Bill Text: CA SB956 | 2011-2012 | Regular Session | Amended

California Senate Bill 956 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Buy-here-pay-here automobile sellers and lenders.

Spectrum: Partisan Bill (Democrat 5-0)

Status: (Vetoed) 2012-09-29 - In Senate. Consideration of Governor's veto pending. [SB956 Detail]

Download: California-2011-SB956-Amended.html

BILL NUMBER: SB 956	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MARCH 26, 2012

INTRODUCED BY   Senator Lieu

                        JANUARY 9, 2012

   An act to add Chapter 1b (commencing with Section 18500) to
Division 8 of the Business and Professions Code, and to amend Section
22054 of the Financial Code, relating to automobile sellers and
lenders.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 956, as amended, Lieu. Buy-here-pay-here automobile sellers and
lenders.
   (1) Existing law prohibits a person from acting as a dealer in
vehicles, as specified, without a license issued by the Department of
Motor Vehicles. Existing law governs conditional sales contracts, as
defined, for the purchase of motor vehicles, including the
enforceability of those contracts. Existing law also governs lease
contracts, as defined, for the lease of motor vehicles, including the
enforceability of those contracts. Existing law, the California
Finance Lenders Law, the violation of which is a crime, provides for
the licensure and regulation of finance lenders by the Commissioner
of Corporations, but exempts from its provisions a bona fide
conditional contract of sale involving the disposition of personal
property when that form of agreement is not used for the purpose of
evading provisions of that law.
   This bill would enact the Buy-Here-Pay-Here Automobile Dealers
Act. The bill would define a "buy-here-pay-here automobile dealer" as
a person who is required to obtain a license from the Department of
Motor Vehicles to act as a dealer in vehicles and who also enters
into conditional sales contracts or lease contracts. This bill would
require those dealers to obtain a finance lender license and subject
them to the other provisions of the California Finance Lenders Law.
The bill would also define a "buyer-borrower" as a person who enters
into a conditional sales contract or lease contract with a
buy-here-pay-here automobile dealer.
   This bill would govern the terms and conditions of contracts
entered into by a buy-here-pay-here automobile dealer and the rights
of the parties, including, but not limited to, requiring a notice to
a buyer-borrower of specified rights under the contract, and would
provide a buyer-borrower with a private right of action against a
buy-here-pay-here automobile dealer who has violated the provisions
of the bill.
   (2) Existing law, the Collateral Recovery Act, provides for the
licensure and regulation of repossession agencies, as defined, and
their employees by the Bureau of Security and Investigative Services
within the Department of Consumer Affairs.
   This bill would impose additional requirements on a
buy-here-pay-here automobile dealer seeking to repossess a vehicle,
including, but not limited to, prohibiting a dealer from commencing
repossession proceedings due to failure to make a scheduled loan
payment prior to the 11th day following the day on which that payment
was due, requiring a dealer to hire a licensed repossession agency
to repossess the vehicle on the dealer's behalf, and prohibiting the
dealer from charging the buyer-borrower a fee exceeding $500 for the
dealer's costs in connection with the repossession. The bill would
also establish a cap on interest rates that could be charged under a
buy-here-pay-here sales or lease contract and require a
buy-here-pay-here automobile dealer to allow a buyer-borrower
 2 months   45 days  to repay any
penalties, fees, and other charges imposed by the dealer on the
buyer-borrower in connection with past due payments that have been
brought current.
   (3) The bill would require that any additional costs to the
Department of Corporations in administering the provisions of the
bill be borne by buy-here-pay-here automobile dealers through fees
charged by the department.
   (4) Because this bill would expand the scope of a crime, the bill
would create a state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Chapter 1b (commencing with Section 18500) is added to
Division 8 of the Business and Professions Code, to read:
      CHAPTER 1b.  BUY-HERE-PAY-HERE AUTOMOBILE DEALERS ACT


