Legislature(2007 - 2008)CAPITOL 120
03/28/2008 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB164 | |
| HB323 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 323 | TELECONFERENCED | |
| + | HB 327 | TELECONFERENCED | |
| + | HB 415 | TELECONFERENCED | |
| + | SB 164 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 164 - USED MOTOR VEHICLE SALES 1:10:53 PM CHAIR RAMRAS announced that the first order of business would be CS FOR SENATE BILL NO. 164(JUD), "An Act relating to disclosures required for the sale of a used motor vehicle, including a trailer, by a motor vehicle dealer." 1:11:33 PM TREVOR FULTON, Staff to Senator Lesil McGuire, Alaska State Legislature, relayed on behalf of Senator McGuire, sponsor, that SB 164 deletes obsolete language from statute and addresses some unintended consequences of what he termed the "auto dealers Act," and that the sponsor's intent is to do the aforementioned without, in any way, reducing consumer protections. He offered his understanding that the provision of statute SB 164 is proposing to repeal - AS 45.25.465(c) - is now no longer of any benefit to dealers, consumers, or the state. Currently, AS 45.25.465(c) requires that a dealer post, on the window of all his/her used vehicles for sale, three disclosures: one, that the vehicle is not subject to [the warranty provisions of AS 45.45.300 - 45.45.360, which he termed] "Alaska's lemon law"; two, that the vehicle is not covered under a manufacturer's warranty; and three, if applicable, that the vehicle was originally manufactured for sale in a foreign country. MR. FULTON offered his understanding that these disclosures were originally mandated in response to an influx in Alaska's market of used Canadian vehicles that were being sold as new. The market has since corrected itself, and the practice that AS 45.25.465(c) was intended to address is no longer an issue. Furthermore, much of the information that this subsection (c) mandates be posted is already made available to consumers as they go through the process of purchasing a used vehicle. This mandatory posting, he opined, is not only an inconvenience to those in the business of selling used vehicles, but it may also be leaving such dealers exposed to what he termed "dubious lawsuits." Not posting the information outlined in subsection (c) would currently result in the commission of an unfair trade practice which could in turn allow for lawsuits that demand treble damages and reimbursement of full legal costs regardless that consumers haven't suffered any actual harm or damages. MR. FULTON relayed that the sponsor feels that this issue should be revisited because the aforementioned provision is unnecessarily burdening Alaska businesses. Subsection (c) no longer provides the consumer protections it once did, and now merely places unnecessary requirements on auto dealers. In conclusion, he urged the committee to support SB 164. REPRESENTATIVE GRUENBERG relayed that he was the author of AS 45.25.465(c), and that it was not meant to address only the used Canadian car issue; instead, it's purpose was to provide consumer protection via full disclosure of information on the windows of the used cars being sold. At the time that this provision was adopted, members were aware that another provision, AS 45.25.470, already required motor vehicle dealers to disclose in writing, at the time of purchase, whether a motor vehicle was originally manufactured for sale in a foreign country. The three disclosures required by AS 45.25.465 were meant to be displayed - via a small form, a sample of which is included in members' packets - on the windows of all used cars being sold, as opposed to being provided to prospective buyers only at the time of actual purchase. He acknowledged that the aforementioned "lemon law" only applies to new vehicles. 1:18:39 PM JON COOK, Legislative Director, Alaska Auto Dealers Association (AADA), after relaying that he supports SB 164, said he's experienced the repercussions of having to post the disclosures required by AS 45.25.465(c), and characterized them as confusing to both dealers and customers and as redundant. He too noted that the warranty provisions of the "lemon law" only apply to new vehicles and not used vehicles, and that motor vehicle dealers must already disclose to the customer in writing if a motor vehicle was originally manufactured for sale in a foreign country. With regard to the latter disclosure, he opined that it doesn't matter that such disclosure is made only at the time of purchase, as opposed to having it posted on the window of the vehicle, because the disclosure is still present. He pointed out that dealers are required by the Federal Trade Commission (FTC) to post a large, what he called an "As Is" sticker [titled "BUYERS GUIDE"] on a used car which discloses that the car either does have a warranty or doesn't have a warranty, and that this sticker must be signed and retained by the customer at the