Amended in Senate August 2, 2016

Amended in Senate June 13, 2016

Amended in Senate June 6, 2016

Amended in Assembly May 28, 2015

Amended in Assembly May 4, 2015

Amended in Assembly March 23, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 287


Introduced by Assembly Members Gordon, Eggman, and Mark Stone

(Principal coauthor: Assembly Member Wilk)

(Coauthors: Assembly Members Dababneh, Jones, and Lackey)

February 11, 2015


An act to amendbegin delete Sections 3065 and 11713.18end deletebegin insert Section 3065end insert of, and to add Article 1.1 (commencing with Section 11750) to Chapter 4 of Division 5 of, the Vehicle Code, relating to vehicle safety.

LEGISLATIVE COUNSEL’S DIGEST

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. A violation of the Vehicle Code is a crime.

This bill would enact the Consumer Automotive Recall Safety Act, which would become operative on July 1, 2017. The act would prohibit a dealer or rental car company, as defined, from loaning, renting, or offering for loan or rent a vehicle subject to a manufacturer’s recall after receiving a notice of the recall, as specified, until the vehicle has been repaired, except as specified.begin delete The act would require a dealer to obtain a recall database report, as defined, before displaying or offering for sale, and every 30 days thereafter, a used vehicle advertised as “certified,” or any similar descriptive term, that implies the vehicle has been certified to meet the terms of a used vehicle certification program. If a recall database report indicates that the used vehicle is subject to a manufacturer’s recall, the act would prohibit a dealer from advertising or selling the vehicle as “certified” or any similar descriptive term until the recall repair has been made.end delete The act would also require the Department of Motor Vehicles to obtain a recall database report before mailing a notice of registration renewal to the registered owner of a vehicle and, if the recall database report indicates the vehicle is subject to a manufacturer’s recall, to include a specified recall disclosure statement with the notice of registration renewal. This requirement would not take effect until the Director of Motor Vehicles executes a declaration, as specified, certifying that the department has appropriate access to the necessary data within a recall database and available funding to include the recall disclosure statement. By creating new prohibitions, the violation of which would be a crime under existing law, this bill would impose a state-mandated local program.

Existing law requires a vehicle franchisor to properly fulfill every warranty agreement made by it and adequately and fairly compensate each of its franchisees for labor and parts used to fulfill that warranty when the franchisee has fulfilled warranty obligations of diagnostics, repair, and servicing.

This bill would specify that the warranty obligations include all costs associated with the disposal of hazardous materials that are associated with a recall. The bill would provide, for purposes of the above-described warranty obligations, that a warranty includes a recall conducted pursuant to federal motor vehicle safety laws. The bill would state that this provision is declaratory of existing law.

begin delete

Existing law makes it a violation of the Vehicle Code for the holder of a dealer’s license to advertise for sale or sell a used vehicle as “certified” if, among other things, the dealer knows the odometer on the vehicle does not indicate actual mileage, the dealer knows the vehicle has sustained frame damage, or the dealer fails to provide the buyer with a completed inspection report indicating all the components inspected prior to sale.

end delete
begin delete

This bill would additionally make it a violation of the Vehicle Code for the holder of a dealer’s license to advertise for sale or sell a used vehicle as “certified” if the vehicle is subject to an unremedied manufacturer’s recall described in a recall database report.

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:

P3    1

SECTION 1.  

(a) The Legislature finds and declares all of the
2following:

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
951 million recalls were issued in 2015, 22 million recalls were
10issued in 2013, and 16.2 million were issued in 2012. The increase
11of recalls in 2014 is a 190 percent increase from 2013 and a 293.8
12percent increase from 2012.

13(2) While federal motor vehicle safety standards are more
14demanding now than at any other point in time and new vehicles
15sold today are the safest in history, the exponential growth of
16recalls issued on motor vehicles has caused confusion and apathy
17for far too many Californians. According to the National Highway
P4    1Traffic Safety Administration and others, about one-third of all
2recalled vehicles are never repaired by the vehicle’s owner.