   18500.  This chapter shall be known, and may be cited, as the
Buy-Here-Pay-Here Automobile Dealers Act.
   18501.  As used in this chapter:
   (a) "Buy-here-pay-here automobile dealer" means a person to whom
each of the following applies:
   (1) The person is a "dealer of vehicles," within the meaning of
Section 11701 of the Vehicle Code, subject to the provisions of
Article 1 (commencing with Section 11700) of Chapter 4 of Division 5
of the Vehicle Code.
   (2) The person enters into either of the following:
   (A) "Conditional sales contracts," within the meaning of
subdivision (a) of Section 2981 of the Civil Code, subject to the
provisions of Chapter 2b (commencing with Section 2981) of Title 14
of Part 2 of Division 3 of the Civil Code.
   (B) "Lease contracts," within the meaning of subdivision (d) of
Section 2985.7 of the Civil Code, subject to the provisions of
Chapter 2d (commencing with Section 2985.7) of Title 14 of Part 2 of
Division 3 of the Civil Code.
   (3) The person does not assign  substantially all
  90 percent  of the contracts described in
paragraph (2) within 30 days following the date as of which the
contracts were executed.
   (b) "Buyer-borrower" means a person who enters into a conditional
sales contract or lease contract with a buy-here-pay-here automobile
dealer.
   (c) "Licensed repossession agency" means a "repossession agency"
as defined in Section 7500.2 that is licensed pursuant to the
Collateral Recovery Act (Chapter 11 (commencing with Section 7500) of
Division 3).
   18502.  (a) Notwithstanding Section 22054 or any other provision
of law, except as otherwise expressly provided in this chapter, a
buy-here-pay-here automobile dealer shall be subject to the
provisions of the California Finance Lenders Law (Division 9
(commencing with Section 22000) of the Financial Code).
   (b) A buy-here-pay-here automobile dealer shall be exempt from the
provisions of Sections 22320, 22320.5, and 22330 of the Financial
Code.
   (c) Notwithstanding Section 22250 of the Financial Code, a
conditional sales contract or a lease contract entered into by a
buy-here-pay-here automobile dealer shall be subject to the
provisions of the Financial Code referenced in Section 22250.
   18503.  (a) In lieu of the notice required by subdivision (h) of
Section 2982 of the Civil Code, a conditional sales contract or lease
contract entered into by a buy-here-pay-here automobile dealer shall
include the following notice, in at least eight-point boldface type:

   "If you have a complaint concerning this buy-here-pay-here
automobile dealer or the contract, you should try to resolve it with
the dealer.
   Complaints concerning unfair or deceptive practices or methods by
the dealer may be referred to the city attorney, the district
attorney, an investigator for the Department of Motor Vehicles, or an
investigator for the Department of Corporations, or any combination
thereof.
   After this contract is signed, the dealer may not change the
financing or payment terms unless you agree in writing to the change.
You do not have to agree to any change, and it is an unfair or
deceptive practice for the dealer to make a unilateral change.
   I have read and understand the terms of this notice.
    _____________________Borrower's Signature"

   (b) The contract shall not be binding unless the buyer-borrower
has acknowledged in writing that he or she has read and understands
the notice required by subdivision (a).
   18504.  (a) A buy-here-pay-here automobile dealer shall be
prohibited from commencing repossession of a vehicle subject to a
conditional sales contract or lease contract due to the
buyer-borrower's failure to make a scheduled payment prior to the
11th day following the date on which that payment was due.
   (b) Following commencement of repossession proceedings against a
buyer-borrower for delinquent payments under a conditional sales
contract or lease contract, if the buyer-borrower pays the delinquent
amount in full, the buyer-borrower shall be entitled to  two
months   45 days  thereafter to pay the
buy-here-pay-here automobile dealer the amount of any delinquency
charges, penalty interest, and fees arising out of the delinquency
and commencement of repossession proceedings.
   (c) A buy-here-pay-here automobile dealer shall not do either of
the following:
   (1)  Take any action to   Physically 
  repossess a vehicle other than through engaging the
services of a licensed repossession agency.
   (2) Charge a buyer-borrower an amount exceeding five hundred
dollars ($500) in fees or charges resulting from the commencement by
the buy-here-pay-here automobile dealer of any action to repossess a
vehicle.
   (d) The provisions of subdivisions (a), (b), and (c) shall be
included in the terms and conditions of a conditional sales contract
 pursuant to Section 2981.9 of,  or lease contract 
pursuant to Section 2985.8 of, the Civil Code  .
   18505.  A buyer-borrower who has entered into a conditional sales
contract or lease contract with a buy-here-pay-here automobile dealer
shall have a private right of action against that dealer for any
violation of this chapter by that dealer.
   18506.   The interest   Notwithstanding any
other law, the annual percentage    rate charged to a
buyer-borrower pursuant to a buy-here-pay-here sales or lease
contract shall not exceed the federal funds rate in effect at the
time the contract was executed plus an additional 17 percent.
  SEC. 2.  Section 22054 of the Financial Code is amended to read:
   22054.  Except as otherwise provided in Chapter 1b (commencing
with Section 18500) of Division 8 of the Business and Professions
Code, this division does not apply to bona fide conditional contracts
of sale involving the disposition of personal property when these
forms of sales agreements are not used for the purpose of evading
this division.
  SEC. 3.  (a) In enacting Section 1 of this act, it is not the
intent of the Legislature to affect or limit existing legal rights,
remedies, or claims available under current law.
   (b) Any additional costs to the Department of Corporations
resulting from its administration of Section 1 of this act shall be
borne by buy-here-pay-here automobile dealers through fees charged by
the department, which fees shall not exceed the reasonable
regulatory costs of administering those provisions.
  SEC. 4.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.