Legislature(1995 - 1996)
04/10/1996 01:08 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 403 - CONSUMER PROTECTION:USED CAR & MAIL ORDER Number 0933 CHAIRMAN GARY DAVIS said the next item on the agenda was HB 403, an act relating to consumer protection involving contracts for the sale, transfer, or assignment of used motor vehicles and involving telephonic solicitations. Number 0933 REPRESENTATIVE KAY BROWN, sponsor of HB 403, said she introduced this bill at the request of the Department of Law (DOL) and the Governor's office to address some consumer protection issues related to the sale of used cars and telephone solicitations. She noted that HB 403 is a straightforward bill and said Section 1 requires the used car dealer to provide a buyer with a copy of a certificate of auto emissions compliance or non-compliance before a contract is consummated. Section 2 requires telemarketers, who are under the mail order exemption, to have legitimate mail order businesses. She said she would answer any questions and said she would defer to Mr. Schwartz, who works in consumer protection and put forth these concepts for legislative consideration. Number 0991 REPRESENTATIVE WILLIAMS asked if the sponsor would be willing to amend HB 403 so that a seller would be obligated to show if a car had been involved in an accident. Number 1026 REPRESENTATIVE BROWN said she would be willing to include this consumer protection right in HB 403. She said the concept of requiring disclosure, if a car has been damaged and rebuilt, seems to be good. Number 1046 CHAIRMAN GARY DAVIS said it is a good concept, but questioned how effective this provision would be. He questioned the degree of inspection that would be needed and said a walk around inspection would often prove to be insufficient. Number 1086 REPRESENTATIVE LONG asked if HB 403 affected people who occasionally worked on vehicles, in a "moonlighting" capacity. Number 1104 REPRESENTATIVE BROWN said the language in HB 403 applies to a person engaged in the business of selling used motor vehicles. Number 1110 CHAIRMAN GARY DAVIS said that does appear to be a bit restrictive, there are plenty of auto sales done on a private basis that this would not cover, I think it is probably the crux of your question. Number 1130 REPRESENTATIVE BEVERLY MASEK asked how the language in HB 403 would affect the rural areas where vehicles are sold. Number 1160 REPRESENTATIVE BROWN said it was her understanding that there are only a few areas of the state that are subject to this emission inspection program. She did not know of any rural areas that would require the emission certificate. Number 1176 CHAIRMAN GARY DAVIS said the rural areas which are not affected now by the emissions certification would not be affected later. Number 1190 REPRESENTATIVE BRICE referred to page one, line 13 and 14, "under the air pollution control requirements applicable in that area" and said this would answer Representative Masek's question. Number 1202 REPRESENTATIVE MASEK asked why used cars and telemarketers were combined in HB 403. Number 1220 REPRESENTATIVE BROWN said the common thread in HB 403 is consumer protection and said it was the DOL's preference to put these separate items together in this manner. She said the two items are clearly addressing different aspects of consumer protection. Number 1264 DAVEED SCHWARTZ, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, testified next via teleconference from Anchorage. He said he was responsible for the consumer protection responsibilities for the state. He began discussion on Section 1 of HB 403 relating to auto emissions, inspection certificates and used cars. He said AS 45.45.400, enacted in 1992, prohibits a used car dealer from transferring or assigning the owners title or interest in a vehicle intended for use in a state approved auto emissions inspection area, currently Anchorage or Fairbanks, unless a vehicle has a certificate of auto emission compliance or non-compliance as required by the local areas. Number 1390 MR. SCHWARTZ said the legislative history reveals that the prime sponsor of AS 45.45.400, then HB 454, intention was that consumers who were considering the purchase of a vehicle, from a used car dealer, be informed of the current Inspection and Maintenance (I/M) status of the vehicle before they actually made the purchase. He said four years ago, in February of 1992, the prime sponsor of HB 454 explained that the intent was to require used car dealers to provide a certificate of compliance or non-compliance to the prospective purchaser and explained that the rational was to allow the prospective purchaser that piece of information to help them in their decision. The prospective purchaser would know, up front, what the I/M status was. He said, despite this intent, the statute as presently worded does not appear to require a used car dealer to present or display any I/M information to the prospective purchaser. MR. SCHWARTZ said the present statute only requires that a used vehicle have an I/M certificate of compliance or non-compliance at the time of transfer or assignment of the owners title or interest. Frequently, the vehicle title is not transferred to the purchaser until days or even weeks after the contract sale is signed. He said the transfer of ownership can happen 30 days after the sale contract. He said HB 403 amends the statute to clarify that the I/M certificate must be presented to the prospective purchaser before the sale of the used vehicle and added that it is a consumer protection safeguard. He reiterated that the prime sponsor of HB 454 recognized and intended for the statute to achieve this goal. Number 1497 MR. SCHWARTZ said, given the current and long standing low level of consumer