Close Call For California Motor Vehicle Dealers

A bill was introduced earlier this year in February that, had it passed, would have made it more difficult for California auto dealers to get bonded or remain bonded.

Assembly Bill 1939 was originally written to increase the cap on the document processing charge for leased vehicles by $20 to $65 and for purchased vehicles by $10 to $65. Opponents to this bill expressed concerns on behalf of the consumers, who have faced many rising costs lately in other areas, and that this increase would be unjustified. Opponents also expressed that an increase in fees, if necessary, should be in some way linked to furthering consumer protection.

In response to opposition, the author of AB 1939 amended the bill in June. First changing the increase for the document processing charge for leased vehicles by $10 to $55 and dropping the increase for purchased vehicles.

The amendment also included a change in the surety bond requirement for dealers and remanufacturers. Currently, dealers and remanufacturers must file a $50,000 bond with their license. If the bill were to pass, the surety bond requirement would be increased to $100,000. The Surety Bond of Motorcycle Dealer, Motorcycle Lessor-Retailer, All-Terrain Vehicle Dealer, or Wholesale-Only Dealer (Less than 25 Vehicles per Year) would remain at $10,000.

These amendments failed to appease the original opponents of the bill and brought on additional opponents because of the increase in the surety bond requirement. Among these opponents, The Surety & Fidelity Association of America (SFAA) raised concerns that the increased bond amount would make it even more difficult for dealers to obtain or maintain their bonding requirements. Others expressed concerns that the increased bond amount would serve as another barrier to dealers just getting started, especially used car dealers.

Fortunately, thanks to the efforts of the SFAA, AIA, and other local surety associations, the bill died in Senate after the hearing was cancelled by the author of the bill.

This topic reinforces the importance of keeping yourself informed of the latest activities of your state legislation. There may be other bills introduced in the future that could be unfavorable to your industry. It is essential that they hear your opinions, so that decisions can be made in the best interests of everyone involved.

Helpful Links

Here you search for information about a bill using keywords or the bill number at:

Submit comments to the Assembly on pending legislation

They also offer an index that list bills introduced in both the Assembly and the Senate.

Eric is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry, he is also a contributing author to the surety bond blog. He has held a range of different roles within the surety industry, from agent assistant to bond issuer, which gives him a unique insider perspective on surety related topics.

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