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
begin delete become operative on July 1, 2017. The act wouldend delete
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. 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
begin delete recall.end delete 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.
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
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
18Traffic Safety Administration and others, about one-third of all
19recalled vehicles are never repaired by the vehicle’s owner.
20(3) Federal regulations now require most vehicle manufacturers
21to provide motor vehicle safety recall information applicable to
22the vehicles they manufacture on the Internet and to the public.
P4 1(b) Accordingly, it is the intent of the Legislature
2this act to increase consumer awareness of unrepaired recalls on
begin delete cars,end delete to ensure that consumers have access to loaner
4and rental vehicles free of any unrepaired
begin delete recalls, and to safeguard
5the advertising of “certified” used cars.end delete
6(c) The Legislature further finds and declares all of the
distribution, sale, and service of new motor vehicles in
9the State of California vitally affect the general economy of this
10state and the public welfare.
11(2) The new motor vehicle franchise system, which operates
12within a strictly defined and highly regulated statutory scheme,
13assures the consuming public of a well-organized distribution
14system for the availability and sale of new motor vehicles
15throughout the state, provides a network of quality warranty, recall,
16and repair facilities to maintain those vehicles, and creates a
17cost-effective method for the state to police those systems through
18the licensing and regulation of private sector franchisors and
20(3) California franchise laws require manufacturers to provide
21reasonable reimbursement to dealers for warranty and recall work,
22but fail to establish guidelines for compensating franchisee disposal
23costs associated with hazardous waste generated by repairs on
25(d) Accordingly, it is the intent of the Legislature in enacting
26this act to ensure that new motor vehicle dealer franchisees are
27treated fairly by their franchisors and that new motor vehicle dealer
28franchisees are reasonably compensated for repairs on recalled
Section 3065 of the Vehicle Code is amended to read:
(a) Every franchisor shall properly fulfill every warranty
32agreement made by it and adequately and fairly compensate each
33of its franchisees for labor and parts used to fulfill that warranty
34when the franchisee has fulfilled warranty obligations of
35diagnostics, repair, and servicing and shall file a copy of its
36warranty reimbursement schedule or formula with the board. The
37warranty reimbursement schedule or formula shall be reasonable
38with respect to the time and compensation allowed to the franchisee
39for the warranty diagnostics, repair, servicing, and all other
40conditions of the obligation, including
begin delete allend delete costs associated
P5 1with the disposal of hazardous materials that are associated with
begin delete recall.end delete The reasonableness of the warranty
3reimbursement schedule or formula shall be determined by the
4board if a franchisee files a protest with the board. A franchisor
5shall not replace, modify, or supplement the warranty
6reimbursement schedule to impose a fixed percentage or other
7reduction in the time and compensation allowed to the franchisee
8for warranty repairs not attributable to a specific repair. A
9franchisor may reduce the allowed time and compensation
10applicable to a specific warranty repair only upon 15 days’ prior
11written notice to the franchisee. Any protest challenging a reduction
12in time and compensation applicable to specific parts or labor
13operations shall be filed within six months following the
14franchisee’s receipt of notice of the reduction, and the franchisor
15shall have the burden of establishing the reasonableness of the
16reduction and adequacy and fairness of the resulting compensation.
17(b) In determining the adequacy and fairness of the
18compensation, the franchisee’s effective labor rate charged to its
19various retail customers may be considered together with other
20relevant criteria. If in a protest permitted by this section filed by
21any franchisee the board determines that the warranty
22reimbursement schedule or formula fails to provide adequate and
23fair compensation or fails to conform with the other requirements
24of this section, within 30 days after receipt of the board’s order,
25the franchisor shall correct the failure by amending or replacing
26the warranty reimbursement schedule or formula and implementing
27the correction as to all franchisees of the franchisor that are located
28in this state.