protection funding in Alaska, HB 403 gives consumers a measure of self help by making a violation of HB 403 a violation of the Consumer Protection Act. He said, currently, consumers are not told about the I/M status of the vehicle if they didn't think to ask which might cost them, at minimum, hundreds of dollars to get their vehicle into compliance. He said the Attorney General's office, the I/M offices and the Better Business Bureau have all received complaints over the last few years and continue to receive complaints on this issue. He said there are horror stories about people who have paid $3,000 to $5,000 to buy a used vehicle only to find out they would need to spend that type of money, in addition, to get their vehicle in compliance. He said, this year, a pizza delivery person bought a $3,800 used vehicle and afterwards found that this vehicle was not in compliance. She needed to quit her job, temporarily, in order to make other transportation arrangements as she used her vehicle in her line of work. Number 1654 CHAIRMAN GARY DAVIS asked if Mr. Schwartz had any comments on the telemarketing section of HB 403. Number 1666 MR. SCHWARTZ said, as the mail order exemption stands right now, it is possible for telemarketers, who would otherwise be regulated under the Telemarketing Registration Act, to hide behind a mail order catalog exemption. He said, currently, the scope of the mail order exemption under the telemarketing law is the subject of an Alaska Supreme Court case with oral arguments occurring over the next few months. He said the provisions in HB 403 would require that a person have a legitimate mail order catalog in order to qualify under that exemption. Number 1740 CHAIRMAN GARY DAVIS asked if the language in HB 403 would adequately give the Attorney General's office enough information to certify whether or not a mail order catalog was legitimate. Number 1750 MR. SCHWARTZ said yes, particularly the proposed exemption which would require "a mail order catalog company to sit back and wait for a call initiated by the prospective customer, rather than sending out a catalog and then flooding the consumers with unsolicited, unwanted telephonic solicitations." He said the problem of unwanted telephonic solicitations is being addressed by HB 109. He said the provisions in HB 403 would assist the DOL in its enforcement of the Telemarketing Registration Act. Number 1817 REPRESENTATIVE BRICE said, on the mail order exemption, there appeared to be a few parameters, under (b)(vi) and (b)(viii), and asked if the numbers 10 and 10,000 were arbitrary. Number 1856 MR. SCHWARTZ said in terms of the (b)(vi) parameter, "10 or more pages" minimum is intended to guard against a telemarketer who produces a one or two page flyer and tries to claim that the flyer is a mail order catalog qualifying under the exemption. He said the "10 pages or more" is designed to provide the consumer with enough information to make an informed decision and contact the telemarketer. If the mail order catalog has less than ten pages they tend to provide less information. He said most catalogs, that he has seen, have well over ten pages and so this provision should not affect legitimate mail order companies. MR. SCHWARTZ referred to the (b)(viii) provision and said other states tend to have a higher circulation number. He said the 10,000 circulation number is designed to accommodate any Alaska small businesses which might consider getting into the mail order business. He said most catalogs and telemarketing centers are based outside of Alaska. Number 1995 STEPHEN CONN, Member, Alaska Public Interest Research Group, (AKPIRG), said HB 403 prevents consumers from being cheated. He said AKPIRG has 3,000 members and is the only non-profit consumer protection organization exclusively representing the consumers. He said the number one area that AKPIRG deals with is the purges of defective vehicles. He said these vehicles were often wrecked vehicles and camouflaged by people in the business of selling vehicles. Number 2087 MR. CONN said someone bought a vehicle, by what she thought was a private owner, but upon investigation it was determined that this person had put 500 advertisements into the Anchorage Daily News, within a three year period, and had sold more than 300 vehicles. The vehicle she purchased, at upwards of $15,000, was defective. Number 2146 MR. CONN said the provision, where the I/M certificate is given before the vehicle is purchased, will allow the purchaser to make a good decision and protects the consumer against a dishonest car dealer. He urged the committee to support HB 403. Number 2259 RICK MORRISON, Past President, Alaska Auto Dealers Association, was next to testify via teleconference from Anchorage. He said as a car dealer he is concerned about the consumer, the business and the dealers who take care of the business. He said the association is involved with the Better Business Bureau and have had numerous conferences with the Attorney General's office and others to become educated about the laws and create an understanding of the responsibilities. MR. MORRISON said, when HB 454 passed, there were considerable difficulties getting information on the aspects of the legislature. He expressed concern over the confusion on what those items were supposed to be and cited examples such as "title only waiver," "certificate of compliance or non-compliance," and the "I/M certificate." He said there is a need for clarification of the terms and added that additional information is needed because the I/M requirements for Anchorage, Fairbanks and the state are not consistent. He said there are laws that allow certain things in Anchorage that cannot be done in Fairbanks. He said there are a number of