Legislature(2019 - 2020)BARNES 124
03/13/2020 03:15 PM LABOR & COMMERCE
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HB 146-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE 3:57:42 PM CHAIR SPOHNHOLZ announced that the final order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 146, "An Act relating to an application for a license to operate as a dealer in motor vehicles; and requiring a dealer in motor vehicles to maintain liability and property insurance." 3:58:04 PM REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, prime sponsor, introduced HB 146. He paraphrased the sponsor statement [included in the committee packet], which read in its entirety as follows [original punctuation provided]: The purpose of House Bill 146 is to improve consumer protections for those purchasing motor vehicles by strengthening the requirements for motor vehicle dealers. Under current law, a motor vehicle dealer in Alaska must register biennially by filling out an application that requires an address, but not a valid telephone number. The application must be accompanied by a $50 registration fee and a surety bond of $50,000. There is no current requirement that dealers carry liability insurance even though we require drivers to have liability insurance for their vehicles and dealers may allow uninsured drivers to take dealer-owned cards for a test drive. Alaska's current statutory requirements for motor vehicle dealers are some of the least stringent in the country. By way of comparison, for an automobile dealership application to be valid in other states: ? Oregon Chapter 822 of Oregon State Statutes provides for civil penalties for acting as a vehicle dealer without a certificate (.005-.009), the processes of applying for, and maintaining, an automobile dealer license and related exemptions, requirements, and privileges (.025-.042), grounds for revocation, suspension, or cancellation of the dealership certificate (.050), and further definition of illegal practices and associated penalties (.055- .080). ? Delaware Title 21, Chapter 63 of the Delaware State Statutes provides for proof-of-location requirements and recordkeeping (? 6303), license expiration and renewal procedures (? 6304), retainment of bill of sale records for a period of at least five years (? 6305), in addition to grounds for revocation of dealer licenses (? 6313); ? Texas Title 14, Subtitle A, Chapter 2301 of the state's Occupations Code provides for public interest information and complaint procedures (Subchapter E), licensing requirements (Subchapter F), license expiration and renewal (Subchapter G), dealer operations (Subchapter H), grounds for license revocation (Subchapter N), as well as procedures for complaint hearings, judicial review, and penalties (Subchapters O, P, and Q). Comparatively speaking, Alaska Statutes Title 8, Chapter 66 addresses the application form (.040) and registration renewal (.050); sets the minimum bond amount (.060), defines allowable action on bonds and defines failure to file a bond as a class A misdemeanor (.070, .080); and holds the dealer responsible for maintaining a record of each motor vehicle transaction (.320). Unlike Texas, Oregon, and Delaware, there are no statutes explicitly providing for a grievance process nor grounds for revocation of the license in question. HB 146 aims to strengthen consumer protection by addressing two scenarios that may create problems for both consumers and dealers: HB 146 seeks to provide better protection when one selling dealer sells multiple vehicles to a buying dealer and receives payment without providing titles (the titles are being held by the bank that provides a credit line for purchasing vehicles). The selling dealer plans to pay for the vehicles and get the titles but runs into financial difficulties and is unable to continue making payments. When this happens, the bank repossesses the vehicles from the buying dealer. The buying dealer has now lost the money and decides to seek recompense from the selling dealer's bond. At present, the bond requirement under state law is $50,000, which, depending on the type and quantity of vehicles, may be only a fraction of what is owed. Raising the bond amount will help protect the buying dealer in the event that the bank repossesses their new stock. Another scenario that this bill addresses is "curbstoning," which is the act of selling used vehicles under the false pretense of being the car's owner in order to evade regulations that are imposed on state-licensed automobile dealers. When a dealer obtains a license, they are qualified to purchase cars at "dealer only" auctions at steep discounts. In these scenarios, the dealer is not required to disclose the fact that they are a licensed car dealer or that the vehicle has a reconstructed title or has known defects. If deemed a personal vehicle, the vehicle is not subject to a routine safety inspection. Often, the title is not placed in the dealer's name, the contact information provided is not the dealer's information, or the transaction takes place in cash, leaving little paper trail for the consumer to follow if issues arise. Requiring a verified working telephone number increases the consumer's ability to locate the dealer. HB 146 would help protect against these two scenarios by requiring that those registering as motor vehicle dealers include more detailed information about their business in the application, register a bond for $100,000 instead of $50,000, and maintain liability insurance that covers collisions with dealer-owned cars. 4:01:34 PM DAVID CLARK, Staff, Representative Matt Claman, Alaska State Legislature, on behalf of Representative Claman, prime sponsor, presented the sectional analysis for HB 146 [included in the committee packet], which read as follows [original punctuation provided]: Section 1 Amends AS 08.66.030: Adds the following requirements to dealer registration applications: ? a valid telephone number for the business; ? a statement that no person holding a five percent or greater interest in the business has been convicted of a felony involving fraud, embezzlement, or misappropriation of property within five years preceding the date of application; ? A statement acknowledging that the applicant has reviewed the requirements for workers' compensation insurance and will maintain workers' compensation insurance under AS 23.30, if applicable; and ? a copy of the liability insurance policy in compliance with section 3 of this bill. Section 2 Amends AS 08.66.060(a): Raises the amount of the bond required for dealer registration applicants from $50,000 to $100,000. Section 3 Adds a new section to AS 08.66: Sec. 08.66.085 Insurance requirements: Requires that dealers maintain public liability and property damage insurance of not less than $50,000 for property damage, $100,000 for injury to a single person, and $200,000 for injury, including death, to more than one person. 