DMV Consumer Affairs Protect Califorians with Car Buyer s Bill of Rights

California Department of Motor Vehicles
DMV Media Relations
2415 First Avenue, Sacramento, CA 95818
Contact: Mike Marando, Steve Haskins, Armando Botello, Mike Miller
June 29, 2006




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Sacramento—As Californians kick the tires while shopping for cars this summer, the Department of Motor Vehicles (DMV) and the Department of Consumer Affairs (DCA) will be busy enforcing rules to protect them on and off the lot. Effective July 1, the "Car Buyer's Bill of Rights" brings with it some of the strongest consumer protections in the nation. Among its new provisions, a two-day return option for used cars, a cap on dealer compensation for finance fees and restrictions on used cars sold as "certified."

"The Car Buyer’s Bill of Rights carries powerful protections for California consumers and holds dealers to the highest of standards," said DMV Director George Valverde. "We're excited to share the news about these changes in the law to make sure that all buyers are treated fairly and that all dealers follow the rules."

The law affects retail sales handled by both new and used car dealers licensed by DMV throughout the state, but the requirements depend on the type of vehicle involved and do not apply to motorcycles or off-road vehicles.

For used cars:

  • Dealers must offer a two-day sales contract cancellation option on certain cars.
  • Vehicles labeled as “certified” must meet specific new requirements.

For new and used cars:

  • Dealers must provide written disclosure with an itemized price list of options.
  • Dealer compensation for finance fees will be capped depending on the loan term.
  • Dealers must disclose all credit scores obtained from recognized credit reporting agencies.

"We are thrilled to be working with DMV to inform consumers about their rights and responsibilities under this new law," said Charlene Zettel, Director of the California Department of Consumer Affairs. "We will assist by fielding the questions about the Car Buyer's Bill of Rights that come into our Consumer Information Center, and we will help get the word out through our existing outreach efforts."

While there is no "cooling-off" period in the sale or lease of new vehicles, used car dealers will have to offer consumers a stand-alone, two-day contract cancellation option either at no cost or for a prescribed fee, for any vehicle purchased at less than $40,000. This option gives the buyer the right to cancel the contract and get a full refund, minus the purchase price of the cancellation option and/or a vehicle-restocking fee, if any.

The cost of the contract cancellation option will be deducted from any vehicle restocking fee if the vehicle is returned in the same condition as it was received, by the close of business on the second day after delivery, with all original receipts and contracts and free from any additional debt. The contract cancellation option does not apply to sales of recreational vehicles, motorcycles, off-road vehicles or vehicles purchased for commercial use.

The second part of the law prohibits dealers from advertising a vehicle as "certified" if the vehicle

  • odometer does not indicate the actual mileage.
  • was repurchased under state or federal warranty law.
  • was branded as a Lemon Law buyback, salvage, junk, non-repairable, flood or similar title designation required by any state.
  • sustained damage in an impact, fire or flood that substantially impairs its use or safety.
  • has frame damage or was sold "as is."

The dealer must also provide the buyer with a complete report of all components inspected.

"The vast majority of car dealers and sales brokers are law-abiding, honest business people," said Director Valverde. "But a very small minority have devised ways to skirt the law and cheat unsuspecting buyers. We think these new restrictions will change that." In order to prevent so-called "payment packing," dealers will also be required to provide buyers with a new written disclosure document to sign that describes and itemizes the price of each item purchased, including service contracts, maintenance or warranty plans, insurance products, theft deterrents or protections, debt cancellation agreements, and exterior or interior surface protection. The document must advise buyers about the cost of monthly installment payments with and without each item, and charges cannot be added to the contract without a buyer's consent.

Compensation that dealers receive for finance fees will also be capped at 2.5 percent for contracts under 60 months and 2 percent for longer terms, unless the dealer bears the entire risk of financial performance for the buyer. And finally, dealers must disclose all credit scores obtained from recognized credit reporting agencies that are used to process a sale.

"While these new laws tighten the rules for car dealers, buyers also need to be better informed about their rights and responsibilities," said DMV Deputy Director of Investigations, Michael Champion. "If people do their homework and still feel they haven’t been treated properly, we want to hear about it. Dealers or salespersons caught breaking the law could face fines, probation, suspension or revocation of their licenses or even criminal prosecution." Record of Complaint Forms (INV 172A) can be found on the DMV Web site at http://apps.dmv.ca.gov/forms/inv/inv172a.pdf. To check the status of a dealer’s license, go to https://dmv.dmv.ca.gov/olinq2/welcome.do.

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