BILL ANALYSIS Ó
AB 675
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Date of Hearing: April 14, 2015
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 675
(Alejo) - As Amended March 26, 2015
As Proposed to be Amended
SUBJECT: Rental vehicles: separately stated charges:
disclosures
KEY ISSUES:
1)Should a rental car company be permitted to LIST rental rate
charges SEPARATELY from government-imposed fees, if any, so
long as the quote provided to the consumer clearly and
conspicuously states the total price?
2)Should a required damage waiver disclosure be updated to
account for the fact that most people now reserve rental
vehicles online?
3)Should the period of time after which a rental car company may
use location data from a rental vehicle's GPS device be
reduced from seven DAYS to three days after the contracted
return date, if the car has not been returned by that date AND
NO extension OF THE RENTAL CONTRACT HAS BEEN requested?
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SYNOPSIS
This bill makes several changes in the statute governing rental
agreements between rental car companies and their customers, in
large measure to reflect new government surcharges and the shift
to online reservations. Existing law requires rental car
companies, when quoting a price to a prospective customer, to
quote the total cost: the base rental fee, plus any surcharges
that are typically added to the base fee. Existing law allows
the rental car company to provide a statement that separates the
company's rental fee from specified government charges, but
unfortunately the statute specifically identifies only those
charges that were in place when the statute was last amended.
Since then, the list of mandatory fees has grown. This bill
would authorize separation of these newer fees along with any
fees still to come, by permitting the rental car company to
separately state its rental fees from any "additional mandatory
charges," defined as any charges imposed by a government entity.
The bill would make two other substantive changes. First, a
damage waiver disclosure that currently must be made orally at
the rental counter could, under this bill, be made online if the
car is reserved online. (Relatedly, the bill eliminates an
existing requirement that a redundant disclosure be hung from
the rear-view mirror.) Second, in order to better prevent theft
and facilitate recovery of unreturned vehicles, a rental company
would be permitted to use the car's GPS device to locate a car
three days after the contracted return date (instead of the one
week period specified under existing law.) Finally, the bill
makes several technical and organizational changes in order to
create a more logical ordering of provisions, eliminate adjacent
statutes that have become inoperative, and move the operative
parts of the deleted statutes into the principle statute, Civil
Code Section 1936. The analysis reflects amendments to be taken
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in this Committee. There is no known opposition to this bill.
SUMMARY: Revises the statute governing agreements between
rental car companies and their customers in order to achieve
relatively non-controversial changes. Specifically, this bill:
1)Permits a rental car company, when providing a quote or
imposing charges, to separately state the rental rate,
additional mandatory charges, if any, and a mileage charge, if
any, that a renter must pay to hire or lease the vehicle for
the period of time to which the rental rate applies.
2)Provides, consistent with existing law, that if additional
mandatory charges apply, the rental company shall do the
following:
a) Provide the person receiving the quote, at the time the
quote is given, with a good faith estimate of the rental
rate and all mandatory charges, as well as the total
charges for the entire rental. Specifies that if quotes and
total charges are provided online, then the total charges
shall be displayed in a typeface at least as large as any
rental rate and shall be obtainable by the person receiving
the quote by following links through no more than two
Internet web site pages, including the page on which the
rental rate is first provided.
b) Clearly and conspicuously disclose in the rental
contract the total of the rental rate, additional mandatory
charges, for the entire rental period, exclusive of charges
that cannot be determined at the time the rental commences.
Prohibits the rental car company from charging more than
the quoted amount unless the renter makes changes
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subsequent to making the reservation.
3)Provides that if a damage waiver is offered orally at the
rental counter, a rental company shall orally disclose at the
time of the offer that the damage waiver may be duplicative of
coverage provided by the customer's own motor vehicle
insurance policy. However, if the damage waiver is obtained
online, then the rental car company may forgo the oral
disclosure and instead provide a clear and conspicuous written
disclosure on the company's Internet Web site, at the time the
quote is given.
