AB 287, as amended, Gordon. Vehicle safety: recalls.
Existing law generally regulates the transfer and registration of motor vehicles. Existing federal law requires a motor vehicle manufacturer to notify the owner or purchaser of a motor vehicle when the manufacturer determines that the vehicle contains a safety-related defect or when the manufacturer is ordered by the federal Secretary of Transportation to notify vehicle owners and purchasers that a vehicle has a safety-related defect. Existing federal law also prohibits a motor vehicle dealer from selling a vehicle if it has been notified of a safety-related defect by the manufacturer, except as specified.
This bill would enact the Consumer Automotive Recall Safety Act, which would be operative on and after July 1, 2016. The act would require a vehicle manufacturer to display notifications of Stop Sale - Stop Drive recalls, as defined, on the manufacturer’s Internet Web site. The act would require a vehicle manufacturer to provide a rental or loaner car for a consumer who seeks to have a vehicle repaired because of a recall but the parts or procedures are not yet available to perform the repair. The act would also require a vehicle manufacturer to compensate its franchisees, as specified, for costs incurred in providing a loaner or rental car and storing a consumer’s vehicle that is subject to recall if the parts or procedures are not yet available to perform the repair.end delete
The act would prohibit a vehicle dealer from displaying or offering for sale at retail a used vehicle, unless the dealer has obtained a recall database report within 30 days of the display or offer. The act would prohibit a vehicle dealer from selling or leasing a vehicle at retail if the used vehicle is subject to a Stop Sale - Stop Drive recall, until the recalled vehicle has been repaired, subject to exception. The act would prohibit a rental car company from renting a vehicle that is subject to a recall, until the recalled vehicle has been repaired, as specified. By creating new prohibitions, the violation of which would be a crime under existing law, this bill would impose a state-mandated local program.end delete
Existing law establishes the New Motor Vehicle Board in the Department of Motor Vehicles, and requires the board to hear and decide certain protests presented by a motor vehicle franchisee in regard to a dispute with the vehicle manufacturer.end delete
This bill would, commencing July 1, 2016, authorize the board to hear and decide protests by franchisees regarding payments for providing a loaner or rental car and storing a consumer’s vehicle subject to recall if the parts or procedures are not yet available to perform the repair. The bill would make additional conforming changes.end delete
Existing law requires the Department of Motor Vehicles to issue a certificate of ownership to the legal owner of a vehicle upon registering a vehicle, and requires the certificate of ownership to contain specified information, including the information required upon the face of the registration card.end delete
This bill would additionally require the certificate of ownership to contain a provision for a recall disclosure statement, as specified.end delete
Under existing law, a vehicle manufacturer, manufacturer branch, distributor, and distributor branch are prohibited from engaging in specified practices. Existing law makes a violation of these prohibitions a crime.end delete
This bill would, commencing July 1, 2016, include within those prohibited practices, unfairly discriminating among franchisees with respect to reimbursement for costs incurred in providing a loaner or rental car and storing a consumer’s vehicle that is subject to recall if the parts or procedures are not yet available to perform the repair. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.end delete
The bill would state findings and declarations of the Legislature relative to vehicle recalls.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
(a) The Legislature finds and declares all of the
3(1) Over the past one-half decade, automakers and the National
4Highway Traffic Safety Administration have issued more recalls
5on new and used motor vehicles than ever before. The year 2014
6set the record for the most recalls on vehicles in United States
7history with over 63.8 million vehicles recalled. The rate of vehicle
8recalls has exponentially grown over this past one-half decade as
P5 1 22 million recalls were
begin delete 2013end delete and 16.2 million were issued in 2012. The
3increase of recalls in 2014 is a 190 percent increase from 2013 and
4a 293.8 percent increase from 2012.
5(2) While federal motor vehicle safety standards are more
6demanding now than at any other point in time and new vehicles
7sold today are the safest in history, the exponential growth of
8recalls issued on motor vehicles has caused confusion and apathy
9for far too many Californians. According to the National Highway
10Traffic Safety Administration and others, about one-third of all
11recalled vehicles are never repaired by the vehicle’s owner.
12(3) Federal regulations now require most vehicle manufacturers
13to provide motor vehicle safety recall information applicable to
14the vehicles they manufacture on the Internet and to the public.
begin delete15 Dealers, rental car companies, and private parties offering vehicles
16for sale or rent now have greater access to recall information than
17ever before.end delete
18(4) Federal law imposes a requirement not to sell a new vehicle
19subject to a recall, but neither federal nor California law addresses
20used vehicles subject to a recall. It is the intent of this act to address
21used vehicles subject to a recall that are not yet repaired.
22(b) Accordingly, it is the intent of the Legislature in enacting
23this act to increase consumer awareness of
begin delete recalls in the car
24purchasing and rental process,end delete
25 to ensure that consumers have access to loaner and rental vehicles
begin delete while their recalled vehicles are being repaired at a new motor
27vehicle dealer, and to ensure that a recalled vehicle that poses a
28risk of imminent harm is not sold or rented to Californians until
29the risk is removed and the vehicle is repaired.end delete
32(c) The Legislature further finds and declares all of the
34(1) The distribution, sale, and service of new motor vehicles in
35the State of California vitally
begin delete affectsend delete the general economy
36of this state and the public welfare.
37(2) The new motor vehicle franchise system, which operates
38within a strictly defined and highly regulated statutory scheme,
39assures the consuming public of a well-organized distribution
40system for the availability and sale of new motor vehicles
P6 1throughout the state, provides a network of quality warranty, recall,
2and repair facilities to maintain those vehicles, and creates a
3cost-effective method for the state to police those systems through
4the licensing and regulation of private sector franchisors and
6(3) Franchisors sometimes establish programs to reimburse
7 franchisees for loaner or rental cars given to consumers whose
8vehicles have been recalled, but California franchise laws fail to
9establish guidelines for rental or loaner vehicle reimbursement.
11 California franchise laws require manufacturers to provide
12reasonable reimbursement to dealers for warranty and recall work,
begin delete failsend delete to establish guidelines for compensating franchisee
begin delete costs associated with recalled vehicles that cannot be repaired and
15remain in the franchisee’s possession.end delete
17(d) Accordingly, it is the intent of the Legislature in enacting
18this act to ensure that new motor vehicle dealer franchisees are
19treated fairly by their
begin delete franchisors, that new motor vehicle dealer
20franchisees are reasonably reimbursed for providing loaner or
21rental vehicles to consumers who have recalled vehicles when the
22parts or procedures to make the recall repair are not available, and
23that new motor vehicle dealer franchisees are reasonably
24compensated for recalled vehicles at their dealerships that cannot
25immediately be repaired and must be stored by the franchisee at
26the dealership.end delete
Section 3050 of the Vehicle Code is amended to read:
The board shall do all of the following:
31(a) Adopt rules and regulations in accordance with Chapter 3.5
32(commencing with Section 11340) of Part 1 of Division 3 of Title
332 of the Government Code governing those matters that are
34specifically committed to its jurisdiction.
35(b) Hear and determine, within the limitations and in accordance
36with the procedure provided, an appeal presented by an applicant
37for, or holder of, a license as a new motor vehicle dealer,
38manufacturer, manufacturer branch, distributor, distributor branch,
39or representative when the applicant or licensee submits an appeal
P7 1provided for in this chapter from a decision arising out of the
3(c) Consider any matter concerning the activities or practices
4of any person applying for or holding a license as a new motor
5vehicle dealer, manufacturer, manufacturer branch, distributor,
6distributor branch, or representative pursuant to Chapter 4
7(commencing with Section 11700) of Division 5 submitted by any
8person. A member of the board who is a new motor vehicle dealer
9may not participate in, hear, comment, advise other members upon,
10or decide any matter considered by the board pursuant to this
11subdivision that involves a dispute between a franchisee and
12franchisor. After that consideration, the board may do any one or
13any combination of the following:
14(1) Direct the department to conduct investigation of matters
15that the board deems reasonable, and make a written report on the
16results of the investigation to the board within the time specified
17by the board.
