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 prohibit a dealer or rental car company, as defined, with a motor vehicle fleet of 34 or fewer loaner or rental vehicles
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 (DMV) to
begin delete 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, toend delete include a specified recall disclosure statement with begin delete the notice of registration renewal.end delete 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 directly associated with the disposal of hazardous materials that are associated with a recall repair. 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.
Existing law authorizes the DMV to suspend or revoke the license issued to a dealer, transporter, manufacturer, manufacturer branch, remanufacturer, remanufacturer branch, distributor, or distribitor branch upon determining that the person to whom the licensed was issued has done, among other things, violate provisions relating to issuance of licenses and certificates to manufacturers, transporters, and dealers.
This bill would also authorize the DMV to suspend or revoke the license issued to the above-mentioned persons upon determining that the person has violated any provision of the Consumer Automotive Recall Safety Act.
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 in enacting
2this act to increase consumer awareness of unrepaired recalls on
3their cars and to ensure that consumers have access to loaner and
4rental vehicles free of any unrepaired recalls.
5(c) The Legislature further finds and declares all of the
7(1) The distribution, sale, and service of new motor vehicles in
8the State of California vitally affect the general economy of this
9state and the public welfare.
10(2) The new motor vehicle franchise system, which operates
11within a strictly defined and highly regulated statutory scheme,
12assures the consuming public of a well-organized distribution
13system for the availability and sale of new motor vehicles
14throughout the state, provides a network of quality warranty, recall,
15and repair facilities to maintain those vehicles, and creates a
16cost-effective method for the state to police those systems through
17the licensing and regulation of private sector franchisors and
19(3) California franchise laws require manufacturers to provide
20reasonable reimbursement to dealers for warranty and recall work,
21but fail to establish guidelines for compensating franchisee disposal
22costs associated with hazardous waste generated by repairs on
24(d) Accordingly, it is the intent of the Legislature in enacting
25this act to ensure that new motor vehicle dealer franchisees are
26treated fairly by their franchisors and that new motor vehicle dealer
27franchisees 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
31agreement made by it and adequately and fairly compensate each
32of its franchisees for labor and parts used to fulfill that warranty
33when the franchisee has fulfilled warranty obligations of
34diagnostics, repair, and servicing and shall file a copy of its
35warranty reimbursement schedule or formula with the board. The
36warranty reimbursement schedule or formula shall be reasonable
37with respect to the time and compensation allowed to the franchisee
38for the warranty diagnostics, repair, servicing, and all other
39conditions of the obligation, including costs directly associated
40with the disposal of hazardous materials that are associated with
P5 1a recall repair. The reasonableness of the warranty reimbursement
2schedule or formula shall be determined by the board if a franchisee
3files a protest with the board. A franchisor shall not replace,
4modify, or supplement the warranty reimbursement schedule to
5impose a fixed percentage or other reduction in the time and
6compensation allowed to the franchisee for warranty repairs not
7attributable to a specific repair. A franchisor may reduce the
8allowed time and compensation applicable to a specific warranty
9repair only upon 15 days’ prior written notice to the franchisee.
10Any protest challenging a reduction in time and compensation
11applicable to specific parts or labor operations shall be filed within
12six months following the franchisee’s receipt of notice of the
13reduction, and the franchisor shall have the burden of establishing
14the reasonableness of the reduction and adequacy and fairness of
15the resulting compensation.
16(b) In determining the adequacy and fairness of the
17compensation, the franchisee’s effective labor rate charged to its
18various retail customers may be considered together with other
19relevant criteria. If in a protest permitted by this section filed by
20any franchisee the board determines that the warranty
21reimbursement schedule or formula fails to provide adequate and
22fair compensation or fails to conform with the other requirements
23of this section, within 30 days after receipt of the board’s order,
24the franchisor shall correct the failure by amending or replacing
25the warranty reimbursement schedule or formula and implementing
26the correction as to all franchisees of the franchisor that are located
27in this state.
28(c) If any franchisor disallows a franchisee’s claim for a
29defective part, alleging that the part, in fact, is not defective, the
30franchisor shall return the part alleged not to be defective to the
31franchisee at the expense of the franchisor, or the franchisee shall
32be reimbursed for the franchisee’s cost of the part, at the
34(d) (1) All claims made by franchisees pursuant to this section
35shall be either approved or disapproved within 30 days after their
36receipt by the franchisor. Any claim not specifically disapproved
37in writing within 30 days from receipt by the franchisor shall be
38deemed approved on the 30th day. All claims made by franchisees
39under this section and Section 3064 for labor and parts shall be
40paid within 30 days after approval.
P6 1(2) A franchisor shall not disapprove a claim unless the claim
2is false or fraudulent, repairs were not properly made, repairs were
3inappropriate to correct a nonconformity with the written warranty
4due to an improper act or omission of the franchisee, or for material
5noncompliance with reasonable and nondiscriminatory
6documentation and administrative claims submission requirements.