29(c) If any franchisor disallows a franchisee’s claim for a
30defective part, alleging that the part, in fact, is not defective, the
31franchisor shall return the part alleged not to be defective to the
32franchisee at the expense of the franchisor, or the franchisee shall
33be reimbursed for the franchisee’s cost of the part, at the
35(d) (1) All claims made by franchisees pursuant to this section
36shall be either approved or disapproved within 30 days after their
37receipt by the franchisor. Any claim not specifically disapproved
38in writing within 30 days from receipt by the franchisor shall be
39deemed approved on the 30th day. All claims made by franchisees
P6 1under this section and Section 3064 for labor and parts shall be
2paid within 30 days after approval.
3(2) A franchisor shall not disapprove a claim unless the claim
4is false or fraudulent, repairs were not properly made, repairs were
5inappropriate to correct a nonconformity with the written warranty
6due to an improper act or omission of the franchisee, or for material
7noncompliance with reasonable and nondiscriminatory
8documentation and administrative claims submission requirements.
9(3) When any claim is disapproved, the franchisee who submits
10it shall be notified in writing of its disapproval within the required
11period, and each notice shall state the specific grounds upon which
12the disapproval is based. The franchisor shall provide for a
13reasonable appeal process allowing the franchisee at least 30 days
14after receipt of the written disapproval notice to provide additional
15supporting documentation or information rebutting the disapproval.
16If disapproval is based upon noncompliance with documentation
17or administrative claims submission requirements, the franchisor
18shall allow the franchisee at least 30 days from the date of receipt
19of the notice to cure any material noncompliance. If the disapproval
20is rebutted, and material noncompliance is cured before the
21applicable deadline, the franchisor shall approve the claim.
22(4) If the franchisee provides additional supporting
23documentation or information purporting to rebut the disapproval,
24attempts to cure noncompliance relating to the claim, or otherwise
25appeals denial of the claim and the franchisor continues to deny
26the claim, the franchisor shall provide the franchisee with a written
27notification of the final denial within 30 days of completion of the
28appeal process, which shall conspicuously state “Final Denial” on
29the first page.
30(5) Failure to approve or pay within the above specified time
31limits, in individual instances for reasons beyond the reasonable
32control of the franchisor, shall not constitute a violation of this
34(6) Within six months after either receipt of the written notice
35described in paragraph (3) or (4), whichever is later, a franchisee
36may file a protest with the board for determination of whether the
37franchisor complied with the requirements of this subdivision. In
38any protest pursuant to this subdivision, the franchisor shall have
39the burden of proof.
P7 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
P8 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.
25(g) For purposes of this section, “warranty” includes a recall
26conducted pursuant to Sections 30118 to 30120, inclusive, of Title
2749 of the United States Code. This subdivision is declaratory and
28not amendatory of existing law.
(a) The department, after notice and hearing, may
31suspend or revoke the license issued to a dealer, transporter,
32manufacturer, manufacturer branch, remanufacturer,
33remanufacturer branch, distributor, or distributor branch upon
34determining that the person to whom the license was issued is not
35lawfully entitled thereto, or has done any of the following:
36(1) Filed an application for the license using a false or fictitious
37name not registered with the proper authorities, or knowingly made
38a false statement or knowingly concealed a material fact, in the
39application for the license.
P9 1(2) Made, or knowingly or negligently permitted, an illegal use
2of the special plates issued to the licensee.
3(3) Used a false or fictitious name, knowingly made a false
4statement, or knowingly concealed a material fact, in an application
5for the registration of a vehicle, or otherwise committed a fraud
6in the application.
7(4) Failed to deliver to a transferee lawfully entitled thereto a
8properly endorsed certificate of ownership.
9(5) Knowingly purchased, sold, or otherwise acquired or
10disposed of a stolen motor vehicle.
11(6) Failed to provide and maintain a clear physical division
12between the type of business licensed pursuant to this chapter and
13any other type of business conducted at the established place of
15(7) Willfully violated Section 3064, 3065, 3074, or 3075 or any
16rule or regulation adopted pursuant thereto.