time of purchase. MR. COOK again characterized the disclosures required by subsection (c) as redundant, and said he is not sure why dealers should be required to post a disclosure on a used car that it isn't covered under the "lemon law" when that law doesn't apply to any used cars and never did. He offered his belief that litigation won't be barred just because the customer hasn't suffered any actual harm. He relayed that currently there is ongoing litigation over not displaying the aforementioned disclosures, and offered his understanding that this litigation won't be affected by the bill. The fact that a business can be sued for not displaying such disclosures is of no benefit to anybody, though it does put businesses at risk of going out of business. Referring to the aforementioned litigation, he offered his belief that because the entity that's being sued is a publicly traded company, it can afford to go through the litigation process and remain solvent. However, most members of the AADA are small, locally-owned, family businesses, and if any of them were to be similarly sued, he remarked, they would either be put out of business or would never be able to get insured again. MR. COOK, in conclusion, said "This sticker ... puts Alaska businesses at risk ... for something that provides no benefits to dealers, the consumers, or the state of Alaska." 1:23:26 PM REPRESENTATIVE GRUENBERG pointed out that the purpose of subsection (c) was not to provide a vehicle for suing dealers - the aforementioned litigation was simply a result of "making it an unfair trade practice"; again, the purpose in offering that provision of law was to provide notice to consumers. He surmised that Mr. Cook doesn't object to providing such notice. MR. COOK concurred, adding that he believes that dealers do provide sufficient disclosures, though such disclosures may not be posted on the vehicle. At issue, he surmised, is how often the same thing should be disclosed. "I am for, and our association is for, full disclosure," he said, adding that he knows that it was not the intent of subsection (c) to engender litigation, but that is what has occurred. REPRESENTATIVE GRUENBERG observed that the "lemon law" provides very important protections for consumers, and so the fact that it doesn't apply to a used vehicle might be extremely important to a particular consumer. If SB 164 becomes law, then consumers will no longer be informed that the "lemon law" doesn't apply. Why, he asked, would [dealers] not want people to know that fact. MR. COOK opined that since the "lemon law" only applies to new vehicles and only addresses the relationship between the consumer and the manufacturer, there is no reason to disclose that fact on a used vehicle. To him, he added, the most important thing to disclose is whether the car comes with a warranty, and that is disclosed via the aforementioned sticker. REPRESENTATIVE GRUENBERG questioned how many customers actually know that the "lemon law" only applies to new vehicles. 1:28:16 PM MR. COOK said he's never had a customer attempt to make the "lemon law" apply to a used vehicle. REPRESENTATIVE GRUENBERG pointed out that that doesn't mean it hasn't been brought up by someone at some point. On the issue of whether a car is manufactured for sale in Canada, he said that the purpose of having disclosure of such a fact in the window of the car is so that the customer could have that information before he/she chooses a car. Why should a customer be denied that disclosure until he/she is in the middle of purchasing a particular vehicle? MR. COOK said that there are a variety of required disclosures that aren't provided until the time of purchase, and that he is not sure that having information, before the actual purchase, that a car was manufactured for sale in another country will impact the customer's decision when choosing a car. Furthermore, there is nothing stopping dealers from making that same disclosure as required by AS 45.25.470 via posting something on the window of the car as opposed to making it in writing at the time of purchase. REPRESENTATIVE GRUENBERG, on the issue of disclosing whether a vehicle has a warranty, said that obviously Congress felt that such disclosure - on every vehicle and in big letters - was important, because it enacted federal law to that effect. He added: I know you want to deny any additional [disclosure] ... on that under state law. I am ... very surprised to hear you take the position you have knowing that [the] public now wants to be fully informed when they buy major purchases, wants full disclosure, and is always vary wary when they buy used [cars]. And I would think that having this sticker on the car would be to the dealers' protection because then the customer could not say later, if they ever sued the dealer, that they weren't informed. The dealer would say, "Sure you were informed - this sticker was on the car." That would provide you with a great legal