18(2) Undertake to mediate, arbitrate, or otherwise resolve any
19honest difference of opinion or viewpoint existing between any
20member of the public and any new motor vehicle dealer,
21manufacturer, manufacturer branch, distributor, distributor branch,
23(3) Order the department to exercise any and all authority or
24power that the department may have with respect to the issuance,
25renewal, refusal to renew, suspension, or revocation of the license
26of any new motor vehicle dealer, manufacturer, manufacturer
27branch, distributor, distributor branch, or representative as that
28license is required under Chapter 4 (commencing with Section
2911700) of Division 5.
30(d) Hear and decide, within the limitations and in accordance
31with the procedure provided, a protest presented by a franchisee
32pursuant to Section 3060, 3062, 3064, 3065, 3065.1, 3065.2, 3070,
333072, 3074, 3075, or 3076. A member of the board who is a new
34motor vehicle dealer may not participate in, hear, comment, advise
35other members upon, or decide, any matter involving a protest
36filed pursuant to Article 4 (commencing with Section 3060), unless
37all parties to the protest stipulate otherwise.
38(e) Notwithstanding subdivisions (c) and (d), the courts have
39jurisdiction over all common law and statutory claims originally
P8 1cognizable in the courts. For those claims, a party may initiate an
2action directly in any court of competent jurisdiction.
Section 3065.2 is added to the Vehicle Code, to read:
(a) A claim made by a franchisee for payment under
5Section 11760 shall be either approved or disapproved within 30
6days after receipt by the franchisor. When a claim is disapproved,
7the franchisee who submits it shall be notified in writing of its
8disapproval within the required period, and each notice shall state
9the specific grounds upon which the disapproval is based. Any
10claim not specifically disapproved in writing within 30 days from
11receipt shall be deemed approved on the 30th day.
12(b) Franchisee claims for compensation under Section 11760
13shall not be disapproved unless the claim is false or fraudulent,
14the claim is ineligible under the statute, or for material
15 noncompliance with reasonable and nondiscriminatory
16requirements of the franchisor, including documentation and
17administrative claims submission requirements.
18(c) The franchisor shall provide a reasonable appeal process
19allowing the franchisee at least 30 days after receipt of the written
20disapproval notice to respond to any disapproval with additional
21supporting documentation or information rebutting the disapproval.
22If disapproval is based upon noncompliance with documentation
23or administrative claims submission requirements, the franchisor
24shall allow the franchisee at least 30 days from the date of receipt
25of the written disapproval notice to cure any material
26noncompliance. If the disapproval is rebutted, and material
27noncompliance is cured before the applicable deadline, the
28franchisor shall approve the claim.
29(d) If the franchisee provides additional supporting
30documentation or information purporting to rebut the disapproval,
31attempts to cure noncompliance relating to the claim, or otherwise
32appeals denial of the claim, and the franchisor continues to deny
33the claim, the franchisor shall provide the franchisee with a written
34notification of the final denial within 30 days of completion of the
35appeal process, which shall conspicuously state “Final Denial” on
36the first page.
37(e) Following the disapproval of a claim, a franchisee shall have
38six months from receipt of the written notice described in either
39subdivision (a) or (d), whichever is later, to file a protest with the
40board for determination of whether the franchisor complied with
P9 1subdivisions (a), (b), (c), and (d). In any hearing pursuant to this
2subdivision or subdivision (a), (b), (c), or (d), the franchisor shall
3have the burden of proof.
4(f) A claim made by franchisees under this section shall be paid
5within 30 days following approval. Failure to approve or pay within
6the time limits specified in this section, in individual instances for
7reasons beyond the reasonable control of the franchisor, is not a
8violation of this section.
9(g) (1) Audits of franchisee records for payment under Section
1011760 may be conducted by the franchisor on a reasonable basis,
11and for a period of nine months after a claim is paid or credit
12issued. A franchisor shall not select a franchisee for an audit, or
13perform an audit, in a punitive, retaliatory, or unfairly
14discriminatory manner. A franchisor may conduct no more than
15one random audit of a franchisee in a nine-month period. The
16franchisor’s notification to the franchisee of any additional audit
17within a nine-month period shall be accompanied by written
18disclosure of the basis for that additional audit.
19(2) Previously approved claims shall not be disapproved and
20charged back unless the claim is false or fraudulent, the claim is
21ineligible under the statute, or for material noncompliance with
22reasonable and nondiscriminatory requirements of the franchisor,
23including documentation and administrative claims submission
24requirements. A franchisor shall not disapprove a claim or
25chargeback a claim based upon an extrapolation from a sample of
26claims, unless the sample of claims is selected randomly and the
27extrapolation is performed in a reasonable and statistically valid
29(3) If the franchisor disapproves of a previously approved claim
30following an audit, the franchisor shall provide to the franchisee,
31within 30 days after the audit, a written disapproval notice stating
32the specific grounds upon which the claim is disapproved. The
33franchisor shall provide a reasonable appeal process allowing the
34franchisee a reasonable period of not less than 30 days after receipt
35of the written disapproval notice to respond to any disapproval
36with additional supporting documentation or information rebutting
37the disapproval and to cure any material noncompliance, with the
38period to be commensurate with the volume of claims under
39consideration. If the franchisee rebuts any disapproval and cures
40any material noncompliance relating to a claim before the
P10 1applicable deadline, the franchisor shall not chargeback the
2franchisee for that claim.
3(4) If the franchisee provides additional supporting
4documentation or information purporting to rebut the disapproval,
5attempts to cure noncompliance relating to the claim, or otherwise
6appeals denial of the claim, and the franchisor continues to deny
7the claim, the franchisor shall provide the franchisee with a written
8notification of the final denial within 30 days of completion of the
9appeal process, which shall conspicuously state “Final Denial” on
10the first page.
11(5) The franchisor shall not chargeback the franchisee until 45
12days after the franchisee receives the written notice described in
13paragraph (3) or (4), whichever is later. If the franchisee cures any
14material noncompliance relating to a claim, the franchisor shall
15not chargeback the dealer for that claim. Any chargeback to a
16franchisee under Section 11760 shall be made within 90 days after
17the franchisee receives that written notice. If the board sustains
18the chargeback or the protest is dismissed, the franchisor shall
19have 90 days following issuance of the final order or the dismissal
20to make the chargeback, unless otherwise provided in a settlement
22(6) Within six months after receipt of the written notice
23described in either paragraph (3) or (4), a franchisee may file a
24protest with the board for determination of whether the franchisor
25complied with this subdivision. If the franchisee files a protest
26pursuant to this subdivision prior to the franchisor’s chargeback
27for denied claims, the franchisor shall not offset or otherwise
28undertake to collect the chargeback until the board issues a final
29order on the protest. In any protest pursuant to this subdivision,
30the franchisor shall have the burden of proof.
31(h) If a false claim
was submitted by a franchisee with the intent
32to defraud the franchisor, a longer period for audit and any resulting
33chargeback may be permitted if the franchisor obtains an order
34from the board.
35(i) This section shall become operative on July 1, 2016.
Section 3066 of the Vehicle Code is amended to read:
(a) Upon receiving a protest pursuant to Section 3060,
383062, 3064, 3065, 3065.1, 3065.2, 3070, 3072, 3074, 3075, or
393076, the board shall fix a time within 60 days of the order, and
40place of hearing, and shall send by registered mail a copy of the
P11 1order to the franchisor, the protesting franchisee, and all individuals
2and groups that have requested notification by the board of protests
3and decisions of the board. Except in a case involving a franchisee
4who deals exclusively in motorcycles, the board or its executive
5director may, upon a showing of good cause, accelerate or postpone
6the date initially established for a hearing, but the hearing may not
7be rescheduled more than 90 days after the board’s initial order.