4)Permits the rental car company to use information from the
rental vehicle's electronic surveillance technology if the
rental vehicle has not been returned three days following the
contracted return date, or three days following the end of an
extension of the return date.
5)Eliminates a requirement that the rental car company hang on
the rear-view mirror of all rental vehicles a paper hanger
that duplicates the damage waiver information that is already
disclosed when offered at the counter or online.
6)Defines "additional mandatory charges" to mean any charges
imposed by a government entity that the renter must pay,
including, but not limited to, a customer facility charge,
airport concession fee, tourism commission assessment, vehicle
license recovery fee, or other government imposed taxes or
fees.
7)Makes several organizational changes to account for provisions
that have become inoperative, to consolidate sections so as to
avoid redundancy, or otherwise provide a more logical
structure to the existing statute.
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EXISTING LAW:
1)Sets forth general rules governing contracts between rental
car companies and their customers on a variety of matters,
including, but not limited to, the manner in which rental car
companies advertise and quote rental charges and additional
fees, the renter's liability or lack thereof for damages to a
rental vehicle, the amount that rental car companies may
charge for damage waivers and the manner in which they are
offered, and the conditions under which a rental car company
may access, obtain, and use geo-location and other information
from the rental vehicle's electronic surveillance technology.
(Civil Code Section 1936; subsequent citations refer to the
Civil Code unless otherwise indicated.)
2)Requires a rental car company that offers a damage waiver to
disclose specified information to the renter in a prescribed
manner, including providing an oral disclosure at the counter
that the damage waiver may be duplicative of coverage that the
customer maintains under his or her own motor vehicle
insurance policy. (Section 1936 (g).)
3)Provides that a rental car company shall only advertise,
quote, and charge a rental rate that includes the entire
amount that the renter must pay to hire or lease the vehicle
for the period of time to which the rental rate applies.
(Section 1936 (m).)
4)Permits a rental car company to separately state the rental
rate from fees and charges imposed by other entities,
including any customer facility charge, airport concession
fee, or tourism commission assessment, so long as the
advertised or quoted rental rate includes the entire amount.
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(Civil Code Section 1936.01 (b).)
5)Prohibits a rental car company from using, accessing, or
obtaining any information relating to the renter's use of the
rental vehicle that was obtained using electronic surveillance
technology, subject to certain exceptions, including when the
technology is used to locate a stolen, abandoned, or missing
rental vehicle after one of the following:
a) The renter or law enforcement has informed the rental
car company that the vehicle is missing or has been stolen
or abandoned.
b) The rental vehicle has not been returned following one
week after the contracted return date, or one week
following the end of an extension of that return date.
c) The rental car company discovers that the vehicle has
been stolen or abandoned and, if stolen, reports the
vehicle stolen to law enforcement by filing a stolen
vehicle report. (Section 1936 (n) (1) (i)-(iii).)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: According to the author, the purpose of this bill is
to "modernize" Civil Code Section 1936, which regulates rental
car contracts. The author believes that this measure will
promote transparency by clearly delineating the private charges
imposed by the rental car company from the many
government-imposed exactions, including tourism fees, airport
concession and facility fees, vehicle fees, and related fees and
surcharges. According to the author, delineation will allow the
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consumer to know which parts of the total charge reflect the
rental company's fees, and which parts represent
government-imposed fees. However, the author stresses, the
existing consumer protection that requires the rental car
company to clearly and conspicuously quote the total charge will
be preserved in this bill. The author contends that the other
changes proposed by this bill - such as allowing disclosures to
be made online when a rental vehicle is reserved online -
"simply modernize the code." The bill, in fact, makes many
changes to existing law; however, the changes are not nearly as
extensive as they appear at first glance. For example, many of
the changes - some of which were apparently made by Legislative
Counsel - delete sections or subdivisions that have become
inoperative or redundant. For example, part of the adjacent
statute, Section 1936.01, duplicates much of Section 1936 except
for some provisions that have become inoperative. Therefore,
this bill deletes Section 1936.01 but re-inserts the still
operative parts of that statute into Section 1936. Other
changes move substantive provisions that were awkwardly placed
in definitional sections into more appropriate substantive
sections.