things the state says can be done which the municipality says cannot be done. He said a consistency in provisions needs to be determined. MR. MORRISON referred to a new auto dealer, who also sells used cars,... TAPE 96-17, SIDE A Number 0000 MR. MORRISON said the certificates are just like titles, the dealer cannot change title until a certificate of compliance or non- compliance is obtained. He said when a dealer does an I/M compliance and the certificate must then go with the title to the Department of Motor Vehicles (DMV). He said the general dealer practice has been to do this I/M test on the vehicle when it arrives. He said if the vehicle is not I/M passable then the vehicle is disposed of or it is sold to a wholesaler. MR. MORRISON said the statute states that in order to transfer the title, a certificate of non-compliance has to be given. He said HB 403 is a "belt suspender approach" to a current law. He said the confusion of where the I/M process is going needs to be addressed so that each department is consistent. Number 0128 MR. MORRISON said HB 403 creates a paperwork and logistical burden for the dealers. He said 99 percent of the car dealers do not act unscrupulously. He said there is a business of people selling cars who are not car dealers and said the association has a problem with those businesses. He said this is a different issue from the I/M certificate and said the association would support legislation to address that issue. He said, in regards to the damaged vehicle concern, this is a national issue where there is an attempt to brand titles. He said the current state process is ineffective regarding branding titles and providing that information to the consumer and the dealer. He said there are cases where even a trained eye will not be able to spot the damages to the vehicle. He said the association would be very interested in setting up disclosure and branding of damaged vehicles. He said the association would also support title regulation for people who are in the business of selling cars, so that dealers are reputable and are concerned about the consumer. Number 0237 MR. MORRISON concluded that HB 403 would create a lot more paperwork and burden especially for those dealers who own more than one lot. He said in this case, the titles and I/M certificates are all kept at one lot. He expressed concern over the combining of this issue with the telemarketing issue as they are separate from each other. Number 0298 CHAIRMAN GARY DAVIS said it appeared that most of the objections expressed would be geared to the regulations rather than the statute. He said the statute only addresses a certificate of compliance or non-compliance. Number 0350 REPRESENTATIVE BROWN said she had found the same confusion with his testimony. Number 0363 MR. MORRISON said, "my understanding is that it would to accompany...we would have to have the I/M certificate accompany the car to its location, so as in the terms of the process of buying the car we would have to have that available at that location. Right now what we do is we have that available for them as they close out their paperwork." CHAIRMAN GARY DAVIS said he was reading that correctly and said a key point in HB 403 is that the time of transfer can occur after the sale. Number 0422 REPRESENTATIVE BROWN said the language of HB 403 reads that the certificate has to be made available before entering into the contract. Number 0433 MR. MORRISON says that it has to be a certified copy to be given to the customer. Number 0445 MR. SCHWARTZ said Mr. Morrison was describing a situation where a dealer has several car lots and only one administrative office where the I/M certificate are kept. He said there is no requirement in HB 403 that the valid copy of a certificate of compliance or non-compliance be in the vehicle on the lot where the vehicle is. The only requirement in HB 403 is that the consumer be presented with a certificate of compliance or non-compliance prior to the sale. If the sale occurs at the administrative office where the file is located, the I/M certificate would be available to present to the consumer. Number 0476 MR. SCHWARTZ said there is no language requiring a display of the certificate or that the certificate be in the vehicle. He said one suggestion, in informal discussions between the Attorney General's office and the dealers association, was that it would be a relatively simple thing to do to make a copy of the certificate of compliance or non-compliance from the administrative file and put the copy in the vehicle. He said there is nothing in HB 403 that requires this. Number 0592 REPRESENTATIVE JAMES said, in Fairbanks, an emissions test produces a print out which is turned over to the state. She said, if these used cars already have a license on them and had an emissions certificate to get that license, the new owner would still have to get an new I/M inspection to get another one for the file. Number 0645 MR. MORRISON said she was correct. He said, as a dealer, if he brings a car in he does an I/M certificate when it is brought in. He said, up until a year ago, he had to do a new I/M certificate every 90 days. He said the current state law is that the I/M certificate is good for one year providing that the vehicle does not change hands and go into a consumers possession. He said the municipal law is not consistent with the state law. He said it is expensive to maintain these certificates and it creates a burden. Number 0715 REPRESENTATIVE JAMES said the only thing HB 403 requires is that a seller give a copy of the certificate to the purchaser and the purchaser signs something to acknowledge that they received it. Number 0741 MR. SCHWARTZ said her statement was correct and added that all HB 403 does