8For the purpose of accelerating or postponing a hearing date, “good
9cause” includes, but is not limited to, the effects upon, and any
10irreparable harm to, the parties or interested persons or groups if
11the request for a change in hearing date is not granted. The board
12or an administrative law judge designated by the board shall hear
13and consider the oral and documented evidence introduced by the
14parties and other interested individuals and groups, and the board
15shall make its decision solely on the record so made. Chapter 4.5
16(commencing with Section 11400) of Part 1 of Division 3 of Title
172 of the Government Code and Sections 11507.3, 11507.6, 11507.7,
1811511, 11511.5, 11513, 11514, 11515, and 11517 of the
19Government Code apply to these proceedings.
20(b) In a hearing on a protest filed pursuant to Section 3060,
213062, 3070, or 3072, the franchisor shall have the burden of proof
22to establish that there is good cause to modify, replace, terminate,
23or refuse to continue a franchise. The franchisee shall have the
24burden of proof to establish that there is good cause not to enter
25into a franchise establishing or relocating an additional motor
27(c) Except as otherwise provided in this chapter, in a hearing
28on a protest alleging a violation of, or filed pursuant to, Section
293064, 3065, 3065.1, 3065.2, 3074, 3075, or 3076, the franchisee
30shall have the burden of proof, but the franchisor has the burden
31of proof to establish that a franchisee acted with intent to defraud
32the franchisor when that issue is material to a protest filed pursuant
33to Section 3065, 3065.1, 3065.2, 3075, or 3076.
34(d) A member of the board who is a new motor vehicle
35may not participate in, hear, comment, or advise other members
36upon, or decide, a matter involving a protest filed pursuant to this
37article unless all parties to the protest stipulate otherwise.
Section 4451 of the Vehicle Code is amended to read:
(a) The certificate of ownership shall contain all of the
P12 1(1) Not less than the information required upon the face of the
3(2) Provision for notice to the department of a transfer of the
4title or interest of the owner or legal owner.
5(3) Provision for application for transfer of registration by the
7(4) Provision for an odometer disclosure statement pursuant to
8subsection (a) of Section 32705 of Title 49 of the United States
10(5) Commencing July 1, 2016, or as soon thereafter as the
11department exhausts its supply of existing certificate of ownership
12forms, provision for a recall disclosure statement pursuant to
14(b) Notwithstanding paragraph (5) of subdivision (a), a
15certificate of ownership previously issued by the department prior
16to July 1, 2016, and in the possession of a registered owner remains
17valid for the transfer of registration of a vehicle.
Section 11713.3 of the Vehicle Code is amended to
It is unlawful and a violation of this code for a
21manufacturer, manufacturer branch, distributor, or distributor
22branch licensed pursuant to this code to do, directly or indirectly
23through an affiliate, any of the following:
24(a) To refuse or fail to deliver in reasonable quantities and within
25a reasonable time after receipt of an order from a dealer having a
26franchise for the retail sale of a new vehicle sold or distributed by
27the manufacturer or distributor, a new vehicle or parts or
28accessories to new vehicles as are covered by the franchise, if the
29vehicle, parts, or accessories are publicly advertised as being
30available for delivery or actually being delivered. This subdivision
31is not violated, however, if the failure is caused by acts or causes
32beyond the control of the manufacturer, manufacturer branch,
33distributor, or distributor branch.
34(b) To prevent or require, or attempt to prevent or require, by
35contract or otherwise, a change in the capital structure of a
36dealership or the means by or through which the dealer finances
37the operation of the dealership, if the dealer at all times meets
38reasonable capital standards agreed to by the dealer and the
39manufacturer or distributor, and if a change in capital structure
40does not cause a change in the principal management or have the
P13 1effect of a sale of the franchise without the consent of the
2manufacturer or distributor.
3(c) To prevent or require, or attempt to prevent or require, a
4dealer to change the executive management of a dealership, other
5than the principal dealership operator or operators, if the franchise
6was granted to the dealer in reliance upon the personal
7qualifications of that person.
8(d) (1) Except as provided in subdivision (t), to prevent or
9require, or attempt to prevent or require, by contract or otherwise,
10a dealer, or an officer, partner, or stockholder of a dealership, the
11sale or transfer of a part of the interest of any of them to another
12person. A dealer, officer, partner, or stockholder shall not, however,
13have the right to sell, transfer, or assign the franchise, or a right
14thereunder, without the consent of the manufacturer or distributor
15except that the consent shall not be unreasonably withheld.
16(2) (A) For the
transferring franchisee to fail, prior to the sale,
17transfer, or assignment of a franchisee or the sale, assignment, or
18transfer of all, or substantially all, of the assets of the franchised
19business or a controlling interest in the franchised business to
20another person, to notify the manufacturer or distributor of the
21franchisee’s decision to sell, transfer, or assign the franchise. The
22notice shall be in writing and shall include all of the following:
23(i) The proposed transferee’s name and address.
24(ii) A copy of all of the agreements relating to the sale,
25assignment, or transfer of the franchised business or its assets.
26(iii) The proposed transferee’s application for approval to
27become the successor franchisee. The application shall include
28forms and related information generally utilized by the
29manufacturer or distributor in reviewing prospective franchisees,
30if those forms are readily made available to existing franchisees.
31As soon as practicable after receipt of the proposed transferee’s
32application, the manufacturer or distributor shall notify the
33franchisee and the proposed transferee of information needed to
34make the application complete.
35(B) For the manufacturer or distributor, to fail, on or before 60
36days after the receipt of all of the information required pursuant
37to subparagraph (A), or as extended by a written agreement
38between the manufacturer or distributor and the franchisee, to
39notify the franchisee of the approval or the disapproval of the sale,
40transfer, or assignment of the franchise. The notice shall be in
P14 1writing and shall be personally served or sent by certified mail,
2return receipt requested, or by guaranteed overnight delivery
3service that provides verification of delivery and shall be directed
4to the franchisee. A proposed sale, assignment, or transfer shall
5be deemed approved, unless disapproved by the franchisor in the
6manner provided by this subdivision. If the proposed sale,
7assignment, or transfer is disapproved, the franchisor shall include
8in the notice of disapproval a statement setting forth the reasons
9for the disapproval.
10(3) In an action in which the manufacturer’s or distributor’s
11withholding of consent under this subdivision or subdivision (e)
12is an issue, whether the withholding of consent was unreasonable
13is a question of fact requiring consideration of all the existing
15(e) To prevent, or attempt to prevent, a dealer from receiving
16fair and reasonable compensation for the value of the franchised
17business. There shall not be a transfer or assignment of the dealer’s
18franchise without the consent of the manufacturer or distributor,
19which consent shall not be unreasonably withheld or conditioned
20upon the release, assignment, novation, waiver, estoppel, or
21modification of a claim or defense by the dealer.
22(f) To obtain money, goods, services, or another benefit from
23a person with whom the dealer does business, on account of, or in
24relation to, the transaction between the dealer and that other person,
25other than for compensation for services rendered, unless the
26benefit is promptly accounted for, and transmitted to, the dealer.
27(g) (1) Except as provided in paragraph (3), to obtain from a
28dealer or enforce against a dealer an agreement, provision, release,
29assignment, novation, waiver, or estoppel that does any of the
31(A) Modifies or disclaims a duty or obligation of a manufacturer,
32manufacturer branch, distributor, distributor branch, or
33representative, or a right or privilege of a dealer, pursuant to
34Chapter 4 (commencing with Section 11700) of Division 5 or
35Chapter 6 (commencing with Section 3000) of Division 2.
36(B) Limits or constrains the right of a dealer to file, pursue, or
37submit evidence in connection with a protest before the board.
38(C) Requires a dealer to terminate a franchise.
