AB 2116 Assembly Bill - Bill Analysis BILL ANALYSIS AB 2116 Page 1 ASSEMBLY THIRD READING AB 2116 (Portantino) As Amended May 7, 2008 Majority vote JUDICIARY 9-0 ----------------------------------------------------------------- |Ayes:|Jones, Tran, Adams, | | | | |Evans, Feuer, Keene, | | | | |Berg, Laird, Levine | | | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Provides that a notice sent to a defaulting vehicle buyer must include specified information relating to reinstatement of a motor vehicles sales contract after the vehicle has been repossessed for nonpayment. Specifically, this bill requires a notice setting forth the conditions precedent necessary to reinstate a conditional sales contract to include all of the following: 1)The total amount required to reinstate the contract as of the date of notice. 2)The amount and due date of any scheduled payments and delinquency fees that may become due to the holder during the initial reinstatement period, if such amounts will increase the amount required to reinstate the contract. 3)The amount of any law enforcement lien that must be paid before the buyer can regain possession of the vehicle and to whom the fee must be paid. 4)To the extent that they are known by the holder, the following information: a) any storage fees that must be paid and to whom they must be paid; b) any amount that may be owed to a repossession agent; and, c) contact information of any third party to whom a fee is owed. 5)Prescribed statements pointing out that other amounts may be due to third parties and that, before reinstatement, the person may be required to demonstrate that he or she is not in default under the insurance or other provisions of the AB 2116 Page 2 contract. 6)An address and phone number of the holder from which the buyer may obtain more information regarding his or her reinstatement rights. FISCAL EFFECT : None COMMENTS : The Rees-Levering Act Conditional Sales Finance Act is a consumer protection measure for automobile buyers who default on their payments. Under existing law, when a person defaults on a conditional automobile sales contract, the creditor may repossess the vehicle and sell it in order to recoup losses. Rees-Levering, however, requires that before selling the repossessed vehicle, the creditor, or other holder of the vehicle, must send the buyer a notice of intent (NOI) to sell the vehicle. The NOI must also inform the buyer of his or her right to redeem the vehicle (by paying the full amount owed) or, alternatively, to reinstate the conditional sales contract by curing any default. Reinstatement is generally a better option for the buyer than redemption, since reinstatement does not require paying the full amount owed before regaining possession of the vehicle. Existing law requires that the NOI set forth "all conditions precedent" to reinstatement, without specifying what "all conditions precedent" might entail. A recent appellate court ruling interpreted this clause and concluded that it requires an NOI to contain sufficient information to enable the buyer to determine precisely what he or she must do to reinstate the conditional sales contract. [Juarez v. Arcadia Financial, Ltd. (2007) 152 Cal. App. 4th 889.] The court held that at a minimum this would require the NOI to state "the amounts due, to whom they are due, the addresses and/or contact information for those parties, and any other specific actions the buyer must take." In particular, the court held that the NOI, if it is to adequately state "all conditions precedent," must also identify the amount of any fees that may be owed to third parties or any other obligations or conditions of the contract beyond the amount owed on the sales price. In short, the Juarez ruling concluded that "all" conditions precedent mean "all" conditions precedent, and that all required fees or actions must be fully detailed in the NOI. AB 2116 Page 3 This bill would effectively overturn the holding in Juarez, at least insofar as what the court seemed to require of the NOI. Whereas the court opinion seems to require that the NOI specify the specific dollar amount of every fee that might be owed and every action that must be taken, this bill would set forth what the author and sponsor believe to be more practicable requirements that would at the same time provide the buyer will essential information need to reinstate the contract and regain possession of the vehicle. Specifically, this bill would provide that the requirement to provide all conditions precedent would be met if the NOI included all of the following: 1) the total amount required to reinstate the contract as of the date of the notice; 2) the amount and due date of any scheduled payments and delinquency fees that may become due to the holder during the initial reinstatement period; 3) to the extent that they are known to the holder, any amounts owed for storage or repossession fees and contact information for third parties to whom fees may be owed; 4) a statement noting that other amounts may be due to third parties in order to obtain possession of the vehicle; 5) a statement noting that the buyer may be required to demonstrate that he or she is not in default under the insurance or other provisions of the contract; and, 6) the address and phone number of the holder so that the buyer may obtain more information regarding his/her reinstatement rights. Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334 FN: 0004582