HB 235-MOTOR VEHICLE TRANSACTIONS  3:27:24 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 235, "An Act relating to certain vehicles, including trailers; and relating to motor vehicle dealer advertising, motor vehicle dealer sales of used motor vehicles, motor vehicle sales contracts, motor vehicle service contracts, and motor vehicle sales financing." 3:28:32 PM REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, thanked members for the opportunity to present HB 235. This bill would update statutes AS 45.25.400 - AS 45.25.900, commonly known as the Alaska Auto Dealers Practices Act. The changes would clarify provisions concerning the advertising of new and used automobiles. These revisions should assist consumers in understanding auto comparison pricing and should eliminate ambiguities contained in the current statutes while assisting dealers in following state law. This bill was drafted in conjunction with the Commercial and Fair Business Section of the Department of Law. He said, "Additionally, this bill should take care of the contentious issues of the "doc" fees, making the issue mute." 3:29:48 PM JANE PIERSON, Staff, Representative Steve Thompson, Alaska State Legislature, presented the sectional analysis for HB 235, as follows [original punctuation provided]: Section 1. Clarifies the "MSRP" shown on the federal Monroney sticker is the manufacturer's suggested retail price, and not the dealer's advertised price. Also clarifies what items are included by the manufacturer in arriving at MSRP as shown on the Monroney sticker, and allows dealers to advertise a savings or discount from the MSRP. Section 2. Requires that the dealer's advertised price must include all dealer fees and costs except fees paid to a governmental agency such as taxes and licensing fees. Section 3. Removes disclosure requirement regarding use of MSRP in advertising, and removes subsection dealing with price advertising that is covered in Section 1 to amendment to AS 45.25.400(b). Section 4. Requires dealers use nationally recognized valuation publications (such as Kelly Blue Book or N.A.D.A. Official Used Car Guide) as the retail value when advertising comparative pricing for used cars. HB 235 requires that this pricing information be provided to consumers upon request. 3:31:08 PM MS. PIERSON continued the sectional analysis for HB 235 by reading the following [original punctuation provided]: Section 5. Removes section now covered in Section 2 amendment to 45.25.440; allows dealer to make vehicle identification information available in the advertisement or at the dealership - this resolves the problem of impossible to read small print on television advertising; and renumbers sections of 45.25.460(a). (This renumbering requires the amendment in Section 8) Section 6. Changes the word "verified" to "signed" so the information provided by an individual to a dealer need not be notarized. Section 7. Allows a dealer to have a vehicle on the sales lot and show it to customers prior to having all required paper work, but prohibits sale of the vehicle until the dealer has all required paperwork in its possession. Section 8. Conforms AS 45.25.520 with renumbering in Section 5. Section 9. Clarifies that the sales contract will be void if the dealer or the financing institution changes terms of a separate agreement relative to financing. 3:32:19 PM MS. PIERSON continued the sectional analysis for HB 235, by reading the following [original punctuation provided]: Section 10. Provides for responsibility of a buyer to return a vehicle if financing is not approved and the responsibility of dealer to return a trade-in delivered to the dealer. Section 11. Establishes responsibility of a buyer to return a vehicle if the financing is denied as a result of intentional misrepresentation in the credit application, including mileage fee if over 100 miles are put on the vehicle and responsibility for damage to the vehicle, parking tickets, towing fees, storage fees, impound fees, and other similar charges incurred by the buyer while the vehicle was in possession of buyer. Section 12. Removes unnecessary and impractical obligation imposed on dealers relating to service contracts. 3:33:09 PM MS. PIERSON continued the sectional analysis, by reading the following [original punctuation provided]: Section 13. Provides that changes affect contracts entered into on or after the effective date of the act and provides definitions for terms used in several sections. For Section 7 - Motor vehicle is defined in 45.25.590(3) "motor vehicle," notwithstanding the definition of "motor vehicle" in AS 45.25.990, means a vehicle, including a trailer, that is required to be registered under AS 28.10, but does not include a motorcycle. For Section 12, Service contract is defined in 45.25.990 (18) "service contract" means an optional agreement that is separate from a contract for the sale of a motor vehicle and that covers certain repair or maintenance functions beyond coverage provided by a warranty. For Section Sections 9, 10, 11, and 12, Motor vehicle is defined in 45.25.990 (12) "motor vehicle" means a motor vehicle that is required to be registered under AS 28.10, but does not include a motor home, a recreational vehicle, or a motorcycle; in this paragraph, (A) "all-terrain vehicle" has the meaning given in AS 45.27.390; (B) "recreational vehicle" includes an all- terrain vehicle and a snow machine; (C) "snow machine" has the meaning given in AS 45.27.390. 