Dealers say compliance with the proposed legislation could prove too costly… ( Christina House / For the…)
SACRAMENTO — Two bills aimed at regulating Buy Here Pay Here used-car dealers have cleared key hurdles in the statehouse, bringing them closer to final passage.
Legislation by state Sen. Ted Lieu (D-Torrance) passed the Assembly Appropriations committee Thursday, just minutes after the committee's Senate counterpart passed a bill by Assemblyman Bob Wieckowski (D-Fremont).
The bills would impose numerous regulations on the dealers, which sell — and often resell — high-mileage used cars to buyers who have shaky credit but need vehicles to drive to work.
Such dealers offer their own financing rather than using outside lenders, making them different from conventional dealerships.
Supporters of the bills have alleged that such direct financing opens the door to consumer abuses.
Buy Here Pay Here lots charge interest rates that can top 30% and demand large down payments on high-mileage cars. And, as documented in a Los Angeles Times article this week, many dealers make a habit of repossessing and reselling the same cars multiple times.
Dealers opposing the bill contend that compliance with the proposed California legislation, which includes a third bill by Assemblyman Mike Feuer (D-Los Angeles), could prove too costly and put hundreds of dealers out of business.
That, they said, could cost the state hundreds of millions of dollars in lost sales taxes.
Larry Grooms, spokesman for a coalition of Buy Here Pay Here dealers, said last week that the bills would "rewrite the entire business model" of the industry and questioned whether legislators had considered the fiscal or economic impact.
Lieu's bill, SB 956, would require Buy Here Pay Here dealers to register as lenders with the state and would cap the interest rate dealers can charge at 17% plus the federal funds rate, now 0.25%.
It also would require dealers to disclose any GPS tracking devices they install on vehicles.
An amendment added to the bill this week would obligate dealers to wait 15 days after a payment due date before they can repossess the vehicle from delinquent borrowers. Earlier versions of the bill stipulated 10 days.
The bill written by Wieckowski, AB 1534, would require dealers to post fair-market valuations on every car. The mandate is a response to the high mark-ups that some Buy Here Pay Here dealers put on cars that often are more than a decade old.
The bills have steadily moved forward in Sacramento since their introduction early this year.
Lieu's bill passed committee on a 12-5 vote, and Wieckowski's passed 5-2. The Feuer bill passed committee last week.
Final floor votes on each could come as soon as this week; all three must be voted on by the end of the month.