Buy Here Pay Here dealers such as Finance Auto Sales in Hawthorne issue their… (Gary Friedman, Los Angeles…)
Legislation aiming to regulate the Buy Here Pay Here used car industry has survived key committee votes in Sacramento, bringing it significantly closer to final passage.
Bills by Assemblymen Bob Wieckowski (D-Fremont) and Mike Feuer (D-Los Angeles) won passage in a marathon state Senate Judiciary Committee session, just days before summer recess.
Buy Here Pay Here dealers provide their own financing on sales of used cars and typically sell to people with credit problems.
The dealers say they are serving people who otherwise couldn't buy needed transportation. Critics of the industry contend that many Buy Here Pay Here dealers target working-class families and purposely put them into unaffordable loans, taking advantage of their limited negotiating power and the fact that they cannot get a conventional bank loan to purchase a car.
The bill written by Wieckowski, AB 1534, would require that Buy Here Pay Here dealers post fair-market valuations on every car they sell. Feuer's bill, AB 1447, requires dealers to provide 30-day limited warranties on the cars they sell and would prohibit use of GPS tracking devices without consent from customers.
Meanwhile, a bill by Sen. Ted Lieu (D-Torrance) sailed through the Assembly Judiciary Committee, which happens to be chaired by Feuer. It will be heard in the Appropriations Committee next month. Like the Feuer and Wieckowski bills, Lieu's bill, SB 956, has already passed floor votes in its originating chamber.
Lieu's bill would require Buy Here Pay Here dealers to register as finance lenders with the California Department of Corporations and would cap interest on their loans at 17% plus the federal funds rate (currently at 0.25%). In addition, it would place restrictions on how and when dealers could repossess vehicles.
As documented in a series of stories in the Los Angeles Times late last year, some dealers sell, repossess and resell the same cars over and over to boost profits.
"This is simply not a matter of let the buyer beware," Wieckowski said in a statement. "Predatory pricing, harsh default terms and swift repossession practices should not be tolerated in the marketplace."
All three bills have faced increasing opposition from industry groups, which claim that the proposed regulations would increase costs so much that many dealers would be forced to close. That, in turn, they argue, would make it harder for people with damaged credit and low income to acquire vehicles to get to work.
In May, a group called the Coalition to Protect Our Freedom to Drive was started by a group of dealers in and around Lancaster. It has said that California stands to lose up to $337 million a year in sales tax revenue if the Buy Here Pay Here bills pass.
"The act of buying a car is an exercise in the freedom to choose and to take personal responsibility and ownership for decisions," the group said in a statement Tuesday. "But it seems a majority of California lawmakers are on the verge of interfering in that relationship, to the detriment of both buyer and seller."