7(3) When any claim is disapproved, the franchisee who submits
8it shall be notified in writing of its disapproval within the required
9period, and each notice shall state the specific grounds upon which
10the disapproval is based. The franchisor shall provide for a
11reasonable appeal process allowing the franchisee at least 30 days
12after receipt of the written disapproval notice to provide additional
13supporting documentation or information rebutting the disapproval.
14If disapproval is based upon noncompliance with documentation
15or administrative claims submission requirements, the franchisor
16shall allow the franchisee at least 30 days from the date of receipt
17of the notice to cure any material noncompliance. If the disapproval
18is rebutted, and material noncompliance is cured before the
19applicable deadline, the franchisor shall approve the claim.
20(4) If the franchisee provides additional supporting
21documentation or information purporting to rebut the disapproval,
22attempts to cure noncompliance relating to the claim, or otherwise
23appeals denial of the claim and the franchisor continues to deny
24the claim, the franchisor shall provide the franchisee with a written
25notification of the final denial within 30 days of completion of the
26appeal process, which shall conspicuously state “Final Denial” on
27the first page.
28(5) Failure to approve or pay within the above specified time
29limits, in individual instances for reasons beyond the reasonable
30control of the franchisor, shall not constitute a violation of this
32(6) Within six months after either receipt of the written notice
33described in paragraph (3) or (4), whichever is later, a franchisee
34may file a protest with the board for determination of whether the
35franchisor complied with the requirements of this subdivision. In
36any protest pursuant to this subdivision, the franchisor shall have
37the burden of proof.
38(e) (1) Audits of franchisee warranty records may be conducted
39by the franchisor on a reasonable basis for a period of nine months
40after a claim is paid or credit issued. A franchisor shall not select
P7 1a franchisee for an audit, or perform an audit, in a punitive,
2retaliatory, or unfairly discriminatory manner. A franchisor may
3conduct no more than one random audit of a franchisee in a
4nine-month period. The franchisor’s notification to the franchisee
5of any additional audit within a nine-month period shall be
6accompanied by written disclosure of the basis for that additional
8(2) Previously approved claims shall not be disapproved or
9charged back to the franchisee unless the claim is false or
10fraudulent, repairs were not properly made, repairs were
11inappropriate to correct a nonconformity with the written warranty
12due to an improper act or omission of the franchisee, or for material
13noncompliance with reasonable and nondiscriminatory
14documentation and administrative claims submission requirements.
15A franchisor shall not disapprove or chargeback a claim based
16upon an extrapolation from a sample of claims, unless the sample
17of claims is selected randomly and the extrapolation is performed
18in a reasonable and statistically valid manner.
19(3) If the franchisor disapproves of a previously approved claim
20following an audit, the franchisor shall provide to the franchisee,
21within 30 days after the audit, a written disapproval notice stating
22the specific grounds upon which the claim is disapproved. The
23franchisor shall provide a reasonable appeal process allowing the
24franchisee a reasonable period of not less than 30 days after receipt
25of the written disapproval notice to respond to any disapproval
26with additional supporting documentation or information rebutting
27the disapproval and to cure noncompliance, with the period to be
28commensurate with the volume of claims under consideration. If
29the franchisee rebuts any disapproval and cures any material
30noncompliance relating to a claim before the applicable deadline,
31the franchisor shall not chargeback the franchisee for that claim.
32(4) If the franchisee provides additional supporting
33documentation or information purporting to rebut the disapproval,
34attempts to cure noncompliance relating to the claim, or otherwise
35appeals denial of the claim and the franchisor continues to deny
36the claim, the franchisor shall provide the franchisee with a written
37notification of the final denial within 30 days of completion of the
38appeal process, which shall conspicuously state “Final Denial” on
39the first page.
P8 1(5) The franchisor shall not chargeback the franchisee until 45
2days after receipt of the written notice described in paragraph (3)
3or paragraph (4), whichever is later. Any chargeback to a franchisee
4for warranty parts or service compensation shall be made within
590 days of receipt of that written notice. If the franchisee files a
6protest pursuant to this subdivision prior to the franchisor’s
7chargeback for denied claims, the franchisor shall not offset or
8otherwise undertake to collect the chargeback until the board issues
9a final order on the protest. If the board sustains the chargeback
10or the protest is dismissed, the franchisor shall have 90 days
11following issuance of the final order or the dismissal to make the
12chargeback, unless otherwise provided in a settlement agreement.
13(6) Within six months after either receipt of the written
14disapproval notice or completion of the franchisor’s appeal process,
15whichever is later, a franchisee may file a protest with the board
16for determination of whether the franchisor complied with this
17subdivision. In any protest pursuant to this subdivision, the
18franchisor shall have the burden of proof.