is to clarify that the consumer must be presented with a certificate by the used car dealer prior to sale. He said HB 403 does not require a new certificate or requirement of any sort, nor does it change the timing of the I/M certificate requirement. Number 0772 REPRESENTATIVE JAMES referred to a vehicle which has been on a lot for nine months, with no miles put on the vehicle, and asked if the I/M certificate was okay to give to the consumer in context of the state extension. Number 0790 MR. SCHWARTZ said the statute as presently worded, not subject to changes by HB 403, makes the certification requirement in line with the local air pollution control requirements. He said the differences in air pollution control creates different requirements for Anchorage and Fairbanks. He said, in Anchorage, the seller has to present an I/M certificate to a buyer where an I/M certificate has been obtained not less than 90 days prior to the sale. MR. SCHWARTZ said Mr. Morrison referred to the state providing an exemption for dealers with vehicles in inventory. He said this exemption was worked out between the Department of Environmental Conservation (DEC) and the dealership association in 1995. He said, other than that arrangement, the local air pollution control requirements would apply. He said he is unclear whether or not the municipality of Anchorage would agree with the interpretation of their own ordinance by the DEC. Number 0916 DON JANSSEN, Member, I/M Task Force, was next to testify via teleconference from Anchorage. He said he auctions off vehicles and said it is unclear as to who will purchase a car at an auction until the hand is raised. He said a contract is signed by the purchaser agreeing to the conditions of the sale which specifically states the as, is, whereas conditions of the car and provides for the removal of plates for vehicles which do not have current I/M certificates and the acquisition of a title only waiver from the municipality for $10. MR. JANSSEN said HB 403 would put him out of business and it requires additional paperwork. He said people do not read the paperwork and ignorance is going to be the key thing. He said HB 403 is not going to do a thing to change the general public awareness about having vehicles comply with the I/M conditions. He said, with the advent of SB 28, there will be significant changes in the way the testing is done. He said, until DEC does a better job of educating the public, there will be continued litigation and radical consumer activity on the part of individuals. He said it costs small businesses money to protect themselves from the activities of consumers. He said the government does not understand their own rules and that a task force needs to be put together that crosses departmental lines in conjunction with the dealer association. MR. JANSSEN said HB 403 would create a situation where he could not comply as he does not know who the purchaser would be. He said the municipality concluded in their I/M inspection and maintenance program an exclusion specifically deferring themselves from EPA guidelines. He said this is in "their own implementation of a disclosure that no vehicle needs to have an I/M if it is sold to an impound sale and all they have to do is take off the plates. But, me if I sell a vehicle for $25, I have to go out pay $10 for a certificate and this car did not run in the first place and the people that bought it were aware of it. But, if a year later he wants to sue me, because I did not provide him with that document. He said it is out of line with what the intent of the law originally was." He referred to a letter, dated in 1993, from Michael Ford who responded that all of "this stuff" is voluntary disclosure and that was the original intent, not the requirement of passing multiple documents between buyers and sellers. Number 1146 RICK GILMORE, President, Better Business Bureau (BBB), was next to testify via teleconference from Anchorage. He said the BBB gets about 40,000 phone calls a year and said used car sales is number three on the list of complaints. He said BBB talks with consumers every day who have received bad cars from both private parties and from used car lots. He said he did not know if HB 403 was the answer to the problem, but said something needs to be done to address the concerns of the consumers. Number 1187 MR. JANSSEN said DMV already tracks I/M certificates and the municipality of Anchorage has the authority to implement the I/M inspection program. He said a better process would be some type of tab or sticker which shows what date the car was inspected attached to the car. Number 1254 CHAIRMAN GARY DAVIS said HB 403 has other referrals, but said most of the debate centers around regulations, as opposed to the statute, and differences in how some of these situations are handled. Number 1271 REPRESENTATIVE BRICE said many of the concerns also revolve around the municipal ordinance versus the state laws. He then moved HB 403 with individual recommendations and zero fiscal note. Number 1286 REPRESENTATIVE JAMES said she was not comfortable with this business on the vehicles, but that she was willing to move HB 403 out of committee. She said government tries to make everything 100 percent risk free for people. She said people need to be responsible for themselves. She said HB 403 requires extra things for people to do in order to solve a problem which is not that difficult to solve. Number 1328 CHAIRMAN GARY DAVIS said HB 403 will go next to the House Labor and Commerce Committee. He said the sponsor will take into consideration the expressed concerns. Hearing no objection HB 403 was moved from the House Standing Committee on Transportation.
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