Legislature(2007 - 2008)BELTZ 211
02/29/2008 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB185 | |
| SB234 | |
| SB164 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 234 | TELECONFERENCED | |
| + | SB 164 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 185 | ||
SB 164-USED MOTOR VEHICLE SALES
2:50:57 PM
CHAIR FRENCH announced the consideration of SB 164.
TREVOR FULTON, staff to Senator McGuire, introduced SB 164 on
behalf of the sponsor. He explained that the bill removes from
statute outdated language governing the sale of used motor
vehicles without reducing consumer protections. The bill repeals
AS 45.25.464(c), which says that dealers must post three
disclosures on used vehicles they intend to sell: 1) the vehicle
is not subject to Alaska's "lemon law," 2) the vehicle is not
covered under a manufacturer warranty, and 3) the vehicle was
not manufactured for sale in a foreign country.
MR. FULTON said the disclosures were mandated in response to an
influx of Canadian vehicles that were sold as new. He
understands that was occurring up until about 2000. Industry and
the Department of Law agree that this is no longer an issue. In
fact, all three disclosures are information that's readily
available to consumers. These mandated postings are an
inconvenience and they may be leaving dealers exposed to legal
suit because failure to post the information in subsection (c)
amounts to unfair trade practices. Unfair trade practices allows
lawsuits demanding treble damages and reimbursement of legal
costs even though the consumer may have suffered no actual harm
or damage. "When the state starts unnecessarily burdening
Alaskan businesses while providing no additional consumer
protection, the sponsor believes it's time to reevaluate."
CHAIR FRENCH asked Mr. Sniffen to give his view of the bill.
2:54:22 PM
ED SNIFFEN, Assistant Attorney General, Civil Division,
Department of Law (DOL) said he's responsible for enforcing the
Alaska Consumer Protection Act and the antitrust statute with a
particular emphasis on regulating auto dealers in Alaska. He
said that Mr. Fulton accurately described how this legislation
came about, but he'd like to highlight information that DOL has
received since it sent a letter to the sponsor. Initially DOL
didn't understand how the statute was passed with reference to a
disclosure requirement that extended to all used vehicles as
opposed to just "current model" used vehicles. DOL has since
communicated with Representative Gruenberg who recalls adding
that language because he wanted to extend the protection to all
used cars. DOL will speak to the Representative about his
concerns to make sure they are addressed but, as Mr. Fulton
said, the protections in subsection (c) are already required in
a number of other ways. He noted that when the "current model"
vehicle language was removed from Title 8 several years ago it
created an issue with this statute. But for the most part
industry has self-corrected in the sense that the harms caused
by selling current model vehicles without the required
disclosures have been removed. He offered to go into further
detail.
2:57:07 PM
CHAIR FRENCH referred to two documents in the packet. The first
has a "little sticker" and the next has a "big sticker." He
asked if the little sticker is being affected.
MR. SNIFFEN said yes; the big sticker has the disclosures that
are required under federal law. It has boxes for the dealer to
check stating the vehicle will be sold as is with no warranty or
with either a full or limited warranty. It's the little sticker
that would no longer be required under this bill.
CHAIR FRENCH recapped that the little sticker says three things
about the vehicle: 1) it's not subject to the lemon laws; 2)
it's not covered under a warranty; and 3) it's not built Canada.
And the big sticker is pretty clear about "no warranty" versus
"warranty." He asked what part of that big sticker tells a
consumer that the vehicle wasn't built in Canada.
MR. SNIFFEN replied he's unaware of any part of the big sticker
that has that information, but the requirement wouldn't change.
"Auto dealers would still have to post a requirement on the car
if the vehicle was manufactured for sale in Canada or another
foreign country." That requirement comes from AS 45.25.470 so
they're duplicative. Removing the requirement from one section
doesn't remove it from the other.
2:59:21 PM
CHAIR FRENCH asked what part of the big sticker would tell a
consumer that the car isn't subject to Alaska's lemon law
protections.
MR. SNIFFEN replied it's not explicit so it's not as clear. The
lemon law protections are in fact warranty protections that
apply only to new cars. When the "no warranty" box is checked on
the big sticker, by assumption that is telling the consumer that
the lemon law would not apply. He isn't aware of any state that
requires that specific kind of disclosure.
CHAIR FRENCH asked if he's comfortable with that.
MR. SNIFFEN said he is comfortable because he doesn't know that
consumers rely on that kind of information when they decide to
buy or not buy a vehicle. The lemon laws have a very specific
application. Consumers have certain rights when they buy a new
vehicle and manufacturers are required to include that
information in the owner's manual. "When it comes to used cars,
that bit of information is just not that harmful to consumers to
not have because it wouldn't apply anyway," he said.
3:01:37 PM
CHAIR FRENCH questioned why the bill is retroactive.
MR. SNIFFEN explained that DOL understands that when this
provision passed it wasn't meant to apply to all used vehicle
sales. It was intended to apply only to "current model" used
cars. Some dealers though that was the correct application of
the law and so they didn't make those disclosures. They started
doing it once they realized the disclosures had to be put on
every use car, but there was a period of time before that
information got around. As a result a lot of dealers are exposed
to significant liability for having failed to disclose properly.
This law would provide protection to those dealers if a claim
isn't already pending.
CHAIR FRENCH asked if the State of Alaska has brought action to
enforce this law as it stood.
MR. SNIFFEN said one action is pending in the state supreme
court on appeal. It was a case DOL brought against Lithia
Dealerships that centered on different issues. As part of the
settlement DOL recognized that Lithia failed to make some of the
disclosures and asked for injunctive relief. They need to make
these disclosures going forward until the law changes or it's no
longer necessary, he said.
CHAIR FRENCH acknowledged that he's suggesting a retroactive
clause and asked if the state envisions further actions against
other dealerships.
MR. SNIFFEN said that's correct. Even in the current case
against Lithia Dealerships, very little consumer harm was
assigned to the failure to make the disclosures. DOL didn't
identify any transactions where consumers wouldn't have gone
forward with the vehicle purchase had they had that information.
If DOL does come across information that indicates that
consumers would have relied on information had the disclosures
been made, it would consider taking action. If the bill is
applied retroactively and no suit is pending he believes there
would still be good grounds to proceed because "all of these
things are probably required by something else." Failure to
disclose that the vehicle is manufactured for sale in Canada or
a foreign country is the provision that can cause the most harm
because warranty is affected. Most manufacturers have addressed
that problem by extending coverage, but for a time it was an
issue for Alaskans who purchased vehicles in Canada. "But that
requirement is already required and will continue to be
required," he said.
3:05:38 PM
JOHN COOK, Legislative Director, Alaska Auto Dealers Association
(AADA), reiterated that all the disclosures that are required on
the small sticker are either unnecessary or redundant. The lemon
law applies only to new vehicles so putting that disclosure on
the vehicle is negative and necessary. The warranty disclosure
is covered in the FTC sticker that every used vehicle in the
U.S. is required to display. Also, AS 45.25.470 requires that
all vehicles manufactured for sale in Canada have that
disclosed. With regard to retroactivity, he agrees with Mr.
Sniffen. Most used car dealers had no idea when the legislation
passed [in 2004] that it contained a requirement for a second
sticker on all used cars. They learned about it when a lawsuit
was filed. Because it's an unfair trade practice there's a two-
year look back period. It leaves dealers exposed yet there is no
tangible benefit to anyone. A company like Lithia can probably
withstand a class action suit, but the majority of the AADA
membership would have difficulty withstanding a suit of this
nature.
3:09:57 PM
CHAIR FRENCH announced he would hold SB 164 for a subsequent
hearing.
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