19(f) If a false claim was submitted by a franchisee with the intent
20to defraud the franchisor, a longer period for audit and any resulting
21chargeback may be permitted if the franchisor obtains an order
22from the board.
23(g) For purposes of this section, “warranty” includes a recall
24conducted pursuant to Sections 30118 to 30120, inclusive, of Title
2549 of the United States Code. This subdivision is declaratory and
26not amendatory of existing law.
Section 11705 of the Vehicle Code is amended to read:
(a) The department, after notice and hearing, may
29suspend or revoke the license issued to a dealer, transporter,
30manufacturer, manufacturer branch, remanufacturer,
31remanufacturer branch, distributor, or distributor branch upon
32determining that the person to whom the license was issued is not
33lawfully entitled thereto, or has done any of the following:
34(1) Filed an application for the license using a false or fictitious
35name not registered with the proper authorities, or knowingly made
36a false statement or knowingly concealed a material fact, in the
37application for the license.
38(2) Made, or knowingly or negligently
permitted, an illegal use
39of the special plates issued to the licensee.
P9 1(3) Used a false or fictitious name, knowingly made a false
2statement, or knowingly concealed a material fact, in an application
3for the registration of a vehicle, or otherwise committed a fraud
4in the application.
5(4) Failed to deliver to a transferee lawfully entitled thereto a
6properly endorsed certificate of ownership.
7(5) Knowingly purchased, sold, or otherwise acquired or
8disposed of a stolen motor vehicle.
9(6) Failed to provide and maintain a clear physical division
10between the type of business licensed pursuant to this chapter and
11any other type of business conducted at the established place of
13(7) Willfully violated Section 3064, 3065, 3074, or 3075 or any
14rule or regulation adopted pursuant thereto.
15(8) Violated any provision of Division 3 (commencing with
16Section 4000) or any rule or regulation adopted pursuant thereto,
17or subdivision (a) of Section 38200.
18(9) Violated any provision of Division 4 (commencing with
19Section 10500) or any rule or regulation adopted pursuant thereto.
20(10) Violated any provision of Article 1 (commencing with
21Section 11700) of, or Article 1.1 (commencing with Section 11750)
22of, Chapter 4 of Division 5 or any rule or regulation adopted
24(11) Violated any provision of Part 5 (commencing with Section
2510701) of Division 2 of the Revenue and Taxation Code or any
26rule or regulation adopted pursuant thereto.
27(12) Violated any provision of Chapter 2b (commencing with
28Section 2981) of Title 14 of Part 4 of Division 3 of the Civil Code
29or any rule or regulation adopted pursuant thereto.
30(13) Submitted a check, draft, or money order to the department
31for any obligation or fee due the state which was dishonored or
32refused payment upon presentation.
33(14) (A) Has caused any person to suffer any loss or damage
34by reason of any fraud or deceit practiced on that person or
35fraudulent representations made to that person in the course of the
37(B) For purposes of this paragraph, “fraud” includes any act or
38omission which is included within the definition of either “actual
39fraud” or “constructive fraud” as defined in Sections 1572 and
401573 of the Civil Code, and “deceit” has the same meaning as
P10 1defined in Section 1710 of the Civil Code. In addition, “fraud”
2and “deceit” include, but are not limited to, a misrepresentation in
3any manner, whether intentionally false or due to gross negligence,
4of a material fact; a promise or representation not made honestly
5and in good faith; an intentional failure to disclose a material fact;
6and any act within Section 484 of the Penal Code.
7(C) For purposes of this paragraph, “person” also includes a
9(15) Failed to meet the terms and conditions of an agreement
10entered into pursuant to Section 11707.
11(16) Violated Section 43151, 43152, or 43153 of, or subdivision
12(b) of Section 44072.10 of, the Health and Safety Code.
13(17) Failed to repay a claim paid by the Consumer Motor
14Vehicle Recovery Corporation as provided in subdivision (i) of
16(18) As a buy-here-pay-here dealer, violated any provision of
17Chapter 11 (commencing with Section 7500) of Division 3 of the
18Business and Professions Code or any rule or regulation adopted
19pursuant to those provisions.
20(b) Any of the causes specified in this chapter as a cause for
21refusal to issue a license to a transporter, manufacturer,
22manufacturer branch, remanufacturer, remanufacturer branch,
23distributor, distributor branch, or dealer applicant is cause to
24suspend or revoke a license issued to a transporter, manufacturer,
25manufacturer branch, remanufacturer, remanufacturer branch,
26distributor, distributor branch, or dealer.
27(c) Except as provided in Section 11707, every hearing provided
28for in this section shall be conducted pursuant to Chapter 5
29(commencing with Section 11500) of Part 1 of Division 3 of Title
302 of the Government Code.