defense, possibly summary judgment in your favor, and now you want to take the sticker off and you're going to potentially get the dealer into lawsuits, and they won't have the printed proof that would give you a really good defense. Have you fully considered that this is really as much for the dealer's protection, if they're sued, as it is for the customer? MR. COOK said he has considered that point, but feels that the litigation risk is increased "by having this second sticker," and he again noted that there is class action litigation occurring now as a result of the current disclosure law. REPRESENTATIVE SAMUELS asked what percentage of used cars are sold through dealerships as opposed to being sold directly by the current owner, and whether there are any consumer protections in place for someone who buys a used car directly from the current owner. MR. COOK declined to answer. REPRESENTATIVE SAMUELS noted that the aforementioned "As Is" sticker specifically states whether there is a warranty. MR. FULTON concurred, and reiterated that that sticker is required to be posted on all used vehicles being sold at a dealership. MR. COOK said dealers post that sticker on one of the car's windows. In response to a question, he acknowledged that occasionally that particular window can get rolled down and the sticker peeled off. CHAIR RAMRAS recapped Mr. Cook's concerns/comments. 1:38:43 PM CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), relayed that when AS 45.25.465(c) was enacted, the DOL had had the understanding that it was aimed at the current-model used-vehicle market because those used vehicles look remarkably like new vehicles and - under Title 8 at that time - could only be sold by a dealer that also sold new vehicles, so there was a potential for deception regarding that specific type of used vehicle. He acknowledged Representative Gruenberg's point that instead that provision was actually intended to apply to all used vehicles, and apologized for the DOL's misunderstanding as expressed in his letter to the sponsor dated 2/19/08. He said he does not disagree with Representative Gruenberg's comments in that regard. MR. SNIFFEN explained that in 2006, Title 8 was amended to remove all reference to current model [used] vehicles, and so now a used car at a dealership is considered to be a used car regardless of whether it is a current model and only has a very few miles on it. One option that the DOL considered was to develop a definition of "current model vehicle," but doing so proved complicated and cumbersome. In looking at the statutes more closely, it seemed that all the protections provided by posting the aforementioned information as required by AS 45.25.465(c) were already being provided under other statutes. He said he agrees that without having information posted that the "lemon law" didn't apply to used vehicles, consumers wouldn't know that, but added that that is not generally a source of consumer complaints for his office. He said that no other state, that he is aware of, requires dealers to inform customers of the application of the "lemon law," which is tied to the manufacture's warranty. The box in the buyers guide which states that the consumer is buying the car as is without a warranty somewhat gives the consumer notice that there is no warranty and thus no "lemon law" protection. MR. SNIFFEN, on the issue of vehicles manufactured for sale in Canada, offered his understanding that almost all American manufacturers will now honor the warranties on such vehicles, so the problem that was being experienced five or six years ago is no longer an issue. He said he understands Representative Gruenberg's argument that consumers might want to know right up front - via a notice posted on the window - whether a particular vehicle they are looking at has been manufactured for sale outside of the U.S.; however, the view at the DOL is that having that information in writing somewhere in the documents provided at the time of purchase is sufficient. He said that he is all for providing as much consumer protection as possible, but the disclosures required by AS 45.25.465(c) do seem to be more duplicative and redundant than useful. MR. SNIFFEN, in conclusion, relayed that the DOL thinks that SB 164 will eliminate that provision's unintended consequence of engendering class action lawsuits. 