17(8) Violated any provision of Division 3 (commencing with
18Section 4000) or any rule or regulation adopted pursuant thereto,
19or subdivision (a) of Section 38200.
20(9) Violated any provision of Division 4 (commencing with
21Section 10500) or any rule or regulation adopted pursuant thereto.
22(10) Violated any provision of Article 1 (commencing with
begin delete ofend delete Chapter 4 of Division 5 or any rule or regulation adopted
26(11) Violated any provision of Part 5 (commencing with Section
2710701) of Division 2 of the Revenue and Taxation Code or any
28rule or regulation adopted pursuant thereto.
29(12) Violated any provision of Chapter 2b (commencing with
30Section 2981) of Title 14 of Part 4 of Division 3 of the Civil Code
31or any rule or regulation adopted pursuant thereto.
32(13) Submitted a check, draft, or money order to the department
33for any obligation or fee due the state which was dishonored or
34refused payment upon presentation.
caused any person to suffer any loss or damage
36by reason of any fraud or deceit practiced on that person or
37fraudulent representations made to that person in the course of the
P10 1 purposes of this paragraph, “fraud” includes any act or
2omission which is included within the definition of either “actual
3fraud” or “constructive fraud” as defined in Sections 1572 and
41573 of the Civil Code, and “deceit” has the same meaning as
5defined in Section 1710 of the Civil Code. In addition, “fraud”
6and “deceit” include, but are not limited to, a misrepresentation in
7any manner, whether intentionally false or due to gross negligence,
8of a material fact; a promise or representation not made honestly
9and in good faith; an intentional failure to disclose a material fact;
10and any act within Section 484 of the Penal Code.
12 purposes of this paragraph, “person” also includes a
14(15) Failed to meet the terms and conditions of an agreement
15entered into pursuant to Section 11707.
16(16) Violated Section 43151, 43152, or 43153 of, or subdivision
17(b) of Section 44072.10 of, the Health and Safety Code.
18(17) Failed to
repay a claim paid by the Consumer Motor
19Vehicle Recovery Corporation as provided in subdivision (i) of
21(18) As a buy-here-pay-here dealer, violated any provision of
22Chapter 11 (commencing with Section 7500) of Division 3 of the
23Business and Professions Code or any rule or regulation adopted
24pursuant to those provisions.
25(b) Any of the causes specified in this chapter as a cause for
26refusal to issue a license to a transporter, manufacturer,
27manufacturer branch, remanufacturer, remanufacturer branch,
28distributor, distributor branch, or dealer applicant is cause to
29suspend or revoke a license issued to a transporter, manufacturer,
30manufacturer branch, remanufacturer, remanufacturer branch,
31distributor, distributor branch, or dealer.
32(c) Except as provided in Section 11707, every hearing provided
33for in this section shall be conducted pursuant to Chapter 5
34(commencing with Section 11500) of Part 1 of Division 3 of Title
352 of the Government Code.
Article 1.1 (commencing with Section 11750) is added
38to Chapter 4 of Division 5 of the Vehicle Code, to read:
This article shall be known, and may be cited, as the
4Consumer Automotive Recall Safety Act (CARS Act).
As used in this article, the following definitions apply:
6(a) The term “dealer” has the same meaning as in Section 285.
7(b) (1) A “manufacturer’s recall” is a recall conducted pursuant
8to Sections 30118 to 30120, inclusive, of Title 49 of the United
10(2) A manufacturer’s recall does not include a service campaign
11or emission recall when the vehicle manufacturer or the National
12Highway Traffic Safety Administration has not issued a recall
13notice to owners of affected vehicles, pursuant to Section 30118
14of Title 49 of the United States Code.
15(c) A “recall database” is a database from which an individual
16may obtain vehicle identification number (VIN) specific
17manufacturer’s recall information relevant to a specific vehicle.