3(3) Federal regulations now require most vehicle manufacturers
4to provide motor vehicle safety recall information applicable to
5the vehicles they manufacture on the Internet and to the public.

6(b) Accordingly, it is the intent of the Legislature in enacting
7this act to increase consumer awareness of unrepaired recalls on
8their cars, to ensure that consumers have access to loaner and rental
9vehicles free of any unrepaired recalls, and to safeguard the
10advertising of “certified” used cars.

11(c) The Legislature further finds and declares all of the
12following:

13(1) The distribution, sale, and service of new motor vehicles in
14the State of California vitally affect the general economy of this
15state and the public welfare.

16(2) The new motor vehicle franchise system, which operates
17within a strictly defined and highly regulated statutory scheme,
18assures the consuming public of a well-organized distribution
19system for the availability and sale of new motor vehicles
20throughout the state, provides a network of quality warranty, recall,
21and repair facilities to maintain those vehicles, and creates a
22cost-effective method for the state to police those systems through
23the licensing and regulation of private sector franchisors and
24franchisees.

25(3) California franchise laws require manufacturers to provide
26reasonable reimbursement to dealers for warranty and recall work,
27but fail to establish guidelines for compensating franchisee disposal
28costs associated with hazardous waste generated by repairs on
29recalled vehicles.

30(d) Accordingly, it is the intent of the Legislature in enacting
31this act to ensure that new motor vehicle dealer franchisees are
32treated fairly by their franchisors and that new motor vehicle dealer
33franchisees are reasonably compensated for repairs on recalled
34vehicles.

35

SEC. 2.  

Section 3065 of the Vehicle Code is amended to read:

36

3065.  

(a) Every franchisor shall properly fulfill every warranty
37agreement made by it and adequately and fairly compensate each
38of its franchisees for labor and parts used to fulfill that warranty
39when the franchisee has fulfilled warranty obligations of
40diagnostics, repair, and servicing and shall file a copy of its
P5    1warranty reimbursement schedule or formula with the board. The
2warranty reimbursement schedule or formula shall be reasonable
3with respect to the time and compensation allowed to the franchisee
4for the warranty diagnostics, repair, servicing, and all other
5conditions of the obligation, including all costs associated with
6the disposal of hazardous materials that are associated with a recall.
7The reasonableness of the warranty reimbursement schedule or
8formula shall be determined by the board if a franchisee files a
9protest with the board. A franchisor shall not replace, modify, or
10supplement the warranty reimbursement schedule to impose a
11fixed percentage or other reduction in the time and compensation
12allowed to the franchisee for warranty repairs not attributable to
13a specific repair. A franchisor may reduce the allowed time and
14compensation applicable to a specific warranty repair only upon
1515 days’ prior written notice to the franchisee. Any protest
16challenging a reduction in time and compensation applicable to
17specific parts or labor operations shall be filed within six months
18following the franchisee’s receipt of notice of the reduction, and
19the franchisor shall have the burden of establishing the
20reasonableness of the reduction and adequacy and fairness of the
21resulting compensation.

22(b) In determining the adequacy and fairness of the
23compensation, the franchisee’s effective labor rate charged to its
24various retail customers may be considered together with other
25relevant criteria. If in a protest permitted by this section filed by
26any franchisee the board determines that the warranty
27reimbursement schedule or formula fails to provide adequate and
28fair compensation or fails to conform with the other requirements
29of this section, within 30 days after receipt of the board’s order,
30the franchisor shall correct the failure by amending or replacing
31the warranty reimbursement schedule or formula and implementing
32the correction as to all franchisees of the franchisor that are located
33in this state.

34(c) If any franchisor disallows a franchisee’s claim for a
35defective part, alleging that the part, in fact, is not defective, the
36franchisor shall return the part alleged not to be defective to the
37franchisee at the expense of the franchisor, or the franchisee shall
38be reimbursed for the franchisee’s cost of the part, at the
39franchisor’s option.

