of the California Constitution
because the only costs that may be incurred by a local agency
or a school district will be incurred because this bill
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 XIIIB of the California Constitution.
EXISTING LAW :
1)Establishes the Car Buyer's Bill of Rights and prohibits a car
dealer from selling or advertising for sale a used car as
"certified" if the following applies:
a) The dealer knows or should have known that the odometer
has been rolled back or altered to show fewer miles than
actually driven;
b) The dealer knows or should have known that the vehicle
was reacquired by the vehicle's manufacturer or a dealer
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pursuant to state or federal warranty laws;
c) The title to the vehicle has been inscribed with the
notation "Lemon Law Buyback," "manufacturer repurchase,"
"salvage," "junk," "nonrepairable," "flood," or similar
title designation required by this state or another state;
d) The vehicle has sustained damage in an impact, fire, or
flood, that after repair and prior to sale substantially
impairs the use or safety of the vehicle;
e) The dealer knows or should have known that the vehicle
has sustained frame damage;
f) The dealer disclaims any warranties of merchantability
on the vehicle;
g) The vehicle is sold "AS IS"; or,
h) The term "certified" or any similar descriptive term is
used in any manner that is untrue or misleading or that
would cause any advertisement to be in violation of the
provisions prohibiting a car dealer from scheming not sell
a vehicle or service at a price other than advertised in
accordance with the Vehicle Code, or the unfair competition
laws contained in the Business and Professions Code.
(Civil Code Section 11713.18.)
2)Establishes the federal Moving Ahead for Progress in the 21st
Century Act (MAP-21) and requires the Secretary of the United
States Department of Transportation (U.S. DOT) to promulgate
regulations by July 6, 2013, requiring motor vehicle safety
recall information to be publicly available online and
searchable by vehicle make, model, and vehicle identification
number (VIN). (Public Law 112-141, 112th Cong., Section
31301)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill would prohibit a licensed car
dealer from selling a used vehicle as "certified" if it is
subject to a manufacturer's safety recall and unresolved
safety issues. This bill also requires dealers to disclose to
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consumers prior to sale certain facts about non-certified used
cars in Spanish, Chinese, Tagalog, Vietnamese, or Korean, if
the transaction was performed primarily in that language.
This bill applies to both voluntary and mandatory recalls, but
does not apply to used vehicles privately sold by an owner.
This bill is sponsored by the Latin Business Association
(LBA).
2)Author's statement . According to the author, "Current law
does not require car dealers to disclose or fix an open recall
on a vehicle before selling it. In 2011, nearly 100,000 used
cars with open recalls were for sale online in California.
Open recalls can be a serious safety issue and should be fixed
by the manufacturer before a dealer sells it to California
consumers. Car dealers do not incur the cost of having an
open recall fixed as it is currently the responsibility of the
manufacturer.
"Current law also provides that a car dealer cannot sell a
used car as 'certified' if [any of] a list of conditions,
including flood or fire damage, have ?occurred to the vehicle.
If the car does have any one of those conditions, it can
still be sold, just not as a certified car and is not required
to be disclosed to consumers. AB 964 updates the law and
ensures that all consumers are informed about these conditions
before purchasing the car. These disclosures will help
protect consumers who cannot afford to purchase a certified
used car."
3)Certification . Existing law does not precisely define what a
"certified" vehicle is or who may perform the certification,
but it does define what a "certified" vehicle is not. Vehicle
manufacturers will use a "factory certified" designation that
includes a vehicle inspection and extends a vehicle's warranty
beyond the initial coverage. Carmax, a company that sells
used cars but is unaffiliated with a vehicle manufacturer,
also has a vehicle certification program base on its own
inspection criteria. Not all certified vehicles include
extended warranty coverage.
4)The Car Buyer's Bill of Rights . The Car Buyer's Bill of
Rights, established pursuant to AB 68 (Montaņez), Chapter 128,
Statutes of 2005, prohibits car dealers from advertising or
selling a used vehicle as "certified" if certain conditions
are present, including odometer rollbacks, salvage titles, and
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damage that substantially impairs the vehicle's use or safety.