39(D) Requires a controversy between a manufacturer,
40manufacturer branch, distributor, distributor branch, or
P15 1representative and a dealer to be referred to a person for a binding
2determination. However, this subparagraph does not prohibit
3arbitration before an independent arbitrator, provided that whenever
4a motor vehicle franchise contract provides for the use of arbitration
5to resolve a controversy arising out of, or relating to, that contract,
6arbitration may be used to settle the controversy only if, after the
7controversy arises, all parties to the controversy consent in writing
8to use arbitration to settle the controversy. For the purpose of this
9subparagraph, the terms “motor vehicle” and “motor vehicle
10franchise contract” shall have the same meaning as defined in
11Section 1226 of Title 15 of the United States Code. If arbitration
12is elected to settle a dispute under a motor vehicle franchise
13contract, the arbitrator shall provide the parties to the arbitration
14with a written explanation of the factual and legal basis for the
16(2) An agreement, provision, release, assignment, novation,
17waiver, or estoppel prohibited by this subdivision shall be
18unenforceable and void.
19(3) This subdivision does not do any of the following:
20(A) Limit or restrict the terms upon which parties to a protest
21before the board, civil action, or other proceeding can settle or
22resolve, or stipulate to evidentiary or procedural matters during
23the course of, a protest, civil action, or other proceeding.
24(B) Affect the enforceability of any stipulated order or
25order entered by the board.
26(C) Affect the enforceability of any provision in a contract if
27the provision is not prohibited under this subdivision or any other
29(D) Affect the enforceability of a provision in any contract
30entered into on or before December 31, 2011.
31(E) Prohibit a dealer from waiving its right to file a protest
32pursuant to Section 3065.1 if the waiver agreement is entered into
33after a franchisor incentive program claim has been disapproved
34by the franchisor and the waiver is voluntarily given as part of an
35agreement to settle that claim.
36(F) Prohibit a voluntary agreement supported by valuable
37consideration, other than granting or renewing a franchise, that
38does both of the following:
39(i) Provides that a dealer establish or maintain exclusive
40facilities, personnel, or display space or provides that a dealer
P16 1make a material alteration, expansion, or addition to a dealership
3(ii) Contains no waiver or other provision prohibited by
4subparagraph (A), (B), (C), or (D) of paragraph (1).
5(G) Prohibit an agreement separate from the franchise agreement
6that implements a dealer’s election to terminate the franchise if
7the agreement is conditioned only on a specified time for
8termination or payment of consideration to the dealer.
9(H) (i) Prohibit a
voluntary waiver agreement, supported by
10valuable consideration, other than the consideration of renewing
11a franchise, to waive the right of a dealer to file a protest under
12Section 3062 for the proposed establishment or relocation of a
13specific proposed dealership, if the waiver agreement provides all
14of the following:
15(I) The approximate address at which the proposed dealership
16will be located.
17(II) The planning potential used to establish the proposed
18dealership’s facility, personnel, and capital requirements.
19(III) An approximation of projected vehicle and parts sales, and
20number of vehicles to be serviced at the proposed dealership.
21(IV) Whether the
franchisor or affiliate will hold an ownership
22interest in the proposed dealership or real property of the proposed
23dealership, and the approximate percentage of any franchisor or
24affiliate ownership interest in the proposed dealership.
25(V) The line-makes to be operated at the proposed dealership.
26(VI) If known at the time the waiver agreement is executed, the
27identity of the dealer who will operate the proposed dealership.
28(VII) The date the waiver agreement is to expire, which may
29not be more than 30 months after the date of execution of the
31(ii) Notwithstanding the provisions of a waiver agreement
32entered into pursuant to the provisions of this subparagraph, a
33dealer may file a protest under Section 3062 if any of the
34information provided pursuant to clause (i) has become materially
35inaccurate since the waiver agreement was executed. Any
36determination of the enforceability of a waiver agreement shall be
37determined by the board and the franchisor shall have the burden
38 of proof.
39(h) To increase prices of motor vehicles that the dealer had
40ordered for private retail consumers prior to the dealer’s receipt
P17 1of the written official price increase notification. A sales contract
2signed by a private retail consumer is evidence of the order. In the
3event of manufacturer price reductions, the amount of the reduction
4received by a dealer shall be passed on to the private retail
5consumer by the dealer if the retail price was negotiated on the
6basis of the previous higher price to the dealer. Price reductions
7apply to all vehicles in the dealer’s inventory that were subject to
8the price reduction. Price differences applicable to new model or
9series motor vehicles at the time of the introduction of new models
10or series shall not be considered a price increase or price decrease.
11This subdivision does not apply to price changes caused by either
12of the following:
13(1) The addition to a motor vehicle of required or optional
14equipment pursuant to state or federal law.
15(2) Revaluation of the United States dollar in the case of a
17(i) To fail to pay to a dealer, within a reasonable time following
18receipt of a valid claim by a dealer thereof, a payment agreed to
19be made by the manufacturer or distributor to the dealer by reason
20of the fact that a new vehicle of a prior year model is in the dealer’s
21inventory at the time of introduction of new model vehicles.
22(j) To deny the widow, widower, or heirs designated by a
23deceased owner of a dealership the opportunity to participate in
24the ownership of the dealership or successor dealership under a
25valid franchise for a reasonable time after the death of the owner.
26(k) To offer refunds or other types of inducements to a person
27for the purchase of new motor vehicles of a certain line-make to
28be sold to the state or a political subdivision of the state without
29making the same offer to all other dealers in the same line-make
30within the relevant market area.
31(l) To modify, replace, enter into, relocate, terminate, or refuse
32to renew a franchise in violation of Article 4 (commencing with
33Section 3060) of Chapter 6 of Division 2.
34(m) To employ a person as a representative who has not been
35licensed pursuant to Article 3 (commencing with Section 11900)
36of Chapter 4 of Division 5.
37(n) To deny a dealer the right of free association with another
38dealer for a lawful purpose.
P18 1(o) (1) To compete with a dealer in the same line-make
2operating under an agreement or franchise from a manufacturer
3or distributor in the relevant market area.
4(2) A manufacturer, branch, or distributor or an entity that
5controls or is controlled by, a manufacturer, branch, or distributor,
6shall not, however, be deemed to be competing in the following
8(A) Owning or operating a dealership for a temporary period,
9not to exceed one year at the location of a former dealership of the
10same line-make that has been out of operation for less than six
11months. However, after a showing of good cause by a
12manufacturer, branch, or distributor that it needs additional time
13to operate a dealership in preparation for sale to a successor
14independent franchisee, the board may extend the time period.
15(B) Owning an interest in a dealer as part of a bona fide dealer
16development program that satisfies all of the following
18(i) The sole purpose of the program is to make franchises
19available to persons lacking capital, training, business experience,
20or other qualities ordinarily required of prospective franchisees
21and the dealer development candidate is an individual who is
22unable to acquire the franchise without assistance of the program.
23(ii) The dealer development candidate has made a significant
24investment subject to loss in the franchised business of the dealer.
25(iii) The program requires the dealer development candidate to
26manage the day-to-day operations and business affairs of the dealer
27and to acquire, within a reasonable time and on reasonable terms
28and conditions, beneficial ownership and control of a majority
29interest in the dealer and disassociation of any direct or indirect
30ownership or control by the manufacturer, branch, or distributor.
31(C) Owning a wholly owned subsidiary corporation of a
32distributor that sells motor vehicles at retail, if, for at least three
33years prior to January 1, 1973, the subsidiary corporation has been
34a wholly owned subsidiary of the distributor and engaged in the
35sale of vehicles at retail.
36(3) (A) A manufacturer, branch, and distributor that owns or
37operates a dealership in the manner described in subparagraph (A)
38of paragraph (2) shall give written notice to the board, within 10
39days, each time it commences or terminates operation of a
P19 1dealership and each time it acquires, changes, or divests itself of
2an ownership interest.
