Used-Car Bill Getting a No Sale;

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Legislation that would let buyers return a vehicle within three days runs into opposition from the governor’s administration.

Los Angeles Times

SACRAMENTO — Siding with some of Gov. Arnold Schwarzenegger‘s most generous financial supporters, his administration Wednesday declared its opposition to a proposed three-day cooling-off period during which unhappy used-car buyers could return their vehicles for a refund.

AB 1839, which advocates consider one of the most substantial consumer protections before the Legislature this year, passed the Assembly in May and seems headed toward Senate approval. It would allow the return of any vehicle by used-car buyers within three days of purchase for a refund, so long as they had not driven it more than 250 miles or damaged it. The cooling-off period would not apply to new cars, recreational vehicles or those on consignment sales.

To cover the cost and hassle of taking back cars, dealers could charge the buyer 2.5% of the car’s price or $500, depending on which was lower. But the Department of Motor Vehicles said handling those returns would require “radical changes” for dealers to administer, and lead them to pass along costs to all car buyers. The department also said the bill would make it harder for the state to process new registrations.

“The protections provided in your bill to a limited number of vehicles buyers would be far overshadowed by the increased cost to the vast majority of car buyers who have entered into contracts which they fully understand and accept,” the department’s assistant director of legislation, Bill Cather, wrote in a letter to the bill’s sponsor, Assemblywoman Cindy Montanez (D-San Fernando).

Consumer advocates said the DMV’s position was just the latest example of Schwarzenegger’s support for car dealers over drivers. Shortly after taking office, the governor replaced a deputy who ran the bureau that regulates auto repairs, which the industry has long criticized as too aggressive.

Calling the DMV’s opposition “outrageous,” Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento nonprofit group, said, “For a guy who ran on getting rid of the car tax, what a betrayal of the car owners of this state this is.

“This is an agency whose job it is to protect the public,” she said. “Apparently they think there are so many unhappy consumers that are going to flood the DMV by rejecting all these bad cars.”

Auto industry leaders have given Schwarzenegger more than $950,000, most of it from California car dealers, according to the Foundation for Taxpayer and Consumer Rights, a Santa Monica nonprofit watchdog.

A spokesman for the governor said that although his agency opposes the bill, Schwarzenegger has not yet taken a position.

The cooling-off period is not the only part of the bill that prompted the administration to object. The DMV letter also echoed complaints raised by car dealers about provisions designed to stop dealers from arranging excessive financing costs that exceed the deals nearby banks, credit unions and other lenders offer.

The bill would require dealers to show car buyers what lower interest rates they could qualify for elsewhere. The bill also would require dealers to disclose any fees or other services that were included in the dealer’s financing package, to prevent them from increasing profits beyond what is necessary to pay for the car.

The DMV’s letter said the restrictions would make it harder for people with poor or no credit to finance cars, and would place car dealers at a disadvantage against banks or other lenders.

“This places an unfair limitation only on car dealers,” the letter stated.

But Sen. Debra Bowen (D-Marina del Rey), who has sponsored a number of bills to rein in the car industry, said the bill places no restrictions on the financing aside from requiring the details to be disclosed. “It’s a good Republican ‘make-the-marketplace-work’ ” measure, she said, because it gives “all the parties all the information.”

Said Montanez: “What is most disturbing is that the DMV appears to be more concerned with protecting the profits of unscrupulous auto dealers and lenders who would fleece unsuspecting customers with well-documented predatory lending practices.”

Brian Maas, the lobbyist for the California Motor Car Dealers Assn., said the DMV’s assessment was right.

“We think the more folks take a look under the hood of AB 1839, they’ll realize it does not promise the consumer benefits its proponents claim,” he said. “We think the three-day cooling-off period doesn’t work in practice.”

Consumer Watchdog
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