This bill would add another prohibited condition to that
particular statute: that the dealer knows or should have
known that the vehicle is subject to a manufacturer's safety
recall. According to a March 2013 Today News article provided
by the author's office, "Last year, more than 2 million used
cars [listed for sale] had unfixed recalls according to a new
survey by Carfax, including defects that could cause car fires
and loss of control on the road - even rollovers."
This bill also requires car dealers to disclose certain
vehicle conditions to the buyer for non-certified used cars if
the transaction is conducted primarily in Spanish, Chinese,
Tagalog, Vietnamese, or Korean. The author's intent is to
provide additional information to consumers outside of the
certified vehicle market so they can make a more informed
purchase. The sponsor contends that the average car buyer
will not have sufficient mechanical knowledge to determine the
condition of a used car and whether or not it needs costly
repairs. Therefore, the consumer must currently rely on the
car dealer to voluntarily disclose any problems with a
non-certified used car. This bill would change that dynamic
by requiring the disclosure of relevant information to
consumers who negotiated in the specified languages.
According to the author's office, the apparent exclusion of
English from the eligible languages was an oversight that may
be fixed by a technical amendment.
5)FTC's consumer guidance for buying a used car . The Federal
Trade Commission (FTC) recommends that a consumer do thorough
research before purchasing a used vehicle, and provides
helpful consumer information on its Web site. For example,
the FTC recommends consumers use an inspection checklist, test
drive the vehicle, request maintenance records, determine the
value of a vehicle, and hire a mechanic to inspect a car, so
the consumer has a better sense of the true costs of acquiring
a used vehicle. The consumer can then use that information to
negotiate more equitable price with a car dealer or private
owner.
In addition, the FTC Web site also points out that there are
several databases a consumer can use to gather information
about a vehicle's history. It states, "The Department of
Justice's National Motor Vehicle Title Information System
(NMVTIS) offers information about a vehicle's title, odometer
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data, and certain damage history? The National Insurance
Crime Bureau maintains a free database that includes flood
damage and other information so you can investigate a car's
history by its VIN. You can also search online for companies
that sell vehicle history reports."
6)Federal law on vehicle safety recall information . In 2012,
Congress enacted the MAP-21 Act, which required motor vehicle
safety recall information to be posted online and searchable
by vehicle make, model, and VIN. This includes information
about each recall that has not been completed for each
vehicle. U.S. DOT is required to promulgate regulations by
July 6, 2013 requiring each vehicle manufacturer to provide
specified vehicle recall information on a public Web site and
to car dealers. Those regulations have not yet been
promulgated, but the requirement may be helpful for the
implementation of this bill if car dealers and consumers can
easily access voluntary and mandatory vehicle recall
information via a Web site instead of contacting vehicle
manufacturers directly.
7)Mandatory vs. voluntary recalls . Recalls are issued for car
parts only; a whole vehicle is never recalled. This bill
applies to all vehicle manufacturer safety recalls, both
voluntary and mandatory.
The National Highway Traffic Safety Administration (NHSTA)
collects national safety recall information from vehicle
manufacturers subject to mandatory recalls because of problems
found to be serious and potentially fatal. This information
is posted on NHSTA's affiliate Web site, and is searchable by
vehicle make and model. Currently, the Web site's database is
not searchable by VIN. However, once the federal regulations
are promulgated and vehicle manufacturers can share VIN
information, a safety vehicle recall will be searchable by VIN
online. This bill allows a car dealer or consumer to identify
whether an individual vehicle has been subject to a safety
recall and whether that repair was made.
There is a significant difference in the level of safety
concerns involved between a voluntary recall and a mandatory
one. A vehicle manufacturer may issue a voluntary safety
recall to address a defect in the performance, construction,
or component of a vehicle. In such a case, the manufacturer
will contact vehicle owners and cover the costs to correct the
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defect without involving the NHTSA. These voluntary recalls
are not posted online on NHTSA's affiliate Web site, but may
be posted on a vehicle manufacturer's Web site.