3(B) A manufacturer, branch, and distributor that owns an interest
4in a dealer in the manner described in subparagraph (B) of
5paragraph (2) shall give written notice to the board, annually, of
6the name and location of each dealer in which it has an ownership
7interest, the name of the bona fide dealer development owner or
8owners, and the ownership interests of each owner expressed as a
10(p) To unfairly discriminate among its franchisees with respect
11to warranty reimbursement or authority granted to its franchisees
12to make warranty adjustments with retail customers.
13(q) To sell vehicles to a person not licensed pursuant to this
14chapter for resale.
15(r) To fail to affix an identification number to a park trailer, as
16described in Section 18009.3 of the Health and Safety Code, that
17is manufactured on or after January 1, 1987, and that does not
18clearly identify the unit as a park trailer to the department. The
19configuration of the identification number shall be approved by
21(s) To dishonor a warranty, rebate, or other incentive offered
22to the public or a dealer in connection with the retail sale of a new
23motor vehicle, based solely upon the fact that an autobroker
24arranged or negotiated the sale. This subdivision shall not prohibit
25the disallowance of that rebate or incentive if the purchaser or
26dealer is ineligible to receive the rebate or incentive pursuant to
27any other term or condition of a rebate or incentive program.
28(t) To exercise a right of first refusal or other right requiring a
29franchisee or an owner of the franchise to sell, transfer, or assign
30to the franchisor, or to a nominee of the franchisor, all or a material
31part of the franchised business or of the assets of the franchised
32business unless all of the following requirements are met:
33(1) The franchise authorizes the franchisor to exercise a right
34of first refusal to acquire the franchised business or assets of the
35franchised business in the event of a proposed sale, transfer, or
37(2) The franchisor gives written notice of its exercise of the
38right of first refusal no later than 45 days after the franchisor
39receives all of the information required pursuant to subparagraph
40(A) of paragraph (2) of subdivision (d).
P20 1(3) The sale, transfer, or assignment being proposed relates to
2not less than all or substantially all of the assets of the franchised
3business or to a controlling interest in the franchised business.
4(4) The proposed transferee is neither a family member of an
5owner of the franchised business, nor a managerial employee of
6the franchisee owning 15 percent or more of the franchised
7business, nor a corporation, partnership, or other legal entity owned
8by the existing owners of the franchised business. For purposes of
9this paragraph, a “family member” means the spouse of an owner
10of the franchised business, the child, grandchild, brother, sister,
11or parent of an owner, or a spouse of one of those family members.
12This paragraph does not limit the rights of the franchisor to
13disapprove a proposed transferee as provided in subdivision (d).
14(5) Upon the franchisor’s exercise of the right of first refusal,
15the consideration paid by the franchisor to the franchisee and
16owners of the franchised business shall equal or exceed all
17consideration that each of them were to have received under the
18terms of, or in connection with, the proposed sale, assignment, or
19transfer, and the franchisor shall comply with all the terms and
20conditions of the agreement or agreements to sell, transfer, or
21assign the franchised business.
22(6) The franchisor shall reimburse the proposed transferee for
23expenses paid or incurred by the proposed transferee in evaluating,
24investigating, and negotiating the proposed transfer to the extent
25those expenses do not exceed the usual, customary, and reasonable
26fees charged for similar work done in the area in which the
27franchised business is located. These expenses include, but are not
28limited to, legal and accounting expenses, and expenses incurred
29for title reports and environmental or other investigations of real
30property on which the franchisee’s operations are conducted. The
31proposed transferee shall provide the franchisor a written
32itemization of those expenses, and a copy of all nonprivileged
33reports and studies for which expenses were incurred, if any, within
3430 days of the proposed transferee’s receipt of a written request
35from the franchisor for that accounting. The franchisor shall make
36payment within 30 days of exercising the right of first refusal.
37(u) (1) To unfairly discriminate in favor of a dealership owned
38or controlled, in whole or in part, by a manufacturer or distributor
39or an entity that controls or is controlled by the manufacturer or
P21 1distributor. Unfair discrimination includes, but is not limited to,
3(A) The furnishing to a franchisee or dealer that is owned or
4controlled, in whole or in part, by a manufacturer, branch, or
5distributor of any of the following:
6(i) A vehicle that is not made available to each franchisee
7pursuant to a reasonable allocation formula that is applied
8uniformly, and a part or accessory that is not made available to all
9franchisees on an equal basis when there is no reasonable allocation
10formula that is applied uniformly.
11(ii) A vehicle, part, or accessory that is not made available to
12each franchisee on comparable delivery terms, including the time
13of delivery after the placement of an order. Differences in delivery
14terms due to geographic distances or other factors beyond the
15control of the manufacturer, branch, or distributor shall not
16constitute unfair competition.
17(iii) Information obtained from a franchisee by the manufacturer,
18branch, or distributor concerning the business affairs or operations
19of a franchisee in which the manufacturer, branch, or distributor
20does not have an ownership interest. The information includes,
21but is not limited to, information contained in financial statements
22and operating reports, the name, address, or other personal
23information or buying, leasing, or service behavior of a dealer
24customer, and other information that, if provided to a franchisee
25or dealer owned or controlled by a manufacturer or distributor,
26would give that franchisee or dealer a competitive advantage. This
27clause does not apply if the information is provided pursuant to a
28subpoena or court order, or to aggregated information made
29available to all franchisees.
30(iv) Sales or service incentives, discounts, or promotional
31programs that are not made available to all California franchises
32of the same line-make on an equal basis.
33(B) Referring a prospective purchaser or lessee to a dealer in
34which a manufacturer, branch, or distributor has an ownership
35interest, unless the prospective purchaser or lessee resides in the
36area of responsibility assigned to that dealer or the prospective
37 purchaser or lessee requests to be referred to that dealer.
38(2) This subdivision does not prohibit a franchisor from granting
39a franchise to prospective franchisees or assisting those franchisees
40during the course of the franchise relationship as part of a program
P22 1or programs to make franchises available to persons lacking capital,
2training, business experience, or other qualifications ordinarily
3required of prospective franchisees.
4(v) (1) To access, modify, or extract information from a
5confidential dealer computer record, as defined in Section
611713.25, without obtaining the prior written consent of the dealer
7and without maintaining administrative, technical, and physical
8safeguards to protect the security, confidentiality, and integrity of
10(2) Paragraph (1) does not limit a duty that a dealer may have
11to safeguard the security and privacy of records maintained by the
13(w) (1) To use electronic, contractual, or other means to prevent
14or interfere with any of the following:
15(A) The lawful efforts of a dealer to comply with federal and
16state data security and privacy laws.
17(B) The ability of a dealer to do either of the following:
18(i) Ensure that specific data accessed from the dealer’s computer
19system is within the scope of consent specified in subdivision (v).
20(ii) Monitor specific data accessed from or written to the dealer’s
22(2) Paragraph (1) does not limit a duty that a dealer may have
23to safeguard the security and privacy of records maintained by the
25(x) (1) To unfairly discriminate against a franchisee selling a
26service contract, debt cancellation agreement, maintenance
27agreement, or similar product not approved, endorsed, sponsored,
28or offered by the manufacturer, manufacturer branch, distributor,
29or distributor branch or affiliate. For purposes of this subdivision,
30unfair discrimination includes, but is not limited to, any of the
32(A) Express or implied statements that the dealer is under an
33obligation to exclusively sell or offer to sell service contracts, debt
34cancellation agreements, or similar products approved, endorsed,
35sponsored, or offered by the manufacturer, manufacturer branch,
36distributor, or distributor branch or affiliate.
