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Consumer Report : Smooth Ride Ahead for Car Renters

February 05, 1989

Help has arrived for car renters.

As of Jan. 1, a $9-a-day limit on collision damage waiver charges was implemented in California. The new law also covers comparable programs by car rental companies that are now called loss damage waivers and physical damage waivers, since they include theft and vandalism as well as collision. Collision damage waiver charges can run as high as $13 a day in some markets.

Under a full-disclosure provision, car-rental companies are also required to inform consumers in ads that their personal insurance may already cover damage to rental cars. Comparable information has to be provided at rental counters.

The law also forbids car rental firms from engaging in "unfair, deceptive or coercive conduct" such as not honoring a reservation to induce a renter to purchase a collision damage waiver. If you choose not to accept the option of collision damage waiver, car-rental companies can no longer require you to leave a deposit or block a certain amount against your credit card.

"In some cases," said Herschel Elkins, deputy state attorney general, "the consumer didn't know that a certain amount, which might be more than just the cost of the car rental itself, was being blocked."

Elkins added that complaints in this area have come from consumers, some of whom have discovered that a hold on their credit-card limit precluded them from doing other things on their vacations and business trips.

"Undisclosed blockage was one aspect that we were very concerned about preventing," Elkins said. "Some companies were blocking as much as double or triple the expected charge, or just guessing at what amount to block over and beyond the amount of the known car-rental cost. Meanwhile, the consumer might not know about it until trying to use his or her card."

Potential Problems

An additional problem might also arise in the unblocking of amounts against credit-card limits, Elkins said. "This process can take two or three weeks, thus the consumer may be inconvenienced."

The law also requires that prices in ads placed by car-rental companies must include all mandatory charges such as gasoline refills and airport access fees. Moreover, optional charges must also be clearly listed in ads, which means an end to hidden charges that have infuriated many renters. Taxes and mileage charges are excluded from the costs that have to be part of the overall price.

In addition, the law bans fraudulent repair practices. Car-rental companies are required to bill renters at the same rate they pay for car repairs. In effect, the car-rental companies have to pass along to the consumer any discounts they may receive from repair shops. In other states, the car-rental contract may obligate the renter to pay retail repair costs.

Driver liability for car theft or damages are also limited. For example, renters are no longer liable for theft if they retain possession of the car key or can establish they hadn't left the key in the ignition when the theft took place.

"The latter proviso is hard to prove," Elkins said. "The best advice is to immediately inform the rental-car company that your rental car has been stolen, and let the police and others, such as your hotel or a restaurant, also know."

If the car is vandalized, but not stolen, the maximum you can be hit with if you don't have a collision damage waiver is $5,000. "Previously, you could have been held responsible for the entire value of the damage," Elkins said.

If the company claims the car is damaged, it can't unilaterally charge your credit card. "Previously, someone could find out a month later when they get their credit card statement that a certain amount had been charged on this basis," Elkins said.

Extra charges for certain additional drivers has also been eliminated. A spouse, for example, can now drive a rental car for as long as he/she meets the regular car-rental requirements (age, driver's license, etc). If the car is being rented for business purposes, others on the same business trip, such as co-workers and employers, can also drive the car.

"Formerly, if the car was driven by a non-authorized driver, you could lose all protection," Elkins said. "Car companies sell this extra driver protection on a per-day fee or a one-time fee per rental."

A Watered-Down Bill

The tough legislation still represents a watering down of the original bill, which called for dropping collision damage waiver charges altogether beginning in 1990. However, the issue of abolishing those charges in California may be tackled by the Legislature.

Hertz is considered the car-rental company most firmly behind the new legislation. Other car-rental companies have criticized the law as limiting their ability to advertise national rates, and for not allowing an increase over a $9 cap to reflect economic changes such as inflation.

The trend to enact legislation concerning car-rental company practices covers other states as well.

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