Conversely, a mandatory recall is one in which NHTSA has
received enough complaints and information about the operation
of a vehicle that it finds there is a significant threat to
public safety. NHTSA will perform an investigation with a
review by engineers and experts and work with the vehicle
manufacturer to recall vehicles. NHTSA may issue several
mandatory recalls each month.
Alerting consumers of safety recalls for used vehicles become
more challenging as the vehicles may change hands several
times. Currently, a car dealer must contact a manufacturer
directly to find out if a vehicle has been subject to a
manufacturer's voluntary safety recall. This bill would
require a car dealer to contact a manufacturer to determine
whether there are any voluntary safety recalls for each used
vehicle make and model it sells, and then identify whether an
individual vehicle has been repaired or not based on the car's
VIN.
In practice, AB 964 would transfer the responsibility of
safety recall notification from the vehicle manufacturer to
the used car dealer. This bill may inform consumers about
outstanding safety recall issues when buying used cars and may
encourage dealers to correct an issue prior to advertising the
used car for sale. This bill may be helpful given that used
cars may change hands multiple times and this makes it more
difficult for a manufacturer to track down and notify the
current owner of safety issues.
At the same time, this bill would require car dealers to
disclose a new type of information to buyers to highlight a
safety issue that manufacturers are responsible for fixing.
Currently, there is no law requiring car dealers to fix safety
recalls. Car dealers would have to spend time continuously
querying manufacturers of each make and model of a used car
for sale to determine if a new voluntary safety recall has
been issued.
8)Vehicle history reports . Current law prohibits a car dealer
from deceptive business practices, including attempting to
defraud or mislead consumers. Car dealers, to protect
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themselves against liability issues, will purchase vehicle
history reports from companies such as Carfax, which compiles
vehicle accident history information from various entities,
including the Department of Motor Vehicles, insurance
companies, and law enforcement. Consumers can also purchase
vehicle history reports prior to buying a used car in order to
find out if there hidden problems that are not obvious with a
visual inspection of the vehicle. The vehicle history reports
include data that is collected, although the reports do not
list vehicle history information that must be provided in
every report, and may or may not include the disclosure
provisions required of car dealers for non-certified used
vehicles contained within this bill.
9)Questions for the Committee . In order to take advantage of the
expected regulations for a national recall database and to
align California and federal recall disclosure provisions, the
Committee may wish to consider inquire of the author as to
whether or not this bill would be improved by adding a delayed
implementation date of 180 days following the issuance of the
MAP-21 regulations. This would allow car dealers and
consumers to easily discover online if a safety recall exists
for a vehicle, instead of individually contacting each
manufacturer directly.
Because the bill as written prohibits the sale of cars as
"certified" if those cars are subject to a manufacturer's
safety recall, but a car can be made safe if the problem is
corrected, the author may wish to consider a clarifying
amendment that states that a vehicle may be sold as certified
if the problem raised by the recall has been properly
repaired.
10)Suggested Committee Amendments . According to the Assembly
Judiciary Committee, the 4/25 amendments mistakenly omitted to
delete an obsolete subsection. The Committee recommends
rectifying that error with a technical amendment to delete
that section.
On page 4, strike lines 10-13
The bill in its current form provides consumers with important
written disclosures about non-certified vehicles, but only if
the transaction was conducted in Spanish, Chinese, Tagalog,
Vietnamese or Korean. According to the author's office, the
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apparent exclusion of English from the list of eligible
languages was a drafting error requiring a technical
amendment.
On page 3, strike lines 25-26 and insert "providing the
buyer written disclosure, in English or in one of the
languages specified in subdivision (b) of Section 1632 of
the Civil Code depending on the language primarily used to
negotiate the transaction, identifying"
11)Arguments in support . According to the sponsor, the LBA,
this bill "improves protections for consumers who cannot
afford to purchase a new or certified used car. The current
law, the Car Buyers Bill of Rights, has protected millions of
car consumers. However, there is one area that it did not
address - used cars that are not certified.