37(B) Express or implied statements that selling or offering to sell
38service contracts, debt cancellation agreements, maintenance
39agreements, or similar products not approved, endorsed, sponsored,
40or offered by the manufacturer, manufacturer branch, distributor,
P23 1or distributor branch or affiliate, or the failure to sell or offer to
2sell service contracts, debt cancellation agreements, maintenance
3agreements, or similar products approved, endorsed, sponsored,
4or offered by the manufacturer, manufacturer branch, distributor,
5or distributor branch or affiliate will have any negative
6consequences for the dealer.
7(C) Measuring a dealer’s performance under a franchise
8 agreement based upon the sale of service contracts, debt
9cancellation agreements, or similar products approved, endorsed,
10sponsored, or offered by the manufacturer, manufacturer branch,
11distributor, or distributor branch or affiliate.
12(D) Requiring a dealer to actively promote the sale of service
13contracts, debt cancellation agreements, or similar products
14approved, endorsed, sponsored, or offered by the manufacturer,
15manufacturer branch, distributor, or distributor branch or affiliate.
16(E) Conditioning access to vehicles or parts, or vehicle sales or
17service incentives upon the sale of service contracts, debt
18cancellation agreements, or similar products approved, endorsed,
19sponsored, or offered by the manufacturer, manufacturer branch,
20distributor, or distributor branch or affiliate.
21(2) Unfair discrimination does not include, and nothing shall
22prohibit a manufacturer from, offering an incentive program to
23vehicle dealers who voluntarily sell or offer to sell service
24contracts, debt cancellation agreements, or similar products
25approved, endorsed, sponsored, or offered by the manufacturer,
26manufacturer branch, distributor, or distributor branch or affiliate,
27if the program does not provide vehicle sales or service incentives.
28(3) This subdivision does not prohibit a manufacturer,
29manufacturer branch, distributor, or distributor branch from
30requiring a franchisee that sells a used vehicle as “certified” under
31a certified used vehicle program established by the manufacturer,
32manufacturer branch, distributor, or distributor branch to provide
33a service contract approved, endorsed, sponsored, or offered by
34the manufacturer, manufacturer branch, distributor, or distributor
36(4) Unfair discrimination does not include, and nothing shall
37prohibit a franchisor from requiring a franchisee to provide, the
38following notice prior to the sale of the service contract if the
39service contract is not provided or backed by the franchisor and
40the vehicle is of the franchised line-make:
2“Service Contract Disclosure
3The service contract you are purchasing is not provided or backed
4by the manufacturer of the vehicle you are purchasing. The
5manufacturer of the vehicle is not responsible for claims or repairs
6under this service contract.
8Signature of Purchaser”
10(y) To take or threaten to take any adverse action against a dealer
11pursuant to an export or sale-for-resale prohibition because the
12dealer sold or leased a vehicle to a customer who either exported
13the vehicle to a foreign country or resold the vehicle in violation
14of the prohibition, unless the export or sale-for-resale prohibition
15policy was provided to the dealer in writing prior to the sale or
16lease, and the dealer knew or reasonably should have known of
17the customer’s intent to export or resell the vehicle in violation of
18the prohibition at the time of sale or lease. If the dealer causes the
19vehicle to be registered in this or any other state, and collects or
20causes to be collected any applicable sales or use tax due to this
21state, a rebuttable presumption is established that the dealer did
22not have reason to know of the customer’s intent to export or resell
24(z) For purposes of this section, the term “area of responsibility”
25means a geographic area specified in a franchise that is used by
26the franchisor for the purpose of evaluating the franchisee’s
27performance of its sales and service obligations.
28(aa) Commencing July 1, 2016, to unfairly discriminate among
29its franchisees with respect to reimbursement or authority granted
30to its franchisees pursuant to subdivision (c) or (d) of Section
(a) Every franchisor shall properly fulfill every warranty
34agreement made by it and adequately and fairly compensate each
35of its franchisees for labor and parts used to fulfill that warranty
36when the franchisee has fulfilled warranty obligations of
37diagnostics, repair, and servicing and shall file a copy of its
38warranty reimbursement schedule or formula with the board. The
39warranty reimbursement schedule or formula shall be reasonable
40with respect to the time and compensation allowed to the franchisee
P25 1for the warranty diagnostics, repair,
begin delete andend delete servicing, and all other
2conditions of the
begin delete obligation.end delete The reasonableness of the warranty
5reimbursement schedule or formula shall be determined by the
6board if a franchisee files a protest with the board. A franchisor
7shall not replace, modify, or supplement the warranty
8reimbursement schedule to impose a fixed percentage or other
9reduction in the time and compensation allowed to the franchisee
10for warranty repairs not attributable to a specific repair. A
11franchisor may reduce the allowed time and compensation
12applicable to a specific warranty repair only upon 15 days’ prior
13written notice to the franchisee. Any protest challenging a reduction
14in time and compensation applicable to specific parts or labor
15operations shall be filed within six months following the
16franchisee’s receipt of notice of the reduction, and the franchisor
17shall have the burden of establishing the reasonableness of the
18reduction and adequacy and fairness of the resulting compensation.
19(b) In determining the adequacy and fairness of the
20compensation, the franchisee’s effective labor rate charged to its
21various retail customers may be considered together with other
22relevant criteria. If in a protest permitted by this section filed by
23any franchisee the board determines that the warranty
24reimbursement schedule or formula fails to provide adequate and
25fair compensation or fails to conform with the other requirements
26of this section, within 30 days after receipt of the board’s order,
27the franchisor shall correct the failure by amending or replacing
28the warranty reimbursement schedule or formula and implementing
29the correction as to all franchisees of the franchisor that are located
30in this state.
31(c) If any franchisor disallows a franchisee’s claim for a
32defective part, alleging that the part, in fact, is not defective, the
33franchisor shall return the part alleged not to be defective to the
34franchisee at the expense of the franchisor, or the franchisee shall
35be reimbursed for the franchisee’s cost of the part, at the
37(d) (1) All claims made by franchisees pursuant to this section
38shall be either approved or disapproved within 30 days after their
39receipt by the franchisor. Any claim not specifically disapproved
40in writing within 30 days from receipt by the franchisor shall be
P26 1deemed approved on the 30th day. All claims made by franchisees
2under this section and Section 3064 for labor and parts shall be
3paid within 30 days after approval.
4(2) A franchisor shall not disapprove a claim unless the claim
5is false or fraudulent, repairs were not properly made, repairs were
6inappropriate to correct a nonconformity with the written warranty
7due to an improper act or omission of the franchisee, or for material
8noncompliance with reasonable and nondiscriminatory
9documentation and administrative claims submission requirements.
10(3) When any claim is disapproved, the franchisee who submits
11it shall be notified in writing of its disapproval within the required
12period, and each notice shall state the specific grounds upon which
13the disapproval is based. The franchisor shall provide for a
14reasonable appeal process allowing the franchisee at least 30 days
15after receipt of the written disapproval notice to provide additional
16supporting documentation or information rebutting the disapproval.
17If disapproval is based upon noncompliance with documentation
18or administrative claims submission requirements, the franchisor
19shall allow the franchisee at least 30 days from the date of receipt
20of the notice to cure any material noncompliance. If the disapproval
21is rebutted, and material noncompliance is cured before the
22applicable deadline, the franchisor shall approve the claim.
23(4) If the franchisee provides additional supporting
24documentation or information purporting to rebut the disapproval,
25attempts to cure noncompliance relating to the claim, or otherwise
26appeals denial of the claim and the franchisor continues to deny
27the claim, the franchisor shall provide the franchisee with a written
28notification of the final denial within 30 days of completion of the
29appeal process, which shall conspicuously state “Final Denial” on
30the first page.
31(5) Failure to approve or pay within the above specified time
32limits, in individual instances for reasons beyond the reasonable
33control of the franchisor, shall not constitute a violation of this
35(6) Within six months after either receipt of the written notice
36described in paragraph (3) or (4), whichever is later, a franchisee
37may file a protest with the board for determination of whether the
38franchisor complied with the requirements of this subdivision. In
39any protest pursuant to this subdivision, the franchisor shall have
40the burden of proof.
