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SACRAMENTO, Calif. — The Independent Automobile Dealers
Association of California, as well as the rest of the buy-here, pay-here store
community in the Golden State, are likely to be quite interested in what happens
at the state capitol for the rest of the month.

As lawmakers return from their summer recess today, they now
have 25 days to give final approval of bills that could greatly regulate how BHPH
dealerships operate.

"There's never been anything like this. Dealers are very
concerned," IADAC executive director Larry Laskowski emphasized during a recent
phone interview.

As published previously by SubPrime Auto Finance News, three
measures are aimed at significantly changing how BHPH stores can sell vehicles
in California.

Senate Bill 956 has three main goals:

—Impose first-ever regulations on dealers offering buy-here,
pay-here installment loans by requiring them to obtain a California Finance
Lender's license.

—Limit used-vehicle installment loans to an interest rate of
no more than 17.25 percent, which would give California the strongest cap in
the nation.

—Change the way BHPH dealers are able to repossess vehicles
to include grace periods and make it easier for buyers to reinstate a repossessed
unit.

Some of the regulations Assembly Bill 1447 would create
include:

—Require BHPH dealers to provide a limited warranty that
covers most major components and lasts for at least 30 days or 1,000 miles.

—Prohibit BHPH dealers from requiring a buyer to make regular
payments in person.

—Require BHPH dealers receive written consent from the buyer
prior to selling a vehicle with an electronic tracking device.

—Require BHPH dealers to provide notice to the buyer of the
presence of ignition shutdown technology in the vehicle and that such
technology be set to provide advance warnings to the driver to help avoid
stranding drivers.

Furthermore, Assembly Bill 1534 received would require a
BHPH dealer to display a label on any used vehicle offered for retail sale that
states the "reasonable market value" of the unit. The bill would require the
label to contain specified information used to determine the vehicle's
reasonable market value and the date the value was determined.

Moreover, AB 1534 would require a BHPH dealer to provide to
a prospective   buyer of the used vehicle
a copy of any information obtained from a nationally recognized pricing guide
the dealer utilized to determine the reasonable market value of the vehicle.

As SB 956 works its way to a second reading before the Assembly
Judiciary Committee, the two Assembly measures are set to be reviewed by the
Senate Appropriations Committee. The bills must be approved and sent to Gov.
Jerry Brown by Aug. 31.

Laskowski is concerned that California lawmakers still do
not have firm classification of what a BHPH dealer is.

"There's not a definition for a buy-here, pay-here dealer because
it's a business model," said Laskowski, a dealer for more than 25 years before
giving up his independent store to focus on IADAC matters full time.

"It's not a check box on your DMV application when you're getting
your dealer license that you want to be a buy-here, pay-here dealer. It's
simply a business model," he continued. "According to the definition they have
now, our study says it probably involves 50 percent of the retail dealers just
because it's so broad reaching. Right now they've got a big problem with the
definition and we don't have a resolution as of yet."

The IADAC official also is wary about lawmakers' belief that
a significant amount of "churn" goes on in the BHPH space' a practice Laskowski
said was promoted in a series of published reports by the Los Angeles Times.

"That's a term as I understand it with the intent of just
trying to repossess the car and resell it," Laskowski explained. "That is
something that is so far from the truth. By and large, if we're talking about
problems this is probably a miniscule problem because those who do bad business
aren't going to stay in business for very long. That's really the way it goes.
If you continue to do that, you're going to get a reputation for not being a
place to go. There's enough competition out there."

Should all three bills become California law, Laskowski
fears that competition will dwindle because the measures will significantly
hurt dealers such as Gus Camacho. Laskowski recapped that Camacho, who operates
several independent stores in southern California, testified during several
committee hearings as one of IADAC's most respected members.

"They try to get people bought at a bank and when there are
no banks to accept the loan they'll go ahead and carry it in house," Laskowski
said about Camacho's store model. "He said their rate is around 24 percent for
the BHPH stuff, and he was quite frank in the committee hearing that he buys his
money at 12.5 percent. The 17-percent rate cap would not allow enough of a
margin to be profitable. He would have to close that portion of his business."

Laskowski indicated that Camacho told lawmakers he would
have to terminate about half of his workforce of about 80 employees if the
bills became law.

"It didn't seem to be too important," Laskowski surmised. "The
fact that Camacho is recognized as a good guy in the industry and would not
able to continue, that means you're going to lose a lot of good dealers. You're
not going to have much left for those credit-challenged consumers to choose
from."