P6    1(d) (1) All claims made by franchisees pursuant to this section
2shall be either approved or disapproved within 30 days after their
3receipt by the franchisor. Any claim not specifically disapproved
4in writing within 30 days from receipt by the franchisor shall be
5deemed approved on the 30th day. All claims made by franchisees
6under this section and Section 3064 for labor and parts shall be
7paid within 30 days after approval.

8(2) A franchisor shall not disapprove a claim unless the claim
9is false or fraudulent, repairs were not properly made, repairs were
10inappropriate to correct a nonconformity with the written warranty
11due to an improper act or omission of the franchisee, or for material
12noncompliance with reasonable and nondiscriminatory
13documentation and administrative claims submission requirements.

14(3) When any claim is disapproved, the franchisee who submits
15it shall be notified in writing of its disapproval within the required
16period, and each notice shall state the specific grounds upon which
17the disapproval is based. The franchisor shall provide for a
18reasonable appeal process allowing the franchisee at least 30 days
19after receipt of the written disapproval notice to provide additional
20supporting documentation or information rebutting the disapproval.
21If disapproval is based upon noncompliance with documentation
22or administrative claims submission requirements, the franchisor
23shall allow the franchisee at least 30 days from the date of receipt
24of the notice to cure any material noncompliance. If the disapproval
25is rebutted, and material noncompliance is cured before the
26applicable deadline, the franchisor shall approve the claim.

27(4) If the franchisee provides additional supporting
28documentation or information purporting to rebut the disapproval,
29attempts to cure noncompliance relating to the claim, or otherwise
30appeals denial of the claim and the franchisor continues to deny
31the claim, the franchisor shall provide the franchisee with a written
32notification of the final denial within 30 days of completion of the
33appeal process, which shall conspicuously state “Final Denial” on
34the first page.

35(5) Failure to approve or pay within the above specified time
36limits, in individual instances for reasons beyond the reasonable
37control of the franchisor, shall not constitute a violation of this
38article.

39(6) Within six months after either receipt of the written notice
40described in paragraph (3) or (4), whichever is later, a franchisee
P7    1may file a protest with the board for determination of whether the
2franchisor complied with the requirements of this subdivision. In
3any protest pursuant to this subdivision, the franchisor shall have
4the burden of proof.

5(e) (1) Audits of franchisee warranty records may be conducted
6by the franchisor on a reasonable basis for a period of nine months
7after a claim is paid or credit issued. A franchisor shall not select
8a franchisee for an audit, or perform an audit, in a punitive,
9retaliatory, or unfairly discriminatory manner. A franchisor may
10conduct no more than one random audit of a franchisee in a
11nine-month period. The franchisor’s notification to the franchisee
12of any additional audit within a nine-month period shall be
13accompanied by written disclosure of the basis for that additional
14audit.

15(2) Previously approved claims shall not be disapproved or
16charged back to the franchisee unless the claim is false or
17fraudulent, repairs were not properly made, repairs were
18inappropriate to correct a nonconformity with the written warranty
19due to an improper act or omission of the franchisee, or for material
20noncompliance with reasonable and nondiscriminatory
21documentation and administrative claims submission requirements.
22A franchisor shall not disapprove or chargeback a claim based
23upon an extrapolation from a sample of claims, unless the sample
24of claims is selected randomly and the extrapolation is performed
25in a reasonable and statistically valid manner.

26(3) If the franchisor disapproves of a previously approved claim
27following an audit, the franchisor shall provide to the franchisee,
28within 30 days after the audit, a written disapproval notice stating
29the specific grounds upon which the claim is disapproved. The
30franchisor shall provide a reasonable appeal process allowing the
31franchisee a reasonable period of not less than 30 days after receipt
32of the written disapproval notice to respond to any disapproval
33with additional supporting documentation or information rebutting
34the disapproval and to cure noncompliance, with the period to be
35commensurate with the volume of claims under consideration. If
36the franchisee rebuts any disapproval and cures any material
37noncompliance relating to a claim before the applicable deadline,
38the franchisor shall not chargeback the franchisee for that claim.

