SACRAMENTO, Calif. — California buy-here, pay-here dealers will have more compliance procedures to maintain when Jan. 1 arrives, since two of the three bills aimed at changing how the industry operates were signed by Gov. Jerry Brown.

But the measure Brown vetoed — a policy that would have created a hard interest-rate cap — is leaving the head of the Independent Automobile Dealers Association of California breathing a little easier. Brown did not sign Senate Bill 956, a measure that would have put a ceiling on today's interest rates at 17.25 percent.

"It's more than a small victory; it's huge," IADAC executive director Larry Laskowski told SubPrime Auto Finance News just a couple of hours after Brown made his decisions on Saturday.

"That was absolutely the worse one by far," Laskowski emphasized. "That would have absolutely put a lot of dealers out of business. We're pleased we've been able to help preserve some of the jobs and businesses in California, along with what it would have done to the industry."

To recap, SB 956 written by Sen. Ted Lieu had 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, which lawmakers believed would have provided consumers with an array of protections.

—Limit used-vehicle installment loans to no more than 17-percent interest, plus the variable Federal funds interest rate, which today is 0.25 percent. That level would have given 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.

In vetoing the bill, Brown said, "This bill requires, among other things, that buy-here, pay-here dealers be regulated by the Department of Corporations under the California Finance Lender's Law.

"I am not yet convinced the evidence merits the regulatory oversight of this bill," Brown continued. "I signed two buy-here, pay-here consumer protection bills this session. If consumers need added protection once those bills are implemented, my administration will work with the legislature to find appropriate, measured solutions."

As the governor pointed out in his veto letter of SB 956, he did put his signature on two bills that originated from the Assembly.

The main points of AB 1447 written by Assemblyman Mike Feuer include:

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

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

—Requires BHPH dealers to receive written consent from the buyer prior to selling a vehicle equipped with electronic tracking technology.

—Requires BHPH dealers to provide notice to the buyer of the presence of "starter interrupt" technology in the vehicle, ensuring that advance warnings are provided to the driver — prior to the vehicle being disabled — in order to help avoid stranding a driver in dangerous circumstances.

Meanwhile, AB 1534 written by Assemblyman Bob Wieckowski requires a BHPH dealer to display a label on any used vehicle offered for retail sale that states the "reasonable market value" of the unit from outlets such as Kelley Blue Book or NADA Used Car Guide. 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.

"Quite frankly, the bill by Wieckowski is relatively harmless in comparison to the other bills," Laskowski surmised. "That one I don't think is going to upset the industry's apple cart too much.

Laskowski continued by stating, "1447 still has a ways to go in order at least from my perspective to figure out how a dealer complies with it without breaking any existing laws. We did mention that to the governor's office when we spoke last week."

FinCo Management, a provider of financing solutions for buy-here, pay-here dealers, reviewed each element of AB 1447 again this past weekend. In a message to SubPrime Auto Finance News, FinCo president Toby Reiley shared what part of the new law might be most difficult for BHPH to navigate.

In regard to the warranty, Reiley stressed that many states already have this provision.

"And some are much more restrictive than these two regulations as approved, but I don't know of any that go into such an exhaustive list of covered components," he continued. "The law expressly states that the burden of proof for compliance in on the dealer.

"While it will curtail bad practices by the bottom 25 percent of the dealers (as measure by selling a quality vehicle) it will cost all dealers something out of their pockets as they will have to fix cars or add warranties. But people whose cars don't run, don't pay," Reiley went on to say. "We know that long term warranties are good for the dealer bottom line. The unscrupulous will be prevented from preying on the customer with a down payment but no means to fix a car in the first month. So I think this is for the good of the dealer as well as the consumer."

The bill's provision about payments is what caught Reiley's attention.

"The law is vague about how these ‘in-advance' or ‘not-in-person' payments are made," Reiley contends. "This may be the biggest challenge of all. It is a huge operation to collect and store the information and authorizations required to process electronic payments such as credit cards, debit cards, direct deposit and ACH transactions. Many of these people don't have checking accounts, and the cost of money orders is high."

Laskowski insisted that IADAC's staff will continue to be working with regulators in Sacramento so instructions are clear about how dealers can be compliant with these new laws that go into effect when 2013 begins.

While Laskowski might have preferred that all three bills would have been vetoed, he applauded the work completed by IADAC, as well as other organizations such as the National Alliance of Buy-Here Pay-Here Dealers and the National Independent Automobile Dealers Association, which also vehemently opposed the measures.

"It was clearly a team effort to try to educate everybody involved as to what the industry is really all about and how far over the top these bills really take it," Laskowski said. "I think the fact that we were able to get a veto on SB 956 was a huge victory. We're just pleased the governor saw that way also.

"The one thing that's become very clear out of  all of this is there really isn't a landscape within the industry that allows you to just go day-to-day and not pay attention to what's going on," Laskowski went on to say. "I think the lesson out of all of this is if you're a business person in California, you really need to be aware of what's going on and have someone with you to help voice your opposition to harmful legislation such as this."