|
- Creates a 2-day cooling off period for used vehicle purchases.
- Creates additional advertising requirements pertaining to "certified" used vehicles.
- Creates additional disclosure requirements pertaining to credit scores and aftermarket add-on items.
- Caps the amount a dealer can mark up a finance rate.
- Establishes additional causes of action against a dealer's license.
Contract Cancellation Option: 2-Day Cooling Off Period for Used Vehicle Purchases
Creates a contract cancellation option for the buyer of a used motor vehicle. If the buyer chooses this option, he may cancel the contract until close of the dealer's place of business on the second day after delivery of the vehicle. A dealer must offer the contract cancellation option for the sale of any used vehicle unless:
- It is not a retail sale.
- The purchase price is $40,000 or more.
- The vehicle is a motorcycle, off-road vehicle or recreational vehicle.
- The vehicle is sold for commercial (as opposed to personal) use.
- The buyer has returned a vehicle to the dealer under a contract cancellation option within the prior 30 days.
The purchase price for the contract cancellation option is based on the cash price of the vehicle. A dealer may offer the contract cancellation at no charge to the buyer. If the dealer charges for the option, the maximum cost is:
- $75 for a vehicle with a cash price of $5,000 or less.
- $150 for a cash price of more than $5,000 but not more than $10,000.
- $250 for a cash price of more that $10,000, but not more than $30,000.
- 1% of the purchase price of a vehicle with a cash price of more than $30,000, but not more than $40,000.
The Contract Cancellation Option Agreement must be a separate document from the sales contract and must include:
- The vehicle identification number and description of the vehicle.
- A statement specifying the time frame for cancellation?minimum of two days.
- The restocking fee charged to the buyer if the vehicle is returned.
- A statement specifying the maximum number of miles allowed prior to return of the vehicle (the amount specified must be no less than 250 miles).
- A statement specifying the condition of the vehicle for return.
- A place for the buyer's signature to elect the option to cancel.
- A statement specifying the last date and time that the buyer can cancel.
A sales contract must include a disclosure next to the space reserved for the buyer's signature, notifying the buyer that a used vehicle may be returned and the transaction cancelled within the time-frame specified in the dealer's cancellation option agreement.
Revises the existing contract disclosure requirement and signage requirement regarding a cooling off period to note there is a cooling off period for used vehicle sales, but that there is none for new vehicles.
Regardless of whether the buyer chooses the contract cancellation option, the vehicle is "sold" as of the date the buyer signs the contract and takes delivery. Registration fees (if applicable) are required and considered used when the vehicle is placed on the road without dealer plates. Note: A buyer cannot drive a "purchased" vehicle on dealer plates.
RETURN OF A VEHICLE UNDER A CONTRACT CANCELLATION OPTION
A contract cancellation under this option takes effect when the buyer gives written notice of cancellation to the dealer at the address specified in the contract and returns the vehicle to the dealer within the timeframe allowed.
- The vehicle must be in substantially the same condition as at delivery, excluding normal wear and tear.
- The mileage at the time of return must not exceed the mileage at delivery by more than 250 miles (or any greater amount indicated in the sales contract).
- The buyer must return to the dealer the original of the contract and all original titling and registration documents provided to the buyer.
- The vehicle must be free of all liens and encumbrances other than the ones created by the conditional sale contract, any loan arranged by the dealer, or any loan obtained by the buyer from a third party.
A dealer must cancel a contract upon return of the vehicle and provide the buyer with a full refund within two days of the date of cancellation, including sales tax and any registration fees, but excluding:
- The cost of the Cancellation Agreement Option
- A restocking fee: The restocking fee is limited to: $175 for a vehicle with a cash price of $5,000 or less; $350 if the purchase price is less than $10,000; or $500 if the purchase price is $10,000 or more. However, any cost of the Cancellation Agreement must be subtracted from the restocking fee.
- A definition of a "full refund" for the above purposes includes the return of any traded-in vehicle or, if it has been sold, either the fair market value of the trade-in or its value as stated in the contract, whichever is greater.
If the purchase included a trade-in vehicle or comparable compensation for one:
- If the buyer was charged for the contract cancellation option, the dealer must retain the trade-in until the end of the two-day cooling off period to have it available to return to the buyer. If the trade-in is inadvertently sold or otherwise disposed of, the dealer must provide comparable compensation (based on the value assigned to the trade-in in the sales contract). Failure to retain the vehicle for return may be a cause of action, unless the dealer has a procedure in place to retain vehicles and sale is an error. If procedures are in place, there is no violation.
- If the buyer was not charged for the cancellation option, the dealer is not required to retain the trade-in. If the contract is cancelled , the dealer must return the trade-in (if available) or refund of fair market value or value stated in contract.