39(4) If the franchisee provides additional supporting
40documentation or information purporting to rebut the disapproval,
P8    1attempts to cure noncompliance relating to the claim, or otherwise
2appeals denial of the claim and the franchisor continues to deny
3the claim, the franchisor shall provide the franchisee with a written
4notification of the final denial within 30 days of completion of the
5appeal process, which shall conspicuously state “Final Denial” on
6the first page.

7(5) The franchisor shall not chargeback the franchisee until 45
8days after receipt of the written notice described in paragraph (3)
9or paragraph (4), whichever is later. Any chargeback to a franchisee
10for warranty parts or service compensation shall be made within
1190 days of receipt of that written notice. If the franchisee files a
12protest pursuant to this subdivision prior to the franchisor’s
13chargeback for denied claims, the franchisor shall not offset or
14otherwise undertake to collect the chargeback until the board issues
15a final order on the protest. If the board sustains the chargeback
16or the protest is dismissed, the franchisor shall have 90 days
17following issuance of the final order or the dismissal to make the
18chargeback, unless otherwise provided in a settlement agreement.

19(6) Within six months after either receipt of the written
20disapproval notice or completion of the franchisor’s appeal process,
21whichever is later, a franchisee may file a protest with the board
22for determination of whether the franchisor complied with this
23subdivision. In any protest pursuant to this subdivision, the
24franchisor shall have the burden of proof.

25(f) If a false claim was submitted by a franchisee with the intent
26to defraud the franchisor, a longer period for audit and any resulting
27chargeback may be permitted if the franchisor obtains an order
28from the board.

29(g) For purposes of this section, “warranty” includes a recall
30conducted pursuant to Sections 30118 to 30120, inclusive, of Title
3149 of the United States Code. This subdivision is declaratory and
32not amendatory of existing law.

begin delete
33

SEC. 3.  

Section 11713.18 of the Vehicle Code is amended to
34read:

35

11713.18.  

(a) It is a violation of this code for the holder of
36any dealer’s license issued under this article to advertise for sale
37or sell a used vehicle as “certified” or use any similar descriptive
38term in the advertisement or the sale of a used vehicle that implies
39the vehicle has been certified to meet the terms of a used vehicle
40certification program if any of the following apply:

P9    1(1) The dealer knows or should have known that the odometer
2on the vehicle does not indicate actual mileage, has been rolled
3back or otherwise altered to show fewer miles, or replaced with
4an odometer showing fewer miles than actually driven.

5(2) The dealer knows or should have known that the vehicle
6was reacquired by the vehicle’s manufacturer or a dealer pursuant
7to state or federal warranty laws.

8(3) The title to the vehicle has been inscribed with the notation
9“Lemon Law Buyback,” “manufacturer repurchase,” “salvage,”
10“junk,” “nonrepairable,” “flood,” or similar title designation
11required by this state or another state.

12(4) The vehicle has sustained damage in an impact, fire, or flood,
13that after repair prior to sale substantially impairs the use or safety
14of the vehicle.

15(5) The dealer knows or should have known that the vehicle has
16sustained frame damage.

17(6) Prior to sale, the dealer fails to provide the buyer with a
18completed inspection report indicating all the components
19inspected.

20(7) The dealer disclaims any warranties of merchantability on
21the vehicle.

22(8) The vehicle is sold “AS IS.”

23(9) The term “certified” or any similar descriptive term is used
24in any manner that is untrue or misleading or that would cause any
25advertisement to be in violation of subdivision (a) of Section 11713
26of this code or Section 17200 or 17500 of the Business and
27Professions Code.

