Subject: SB 95 Senate Bill - Bill Analysis
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Date: Fri, 28 Aug 2009 05:14:36 -0700

BILL ANALYSIS

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UNFINISHED BUSINESS

Bill No: SB 95
Author: Corbett (D)
Amended: 7/1/09
Vote: 21

SENATE JUDICIARY COMMITTEE : 3-2, 3/31/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters

SENATE APPROPRIATIONS COMMITTEE : 7-5, 5/28/09
AYES: Kehoe, Corbett, DeSaulnier, Hancock, Leno, Oropeza,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
NO VOTE RECORDED: Wolk

SENATE FLOOR : 21-17, 6/3/09
AYES: Alquist, Cedillo, Corbett, DeSaulnier, Ducheny,
Florez, Hancock, Kehoe, Leno, Liu, Lowenthal, Negrete
McLeod, Oropeza, Padilla, Pavley, Romero, Simitian,
Steinberg, Wiggins, Wolk, Yee
NOES: Aanestad, Ashburn, Benoit, Calderon, Cogdill,
Correa, Cox, Denham, Dutton, Harman, Hollingsworth, Huff,
Maldonado, Strickland, Walters, Wright, Wyland
NO VOTE RECORDED: Runner, Vacancy

ASSEMBLY FLOOR : 46-23, 8/20/09 - See last page for vote

SUBJECT : California Car Buyers Protection Act of 2009

SOURCE : Consumer for Auto Reliability and Safety

CONTINUED

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DIGEST : This bill enacts the California Car Buyers
Protection Act of 2009. The bill imposes certain
requirements when a dealer purchases or obtains a vehicle
in trade in a retail sale or lease transaction and the
vehicle is subject to a prior credit or lease balance,
relating to the discharge of the credit or balance. The
bill increases dealer's license and renewal fees to $175
and $125, respectively. The bill increases auto broker's
endorsement and renewal fees to $100 and $75, respectively.

Assembly Amendments narrowed the scope of the bill by
deleting provisions that (1) increased the amount of a
dealers bond; (2) rights of action against a dealer by a
customer who suffers a loss by reason of fraud; (3)
specified service fees; (4) added provisions that increase
auto broker's endorsement and renewal fees, as specified.

ANALYSIS : Existing law provides for the issuance of
dealer's licenses, and sets the fees for an original
license at $150 and for an annual renewal at $100.
Existing law sets the fees for an original auto broker's
endorsement at $50 and for the annual renewal at $25.

This bill enacts the California Car Buyer' Protection Act
of 2009. Specifically, this bill:

1. Increases the fee for a license issued to dealers and
lessor-retailers by $25 for the original license, or an
ownership change which requires a new application and
for the annual renewal of a license, and the fee for an
auto broker's endorsement to a dealer's license and
annual renewals by $50.

2. Provide that it is the intent of the Legislature by
increasing the fee for the annual renewal of the license
of a dealer and of a lessor-retailer by $25 that $40 of
the total fee shall, when appropriated, be utilized by
the Department of Motor Vehicles (DMV) for the
investigation of those dealers and lessor-retailers who
demonstrate the greatest potential for causing losses to
consumers as shown by repeated consumer complaints,
habitual violations of the requirements of their
licenses, the issuance of a probationary license by the

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department, or a violation of other standards and
criteria established by the department for these
purposes.

3. Provides that when a dealer purchases or obtains a
vehicle in trade in a retail sale or lease transaction
and the vehicle is subject to a prior credit or lease
balance, all of the following apply:

A. If the dealer agreed to pay a specified amount
on the prior credit or lease balance owing on the
vehicle purchased or obtained in trade, and the
agreement to pay the specified amount is contained
in a written agreement documenting the transaction,
the dealer shall tender the agreed upon amount as
provided in the written agreement to the lessor
registered in accordance with Vehicle Code Section
4453.5, or to the legal owner reflected on the
ownership certificate, or to the designee of that
lessor or legal owner of the vehicle purchased or
obtained in trade within 21 calendar days of
purchasing or obtaining the vehicle in trade. This
time period may be shortened if the dealer and
consumer agree, in writing, to a shorter time
period.

B. If the dealer did not set forth an agreement
regarding payment of a prior credit or lease
balance owed on the vehicle purchased or obtained
in trade, in a written agreement documenting the
transaction, the dealer shall tender to the lessor
registered in accordance with Vehicle Code Section
4453.5, or to the legal owner reflected on the
ownership certificate, or to the designee of that
lessor or legal owner of the vehicle purchased or
obtained in trade, an amount necessary to discharge
the prior credit or lease balance owing on the
vehicle purchased or obtained in trade within 21
calendar days of purchasing or obtaining the
vehicle in trade. This time period may be
shortened if the dealer and consumer agree, in
writing, to a shorter time period.

C. A dealer shall not sell, consign for sale, or

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transfer any ownership interest in the vehicle
purchased or obtained in trade until an amount
necessary to discharge the prior credit or lease
balance owing on the vehicle has been tendered to
the lessor registered in accordance with Section
4453.5, or to the legal owner reflected on the
ownership certificate, or to the designee of that
lessor or legal owner of the vehicle purchased or
obtained in trade.