Requirements for fees/registration/documents are the same as for any other roll-back of a sale. There are no changes to requirements for when fees are due or when documents are required and due.
Registration fees collected must be returned to the buyer when the contract cancellation option is activated. If the vehicle was operated so as to cause fees to become due (that is, the vehicle was not currently registered at the time of sale), then those fees must be posted with DMV. A dealer may collect prorated registration fees (based on the number of months left in the registration year) from a subsequent buyer.
New Disclosures Required Under AB 68
A dealer who arranges financing, makes a credit sale, sells or otherwise transfers a conditional sale contract must clearly and conspicuously disclose to the buyer any three-digit credit score of the buyer obtained from a credit reporting agency. The disclosure must be a separate document that includes the name and address of the seller at the top, discloses the three digit credit score, the name, address and phone number of any credit reporting agency from which the dealer obtain a credit score, and the range of scores established by that credit agency.
If the sale or lease includes the sale of a
- service contract or maintenance plan
- insurance product
- theft deterrent or protection product
- debt cancellation agreement ("gap" insurance)
- exterior or interior surface protection,
the dealer must provide the buyer a separate written disclosure that includes the name and address of the seller at the top and the date of the contract. The disclosure must reflect:
- a description and the cost of each individual item
- the total cost of all of the items
- the amount of the installment payment if the buyer does not purchase the items
- the amount of the installment payment if the buyer does purchase the items.
After the disclosure is provided to the buyer, if the buyer decides either to not purchase one or more of the items in the disclosure, or the purchase additional items, then a new disclosure form listing the items to be purchased must be provided.
Failure to provide the buyer these disclosures is a cause for action against a dealer's license and a misdemeanor crime.
Finance Charge Rate
AB 68 prohibits a dealer, when assigning a conditional sale contract, from receiving or accepting a finance charge in an amount in excess of 2? percent for contracts up to 60 months and 2 percent for contracts over 60 months. This limitation does not apply when:
- the assignment requires the dealer to bear the entire risk of financial performance of the buyer;
- the assignment is more than six months after the date of the conditional sale contract;
Accepting or receiving an amount higher than that authorized would be a cause of action against a dealer's license and a misdemeanor crime.
Note: Isolated instances resulting from bona fide errors may not be considered a violation provided that the dealer maintains reasonable procedures to guard against such errors and if, upon notice of the error, the dealer promptly remits back to the buyer any amount received in excess of the amount permitted.
Advertising Restrictions Related to "Certified" Used Vehicles
Current law does not regulate the advertising of "certified used," "certified pre-owned," or other similar terms. AB 68 regulates the use of these terms both by prohibiting dealers from advertising for sale or selling certain vehicles as "certified" and establishing a specific requirements to be met in order to advertise a vehicle as "certified".
A dealer may not advertise a vehicle as "certified" if:
- the vehicle has sustained damage from an impact, fire, or flood that substantially impairs its use or safety;
- the dealer knows or should have known that the vehicle has sustained frame damage;
- the dealer knows or should have known that the odometer has been rolled back, altered or replaced to show fewer miles than actually driven;
- the dealer knows or should have known that the vehicle has been repurchased by a dealer or manufacturer due to state or federal warranty laws ("lemon law");
- the vehicle's title has been branded as a lemon law buyback, manufacturer repurchase, salvage, junk, nonrepairable, flood or similar designation required by California or another state;
- the dealer disclaims any warranties on the vehicle; or
- the vehicle is sold "as is."
A dealer cannot advertise a vehicle as "certified" unless:
- Prior to the sale, the dealer gives the buyer a completed inspection report reflecting all the components inspected under the vehicle certification program.
A violation of the provisions addressing the advertising of certified used vehicles is actionable under
- the Consumer Legal Remedies Act,
- the Unfair Competition Law,
- Section 17500 of the Business and Professions Code prohibiting false or misleading advertising, and
- any other applicable state or federal law.
New Causes of Action Created by AB 68
AB 68 adds the following causes for action against a dealer's license:
- The addition of charges to a contract for any goods or services after the contract has been negotiated without previously disclosing the costs to the buyer and obtaining the buyer's consent.
- The inflation of the amount of any installment payment or down payment or the extension of the maturity of a sale or lease contract for the purpose of disguising the actual charges for goods or services to be added by the dealer to the contract.
- Failure to provide new disclosures required by AB 68 (credit score, disclosure of costs for added items).
- Accepting over 2 ?% (contracts under 60 months) or 2% (contracts over 60 months) of the finance charge contract when assigning the contract.
|
.gif)
