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The San Francisco Chronicle
Aug 11, 2004 - 01:00 AM

by John M. Hubbell, Chronicle Sacramento Bureau

DMV comes out against rules for auto dealers;

Critics see link to governor's campaign cash
SACRAMENTO -- When the auto sales industry lined up to oppose Assemblywoman Cindy Montaez's bill to give far-reaching protections for California car buyers, the Southern California lawmaker was hardly shocked: There's plenty in the legislation for dealers to hate.

Among other things, her bill -- which may come before a key Senate committee Thursday -- would allow an unprecedented three-day cooling-off period on the sale of all used autos, bring greater transparency to dealer financing arrangements and provide a legal definition for a "certified" used car.

So when Montaez recently received a letter stating that her legislation "imposes undue influence over the marketplace" and represents "an unfair limitation only on car dealers," she was surprised only to see who sent it: the California Department of Motor Vehicles.

"This is quite shocking, and contrary to the principles of what the DMV is," Montaez, D-San Fernando (Los Angeles County), said recently. "They should be defending the rights of consumers, not the profits of car dealers."

Government watchdogs say they see a clear link between the more than $1 million they calculate Gov. Arnold Schwarzenegger has received in campaign donations from the auto industry and the DMV's opposition to the bill. Despite talk of vanquishing special interests, they say, it shows how money and lobbyists continue to resonate loudly with the governor's office.

"This is the way campaign contributions influence politics," said Doug Heller, president of the Foundation for Taxpayer and Consumer Rights. "You've got your agency coming in, opposing a bill for, at best, kind of weak reasons -- after you've received almost a million bucks from the folks who care so much."

Administration officials dismiss the accusation as, at the least, premature. Schwarzenegger has taken no official position on the bill, spokesman Vince Sollitto said Tuesday.

"It seems pretty clear that Californians know the governor can't be bought and that he does what he thinks is best for California," Sollitto said.

Sweeping in scope

By far, Montaez's bill, AB1839, is the most expansive consumer protection legislation to come before the Assembly since Schwarzenegger replaced Gray Davis as governor.

The cooling-off provision -- which would allow consumers to return a vehicle to a dealer within three days, with a variable restocking fee -- would give buyers a hedge not found elsewhere in the nation. Car dealerships say it could turn them into virtual rental agencies, subject to joyriders and other cheats.

"Who owns the car for the three days? What if they maim somebody? What about trade-ins?" asked Peter Welch, president of the California Motor Car Dealers Association, which represents more than 1,400 dealerships.

With some retailers already offering a three-day return policy, "we think the marketplace is out there for those who want to have that kind of a right," Welch said.

The bill would allow a used car to be called "certified" only if inspected by a qualified technician, whose report would be furnished to a buyer before a sale closed.

Further, it mandates that buyers who finance through a dealer be made aware of the lowest rate for which they qualify, and that so-called financing markups -- which reflect a lender's added-on costs -- be explained and capped at 2 percent on a standard five-year loan. Louisiana recently enacted a first-in-the-nation 3 percent cap.

The state Department of Consumer Affairs and the American Automobile Association's state branch have not taken positions on the bill.

Because the DMV is charged with licensing the state's car dealers, consumer accusations of dishonesty in a sale could prompt more agency investigations -- a worry articulated in the July 28 letter to Montaez by Bill Cather, the DMV's assistant director for legislation. An analysis by the Senate Appropriations Committee -- which the bill must clear Thursday to come before both legislative chambers -- put its potential cost to the DMV at $100,000.

Similar concerns

Cather's letter also echoed objections to the bill by car dealer groups on matters such as financing, saying the legislation "does not recognize the realities of the marketplace" and would "have a significant fiscal impact on vehicle dealers."

Cather could not be reached for comment. A colleague, assistant legislative officer Tom Weibel, said the DMV is more concerned that its oversight role may be expanded as a result of the bill and that financing reform "really isn't our issue in this."

The DMV has "a limited number of investigators, and we'd like to devote them to serious malfeasance," Weibel said. "This would be stretching that limited number even further."

The administration's opposition to Montaez's bill extends a largely cordial relationship with auto dealers that began with Schwarzenegger's recall campaign promise to roll back the much-maligned tripling of the vehicle license fee -- something Schwarzenegger made good on during his first day in office.

But car dealers' support of Schwarzenegger is based more broadly on the governor's pro-business stance and efforts to stimulate California's economy, said Welch, the auto association leader. Their campaign donations to Schwarzenegger "had to do more with the overall economic climate.""It doesn't come as a great surprise to me that the administration thinks government price controls on interest rates is a bad idea," he said.

'Not their job'

Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a consumer-advocacy group backing Montaez's bill, said "there's no question there's a different philosophy" guiding Schwarzenegger administration decisions on industry. But she said she was alarmed to find it being articulated by a regulatory agency.

"I have never seen a letter like this from the DMV before," she said. "That's not their job -- to be worried about car dealers."

The governor, she said, is "sending a message: Don't send that bill to my desk."
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E-mail the writer at jhubbell@sfchronicle.com




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