California legislators contemplating increased regulation of car dealerships

Two proposals currently in committee would make it difficult for dealerships to repossess vehicles and sell recalled vehicles.

Financing buyers with bad credit can be a gamble for car dealerships. Many people with bad credit have a low score for a reason - the risk of default is high. That is why some dealerships in California use various means of repossession if a buyer is behind on payments. One method involves car immobilization, which has recently received scrutiny in the California legislature.

Under Assembly Bill 265, dealerships would have to wait a mandatory 10 days before repossessing a car with a starter interruption device. Two days before rendering the car inoperable, the dealership would have to provide an additional warning notice to the vehicle owner.

The Consumer Protection Committee passed the measure by an 11-0 vote. In May, the Appropriations Committee will review the measure. After receiving pushback from the industry, bill drafters cut the required waiting period from 20 days to 10. Still, some dealerships oppose the measure, believing that it sends a message to some borrowers that they can drive a car without making payments.

The bill is not yet law, but so far is on track for a vote on the Assembly floor. Whether or not this bill passes in its current form, dealerships must be wary to comply with the numerous and stringent consumer laws governing car dealerships.

Dealership regulations and consumer defense

California has numerous laws governing the sale of vehicles. On April 14, for example, AB 287 passed the Assembly Transportation Committee. This bill would make it difficult for dealerships to sell cars that have been recalled. Namely, the bill would require dealerships to fix recalled vehicles themselves before selling.

The California New Car Dealers Association has promoted an alternative bill under which dealerships could sell recalled vehicles if they notify buyers of the recall and where they can be fixed. Dealerships have argued that if the bill passes in its current form, dealers may be required to hold on to recalled vehicles for months while waiting to get the required parts.

These are just two examples of the numerous regulations that affect car dealerships in California.

At Burkhalter, Kessler, Clement & George, LLP, our attorneys understand consumer defense and compliance issues for auto dealerships in the state. Our attorneys can help dealerships with a variety of legal issues, from franchise agreements to employment law matters. Car dealerships concerned with compliance or who are facing a legal dispute should contact our firm to discuss their legal options and next steps.

Keywords: Consumer financing, recalls, car dealerships, California dealership laws, sale of vehicles, Assembly Bill 265, Assembly Bill 287.