28(10) The vehicle is subject to an unremedied manufacturer’s
29recall described in a recall database report required by Section
3011756.

31(b) A violation of this section is actionable under the Consumers
32Legal Remedies Act (Title 1.5 (commencing with Section 1750)
33of Part 4 of Division 3 of the Civil Code), the Unfair Competition
34Law (Chapter 5 (commencing with Section 17200) of Part 2 of
35Division 7 of the Business and Professions Code), Section 17500
36of the Business and Professions Code, or any other applicable state
37or federal law. The rights and remedies provided by this section
38are cumulative and shall not be construed as restricting any right
39or remedy that is otherwise available.

P10   1(c) This section does not abrogate or limit any disclosure
2obligation imposed by any other law.

3(d) This section does not apply to the advertisement or sale of
4a used motorcycle or a used off-highway motor vehicle subject to
5identification under Section 38010.

end delete
6

begin deleteSEC. 4.end delete
7
begin insertSEC. 3.end insert  

Article 1.1 (commencing with Section 11750) is added
8to Chapter 4 of Division 5 of the Vehicle Code, to read:

9 

10Article 1.1.  Consumer Automotive Recall Safety Act
11

 

12

11750.  

This article shall be known, and may be cited, as the
13Consumer Automotive Recall Safety Act (CARS Act).

14

11752.  

As used in this article, the following definitions apply:

15(a) The term “dealer” has the same meaning as in Section 285.

16(b) (1) A “manufacturer’s recall” is a recall conducted pursuant
17to Sections 30118 to 30120, inclusive, of Title 49 of the United
18States Code.

19(2) A manufacturer’s recall does not include a service campaign
20or emission recall when the vehicle manufacturer or the National
21Highway Traffic Safety Administration has not issued a recall
22notice to owners of affected vehicles, pursuant to Section 30118
23of Title 49 of the United States Code.

24(c) A “recall database” is a database from which an individual
25may obtain vehicle identification number (VIN) specific
26manufacturer’s recall information relevant to a specific vehicle.

27(1) For a vehicle manufacturer that is not subject to the
28regulations adopted pursuant to Section 31301 of the federal
29Moving Ahead for Progress in the 21st Century Act (Public Law
30112-141), a recall database is one of the following:

31(A) The recall data on a vehicle manufacturer’s Internet Web
32site for a specific vehicle’s line-make.

33(B) The recall data in a vehicle manufacturer’s internal system
34that provides information to its franchisees on vehicles subject to
35recall.

36(C) The recall data in subparagraph (A) or (B) that is contained
37in a commercially available vehicle history system.

38(2) For a vehicle manufacturer that is subject to the regulations
39adopted pursuant to Section 31301 of the federal Moving Ahead
40for Progress in the 21st Century Act (Public Law 112-141), a recall
P11   1database shall include, at a minimum, the recall information
2required pursuant to Section 573.15 of Title 49 of the Code of
3Federal Regulations.

4(d) A “recall database report” is a report, specific to a vehicle
5that is identified by its VIN, containing information obtained from
6a recall database.

7(e) A “rental car company” is a person or entity in the business
8of renting passenger vehicles to the public in California.

9(f) The term “used vehicle” has the same meaning as set forth
10in Section 665.

11

11754.  

(a) No later than 48 hours after receiving a notice of a
12manufacturer’s recall, or sooner if practicable, a dealer or rental
13car company shall not loan, rent, or offer for loan or rent a vehicle
14subject to that recall until the recall repair has been made.

15(b) If a recall notification indicates that the remedy for the recall
16is not immediately available and specifies actions to temporarily
17repair the vehicle in a manner to eliminate the safety risk that
18prompted the recall, the dealer or rental car company, after having
19the repairs completed, may loan or rent the vehicle. Once the
20remedy for the vehicle becomes available to the dealer or rental
21car company, the dealer or rental car company shall not loan or
22rent the vehicle until the vehicle has been repaired.

begin delete
23

11756.  