P27 1(e) (1) Audits of franchisee warranty records may be conducted
2by the franchisor on a reasonable basis for a period of nine months
3after a claim is paid or credit issued. A franchisor shall not select
4a franchisee for an audit, or perform an audit, in a punitive,
5retaliatory, or unfairly discriminatory manner. A franchisor may
6conduct no more than one random audit of a franchisee in a
7nine-month period. The franchisor’s notification to the franchisee
8of any additional audit within a nine-month period shall be
9accompanied by written disclosure of the basis for that additional
11(2) Previously approved claims shall not be disapproved or
12charged back to the franchisee unless the claim is false or
13fraudulent, repairs were not properly made, repairs were
14inappropriate to correct a nonconformity with the written warranty
15due to an improper act or omission of the franchisee, or for material
16noncompliance with reasonable and nondiscriminatory
17documentation and administrative claims submission requirements.
18A franchisor shall not disapprove or chargeback a claim based
19upon an extrapolation from a sample of claims, unless the sample
20of claims is selected randomly and the extrapolation is performed
21in a reasonable and statistically valid manner.
22(3) If the franchisor disapproves of a previously approved claim
23following an audit, the franchisor shall provide to the franchisee,
24within 30 days after the audit, a written disapproval notice stating
25the specific grounds upon which the claim is disapproved. The
26franchisor shall provide a reasonable appeal process allowing the
27franchisee a reasonable period of not less than 30 days after receipt
28of the written disapproval notice to respond to any disapproval
29with additional supporting documentation or information rebutting
30the disapproval and to cure noncompliance, with the period to be
31commensurate with the volume of claims under consideration. If
32the franchisee rebuts any disapproval and cures any material
33noncompliance relating to a claim before the applicable deadline,
34the franchisor shall not chargeback the franchisee for that claim.
35(4) If the franchisee provides additional supporting
36documentation or information purporting to rebut the disapproval,
37attempts to cure noncompliance relating to the claim, or otherwise
38appeals denial of the claim and the franchisor continues to deny
39the claim, the franchisor shall provide the franchisee with a written
40notification of the final denial within 30 days of completion of the
P28 1appeal process, which shall conspicuously state “Final Denial” on
2the first page.
3(5) The franchisor shall not chargeback the franchisee until 45
4days after receipt of the written notice described in paragraph (3)
5or paragraph (4), whichever is later. Any chargeback to a franchisee
6for warranty parts or service compensation shall be made within
790 days of receipt of that written notice. If the franchisee files a
8protest pursuant to this subdivision prior to the franchisor’s
9chargeback for denied claims, the franchisor shall not offset or
10otherwise undertake to collect the chargeback until the board issues
11a final order on the protest. If the board sustains the chargeback
12or the protest is dismissed, the franchisor shall have 90 days
13following issuance of the final order or the dismissal to make the
14chargeback, unless otherwise provided in a settlement agreement.
15(6) Within six months after either receipt of the written
16disapproval notice or completion of the franchisor’s appeal process,
17whichever is later, a franchisee may file a protest with the board
18for determination of whether the franchisor complied with this
19subdivision. In any protest pursuant to this subdivision, the
20franchisor shall have the burden of proof.
21(f) If a false claim was submitted by a franchisee with the intent
22to defraud the franchisor, a longer period for audit and any resulting
23chargeback may be permitted if the franchisor obtains an order
24from the board.
(a) It is a violation of this code for the holder of
32any dealer’s license issued under this article to advertise for sale
33or sell a used vehicle as “certified” or use any similar descriptive
34term in the advertisement or the sale of a used vehicle that implies
35the vehicle has been certified to meet the terms of a used vehicle
36certification program if any of the following apply:
37(1) The dealer knows or should have known that the odometer
38on the vehicle does not indicate actual mileage, has been rolled
39back or otherwise altered to show fewer miles, or replaced with
40an odometer showing fewer miles than actually driven.
P29 1(2) The dealer knows or should have
known that the vehicle
2was reacquired by the vehicle’s manufacturer or a dealer pursuant
3to state or federal warranty laws.
4(3) The title to the vehicle has been inscribed with the notation
5“Lemon Law Buyback,” “manufacturer repurchase,” “salvage,”
6“junk,” “nonrepairable,” “flood,” or similar title designation
7required by this state or another state.
8(4) The vehicle has sustained damage in an impact, fire, or flood,
9that after repair prior to sale substantially impairs the use or safety
10of the vehicle.
11(5) The dealer knows or should have known that the vehicle has
12sustained frame damage.
13(6) Prior to sale, the dealer fails to provide the buyer with a
14completed inspection report indicating all the components
16(7) The dealer disclaims any warranties of merchantability on
18(8) The vehicle is sold “AS IS.”
19(9) The term “certified” or any similar descriptive term is used
20in any manner that is untrue or misleading or that would cause any
21advertisement to be in violation of subdivision (a) of Section 11713
22of this code or Section 17200 or 17500 of the Business and
27(b) A violation of this section is actionable under the Consumers
28Legal Remedies Act (Title 1.5 (commencing with Section 1750)
29of Part 4 of Division 3 of the Civil Code), the Unfair Competition
30Law (Chapter 5 (commencing with Section 17200) of Part 2 of
31Division 7 of the Business and Professions Code), Section 17500
32of the Business and Professions Code, or any other applicable state
33or federal law. The rights and remedies provided by this section
34are cumulative and shall not be construed as restricting any right
35or remedy that is otherwise available.
36(c) This section does not abrogate or limit any disclosure
37obligation imposed by any other law.
38(d) This section does not apply to the advertisement or sale of
39a used motorcycle or a used off-highway motor vehicle subject to
40identification under Section 38010.
Article 1.1 (commencing with Section 11750) is added
3to Chapter 4 of Division 5 of the Vehicle Code, to read:
This article shall be known, and may be cited, as the
8Consumer Automotive Recall Safety Act (CARS Act).
As used in this article, the following definitions apply:
10(a) The term “dealer” has the same meaning as in Section 285.
11(b) (1) A “manufacturer’s recall” is a recall conducted pursuant
12to Sections 30118 to 30120, inclusive, of Title 49 of the United
begin delete Code, the National Highway Traffic and Motor Vehicle
14Safety Act (49 U.S.C. Sec. 30101, et seq.).end delete
15(2) A manufacturer’s
recall does not include a service campaign
16or emission recall when the vehicle manufacturer or the National
17Highway Traffic Safety Administration has not issued a recall
18notice to owners of affected vehicles, pursuant to Section 30118
19of Title 49 of the United States
begin delete Code, the National Highway Traffic
20and Motor Vehicle Safety Act (49 U.S.C. Sec. 30101, et seq.). A
21manufacturer’s recall does not include a Stop Sale - Stop Drive
23(c) The term “new motor vehicle dealer” has the same meaning
24as in Section 426.
26 A “recall database” is a database from which an individual
27may obtain vehicle identification number (VIN) specific
begin delete Stop Sale manufacturer’s recall information relevant
28- Stop Drive recall andend delete
29to a specific vehicle.
30(1) For a vehicle manufacturer that is not subject to the
31regulations adopted pursuant to Section 31301 of the federal
32Moving Ahead for Progress in the 21st Century Act (Public Law
33112-141), a recall database is one of the following:
34(A) The recall data on a vehicle manufacturer’s Internet Web
35site for a specific vehicle’s line-make.
36(B) The recall data in a vehicle manufacturer’s internal system
37that provides information to its franchisees on vehicles subject to
39(C) The recall data in subparagraph (A) or (B) that is contained
40in a commercially available vehicle history system.