Article 1.1 (commencing with Section 11750) is added
32to Chapter 4 of Division 5 of the Vehicle Code, to read:
This article shall be known, and may be cited, as the
37Consumer Automotive Recall Safety Act (CARS Act).
As used in this article, the following definitions apply:
39(a) The term “dealer” has the same meaning as in Section 285.
P11 1(b) (1) A “manufacturer’s recall” is a recall conducted pursuant
2to Sections 30118 to 30120, inclusive, of Title 49 of the United
4(2) A manufacturer’s recall does not include a service campaign
5or emission recall when the vehicle manufacturer or the National
6Highway Traffic Safety Administration has not issued a recall
7notice to owners of affected vehicles, pursuant to Section 30118
8of Title 49 of the United States Code.
9(c) A “recall database” is a database from which an individual
10may obtain vehicle identification number (VIN) specific
11manufacturer’s recall information relevant to a specific vehicle.
12(1) For a vehicle manufacturer that is not subject to the
13regulations adopted pursuant to Section 31301 of the federal
14Moving Ahead for Progress in the 21st Century Act (Public Law
15112-141), a recall database is one of the following:
16(A) The recall data on a vehicle manufacturer’s Internet Web
17site for a specific vehicle’s line-make.
18(B) The recall data in a vehicle manufacturer’s internal system
19that provides information to its franchisees on vehicles subject to
21(C) The recall data in subparagraph (A) or (B) that is contained
22in a commercially available vehicle history system.
23(2) For a vehicle manufacturer that is subject to the regulations
24adopted pursuant to Section 31301 of the federal Moving Ahead
25for Progress in the 21st Century Act (Public Law 112-141), a recall
26database shall include, at a minimum, the recall information
27required pursuant to Section 573.15 of Title 49 of the Code of
29(d) A “recall database report” is a report, specific to a vehicle
30that is identified by its VIN, containing information obtained from
31a recall database.
32(e) A “rental car company” is a person or entity in the
33of renting passenger vehicles to the public in California.
(a) No later than 48 hours after receiving a notice of a
35manufacturer’s recall, or sooner if practicable, a dealer or rental
36car company with a motor vehicle fleet of 34 or fewer loaner or
37rental vehicles shall not loan, rent, or offer for loan or rent a vehicle
38subject to that recall until the recall repair has been made.
39(b) If a recall notification indicates that the remedy for the recall
40is not immediately available and specifies actions to temporarily
P12 1repair the vehicle in a manner to eliminate the safety risk that
2prompted the recall, the dealer or rental car company, after having
3the repairs completed, may loan or rent the vehicle. Once the
4remedy for the vehicle becomes available to the dealer or rental
5car company, the dealer or rental car company shall not loan or
6rent the vehicle until the vehicle has been repaired.
(a) Before mailing a notice of registration renewal to
8the registered owner of a vehicle, pursuant to Section 1661, the
9department shall obtain a recall database report for that vehicle.
10If the recall database report indicates that the vehicle is subject to
11a manufacturer’s recall, the department shall notify the registered
12owner by checking the box next to the recall disclosure statement
13specified in subdivision (b).
The department shall include the following recall
16disclosure statement on
begin delete the notice of registration renewal for a
17vehicle subject to a manufacturer’s recall:end delete
This vehicle has an unrepaired manufacturer’s
21 For most vehicles,
begin delete you can get this recallend delete repaired for
25free. You can check for any recalls and how to get the recall
26repaired at www.safercar.gov.”
section shall become operative on the date that the
29Director of Motor Vehicles executes a declaration, to be retained
30by the director, in which the director certifies that the department
31has appropriate access to the necessary data within a recall database
32and available funding to include a recall disclosure statement on
33the notice of registration renewal for a vehicle subject to a
34 manufacturer’s recall. The director shall post the declaration on
35the department’s Internet Web site and shall send the declaration
36to the appropriate committees of the Legislature and to the
This article shall not create any legal duty upon the
39dealer, rental car company, or department related to the accuracy,
40errors, or omissions contained in a recall database report or any
P13 1legal duty to provide information added to a recall database after
2the dealer, rental car company, or department obtained the recall
3database report pursuant to Sections 11754 and 11758.
The rights and remedies provided by this article are
5cumulative and shall not be construed as restricting any right or
6remedy that is otherwise available.
The provisions of this article are severable. If any
8provision of this article or its application is held invalid, that
9invalidity shall not affect other provisions or applications that can
10be given effect without the invalid provision or application.
No reimbursement is required by this act pursuant to
12Section 6 of Article XIII B of the California Constitution because
13the only costs that may be incurred by a local agency or school
14district will be incurred because this act creates a new crime or
15infraction, eliminates a crime or infraction, or changes the penalty
16for a crime or infraction, within the meaning of Section 17556 of
17the Government Code, or changes the definition of a crime within
18the meaning of Section 6 of Article XIII B of the California