18(1) For a vehicle manufacturer that is not subject to the
19regulations adopted pursuant to Section 31301 of the federal
20Moving Ahead for Progress in the 21st Century Act (Public Law
21112-141), a recall database is one of the following:
22(A) The recall data on a vehicle manufacturer’s Internet Web
23site for a specific vehicle’s line-make.
24(B) The recall data in a vehicle manufacturer’s internal system
25that provides information to its franchisees on vehicles subject to
27(C) The recall data in subparagraph (A) or (B) that is contained
28in a commercially available vehicle history system.
29(2) For a vehicle manufacturer that is subject to the regulations
30adopted pursuant to Section 31301 of the federal Moving Ahead
31for Progress in the 21st Century Act (Public Law 112-141), a recall
32database shall include, at a minimum, the recall information
33required pursuant to Section 573.15 of Title 49 of the Code of
35(d) A “recall database report” is a report, specific to a vehicle
36that is identified by its VIN, containing information obtained from
37a recall database.
38(e) A “rental car company” is a person or entity in the
39of renting passenger vehicles to the public in California.
P12 1(f) The term “used vehicle” has the same meaning as set forth
2in Section 665.
(a) No later than 48 hours after receiving a notice of a
4manufacturer’s recall, or sooner if practicable, a dealer or rental
5car company shall not loan, rent, or offer for loan or rent a vehicle
7subject to that recall until the recall repair has been made.
8(b) If a recall notification indicates that the remedy for the recall
9is not immediately available and specifies actions to temporarily
10repair the vehicle in a manner to eliminate the safety risk that
11prompted the recall, the dealer or rental car company, after having
12the repairs completed, may loan or rent the vehicle. Once the
13remedy for the vehicle becomes available to the dealer or rental
14car company, the dealer or rental car company shall not loan or
15rent the vehicle until the vehicle has been repaired.
(a) Before mailing a notice of registration renewal to
17the registered owner of a vehicle, pursuant to Section 1661, the
18department shall obtain a recall database report for that vehicle.
19If the recall database report indicates that the vehicle is subject to
20a manufacturer’s recall, the department shall notify the registered
21owner by checking the box next to the recall disclosure statement
22specified in subdivision (b).
23(b) The department shall include the following recall disclosure
24statement on the notice of registration renewal for a vehicle subject
25to a manufacturer’s recall:
This vehicle has an unrepaired manufacturer’s
begin delete Youend delete can get this recall repaired
29for free. You can check for any recalls and how to get the recall
begin delete the National Highway Traffic Safety Administration’s
31Internet Web site.”end delete
section shall become operative on the date that the
34Director of Motor Vehicles executes a declaration, to be retained
35by the director, in which the director certifies that the department
36has appropriate access to the necessary data within a recall database
37and available funding to include a recall disclosure statement on
38the notice of registration renewal for a vehicle subject to a
39 manufacturer’s recall. The director shall post the declaration on
40the department’s Internet Web site and shall send the declaration
P13 1to the appropriate committees of the Legislature and to the
This article shall not create any legal duty upon the
4dealer, rental car company, or department related to the accuracy,
5errors, or omissions contained in a recall database report or any
6legal duty to provide information added to a recall database after
7the dealer, rental car company, or department obtained the recall
8database report pursuant to Sections 11754 and 11758.
The rights and remedies provided by this article are
10cumulative and shall not be construed as restricting any right or
11remedy that is otherwise available.
The provisions of this article are severable. If any
13provision of this article or its application is held invalid, that
14invalidity shall not affect other provisions or applications that can
15be given effect without the invalid provision or application.
Except as otherwise provided in Section 11758, this
17article shall become operative on July 1, 2017.
No reimbursement is required by this act pursuant to
20Section 6 of Article XIII B of the California Constitution because
21the only costs that may be incurred by a local agency or school
22district will be incurred because this act creates a new crime or
23infraction, eliminates a crime or infraction, or changes the penalty
24for a crime or infraction, within the meaning of Section 17556 of
25the Government Code, or changes the definition of a crime within
26the meaning of Section 6 of Article XIII B of the California