1:45:16 PM REPRESENTATIVE GRUENBERG observed that the penalty section of the Alaska Unfair Trade Practices and Consumer Protection Act covers 40-50 different unfair trade practices, but the penalty provisions aren't uniform and in some cases are what he characterized as quite draconian. When debating the inclusion of AS 45.25.465(c) into law, there was discussion, he recalled, that it would make the failure to post notice on a used vehicle subject to the Alaska Unfair Trade Practices and Consumer Protection Act, but there wasn't much discussion regarding what would constitute a separate offense. If indeed, under that Act, the failure to put a sticker on each vehicle would be considered a separate offense and lead to a $500 penalty being assessed for each car and result in a very large total fine - particularly in situations involving large dealerships - that was not his intention, he relayed, and thus he would strongly support changing the Alaska Unfair Trade Practices and Consumer Protection Act. However the industry didn't seem interested in pursuing that remedy. REPRESENTATIVE GRUENBERG said he'd thought that it was the policy of the Alaska Unfair Trade Practices and Consumer Protection Act and the State of Alaska to provide full disclosure and consumer protection, and so he doesn't see "any good public policy" in repealing "this" warning to the consumers. Representative Gruenberg asked Mr. Sniffen, as the protector of the Alaskan consumer, to explain why it would be good public policy to strip away the public's right to know via "this tiny sticker." MR. SNIFFEN said that he doesn't view the use of such a sticker as a bad thing, and that it is the position of [the DOL] to provide consumers as much protection as possible, but he doesn't know that "this particular sticker" provides so much extra consumer protection that its lack would be detrimental, particularly given all the other disclosures that are already being required by a law, though he doesn't have a problem with continuing to require the posting of such a sticker on used vehicles. Again, it just seemed as though the sticker required by AS 45.25.465(c) provided redundant and duplicative information. 1:48:45 PM REPRESENTATIVE GRUENBERG characterized the removal of that provision as just one possible solution to the perceived problem, and acknowledged that the dealers do have a problem because of the draconian penalty. But why not find some other solution that doesn't "throw the baby out with the bath water," he asked. Why not turn this into a win-win scenario, keep the consumer protection, and deal with the penalty provision? Wouldn't that be fairer and more just? MR. SNIFFEN said that that would certainly be another approach to addressing the problem, and that the DOL would certainly review such legislation. CHAIR RAMRAS, after ascertaining that one else wished to testify, closed public testimony on SB 164. 1:49:47 PM REPRESENTATIVE HOLMES made a motion to adopt Amendment 1, labeled 25-LS0867\M.1, Bannister, 3/28/08, which read: Page 1, line 1, following "Act": Insert "limiting motor vehicle dealer charges for fees and costs; and" Page 1, following line 3: Insert a new bill section to read: "* Section 1. AS 45.25.440 is amended to read: Sec. 45.25.440. Additional fees and costs [ADVERTISED PRICE]. (a) When selling a motor vehicle, a motor vehicle dealer may not charge any dealer fees or costs in addition to the advertised or negotiated price, except for (1) fees actually paid to a state agency for licensing, registration, or title transfers; (2) charges for optional equipment, for substantial additions to the motor vehicle, for warranties, for services, and for style, design, or color features [, UNLESS THE FEES OR COSTS ARE INCLUDED IN THE ADVERTISED PRICE]. (b) In this section, "dealer fees or costs" includes dealer preparation fees, document preparation fees, surcharges, charges, and other dealer-imposed fees and costs." Page 1, line 4: Delete "Section 1" Insert "Sec. 2" Renumber the following bill sections accordingly. Page 1, line 8: Delete "sec. 1" Insert "sec. 2" Page 1, line 14: Delete "sec. 1" Insert "sec. 2" CHAIR RAMRAS objected. REPRESENTATIVE HOLMES explained that Amendment 1 pertains to document fees, and would require dealers, should they choose to charge document fees, to include those fees as part of either the advertized price of a vehicle or the negotiated price of a vehicle. Amendment 1 won't preclude dealers from charging document fees; instead, dealers will simply have to notify the consumer that a portion of the advertized or negotiated price includes document fees, as opposed to making such fees additional to the advertized or negotiated price. 1:52:54 PM REPRESENTATIVE LES GARA, Alaska State Legislature, after relaying that the text of Amendment 1 is included in other pending legislation, offered his understanding that Mr. Sniffen would be able to address the merits of Amendment 1 and that Representative Gatto has been "victimized by the [document] fee process in the past." Representative Gara said that the problem is that there are car dealers in the industry who seek to gain an advantage over consumers by adding document fees to the advertised or negotiated price. He said he doesn't have a problem with dealers charging whatever they deem necessary, but is opposed to the practice of adding extra fees after the price has been agreed upon, because then the consumer is forced to pay that extra amount even though it was not something he/she was taking into consideration when negotiating the price. CHAIR RAMRAS