BHPH Legislation Moves Forward in California

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SACRAMENTO and SAN JOSE, Calif. — Regulation to significantly
oversee buy-here, pay-here dealers in California took another step toward
coming to fruition this week as bills made their way through floor discussion
in both the state's Assembly and Senate.

For one BHPH dealer who spoke to SubPrime Auto Finance News
and has been in business for 30 years, the potential impact of what Assembly Bill
1447 and Senate Bill 956 could do to his store is enormous.

"They're pushing us to go out of business," said Steve Ezaz,
who runs California Automart in San Jose. "How are we going to sell cars with
all of this regulation? Business lately has been pretty normal, but if they put
all of these restrictions on us as far as interest or we cannot do this or
that, I just cannot be in business.

"It's almost like they're taking bread off our table," Ezaz
added.

Despite valiant opposition from the National Alliance of
Buy-Here, Pay-Here Dealers, the measures have been approved by the respective
segments of the California Legislature. The bills had to reach this point by
today, the deadline on the state's calendar for each measure to navigate out of
its originating legislative body and be sent to over to other respective side.

NABD founder Ken Shilson sent SubPrime Auto Finance News his
reaction after he heard about the California developments while attending this
week's Non-Prime Auto Financing Conference orchestrated by the National
Automotive Finance Association.

"Based upon estimates I have seen, California will lose over
$70 million in sales tax revenue if BHPH does not survive the adverse
regulatory environment," Shilson projected.

"In addition, transportation will be unavailable to
unbankable consumers who won't be able to get to and from jobs," he continued. "This
will increase unemployment and be detrimental to the local economy. The
economic impact of these initiatives should be carefully considered before
enacting these new regulations."

Legislators Reiterate and Defend Bills

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Bill sponsors cheered the decisions by the fellow
representatives earlier this week.

On Thursday, the California Senate approved the plan written
by Sen. Ted Lieu.

"Senate Bill 956 seeks to regulate an industry that is
currently unregulated under state law," Lieu said as the Senate sent his
measure to the Assembly on a 23-12 vote.

"These buy-here, pay-here used-car dealers take advantage of
our lack of laws to prey on desperate workers, low-income families and members
of the military by pushing unregulated loans to sell cars for far beyond market
value," Lieu proclaimed.

Specifically, Lieu's measure 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.

"As it now stands, used-car dealers offering these ‘buy
here, pay here' loans are exempt from many of the protections that apply to other
areas of finance," Lieu insisted. "Without these protections, consumers are
paying the price — often an exorbitant price."

No date has yet been set for the Assembly to review SB 965.

Meanwhile on Tuesday, California's other legislative chamber
voted to approve AB 1447, created by Assembly Member Mike Feuer.

"Without the protections included in AB 1447, mostly
low-income buy-here, pay-here customers can't be sure they are buying
dependable vehicles," Feuer said about the bill his fellow representatives
approved by a 49-25 margin. "That's why
my bill requires a minimum warranty and other critical safeguards that help
ensure buyers are paying for reliable transportation."

Some of the regulations AB 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.

That Assembly bill will next be heard in a Senate policy
committee.

Furthermore, AB 1534 received Assembly approval by a 42-32
margin.

This bill 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.