Legislature(2005 - 2006)BELTZ 211
03/17/2005 01:30 PM LABOR & COMMERCE
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* first hearing in first committee of referral
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SB 138-MOTOR VEHICLE DEALER SALES CHAIR CON BUNDE announced SB 138 to be up for consideration. SENATOR SEEKINS moved to adopt CSSB 138(L&C), version G, for discussion. There were no objections and it was so ordered. CHAIR BUNDE asked Mr. Sniffen to explain the differences. ED SNIFFEN, Department of Law (DOL), said he is the attorney who handles all of the consumer protection issues that come with automobiles in the State of Alaska. The reason the language in AS 08.66.015 is the way it is currently is because of a concern with auto brokers some years ago who were selling used cars as new vehicles. A lot of those problems are no longer prevalent in auto transactions today, but there is some question about when a used car dealer should be allowed to obtain a low-mileage vehicle and sell if off their used-car lot as a used car even though it might have the appearance of a new car. There were concerns about warranty and odometer issues with cars imported from Canada and the lemon. Those were addressed through amendments to another statute that require auto dealers to disclose those issues to consumers. 2:40:02 PM He wanted a balanced fix to the problem of allowing new and used car dealers to sell products and not interfere with the free flow of commerce. He proposed in his report: The first one was to simply remove the language "current model vehicle" from the statute, which would essentially allow anyone to sell a vehicle as a used vehicle as long as it had been sold once and the vehicle lost its manufacturer's statement of origin (MSO), which is a document that comes from the factory with a new car that is surrendered to the Department of Motor Vehicles (DMV) as soon as a car has been titled to a first purchaser.... Then we would leave these other issues related to low mileage, current model vehicles showing up on car lots - we would leave that to the auto dealers and their manufacturers to resolve, because that really doesn't involve too many enforcement issues with our office. The second proposal I made and, I think, the committee substitute that you have before you is premised on the second proposal is essentially adopted from Washington State's DMV's approach to this problem. They deal with some related issues being a border state with Canada and they have decided in their code to define new motor vehicles to mean motor vehicles that have 3,000 miles or less or have been titled for 90 days or less - and you can't sell a vehicle unless it meets that requirement unless you are a new car dealer. And there is an exception to that rule that allows for the resale of a vehicle if it was actually a vehicle purchased by a bona fide purchaser and that is defined to mean someone who actually bought the car to use it as opposed to a broker who is actually buying a car just for the purpose of reselling it. The CS has language that allows for that arrangement. The department's concern is to fix language in AS 08.66.015, because now no car dealer, new or used, can sell a used current model vehicle. He thought it was an oversight. CHAIR BUNDE asked if the new definition of "new vehicle" takes care of that problem. MR. SNIFFEN replied yes. 2:45:45 PM STEVE ALLWINE, Alaska Automobile Dealers Association, supported CSSB 138(L&C) and agreed with Mr. Sniffen's synopsis of the issue. Currently, new car dealers who sell used cars are in violation of this statute, which was an unintended consequence to the legislation. 2:49:26 PM CHAIR BUNDE said that 3,000 miles is a lot of miles. STEVE ALLWINE said that "demonstrators" are still under the MSO and it must be disclosed that it is demonstration vehicle, but they are still new vehicles. CHAIR BUNDE asked him to comment on the 90 days difference between 120 days and 30. MR. ALLWINE replied that 90 days is a compromise. This precludes people from manufacturing used cars.... In other regions of the country, manufacturers may pile on some significant incentives because they have huge inventories. If they put those incentives on and somebody walks in there to buy one of those cars... those incentives may be significant enough that it allows them to manufacture a used car, bring it to this side of the world and dump here in Alaska. Now, that vehicle, depending on the manufacturer, also may or may not include any manufacturers warranty. If you put a 90-day or a 120, or 150 or a 180-day time on it, if they want to manufacture a used car, they are going to pay the interest on that money for that period of time. What that does is it slows them down from doing that. That's the reason we feel the 90 or 120 or 150 is more than appropriate. If you went with a 30-day number, I think that would be a cursory number; it would have zero impact. 2:51:15 PM SENATOR SEEKINS disclosed that he has been an automobile dealer in Alaska since 1977. 