Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
Issue link: http://autodealermonthly.epubxp.com/i/89861
industry expert / legal buy-here-pay-here dealer seeking to repossess a vehicle, including prohibiting the dealer from commencing repossession proceedings for failure to make a sched- uled payment prior to the 16th day follow- ing the day on which that payment was due, requiring the dealer to hire a licensed repossession agency to repossess the ve- hicle on the dealer's behalf, and prohibiting the dealer from charging the buyer more than $500 for the dealer's repossession costs. The bill also caps interest rates that could be charged under a conditional sale or lease contract (which is interesting, be- cause leases do not employ interest rates) and requires a buy-here-pay-here dealer to allow a buyer 45 days to repay any penalties, fees, and other charges imposed by the dealer for past due payments that have been brought current. AB 1447 requires a buy-here-pay-here dealer (defined as in SB 956 and AB 1534) to issue a 30-day or 1,000-mile warranty to the buyer or lessee of a used vehicle bought or leased at retail price. The warranty must cover a large number of designated parts, well beyond the "engine and drive train" warranties often offered. The bill requires the dealer to either repair covered parts that fail or, at the dealer's election, to cancel the sale or lease and reimburse the buyer or lessee. The bill requires the dealer to pay 100 percent of the cost of labor and parts for any war- ranty repairs. The bill voids any agree- ment for the purchase or lease of a vehicle that waives, limits, or disclaims these requirements, and provides that a war- ranty is deemed to have been issued if a buy-here-pay-here dealer fails to issue one as required. The bill prohibits a buy-here-pay-here dealer from requiring the buyer to make payments in person (other than the downpayment), would prohibit the dealer from repossessing the vehicle or charging a penalty following timely payment of a deferred downpay- ment, and would prohibit the dealer from tracking the vehicle using GPS technology or from disabling the vehicle with starter interrupt technology, except with the buyer's permission and subject to other specified protections for the buyer. AB 1447 and AB 1534 were signed by the governor on Sept. 29, and SB 956 was ve- toed by the governor on the same day. The governor's veto can be overridden by a two-thirds' vote in both houses. AB 1534, by itself, would be a nuisance by in- creasing dealer overhead and providing no benefit to consumers. However, together, AB 1447, AB 1534 and SB 956 (should the governor's veto be overridden) would dramatically alter the California buy-here- pay-here landscape. California dealers will engage in a mad scramble with their lawyers to determine whether they can reconfigure their businesses so as to fall within one or more of the exemptions, but how many buy-here-pay-here dealers will be able to employ five or more certified mechanics on site or limit themselves primarily to leasing vehicles that are two model years old or newer? Those dealers who are unable to escape the definition of a buy-here-pay-here dealer will face interest rate caps, fee caps, disclosure requirements, warranty obligations, repossession limitations and other requirements that will impose sig- nificant compliance burdens and costs that smaller operators are unlikely to be able to meet. You can expect a wave of dealers exiting the buy-here-pay-here business or consolidating their operations to create businesses with sufficient resources to meet these new demands. These bills represent a low point for the California legislature, which missed an opportunity to do something good for its citizens and for California's honest and reputable buy-here-pay-here dealers. Rather than taking as gospel the newspa- per's allegations that the bad acts of a few dealers were representative of the indus- try as a whole, without doing anything to determine whether the bad acts were pervasive, the lawmakers instead could have actually, you know, spent some time studying the businesses they wanted to regulate, identifying best practices of the honest and reputable operators, and fashioning a law that reflected those best practices. That might have taken a bit more time, but at the end of the day, such an approach would have resulted in prohibitions that applied to the bad actors, and not to the large majority of the dealers who are doing it right. But evidently that sort of approach doesn't get you re-elected.