Legislature(2005 - 2006)BELTZ 211

03/17/2005 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Bills Previously Heard/Scheduled
Moved CSSB 124(L&C) Out of Committee
Moved HB 102 am Out of Committee
Heard & Held
               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                                                               
     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                                                                    
     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                                                                    
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.                                                                                            

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