"Specifically, the current law does not allow car dealers to
'certify' a used vehicle if they know it has [sustained]
certain damage, such as previous flood and fire damage, frame
damage, and an odometer rollback. However, a dealer does not
have any obligations to inform consumers about a vehicle's
history - beyond the basic information the NMVTIS provides -
when they sell a used call that is not certified.
"[The LBA] wants to ensure that when anyone buys a car -
whether they can afford a certified used car or not - has as
many facts about the car that is available."
12)Arguments in opposition . According to the California New Car
Dealers Association, "AB 964 wrongly targets all car dealers
for a problem that has been brought about by the rental car
industry. The rental car industry has faced scrutiny in
recent years for renting defective vehicles to consumer
despite being informed of open safety recalls? Rather than
focusing on rental car companies, AB 964 targets every dealer
seeking to 'certify' a vehicle - regardless of how minor the
recall is, or whether the dealer has access to information
about the recall.
"Changing the focus of regulation from rental car companies
creates more, not less, compliance issues. While a rental car
company is notified directly by the manufacturer when a
vehicle it owns is recalled, car dealers receive no such
notification (unless franchised to sell that make)? Nor does
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that dealer have access to information concerning whether the
vehicle has been recalled, or, if so, whether the defect has
been repaired?
"Congress passed legislation last year requiring the creation
of a free Internet database - searchable by make, model, and
VIN - containing information about each recall and whether it
has been completed for each individual vehicle? Until this
database is operational, compliance with AB 984 would be
impossible."
According to the Consumers for Auto Reliability and Safety,
"This is a fundamentally flawed bill that would actually
weaken protections for vulnerable, low-income used car buyers
who are already often preyed upon by unscrupulous auto
dealers. It would be particularly harmful to consumers who
are monolingual or may have literacy issues, and who cannot
afford to purchase newer, more expensive vehicles, yet need a
car in order to get to work, transport their families, and
obtain the necessities of life?
"[This bill] allows auto dealers to sell used cars with
serious problems that may be life-threatening, if they merely
give "written disclosure" to the buyers. However, those
disclosures are not required to be clear or conspicuous, or in
plain language, so they could easily be hidden in fine print
or incomprehensible legalese."
13)Related legislation . SB 686 (Jackson) of 2013 would prohibit
a car dealer from selling, leasing, displaying, renting, or
loaning a new or used vehicle, as specified, if the car has a
defect that is subject to a manufacturer's safety recall,
unless the car has been repaired to correct the defect. SB
686 is pending in the Senate Judiciary Committee.
14)Previous legislation . AB 1215 (Blumenfield), Chapter 329,
Statutes of 2001, requires new car dealers to participate in a
program to electronically title and register vehicles that
they sell and to post specified warning notices on some used
cars.
SB 990 (Vargas) of 2012 would have allowed a car dealer
selling a used car to obtain data from a commercial entity,
rather than the federal government, to provide required
information to consumers on the vehicle's title history. AB
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990 was held in the Senate Transportation and Housing
Committee.
AB 68 (Montaņez), Chapter 128, Statutes of 2005, enacts the
Car Buyer's Bill of Rights, provided that a car dealer may not
advertise of sell as "certified" a used or pre-owned motor
vehicle, as defined, unless specified conditions are
satisfied, and further provided that vehicles sold as
"certified" may not be sold "as is," or if the dealer has
disclaimed any warranties.
15)Double-referred . This bill was heard by the Assembly
Judiciary Committee on April 22, 2013 and approved by a 7-3
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Latin Business Association (sponsor)
California Hispanic Chambers of Commerce
California Urban Partnership
Opposition
California Financial Services Association
California Immigrant Policy Center
California New Car Dealers Association
Consumer Federation of California
Consumer Watchdog
Consumers for Auto Reliability and Safety
Independent Automobile Dealers Association of California
The Trauma Foundation
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301