4. Provides that a dealer does not violate the foregoing
section if the dealer reasonably and in good faith gives
notice of rescission of the contract promptly, but no
later than 21 days after the date on which the vehicle
was purchased or obtained in trade, and the contract is
thereafter rescinded on any of the grounds in Civil Code
Section 1689.

Prior legislation

SB 729 (Padilla), Chapter 437, Statutes of 2007

Background

Senate Bill 729 (Padilla), Chapter 437, Statutes of 2007,
created the Consumer Motor Vehicle Recovery Corporation
(CMVRC), a nonprofit mutual benefit corporation, with a
board of directors with certain powers and duties, in order
to provide payments to consumers on eligible claims,
including a vehicle dealer or lessor-retailer's failure to
remit license or registration fees, failure to pay off a
trade-in's sale or lease balance owed, or failure to pay
proceeds of a consignment sale. A consumer may file an
application with the CMVRC for the payment of the
consumer's eligible claim if the dealer or lessor-retailer
against whom the claim is asserted has ceased selling and
leasing vehicles or is in bankruptcy.

The DMV is required to charge dealers and lessor-retailers
a fee of $1.00 for each vehicle sold by the dealers and
lessor-retailers, up to $2,500 per dealer per year. The
fees are continuously appropriated to the DMV for quarterly
payment to the CMVRC until the recovery fund has reached $5
million. To date the DMV has collected approximately

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$720,000. Oversight and review of the CMVRC is done by the
Attorney General.

Although the CMVRC was to be implemented by July 1, 2008,
information provided to Consumers for Auto Reliability and
Safety (CARS) indicates that the CMVRC is not yet fully
implemented. The information also indicates that all the
board members have been appointed; the board is in the
process of devising the claims forms and having them
translated; the CMVRC is close to the point where it may
start accepting claims; and it may be a matter of weeks
before it is ready to begin processing claims.

FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No

According to the Assembly Appropriations analysis, annual
increased license fee revenue to the DMV of $475,000, and
one-time programming and administrative costs of $100,000
to implement the fee increases. The additional revenues
will be available, upon appropriation, to the DMV's
Occupational Licensing and Investigative Services program.

SUPPORT : (Verified 8/26/09)

Consumers for Auto Reliability and Safety (source)
American Federation of State, County and Municipal
Employees
California Broker's Association
California Public Interest Research Group
California Statewide Law Enforcement Association
Congress of California Seniors
Consumer Attorneys of California; Teamsters
Consumer Federation of California
Consumer Watchdog
Consumers Union

ARGUMENTS IN SUPPORT : According to the author's office,
this bill is intended to require dealers to pay-off car
liens before trading or selling the vehicles so consumers
are not stuck with two car payments. The bill requires a
dealer to payoff a lien before it sells or trades the
vehicle, and do so within 21 days. In addition, the bill

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increases funding for DMV investigators by a small increase
in the dealer license fee.

The author's office explains the need for the bill as
follows: "Consumers are losing confidence in the
automotive marketplace. They are unable to tell in advance
whether a dealer is solvent or about to close its doors,
posing unacceptable risks and causing a ripple effect
throughout our economy. SB 95 is a comprehensive solution
that will require dealers to pay outstanding liens on
traded-in vehicles before they trade or sell the vehicle to
ensure the consumer is protected. As dealerships close
their doors, they are leaving consumers with unpaid liens
on vehicles they traded-in, as well as a second loan on the
newer vehicle they purchased at the dealership. Too often
the consequence is destruction of consumer credit,
repossession of the vehicles, job losses due to the lack of
transportation to get to work, and consumers being forced
into bankruptcy."

According to supporters, the DMV reports that the number of
consumer complaints involving a dealer's failure to pay off
a trade-in has risen significantly from prior years. As of
the end of February 2009, the DMV states that it is
investigating 256 active cases where a dealer has failed to
pay off a consumer's trade-in and 564 additional consumer
complaints that the consumer had not yet received
verification that title to a vehicle bought from or sold to
a dealer had been transferred.

ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
Fong, Fuentes, Furutani, Hall, Hayashi, Hernandez, Hill,
Huber, Huffman, Jones, Krekorian, Lieu, Bonnie Lowenthal,
Ma, Mendoza, Monning, Nava, John A. Perez, Portantino,
Ruskin, Salas, Saldana, Solorio, Swanson, Torlakson,
Torres, Torrico, Yamada, Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Fletcher,
Fuller, Gilmore, Hagman, Harkey, Knight, Logue, Nestande,
Niello, Nielsen, Smyth, Audra Strickland, Tran, Villines
NO VOTE RECORDED: Block, Emmerson, Gaines, Galgiani,

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Garrick, Jeffries, Miller, V. Manuel Perez, Silva,
Skinner, Vacancy

RJG:do 8/26/09 Senate Floor Analyses

SUPPORT/OPPOSITION: SEE ABOVE

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