3:33:44 PM REPRESENTATIVE SADDLER referred to page 5, line 23 of HB 235, which relates to entering into a contract. He asked whether the contract must be a written contract or if it could be a verbal contract by a dealer to hold a car until the financing could be arranged. He further asked what constitutes a contract in section. MS. PIERSON offered her belief that the changes in proposed Section 7 refer to a contract to sell a motor vehicle so it would be the actual sale. 3:34:23 PM REPRESENTATIVE SADDLER related a scenario in which a prospective buyer is interested in a car and asks the dealer to hold it while he consults with his wife. In the event that another prospective buyer expresses interest in the car, whether the dealer is bound by contract to hold the car for the first customer. MS. PIERSON offered her belief that the dealer did not have an agreement to sell a vehicle, but rather just to hold it. 3:35:06 PM CHAIR OLSON asked whether the MSRP is a country wide pricing, except for transportation costs. He surmised that the MSRP for California would be differences due to its stringent pollution requirements. MS. PIERSON identified that the MSRP is the manufacturer's sticker on the vehicle, and is defined by the federal Monroney statute. She explained that the dealer can adjust prices from the Monroney sticker, so it represents the manufacturer's price. CHAIR OLSON offered that the MSRP would be the same as it is in Nevada, except for transportation costs. He asked for an explanation of how transportation costs are handled given that Alaska's transportation costs are much higher than anywhere else except for Hawaii. MS. PIERSON related her understanding the prices are the same, but the auto dealers and department are on-line and could correct her if that is not so. 3:36:18 PM REPRESENTATIVE HOLMES referred to Section 5, [to page 3, line 18] and wondered whether this means she does not need to listen to the numbers rattled off in a commercial. MS. PIERSON answered yes. 3:36:50 PM REPRESENTATIVE HOLMES asked for clarification on Section 12, as she was unsure if the purpose is to streamline this process. MS. PIERSON deferred to one of the experts. She related her understanding that this means the service contract must be in writing and include all provisions. 3:37:52 PM REPRESENTATIVE JOHNSON related his understanding some settlements that require disclosure of vehicle identification numbers (VIN) in advertising, if this bill changes that settlement, or if is it an antiquated settlement. 3:38:42 PM REPRESENTATIVE SADDLER referred to Section 6, page 5, line 15, and asked if the disclosure of the vehicle's history and condition be true and whether the change in language from verify to signed change imply any change in the representation. MS. PIERSON answered no. She explained that it just means it does not have to be notarized, since the notary is merely verifying the person is truly the person who is signing it. 3:39:25 PM REPRESENTATIVE SADDLER related his understanding that it would not need to be notarized, but also does not say the information is true. MS. PIERSON agreed with the function of a notary as limited to verifying the identity of the person signing the document. 3:39:42 PM REPRESENTATIVE MILLER referred to page 6, line 31, and page 7, line 10, specifically to the word "intentional," and read, "if a buyer's final financing is not approved and the buyer has made an intentional representation ..." He asked who would make the determination on the length of time it would take and how this would be verified. MS. PIERSON suggested it would be apparent. She related a scenario in which she was to state that she earns $200,000 working for legislature. It would be apparent to everyone that her statement wasn't true. Additionally, it would be a misrepresentation on a financial document. She summarized the gist of this is to assure people are employed and that their income and credit ratings are reported accurately. She thought the language was fairly clear in terms of financial agreements. REPRESENTATIVE MILLER agreed, but offered other examples might be somewhat subtle. MS. PIERSON deferred to the Department of Law to better respond. 3:41:28 PM REPRESENTATIVE JOHNSON referred to page 7, line 5 of proposed Section 11 to the business use mileage. He asked for the current business usage rate. REPRESENTATIVE MILLER answered that he thought the rate was $.54 or $.59 statewide. MS. PIERSON said she was unsure, but the figure is recognized by the Internal Revenue Service (IRS) so the rate would be a standard rate throughout the U.S. 3:42:15 PM REPRESENTATIVE JOHNSON offered his belief that the business use mileage rate and the $.45 a mile rates are in the bill as placeholders. MS. PIERSON answered yes. 3:42:38 PM CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), offered to answer questions raised thus far. He explained that his duties include enforcement of this act. He said he has worked with the auto dealers for the past 12 years on many of these issues and much of this bill is aimed at clarifying and cleaning up some areas and makes it much easier for consumers and auto dealers. He indicated he has no problems with the current language in the bill and the DOL supports the bill. 3:44:08 PM MR. SNIFFEN referred to an earlier question with respect to whether a contract to sell and an oral representation constitutes an enforceable contract. He offered that it could be; however, in this bill the intent is that the statute must be complied with before a dealer can actually enter into a written contract with a consumer to sell a vehicle. He suggested that oral representations are more in the nature of offers to hold, which is not the intent of the language in this bill. 3:44:56 PM MR. SNIFFEN referred to an earlier question on whether the MSRP is standard across the country. He related his understanding that the cost is standard in the U.S. He said at one time transportation costs were included in the MSRP. He was unsure whether the transportation charge differential has changed with respect to the costs for vehicles in Anchorage versus in Detroit. He suggested that some people in the industry could better answer the question. MR. SNIFFEN referred to an earlier question, with respect to settlements and whether any recent settlements required disclosure of VINS, and if so, whether they were enforceable. He said the settlements he has been involved with pertained to a settlement on dock fees, which did not include disclosure of any VIN. The rule of law still stands and document preparation fees must be included and he was not aware of any private settlements. 