What is the New Law in California for Consignment Sales of Recreational Vehicles Subject to a Loan?
Full Question:
Answer:
Effective January 1, 2010, the California Car Buyers’ Protection Act of 2009 becomes law.
This law increases dealer, lessor-retailer, and auto broker license fees and requires a vehicle dealer to pay off the outstanding loan or lease balance on any vehicle accepted in trade within 21 calendar days.
The law further prohibits a dealer from selling, consigning for sale, or transferring a vehicle accepted in trade before the outstanding loan or lease balance has been paid.
Dealers are required to pay the outstanding loan or lease balance, or other specified amount agreed upon when the vehicle acquired through purchase or in trade has a prior loan or lease balance. The dealer must pay the legal owner or lessor shown on the ownership certificate the balance or specified amount within 21 calendar days of purchasing or obtaining the vehicle in trade.
The dealer is not in violation of this section if notice of rescission of the contract is given reasonably and in good faith promptly, but no later than 21 days after the date the vehicle was purchased or obtained in trade, and the contract is thereafter rescinded on any of the grounds in Civil Code §1689.
The following are CA statutes:
11709.4. (a) When a dealer purchases or obtains a vehicle in trade
in a retail sale or lease transaction and the vehicle is subject to a
prior credit or lease balance, all of the following apply:
(1) If the dealer agreed to pay a specified amount on the prior
credit or lease balance owing on the vehicle purchased or obtained in
trade, and the agreement to pay the specified amount is contained in
a written agreement documenting the transaction, the dealer shall
tender the agreed upon amount as provided in the written agreement to
the lessor registered in accordance with Section 4453.5, or to the
legal owner reflected on the ownership certificate, or to the
designee of that lessor or legal owner of the vehicle purchased or
obtained in trade within 21 calendar days of purchasing or obtaining
the vehicle in trade.
(2) If the dealer did not set forth an agreement regarding payment
of a prior credit or lease balance owed on the vehicle purchased or
obtained in trade, in a written agreement documenting the
transaction, the dealer shall tender to the lessor registered in
accordance with Section 4453.5, or to the legal owner reflected on
the ownership certificate, or to the designee of that lessor or legal
owner of the vehicle purchased or obtained in trade, an amount
necessary to discharge the prior credit or lease balance owing on the
vehicle purchased or obtained in trade within 21 calendar days of
purchasing or obtaining the vehicle in trade.
(3) The time period specified in paragraphs (1) or (2) may be
shortened if the dealer and consumer agree, in writing, to a shorter
time period.
(4) A dealer shall not sell, consign for sale, or transfer any
ownership interest in the vehicle purchased or obtained in trade
until an amount necessary to discharge the prior credit or lease
balance owing on the vehicle has been tendered to the lessor
registered in accordance with Section 4453.5, or to the legal owner
reflected on the ownership certificate, or to the designee of that
lessor or legal owner of the vehicle purchased or obtained in trade.
(b) A dealer does not violate this section if the dealer
reasonably and in good faith gives notice of rescission of the
contract promptly, but no later than 21 days after the date on which
the vehicle was purchased or obtained in trade, and the contract is
thereafter rescinded on any of the grounds in Section 1689 of the
Civil Code.
11729. (a) Except as provided in subdivision (b), any dealer
engaging in a consignment with an owner not licensed as a dealer,
manufacturer, manufacturer branch, distributor, or a distributor
branch licensed under this code, and the consignment is not otherwise
prohibited by this code, shall execute a consignment agreement as
prescribed by Section 11730. The failure of a dealer, when required
under this section, to complete and comply with the terms of the
prescribed consignment agreement for any vehicle which the dealer
agrees to accept on consignment, or to pay the agreed amount to the
consignor or his or her designee within 20 days after the date of
sale of the vehicle, is cause for suspending or revoking the license
of the dealer under paragraph (10) of subdivision (a) of Section
11705.
