Thursday, Jul. 13, 2006, 08:00 PM UPDATED 11:59 AMBy Nick Zulovich
SACRAMENTO, Calif. (July 14, 2006) -- California DMV taskforces are currently visiting dealerships throughout the state to ensure they are in compliance with the Car Buyer's Bill of Rights, which went into effect July 1.
Mike Macaulay, an independent car dealer as well as a member of the Vehicle Industry Advisory Board for the California DMV, told AuSM Thursday that the DMV just recently formed the taskforces, which are knocking on dealers' doors and completing inspections. Whether these groups are warning dealers if they aren't in compliance or fining them, Macaulay said he wasn't sure.
"The postings telling consumers they have the option of purchasing a two-day return period have to be up in plain sight," Macaulay explained. "They are inspecting dealerships to make sure they're in compliance."
So far, Macaulay said he hasn't heard of any dealerships getting citations, and a taskforce has yet to visit his store, but he cautioned that dealers should be aware that such inspections could be coming their way.
The advisory board Macaulay serves on recently met with DMV officials to discuss enforcement of the Car Buyer's Bill of Rights.
"We laid the groundwork for administrative and regulatory changes," he said. "We're in a wait and see mode right now to see how the new law affects the industry. We aren't sure what problems might arise from the legislation."
When the legislation was passed, Bill Dorhing, a lobbyist for the California United Auto Dealers Association, said the bill could prove costly for independent dealers in the state, as they will be required to provide all new retail transaction contracts for their consumers that list the option of a two-day cooling-off period.
"Contracts are not cheap," Dorhing explained. "Dealers are going to have to get another form printed up, and don't forget about one for if the vehicle is returned. This is very complicated. Dealers are going to have to buy all new contracts, which will cost a lot of money. Consumers will end up paying more for cars to cover the extra costs."
According to the legislation, dealers may charge up to $250 to a customer who wishes to purchase the right to return his vehicle after two days. The provision only applies to vehicles worth less than $40,000. A consumer must return the vehicle to the dealership with all accompanying title contract and related documents in the same condition as they were when purchased.
Also, a dealer may now charge up to $500 in restocking fee ($350 for vehicles under $10,000), against which the buyer may credit the contract cancellation price, if any. During the cooling-off period the bill stipulates that the buyer assumes all legal liability for damage, liens, tickets, etc. The dealer only needs to offer the cooling-off period to a consumer once in a 30-day period (to prevent repeated purchase and returns).
"Even though the legislation will hold the consumer liable for anything that happens to the car during the cooling-off period, the dealers still don't know what is done to the vehicle during that period," Dorhing noted back when the bill was approved.
"The consumer could have changed out the parts or done any number of other things not easily noticeable by the dealer," he continued. "Dealers are going to have to add money onto the vehicle's cost to cover the possibilities of what can happen during the cooling-off period. Even if the consumer doesn't avail themselves of the cooling-off option, the dealer needs to still take time to explain it."
The Car Buyer's Bill of Rights also imposes limitations on dealer finance income. Such charges are now limited to 2.5 percent for contracts of 60 months or less than 2 percent for contracts more than 60 months.
"I still don't understand why the bill was introduced," Dorhing said. "There are more than 2 million title transfers a year, and only about 4,000 complaints. A local dealership was responsible for many of these complaints. The majority of dealers don't have a problem or have consumers wanting to return vehicles."