Bill would limit ag­gres­sive re­pos

AB 265 would make Buy Here Pay Here deal­ers wait 10 days to im­mo­bi­lize a car af­ter a missed pay­ment.

Los Angeles Times - - MONDAY BUSINESS - By Marc Lif­sher marc.lif­sher@la­times.com

— Cal­i­for­nia law­mak­ers again are tak­ing ac­tion to curb abuses in fi­nanc­ing used car sales with Buy Here Pay Here loans.

Such con­tracts are di­rectly funded by auto deal­ers that tar­get low-in­come cus­tomers with poor credit. The loans, with in­ter­est rates of 30% or more, con­trib­ute to de­faults for about 1 in 4 pur­chasers. The cars are quickly re­pos­sessed — some­times with re­mote sig­nals that stop their en­gines — and then resold.

The prac­tice in re­cent years was spot­lighted by a se­ries of L.A. Times sto­ries that spurred the Leg­is­la­ture and Gov. Jerry Brown to ap­prove two bills reg­u­lat­ing in­dus­try prac­tices.

The Times re­ported in Oc­to­ber 2011 that Buy Here Pay Here out­lets an­nu­ally make about $80 bil­lion in loans, sell­ing 2.4 mil­lion cars na­tion­ally through 33,000 deal­er­ships.

One new con­sumer pro­tec­tion law re­quired deal­ers to give buy­ers a 30-day, 1,000mile war­ranty. A sec­ond called for post­ing a fair-mar­ket val­u­a­tion on all cars sold. The gover­nor ve­toed a third bill reg­u­lat­ing con­tract terms.

Now, As­sem­bly­man Chris Holden (D-Pasadena) wants to limit im­mo­bi­liz­ing cars on short no­tice when a bor­rower misses a pay­ment.

Holden’s bill, AB 265, would man­date a 10-day grace pe­riod be­fore deal­ers can re­pos­sess a car with a “starter in­ter­rup­tion de­vice.” Deal­ers would also have to pro­vide a sec­ond warn­ing no­tice 48 hours be­fore the car is ren­dered in­op­er­a­ble.

“Deal­ers of­ten tar­get the work­ing poor and rely on re­peated re­selling of th­ese high-priced ve­hi­cles to gen­er­ate much of their rev­enue,” Holden said. “AB 265 would pro­vide added pro­tec­tion for th­ese low-in­come pur­chasers ... by slow­ing down ag­gres­sive re­pos­ses­sion of cars.”

The bill passed the As sem­bly’s Con­sumer Pro­tec­tion Com­mit­tee by an 11-0 vote and is headed to the Ap­pro­pri­a­tions Com­mit­tee in May.

The bill was mod­i­fied in com­mit­tee to re­move op­po­si­tion, said Bill Dohring, a lob­by­ist for the In­de­pen­dent Auto Deal­ers Assn. of Cal­i­for­nia.

The key to craft­ing a com­pro­mise was re­duc­ing the warn­ing no­tice from a pro­posed 20 days to 10 days. But even that, Dohring said, “sends the mes­sage ... that the bor­rower can drive the car with­out a pay­ment.” Gas prices

Years of de­bate over the rea­son for Cal­i­for­nia’s high gas prices have not pro­duced a de­fin­i­tive an­swer to why a gal­lon costs up to 40 cents more in the state than in other ar­eas of the coun­try.

Higher prices prob­a­bly are caused by a com­bi­na­tion of state taxes, ex­pen­sive cleaner-burning gas and limited com­pe­ti­tion among re­finer­ies, writes Sev­erin Boren­stein, an eco­nomics pro­fes­sor at the UC Berke­ley Haas School of Busi­ness, in a re­cent blog post.

But pay­ing an es­ti­mated $37 to $51 a year more for less-pol­lut­ing Cal­i­for­nia gaso­line is worth it for the av­er­age mo­torist, Boren­stein said. The gas has re­duced smog since the early 1990s, es­pe­cially in South­ern Cal­i­for­nia.

“The Cal­i­for­nia stan­dard,” he said, “saves at least 660 lives per year, which more than jus­ti­fies the ad­di­tional cost.”

Gary Fried­man Los An­ge­les Times

BUY HERE PAY NOW auto deal­ers tar­get low-in­come cus­tomers with poor credit. Above, used cars for sale in Hawthorne in 2011.

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