3:46:33 PM MR. SNIFFEN brought up an earlier question on whether the definition of "verified" versus "signed" and if that would mean the person had signed, but the information was not verified. He explained that this statute attempts to ensure that owners who trade in vehicles provide the accident and repair history. He further explained that the dealer cannot verify this information so requiring the owner to sign and verify gives the future purchaser a record. He reported that the DOL has not had any issues with this. He suggested this change just makes it easier for dealers so they would not need to provide a notary every time a person wants to sell a vehicle. MR. SNIFFEN recalled an earlier question with respect to intentional misrepresentation, which he said would be a matter that would be decided by the courts. Thus if a dispute arose in which a person intentionally provided false information, the courts would decide. He agreed with Ms. Pierson's description of obviously false information. He agreed some gray areas could arise, such as employment projections. He reiterated the courts could decide any disputes; however, he did not think that the amount of money involved in these types of case would warrant this. 3:48:57 PM REPRESENTATIVE JOHNSON referred to page 7, line 16, to Section 12 of the bill. He related that a service contract could be buried in a stack of documents the buyer must review and sign. He questioned whether it is conceivable for a dealer to add in a service contract with the car purchase agreement and not clearly mark it as a contract for a service contract. MR. SNIFFEN agreed considerable paperwork is involved in these transactions and although the possibility exists the statute would require all the terms and conditions of the contract be presented to the consumer. He highlighted that if a consumer indicated he/she did not recall agreeing to a service contract, that it would be the responsibility and burden of the dealer to prove the consumer requested the service. 3:51:05 PM REPRESENTATIVE JOHNSON read, "A motor vehicle service contract must be in writing and contain all essential provisions regarding the administration of the contract." He pointed out that this subsection previously included the language, "clearly and conspicuously marked." He asked whether retaining the language, "clearly and conspicuously marked" would constitute a service to the public or if it would be a hindrance to the dealership. He further asked if this provision would provide a safety net or if it was yet another obstacle to businesses. MR. SNIFFEN suggested another provision in the Automobile Dealer's Act, which he did not have before him, requires that all disclosures must be done so in a clear and conspicuous manner. He clarified that the way service contracts work is not currently done through an application. He reiterated that provisions for disclosure must be done in a clear and conspicuous manner and to not do so would be in violation of the law. REPRESENTATIVE JOHNSON responded that he wanted to raise the concern, that the response clarifies this for him. 3:53:08 PM CHAIR OLSON expressed the same concern about the service contract being buried in the middle of the paperwork. He inquired as to whether any complaints of that nature have been filed. MR. SNIFFEN answered no. He said he did not recall any complaints of that nature. He explained that normally those types of complaints would be a pattern or practice by a dealer. 3:53:45 PM REPRESENTATIVE JOHNSON reported that the committee staff has located the specific reference to the statute, which read, "...separate agreement clearly and conspicuously informs the buyer...." He affirmed that his questions have been answered. 3:54:46 PM MARTEN MARTENSEN, President, Alaska Automobile Dealers Association (AADA), stated that he hoped members would recognize the changes incorporated in HB 235 attempt to clean up the gray area and the auto dealers are not asking for any advantages. He pointed out that some of the current statutes are ambiguous and open to interpretation. The proposed changes would make it easier for auto dealers to operate and to work with the DOL in terms of what is allowable. He characterized HB 235 as a bill that would make things black and white. He said that he and his colleagues are here to ask members for their support. 3:56:20 PM CHAIR OLSON offered his belief that most compelling testimony the committee has heard today is from Ed Sniffen. He emphasized when Mr. Sniffen says he supports this bill, and he has done so on two prior occasions, that it carries a tremendous amount of weight. He invited anyone in opposition to the bill to come forward. 3:57:11 PM REPRESENTATIVE HOLMES asked for the purpose of the changes in Section 12. MR. MARTENSEN explained that key word in this section is "application." He characterized dealers as the middle man and the paperwork is not considered an application, but is a contract. 3:58:06 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 235. 3:58:43 PM REPRESENTATIVE JOHNSON moved to report [HB 235] out of committee with individual recommendations and the accompanying fiscal note 3:59:26 PM REPRESENTATIVE JOHNSON restated his motion. He moved to report HB 235 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 235 was reported from the House Labor and Commerce Standing Committee. 3:59:56 PM The committee took an at-ease from 3:59 p.m. to 4:05 p.m.