In brief, there are three substantive changes made by this bill
that merit attention: (1) updating a provision that allows a
rental car company to separate its rental fees from
government-imposed charges in order to reflect more recently
imposed charges; (2) eliminating a requirement that damage
waiver disclosures be made orally to reflect the fact that an
increasing number of people reserve rental vehicles online; and
(3) notwithstanding a general prohibition on the use of
information obtained from the rental vehicle's GPS device,
permitting the company to access and use GPS information to
locate the vehicle if the vehicle is not returned within three
days after the contracted return date, shortened from the one
week period in existing law.
Separation of Private and Public Fees: Civil Code Section 1936
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sets forth the general rules governing rental car contracts and
the respective duties and liabilities of rental car companies
and their customers. One of the key issues that prompted the
initial legislation, and which has been the subject of several
amendments over the years, concerns the various taxes,
assessments, and surcharges typically tacked on to the rental
company's fees and the manner in which the company may quote
those fees and charges to customers. For example, consumer
advocates previously alleged that rental companies used a "bait
and switch" technique of advertising or quoting only the base
amount of the total rental rate to customers, meaning customers
only learned of the additional charges when they picked up the
vehicle at the rental location. Legislation addressing this
issue was first enacted in 1988, amended in 1996, and
substantially re-written in 2001. Among other things, past
measures required a rental car company to quote the entire
amount, with the rental fees and additional surcharges "bundled"
together into a single quote. Because rental car companies
understandably wanted their customers to know which part of the
total was attributable to the rental car company and which part
represented government-imposed fees, the statute was amended
again in 2007 to authorize rental car companies to separate, or
effectively itemize, company fees from charges required by some
other entity, such as a government surcharge to expand or
maintain airport facilities, so long as the total charge was
clearly and conspicuously quoted to the consumer. The problem
with existing law on this point, however, is that it
specifically names the fees and charges that may be separated,
instead of identifying additional mandatory charges, such as
government fees, in general. Since last amended, several new
mandatory charges have been imposed, but they cannot be
separately listed with the other specified mandatory charges.
This bill would address this shortcoming by permitting the
rental car company to separate its rental charges from any
"additional mandatory charges," which are defined to include any
government-imposed charges.
Damage Waiver Disclosure: Another previous criticism that
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consumer groups have made against rental car companies in the
past was about both the cost and the necessity of the "damage
waiver" offered by rental car companies. Consumer groups
alleged that these waivers - which supposedly relieved the
renter from liability for damage to the vehicle - were often
quite limited in what they covered and, moreover, were often
unnecessary insofar as they duplicated coverage by the renter's
personal car insurance policy. To address this, the law was
amended to require the company to disclose to the consumer that
the damage waiver may be duplicative of his or her personal car
insurance policy. Since 2001, existing law has mandated that
this disclosure must be made orally at the counter and at the
time when the damage waiver is offered. However, since 2001,
the method by which rental vehicles are reserved and rental
agreements are entered into has changed dramatically because of
the Internet. Today, many if not most consumers reserve rental
vehicles online and select available options, including the
option of whether to accept the damage waiver offer. Most
people make these choices in advance so they can simply pick up
their vehicles without having to stand in line and have an
employee at the counter explain the options and make the
required disclosures in person. This bill would acknowledge
this reality by allowing the disclosure to be made online if the
vehicle is reserved online. If the customer reserves the
vehicle or selects the damage waiver option at the counter, then
the disclosure must still have to be made orally.