4:03:17 PM REPRESENTATIVE STORY sought clarification on the cost of insurance. 4:04:11 PM STEVE ALWINE, President, Mendenhall Auto Center, stated that the need for further regulation is because its easier to obtain a dealers license in the state of Alaska than in any other state. He explained that a dealer's license grants access to dealer only auctions wherein inventory swaps occur. He addressed the expense of a bond, reporting that his bond for $50,000 costs $700 and renews every two years. He noted that the premium is linear if the bond rises from $50,000 to $100,000 the price increases from $700 to $1500. He added that its not a barrier to entry, nor is it supposed to be - however, he emphasized that he expects those entering the industry to act in a responsible matter. 4:07:28 PM CHAIR SPOHNHOLZ sought to clarify that the bond expense is $700 every two years. MR. ALWINE answered yes. 4:07:42 PM TROY JARVIS, President, Alaska Automobile Dealers Association, expressed his support for HB 146. He informed the committee that he has been in the car business in Alaska for the last 40 years and recently, the amount of deception in the dealers industry has increased. He shared an anecdotal example. He reiterated that as dealers, they are not trying to make it more difficult to get licensed, but they do want to regulate and monitor peoples actions to ensure that car dealers have a good reputation in Alaska. He added that the leniency of the current law allows individuals to obtain a license at little cost. Some of those individuals then compound the problem by selling vehicles under false pretenses. He said he wants to make [the industry] legitimate and safe and to protect consumers. To conclude, he reiterated his support for the bill. CHAIR SPOHNHOLZ sought to clarify the problem being presented. She summarized that there are people registered as dealers who are potentially buying defective cars through auctions and selling them on Craigslist to people without transparently revealing that they could be held responsible for the known defects. She asked if that is correct. MR. JARVIS confirmed that. 4:11:24 PM MARCUS WAEHLER, Alaska Automobile Dealers Association, shared a personal anecdote to exemplify the problem at hand. He expressed his hope that HB 146 will benefit the consumers, as well as the reputation of [car] dealers in Alaska. 4:14:38 PM REPRESENTATIVE HANNAN asked if the Division of Motor Vehicles (DMV) has seen an increase in fraudulent behavior by dealers acting as private parties to sell used vehicles with reconstructed titles. 4:15:17 PM JOANNE OLSEN, Director, Division of Motor Vehicles, Department of Administration, stated that she has worked for over 31 years and during that time has experienced that behavior. She noted that another problem is when dealers do not provide a valid phone number. She offered her belief that increasing the bond might help because the cost of vehicles has increased. 4:16:11 PM CHAIR SPOHNHOLZ asked if the requirements in HB 146 would adequately prevent this problem from continuing to happen. MR. WAEHLER said hopefully it would deter some people and curb their behaviors; however, it will not eradicate the problem completely. He offered his belief that the bill will have an impact. CHAIR SPOHNHOLZ asked if there is a requirement for registered dealers to post their information whenever they make a sales transaction. MR. WAEHLER offered his understanding that disclosure is required but it's not being followed through on or enforced. CHAIR SPOHNHOLZ asked if Mr. Waehler filed a report when he witnessed this deceptive behavior. MR. WAEHLER said, its a little difficult to track down because [the dealers] title had already been transferred into [the buyers] name." He added that the buyer didnt remember the dealers name only that she had found the car on Craigslist. He said he connected the dots based on that information. CHAIR SPOHNHOLZ asked if the buyer was acting in good faith. MR. WAEHLER shared his belief that she was. 4:20:24 PM CHAIR SPOHNHOLZ asked what protections could be put in place to ensure that unscrupulous dealers arent misrepresenting themselves. She asked for additional recommendations in terms of offering more transparency or enforcement to help solve the problem. MS. OLSEN stated that HB 146 should help deter dishonest people from applying for a license. She said currently, theres not much the DMV can do to protect the public from these situations. CHAIR SPOHNHOLZ asked what the DMV does when they identify that someone has been a victim of this kind of fraud or deception. MS. OLSEN said theres not much they can do when the title has already been transferred to [the buyers] name. She shared an anecdotal example. 4:23:26 PM REPRESENTATIVE CLAMAN added that in terms of consumer remedies, the automobile dealers are subject the Alaska Unfair Trade Practices and Consumer Protection Act [AS 45.50.471]. He explained that if they are found liable in a civil claim, they are subject to treble damages. He noted that a key feature of HB 146 is adding required liability insurance, which would provide a source of money if someone brings a claim against a dealer. He said the liability insurance would also provide coverage for potential buyers that [test] drive a car on the dealers lot. CHAIR SPOHNHOLZ said that is helpful; however, it doesnt address the problem of individuals who deceptively misrepresent themselves. She observed that there doesnt appear to be a meaningful accountability mechanism, which is problematic from a consumer protection standpoint. REPRESENTATIVE CLAMAN agreed. Nonetheless, he stated that the DMV does not have adequate resources to take on that kind of investigative capacity given the current budget environment. CHAIR SPOHNHOLZ said they may not have the investigators or the personnel; however, the DMV is one of the few state agencies in Alaska that generates a profit. She suggested equipping the DMV with FTE [full time equivalent] to invest in consumer protection. 4:27:30 PM CHAIR SPOHNHOLZ announced HB 146 was held over.