(b) (1) A dealer conducting retail auction sales on behalf of a
fleet owner shall execute a consignment agreement applicable to all
vehicles consigned for sale during the term of the agreement which
contains, at a minimum, substantially all of the terms, phrases,
conditions, and disclosures required by Section 11730, except the
following are not required:
(A) The description of a specific vehicle by year, make,
identification number, license, state, or mileage.
(B) The information contained in paragraph (4) of subdivision (b)
of Section 11730.
(2) If mutually agreeable, in lieu of the requirements of
paragraph (7) of subdivision (b) of Section 11730, the consignor may
provide the documents necessary to transfer the ownership of the
vehicle to the consignee prior to the auction being held.
(3) For purposes of this subdivision, "fleet owner" is either of
the following:
(A) A person who is the registered or legal owner of 25 or more
vehicles registered in this state and is the owner, as recorded in
the department's records, of the vehicles consigned for sale to the
dealer.
(B) A bankruptcy trustee who owns or has legal control of the
vehicles consigned for sale to the dealer, government agency, or
financial institution.
11730. The consignment agreement required by Section 11729 shall
contain all the following terms, phrases, conditions, and
disclosures:
(a) The date the agreement is executed.
(b) All of the following statements:
(1) "I (We), the undersigned consigner(s), hereby consign and
deliver possession of my(our) vehicle, which is a (Year) ____ (Make)
____ (ID#) ____ (License) ____ (State) ____ (Mileage) ____, to
(Consignee) _____ (Dealer #) ____ for the sole purpose of selling the
vehicle and paying, to the consignor or his or her designee from the
proceeds of the sale of the vehicle, the amount agreed upon under
terms of this agreement. This agreement is effective and valid only
for a period of ____ days from this date."
(2) "At the termination of this agreement, the consignee shall
return the vehicle to the consignor, or, at the option of both the
consignor and consignee, enter into a new agreement."
(3) "If the vehicle is sold by the consignee during the term of
this agreement, the money due the consignor shall be disbursed within
20 days after the date of sale in accordance with the terms of this
agreement. As used in this agreement, a "sale" occurs when the
consignee either (A) receives the purchase price or its equivalent or
executes a conditional sales contract for the vehicle, or (B) when
the purchaser takes delivery of the vehicle, whichever occurs first."
(4) "The following information shall be completed prior to the
signing of this agreement:
Current market value: $____ Source: ____.
Outstanding liens: $____ Lienholder: ____.
(Any difference between the outstanding amount shown and the
actual payoff to the lienholder will be credited to the consignor.)
Repairs to be made: $____ Work Order #____.
Moneys to the consignor: ____ percent of sale price, flat fee of
$____ or the following specific formula: ____."
(5) "Within 20 days after sale, the consignee shall make an
accounting to the consignor of all of the following: date of sale,
repairs authorized by consignor (supported by work records), exact
amount of any liens payable to lienholders, evidence of payment of
any liens, and the total sales price."
(6) "The consigned vehicle is delivered to the consignee in trust
for the exact terms set forth in this agreement. The consignee agrees
to receive this vehicle in trust and not to permit its use for any
other purpose other than contained in this agreement without the
express written consent of the consignor."
(7) "Upon payment of the moneys due the consignor, the consignor
agrees to furnish the consignee those documents necessary to transfer
the ownership of the vehicle to the purchaser.
Signatures:
-------------------+----------------+--------------
Consignor | | Date
-------------------+----------------+--------------
| Address |
-------------------+----------------+--------------
Consignee | | Date
-------------------+----------------+--------------
| Address | "
-------------------+----------------+--------------
(8) "NOTICE TO CONSIGNOR: Failure of the consignee to comply with
the terms of this agreement may be a violation of statute which could
result in criminal or administrative sanctions, or both. If you feel
the consignee has not complied with the terms of this agreement,
please contact an investigator of the Department of Motor Vehicles."
See also:
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=90059719369+0+0+0&WAISaction=retrieve