SB 164-USED MOTOR VEHICLE SALES  2:50:57 PM CHAIR FRENCH announced the consideration of SB 164. TREVOR FULTON, staff to Senator McGuire, introduced SB 164 on behalf of the sponsor. He explained that the bill removes from statute outdated language governing the sale of used motor vehicles without reducing consumer protections. The bill repeals AS 45.25.464(c), which says that dealers must post three disclosures on used vehicles they intend to sell: 1) the vehicle is not subject to Alaska's "lemon law," 2) the vehicle is not covered under a manufacturer warranty, and 3) the vehicle was not manufactured for sale in a foreign country. MR. FULTON said the disclosures were mandated in response to an influx of Canadian vehicles that were sold as new. He understands that was occurring up until about 2000. Industry and the Department of Law agree that this is no longer an issue. In fact, all three disclosures are information that's readily available to consumers. These mandated postings are an inconvenience and they may be leaving dealers exposed to legal suit because failure to post the information in subsection (c) amounts to unfair trade practices. Unfair trade practices allows lawsuits demanding treble damages and reimbursement of legal costs even though the consumer may have suffered no actual harm or damage. "When the state starts unnecessarily burdening Alaskan businesses while providing no additional consumer protection, the sponsor believes it's time to reevaluate." CHAIR FRENCH asked Mr. Sniffen to give his view of the bill. 2:54:22 PM ED SNIFFEN, Assistant Attorney General, Civil Division, Department of Law (DOL) said he's responsible for enforcing the Alaska Consumer Protection Act and the antitrust statute with a particular emphasis on regulating auto dealers in Alaska. He said that Mr. Fulton accurately described how this legislation came about, but he'd like to highlight information that DOL has received since it sent a letter to the sponsor. Initially DOL didn't understand how the statute was passed with reference to a disclosure requirement that extended to all used vehicles as opposed to just "current model" used vehicles. DOL has since communicated with Representative Gruenberg who recalls adding that language because he wanted to extend the protection to all used cars. DOL will speak to the Representative about his concerns to make sure they are addressed but, as Mr. Fulton said, the protections in subsection (c) are already required in a number of other ways. He noted that when the "current model" vehicle language was removed from Title 8 several years ago it created an issue with this statute. But for the most part industry has self-corrected in the sense that the harms caused by selling current model vehicles without the required disclosures have been removed. He offered to go into further detail. 2:57:07 PM CHAIR FRENCH referred to two documents in the packet. The first has a "little sticker" and the next has a "big sticker." He asked if the little sticker is being affected. MR. SNIFFEN said yes; the big sticker has the disclosures that are required under federal law. It has boxes for the dealer to check stating the vehicle will be sold as is with no warranty or with either a full or limited warranty. It's the little sticker that would no longer be required under this bill. CHAIR FRENCH recapped that the little sticker says three things about the vehicle: 1) it's not subject to the lemon laws; 2) it's not covered under a warranty; and 3) it's not built Canada. And the big sticker is pretty clear about "no warranty" versus "warranty." He asked what part of that big sticker tells a consumer that the vehicle wasn't built in Canada. MR. SNIFFEN replied he's unaware of any part of the big sticker that has that information, but the requirement wouldn't change. "Auto dealers would still have to post a requirement on the car if the vehicle was manufactured for sale in Canada or another foreign country." That requirement comes from AS 45.25.470 so they're duplicative. Removing the requirement from one section doesn't remove it from the other. 2:59:21 PM CHAIR FRENCH asked what part of the big sticker would tell a consumer that the car isn't subject to Alaska's lemon law protections. MR. SNIFFEN replied it's not explicit so it's not as clear. The lemon law protections are in fact warranty protections that apply only to new cars. When the "no warranty" box is checked on the big sticker, by assumption that is telling the consumer that the lemon law would not apply. He isn't aware of any state that requires that specific kind of disclosure. CHAIR FRENCH asked if he's comfortable with that. MR. SNIFFEN said he is comfortable because he doesn't know that consumers rely on that kind of information when they decide to buy or not buy a vehicle. The lemon laws have a very specific application. Consumers have certain rights when they buy a new vehicle and manufacturers are required to include that information in the owner's manual. "When it comes to used cars, that bit of information is just not that harmful to consumers to not have because it wouldn't apply anyway," he said. 3:01:37 PM CHAIR FRENCH questioned why the bill is retroactive. MR. SNIFFEN explained that DOL understands that when this provision passed it wasn't meant to apply to all used vehicle sales. It was intended to apply only to "current model" used cars. Some dealers though that was the correct application of the law and so they didn't make those disclosures. They started doing it once they realized the disclosures had to be put on every use car, but there was a period of time before that information got around. As a result a lot of dealers are exposed to significant liability for having failed to disclose properly. This law would provide protection to those dealers if a claim isn't already pending. CHAIR FRENCH asked if the State of Alaska has brought action to enforce this law as it stood. MR. SNIFFEN said one action is pending in the state supreme court on appeal. It was a case DOL brought against Lithia Dealerships that centered on different issues. As part of the settlement DOL recognized that Lithia failed to make some of the disclosures and asked for injunctive relief. They need to make these disclosures going forward until the law changes or it's no longer necessary, he said. CHAIR FRENCH acknowledged that he's suggesting a retroactive clause and asked if the state envisions further actions against other dealerships. MR. SNIFFEN said that's correct. Even in the current case against Lithia Dealerships, very little consumer harm was assigned to the failure to make the disclosures. DOL didn't identify any transactions where consumers wouldn't have gone forward with the vehicle purchase had they had that information. If DOL does come across information that indicates that consumers would have relied on information had the disclosures been made, it would consider taking action. If the bill is applied retroactively and no suit is pending he believes there would still be good grounds to proceed because "all of these things are probably required by something else." Failure to disclose that the vehicle is manufactured for sale in Canada or a foreign country is the provision that can cause the most harm because warranty is affected. Most manufacturers have addressed that problem by extending coverage, but for a time it was an issue for Alaskans who purchased vehicles in Canada. "But that requirement is already required and will continue to be required," he said. 3:05:38 PM JOHN COOK, Legislative Director, Alaska Auto Dealers Association (AADA), reiterated that all the disclosures that are required on the small sticker are either unnecessary or redundant. The lemon law applies only to new vehicles so putting that disclosure on the vehicle is negative and necessary. The warranty disclosure is covered in the FTC sticker that every used vehicle in the U.S. is required to display. Also, AS 45.25.470 requires that all vehicles manufactured for sale in Canada have that disclosed. With regard to retroactivity, he agrees with Mr. Sniffen. Most used car dealers had no idea when the legislation passed [in 2004] that it contained a requirement for a second sticker on all used cars. They learned about it when a lawsuit was filed. Because it's an unfair trade practice there's a two- year look back period. It leaves dealers exposed yet there is no tangible benefit to anyone. A company like Lithia can probably withstand a class action suit, but the majority of the AADA membership would have difficulty withstanding a suit of this nature. 3:09:57 PM CHAIR FRENCH announced he would hold SB 164 for a subsequent hearing.