P31 1(2) For a vehicle manufacturer that is subject to the regulations
2adopted pursuant to Section 31301 of the federal Moving Ahead
3for Progress in the 21st Century Act (Public Law 112-141), a recall
4database shall include, at a minimum, the recall information
5required pursuant to Section 573.15 of Title 49 of the Code of
8 A “recall database report” is a report, specific to a vehicle
9that is identified by its VIN, containing information obtained from
10a recall database.
12 A “rental car company” is a person or entity in the business
13of renting passenger vehicles to the public in California.
16(g) A “Stop Sale - Stop Drive recall” is a recall notice provided
17to owners of affected vehicles, pursuant to Sections 30118 to
1830120, inclusive, of Title 49 of the United States Code, the National
19Highway Traffic and Motor Vehicle Safety Act (49 U.S.C. Sec.
2030101, et seq.), when the vehicle manufacturer or the National
21Highway Traffic Safety Administration informs the dealer to stop
22the sale of the vehicle or contains any precaution advice to the
23owner to stop operating the vehicle.
24(h) A “vehicle manufacturer” is a person who manufactures,
25assembles, or distributes new motor vehicles, sold or leased, that
26are subject to registration under this code.
(a) A dealer shall not display or offer for sale at retail
28a used vehicle, as defined in Section 665, that is subject to
29registration under this code, unless the dealer has obtained a recall
30database report within 30 days of the display or offer.
31(b) If a recall database report obtained by a dealer indicates that
32a used vehicle is subject to a Stop Sale - Stop Drive recall, the
33dealer shall not sell or lease that vehicle at retail until the recall
34repair has been made.
35(c) If a recall database report obtained by a dealer indicates that
36a used vehicle is subject to a manufacturer’s recall and the used
37vehicle is of the same line-make as the franchise of the new motor
38vehicle dealer, the dealer shall not sell or lease that vehicle at retail
39until the recall repair has been made.
P32 1(d) If a recall database report obtained by a dealer indicates that
2a used vehicle is subject to a manufacturer’s recall and the used
3vehicle is not of the same line-make as the franchise of the new
4motor vehicle dealer or the dealer does not have a franchise, the
5dealer may sell or lease the vehicle at retail if all of the following
7(1) The dealer discloses the manufacturer’s recall by providing
8a copy of the recall database report to the consumer prior to sale
10(2) The consumer signs the disclosure acknowledging that the
11 vehicle has a manufacturer’s recall and that the consumer can get
12the recall repaired at no cost to the consumer at a new motor vehicle
13dealer of the vehicle’s line-make.
14(e) To comply with subdivision (d), and notwithstanding Section
152981.9 of the Civil Code, a recall database report, that indicates
16the vehicle is subject to a manufacturer’s recall and the recall repair
17has not been made, shall be disclosed and the disclosure signed
18by the consumer in a document separate from the conditional sales
19contract or other vehicle purchase agreement.
20(f) The disclosure by a dealer, and receipt and acknowledgment
21by the consumer, of the information specified in subdivisions (d)
22and (e) has no legal effect other than to demonstrate compliance
23by the dealer with the requirements prescribed in those
24subdivisions. Nothing in this article shall be interpreted to place
25consumers in a less advantageous legal position for having received
26or signed the disclosures provided pursuant to this article than if
27no disclosure had been made.
(a) No later than 48 hours after receiving a notice of a
29recall conducted pursuant to Sections 30118 to 30120, inclusive,
30of Title 49 of the United States Code, the National Highway Traffic
31and Motor Vehicle Safety Act (49 U.S.C. Sec. 30101, et seq.), or
32sooner if practicable, a rental car company is prohibited from
33renting or offering for rent any vehicle subject to that recall.
34(b) If a recall notification indicates that the remedy for the recall
35is not immediately available and specifies actions to temporarily
36repair the vehicle in a manner to eliminate the safety risk that
37prompted the recall, the rental car company, after having the repairs
38completed, may rent the vehicle. Once the remedy for the rental
39vehicle becomes available to the rental car company, the rental
P33 1car company may not rent the vehicle until the vehicle has been
Commencing July 1, 2016, or as soon thereafter as the
4department exhausts its supply of existing certificate of ownership
5forms, the department shall include the following recall disclosure
6statement on the certificate of ownership and bill of sale form for
9“This vehicle may have an unrepaired manufacturer’s recall.
10Please ask the seller if there is an unrepaired manufacturer’s recall
11on this vehicle. You can check for any recalls and how to get the
12recall repaired at the National Highway Traffic Safety
(a) A vehicle manufacturer shall clearly and
15conspicuously display on its Internet Web site and in all recall
16notifications pursuant to Section 30118 of Title 49 of the United
17States Code, the National Highway Traffic and Motor Vehicle
18Safety Act (49 U.S.C. Sec. 30101, et seq.), whether a vehicle is
19subject to a Stop Sale - Stop Drive recall.
20(b) When a consumer seeks to repair a vehicle subject to a Stop
21Sale - Stop Drive recall or manufacturer’s recall as identified in
22a recall database report and the parts or procedures for the repair
23are not yet available, the vehicle manufacturer shall, upon request
24by the consumer, provide a rental or loaner vehicle to the consumer
25at no cost to the consumer until the recall repair has been made.
26 The consumer shall not be provided with a rental or loaner vehicle
27that is subject to a Stop Sale - Stop Drive recall or a manufacturer’s
29(c) If a vehicle manufacturer requires a franchisee to provide a
30rental or loaner vehicle to a consumer under subdivision (b), the
31vehicle manufacturer shall adequately and fairly compensate the
32franchisee for all costs incurred in providing a loaner or rental
33vehicle to a consumer. For purposes of this paragraph, adequate
34and fair compensation shall be the average daily rental amount
35of____ dollars ($____) for each day a consumer uses a loaner or
37(d) A vehicle manufacturer shall adequately and fairly
38compensate each of its franchisees for all costs incurred in storing
39vehicles with a Stop Sale - Stop Drive recall or manufacturer’s
40recall in the franchisee’s possession if the parts or procedures are
P34 1not yet available to repair the recall of the vehicle. For purposes
2of this paragraph, adequate and fair compensation shall be the
3average daily amount of ____ dollars ($_____) for each day a
4vehicle subject to a Stop Sale - Stop Drive recall or manufacturer’s
5recall is in the franchisee’s possession, the parts or procedures are
6not yet available to repair the recall of the vehicle, and the recall
7repair has not been made.
(a) This article shall not create any legal duty upon the
9dealer, franchisee, rental car company, or private seller related to
10the accuracy, errors, or omissions contained in a recall database
11report or any legal duty to provide information added to a recall
12database after the dealer, franchisee, rental car company, or private
13seller obtained the recall database report pursuant to Sections
1411754, 11756, and 11758. Nothing in this article shall affect any
15legal rights, claims, or remedies otherwise available under law.
16(b) The provisions of this article are severable. If any provision
17of this article or its application is held invalid, that invalidity shall
18not affect other provisions or applications that can be given effect
19without the invalid provision or application.
20(c) This article does not apply to the sale of a recreational
21vehicle, a motorcycle, an off-highway motor vehicle subject to
22identification under Section 38010, a vehicle sold by a dismantler
23after being reported for dismantling pursuant to Section 11520, or
24a vehicle sold by a salvage pool after obtaining a salvage pool
25certificate pursuant to Section 11515 or a nonrepairable vehicle
26certificate issued pursuant to Section 11515.2.
27(d) This article shall become operative on July 1, 2016.
No reimbursement is required by this act pursuant to
19Section 6 of Article XIII B of the California Constitution because
20the only costs that may be incurred by a local agency or school
21district will be incurred because this act creates a new crime or
22infraction, eliminates a crime or infraction, or changes the penalty
23for a crime or infraction, within the meaning of Section 17556 of
24the Government Code, or changes the definition of a crime within
25the meaning of Section 6 of Article XIII B of the California