argued that the consumer could instead simply take his/her business elsewhere; that's simply an aspect of doing business in the private sector. REPRESENTATIVE GARA argued that that's not possible when every dealer engages in the same practice. The committee took an at-ease from 1:58 p.m. to 2:01 p.m. 2:01:08 PM REPRESENTATIVE GARA said that [Amendment 1] is intended to "level the playing field so that dealers don't engage [in] what I consider to be an untoward negotiating strategy towards a consumer." He went on to say: By adding the [document] fee after they negotiate a price, and by every dealer in the city doing that - and I think virtually every dealer does that though I have heard that some dealers are now advertizing 'No [document] fees' - ... when most of the dealers you go to do the same thing, it really doesn't help to be able to walk [away from] ... one car dealer and go to another lot and have to deal with the same thing. So I consider the [document] fee strategy a deceptive one. The attorney general's office has fought it in the past, and ... this legislature passed a law back in the 1990s to ban the practice, but it was written in a way where this is what's left as a loophole: you're not allowed, under the interpretation of that [law] ... to charge a [document] fee in addition to the advertized price but you can charge it once you move off the advertized price and it becomes the negotiated price. REPRESENTATIVE GARA relayed that he will be asking that Amendment 1 be withdrawn after the committee has had the chance to debate it, and indicated that he would be offering this same amendment when SB 164 is heard on the House floor. REPRESENTATIVE SAMUELS offered his belief that various types of private-sector retail businesses seek to get customers to pay as much as possible, and opined that in the case of buying a car, it is the responsibility of the consumer to refuse to pay more than he/she negotiates with the car dealer. 2:07:16 PM REPRESENTATIVE CARL GATTO, Alaska State Legislature, relayed that in one instance, he'd gone to a car dealer to buy a brand new Subaru advertized for $19,995.95, but when he got ready to make the purchase, the taxes, licensing fees, and document fees were all lumped together as an additional charge. After telling the dealer that he didn't want to pay the document fees because he wasn't buying the car on credit, the dealer told him that he was required to charge the document fees. Representative Gatto said he paid the document fees at the time, but then later learned that what the dealer had said was not true and that document fees were simply an addition to the bill. REPRESENTATIVE GATTO relayed that in another instance he'd gone to a different car dealer to buy a used car and the same thing occurred: even though the car dealer was not required to charge document fees, he claimed that he was. Representative Gatto said that in each case, he was told that he was required to pay document fees. He characterized this practice as deceiving the customer. Representative Gatto noted that during another committee hearing, the comment was made that document fees are simply part of the car dealer's additional profit. CHAIR RAMRAS again said that the consumer could simply refuse to purchase the product, adding his belief that that's just the way the free market operates - consumers have the choice to not participate in a particular transaction. REPRESENTATIVE LYNN opined, however, that purposeful deception is not acceptable. CHAIR RAMRAS argued that that's not what is occurring when car dealers charge document fees. REPRESENTATIVE GATTO pointed out, though, that when a car dealer says charging document fees is required when in fact it is not, that is deceptive, and that he is unable to simply pick another Subaru dealer to do business with because there aren't any others within a 500 mile radius. He opined that car dealers ought to have some obligation to be completely up-front and say, if asked, that document fees are what they charge everybody so as to make an additional profit. CHAIR RAMRAS opined that Representative Gatto should simply pick a different make of car next time. [Following was a brief discussion regarding other legislation.] REPRESENTATIVE HOLMES withdrew Amendment 1. 2:20:05 PM REPRESENTATIVE GRUENBERG, mentioning that he'd attempted to get an amendment crafted but was unable to do so, said he opposes moving SB 164 from committee and will be [signing "Do Not Pass" on the bill report]. REPRESENTATIVE DAHLSTROM moved to report CSSB 164(JUD) out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE GRUENBERG objected. A roll call vote was taken. Representatives Samuels, Lynn, Holmes, Dahlstrom, Coghill, and Ramras voted in favor of reporting CSSB 164(JUD) from committee. Representative Gruenberg voted against it. Therefore, CSSB 164(JUD) was reported from the House Judiciary Standing Committee by a vote of 6-1.
| Document Name | Date/Time | Subjects |
|---|