Relatedly, this bill would eliminate an existing requirement for
a paper "hanger," repeating the damage waiver disclosure, to be
hung from the rear-view mirror of every vehicle. Presumably,
the paper hanger gives the renter one last chance to opt for the
damage waiver, if he or she had refused, or to refuse it, if he
or she had accepted. According to the sponsor, most of these
paper hangers end up on the floors or in the back seats of the
rental vehicles and are rarely, if ever, used. This no doubt
reflects the fact that the customer is not likely to change his
or her mind between the walk from the counter - where the
disclosure and option may have just been provided - and the lot.
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If the customer has reserved the vehicle online so as to avoid
interacting with an employee at the counter, existing law only
makes the paper hanger effective if it is handed to an employee
at the counter. Given that the disclosure is already made
online or at the counter - and if made at the counter provided
only moments before the customer is likely to see the paper
hanger before leaving the lot - the author and sponsor believe
that the paper hanger disclosure is ineffective, inefficient,
and wasteful. It is difficult to disagree.
Use of GPS Information: California is one of just a handful of
states that prohibit rental car companies from using information
obtained from the rental vehicle's GPS device to locate their
vehicles, except in a few narrowly defined situations. A
high-profile court case in Connecticut involved a rental company
that used GPS information to charge customers extra fees for
"recklessly" using the vehicle, or driving a vehicle
out-of-state or otherwise outside of a contractually-restricted
geographical area. A customer sued the company and a court
found that the charges, at least under the terms of the specific
contract, were unwarranted. In response to this case, a small
number of states, most notably Connecticut, New York, and
California, passed laws that limit the ability of rental car
companies to use GPS information for such purposes. Indeed,
California enacted a general prohibition against the use of this
information, unless it is to provide the customer with requested
services. Otherwise, current law prohibits GPS information from
being accessed until the vehicle is returned, unless the vehicle
is missing, abandoned, or stolen, or the customer fails to
return the vehicle within one week of the contracted return date
or any extension thereof. The author and sponsor contend, not
unreasonably, that one week is a long time to wait before using
GPS to try to determine the whereabouts of a vehicle that has
not been returned, and where the renter has failed to notify the
rental company or sought to extend the contracted return date.
This bill would reduce the period from one week to three days
after the contracted return date.
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ARGUMENTS IN SUPPORT: According to the sponsors - the major car
rental companies, Avis, Enterprise, and Hertz - this bill "seeks
to modernize the relevant rental car code sections by making
them more consistent with practices in other states and
promoting transparency in pricing for consumers. In lieu of
outdated practices, the bill also requires internet disclosure
for the optional damage waiver and to combat theft, allows
rental car companies to locate missing vehicles sooner. . .
.[T]his bill makes a few small updates to the codes written
nearly 30 years ago. As technology changes and the market
follows, it is imperative that our code section allows us to
continue serving customers while maintaining the critical
consumer protections envisioned when originally crafted."
Proposed Author Amendments: The author will take the following
amendments in this Committee. The first three amendments listed
below are technical and clarifying in nature. The fourth
changes the time frame for using GPS information from two days
following failure to return the vehicle to three days following
failure to return.
- On page 4 line 11 after "charges" insert: imposed by a
government entity, and on lines 11 to 13 delete "in
addition to a per period base rental and mileage charge, if
any"
- On page 8 after line 17 add a new paragraph (16) which
reads: "Vehicle Registration Fee" means any fee imposed
pursuant to any provision of Division 3, Chapter 6 of the
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Vehicle Code.
- On page 8 line 18 change "(16)" to "(17)" and on line 19
after "fees" insert: and vehicle registrations fees
- On page 24 on line 23 change "two" to three in both
places in which it occurs in line 23.
REGISTERED SUPPORT / OPPOSITION:
Support
Avis Rental Cars
Enterprise Rental Cars
Hertz Rental Cars
Opposition
None on file
Analysis Prepared by:Thomas Clark / JUD. / (916) 319-2334
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