2:52:07 PM There are ways to obtain a vehicle from the black market or from another country where the exchange rate is different and not increase the price. However, the manufacturer takes a lesser profit than if they sold it to a dealer in the United States. He explained: As a result of that, in the exchange rates, there may be automobiles that come into the market that a broker can buy and turn around and sell at a reasonable profit for less money than a franchise automobile dealer can buy from their own manufacturer. In some cases, for some manufacturers, those vehicles that do cross the international border no longer carry a warranty on them from the fact that - Chrysler Corporation was one of them that I'm aware of - that dropped the warranty. I believe Daimler Benz may have, Honda may have, Chevrolet, General Motors may have - I've seen lists and I think that those four, maybe Toyota, as well have it, but I'm not sure of all the manufacturers. I just know that some of them don't do that. So, when it comes time, then, for someone who has a used car license in a temporary facility that's on the corner of a lot somewhere - will attempt to sell that vehicle and misrepresent it as a vehicle with a warranty. Because all automobiles in the United State that are bought in the United States, the warranty follows that vehicle, not the owner. And all of a sudden, the person finds out they don't have a warranty. But they may have been sold a service contract that was represented as a warranty. So there's a lot of misrepresentation that can take place in that process and I think probably the best police that are out there of other dealers are automobile dealers, themselves. When they see someone who is not living up to the standards of the law, it's not unusual for them to make a phone call to Mr. Sniffen or someone else in the DMV or Department of Law and say this dealer is not complying with the law.... 2:57:18 PM Franchise dealers who feel they must meet the needs of their community by providing expensive servicing are at a disadvantage because of the loophole. There are also problems with people are buying cars without knowing for sure. 2:58:04 PM MR. ARPINO, Affordable Used Cars, said he is located in both Fairbanks and Anchorage. He supported the CS with the timeframe and mileage. He said it would help clarify current law which is not working. ART HOUSER, Alaska Park and Sell, agreed that the loopholes have to be closed. The only issue he has is that using 3,000 miles and 90-days for a new vehicle is that there are still loopholes. For long-term benefits, the bill has to be kept simple. If it's got an MSO, it's a new vehicle; if it's got a title, it's a used vehicle. 2:59:44 PM RICK MORRISON, Auto Dealers Association, agreed that the law needs to be clarified or there could be a class action suit. He supported CSSB 138(L&C). 3:03:24 PM CHAIR BUNDE asked if he thought industry would be self-policing. MR. MORRISON said he thought that would help. The current law is very vague. If you are in the new car business and are a franchise dealer, you have paid thousands of dollars for tools; you've paid thousands of dollars for training; you've paid millions of dollars for a facility and all in order to take care of the consumer.... He concluded saying that this bill gives the consumer an opportunity to defend himself and gives other dealers in the area something to stand on. WAYNE BANNOCK, Division of Motor Vehicles, said he works very closely with dealers and has some concerns with version G. His comments were on section (d)(2), but didn't concern the mileage or the timeframe. DMV believes that the definition of a new motor vehicle is limited to that of a vehicle that retains its MSO or MCO. Once a vehicle has been converted to a titled vehicle, it is a used vehicle. What is described in (d)(2)(b)(1) and (2) is indeed a used vehicle. It is a very slightly used vehicle, but it is without exception a used vehicle. Now recognizing the industry, recognizing some of the excellent points that have been made by the speakers before me, with your permission, sir, I would like to propose an alternative that I think may solve both the DMV's problem and adequately addresses the other speakers as well. 3:05:48 PM If the language of (d)(2)(b)(1) and (2) is written in the affirmative and is placed in section (c)(4), (c)(4) would then read, 'The vehicle has been operated in excess of 3,000 miles or titled and registered in more than 90 days.' Section (c) speaks to what cars can be sold. So, what it says in section (c), if that were to be adopted, is that it is definitely a used car. We're recognizing that it's a used car and it can be sold if it meets that threshold of 3,000 miles or more than 90 days.... So, I believe from the speakers we've heard from before, it would accomplish the exact same effect, yet it would not put the State of Alaska in the awkward position of attempting to define a slightly used car as a new car. CHAIR BUNDE thanked him for the suggestion. He said he would hold the bill for a further hearing.