(a) For every used vehicle advertised for sale as
24“certified” or any similar descriptive term in the advertisement or
25the sale of a used vehicle that implies the vehicle has been certified
26to meet the terms of a used vehicle certification program, a dealer
27shall obtain a recall database report before the display or offer and
28every 30 days thereafter until the vehicle is no longer displayed
29or offered for sale.

30(b) If a recall database report obtained by a dealer indicates that
31a used vehicle is subject to a manufacturer’s recall, the dealer shall
32not advertise for sale or sell that vehicle as “certified” or use any
33similar descriptive term in the advertisement or the sale of the used
34vehicle that implies the vehicle has been certified to meet the terms
35of a used vehicle certification program until the recall repair has
36been made.

end delete
37

11758.  

(a) Before mailing a notice of registration renewal to
38the registered owner of a vehicle, pursuant to Section 1661, the
39department shall obtain a recall database report for that vehicle.
40If the recall database report indicates that the vehicle is subject to
P12   1a manufacturer’s recall, the department shall notify the registered
2owner by checking the box next to the recall disclosure statement
3specified in subdivision (b).

4(b) The department shall include the following recall disclosure
5statement on the notice of registration renewal for a vehicle subject
6to a manufacturer’s recall:


8“WARNING. This vehicle has an unrepaired manufacturer’s
9recall. You can get this recall repaired for free. You can check for
10any recalls and how to get the recall repaired at the National
11Highway Traffic Safety Administration’s Internet Web site.”


13(c) This section shall become operative on the date that the
14Director of Motor Vehicles executes a declaration, to be retained
15by the director, in which the director certifies that the department
16has appropriate access to the necessary data within a recall database
17and available funding to include a recall disclosure statement on
18the notice of registration renewal for a vehicle subject to a
19 manufacturer’s recall. The director shall post the declaration on
20the department’s Internet Web site and shall send the declaration
21to the appropriate committees of the Legislature and to the
22Legislative Counsel.

23

11760.  

This article shall not create any legal duty upon the
24dealer, rental car company, or department related to the accuracy,
25errors, or omissions contained in a recall database report or any
26legal duty to provide information added to a recall database after
27the dealer, rental car company, or department obtained the recall
28database report pursuant to Sectionsbegin delete 11754, 11756,end deletebegin insert 11754end insert and
2911758.

30

begin delete11760.5.end delete
31
begin insert11761.end insert  

The rights and remedies provided by this article are
32cumulative and shall not be construed as restricting any right or
33remedy that is otherwise available.

begin delete
34

11761.  

This article does not apply to the sale of a recreational
35vehicle, a motorcycle, an off-highway motor vehicle subject to
36identification under Section 38010, a vehicle sold by a dismantler
37after being reported for dismantling pursuant to Section 11520, or
38a vehicle sold by a salvage pool after obtaining a salvage pool
39certificate pursuant to Section 11515 or a nonrepairable vehicle
40certificate issued pursuant to Section 11515.2.

end delete
P13   1

11762.  

The provisions of this article are severable. If any
2provision of this article or its application is held invalid, that
3invalidity shall not affect other provisions or applications that can
4be given effect without the invalid provision or application.

5

11763.  

Except as otherwise provided in Section 11758, this
6article shall become operative on July 1, 2017.

7

begin deleteSEC. 5.end delete
8
begin insertSEC. 4.end insert  

No reimbursement is required by this act pursuant to
9Section 6 of Article XIII B of the California Constitution because
10the only costs that may be incurred by a local agency or school
11district will be incurred because this act creates a new crime or
12infraction, eliminates a crime or infraction, or changes the penalty
13for a crime or infraction, within the meaning of Section 17556 of
14the Government Code, or changes the definition of a crime within
15the meaning of Section 6 of Article XIII B of the California
16Constitution.



O

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