MINUTES OF THE meeting
of the
ASSEMBLY Committee on Commerce and Labor
Seventy-First Session
March 7, 2001
The Committee on Commerce and Labor was called to order at 4:03 p.m., on Wednesday, March 7, 2001. Chairman Joe Dini, Jr. presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Joseph Dini, Jr., Chairman
Ms. Barbara Buckley, Vice Chairman
Mr. Morse Arberry Jr.
Mr. Bob Beers
Ms. Dawn Gibbons
Mr. David Goldwater
Mr. Lynn Hettrick
Mr. David Humke
Ms. Sheila Leslie
Mr. Dennis Nolan
Mr. John Oceguera
Mr. David Parks
Mr. Richard D. Perkins
COMMITTEE MEMBERS EXCUSED:
Ms. Chris Giunchigliani
GUEST LEGISLATORS PRESENT:
Assemblywoman Vonne Chowning
Assemblywoman Sharron Angle
STAFF MEMBERS PRESENT:
Vance Hughey, Committee Policy Analyst
Darlene Nevin, Committee Secretary
OTHERS PRESENT:
Steve Yarborough, Nevada Gasoline Retailers and Garage Owners Association, and Vice Chairman, Automotive Repair Committee
Patricia Jarman-Manning, Commissioner of the Consumer Affairs Division
Russ Benzler, Administrator, Compliance Enforcement Division, Department of Motor Vehicles and Public Safety
John Sande, Legislative Advocate, Nevada Franchised Auto Dealers Association of Nevada
Mary Lau, Executive Director, Retail Association of Nevada
Kimberly R. Maxson-Rushton, Chief Deputy Attorney General, Gaming Division, Office of the Attorney General, State of Nevada
Joseph McDermott, owner, The Auto Inspector
Gary Wolff, Legislative Advocate, Nevada Highway Patrol Association
Wayne Frediani, Executive Director, Nevada Franchised Auto Dealers Association
Daryl Capurro, Managing Director, Nevada Motor Transport Association
Jim Gibson, Attorney; Rooker, Gibson and Later; representing Robert P. Ellis, President, CEO and owner, B & E Auto Inc.
Chairman Dini called the meeting to order at 4:03 p.m. A quorum was present. He presented the following BDRs for committee introduction:
ASSEMBLYMAN GOLDWATER MOVED TO INTRODUCE BDR 54-576.
MRS. GIBBONS SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
********
ASSEMBLYMAN GOLDWATER MOVED TO INTRODUCE BDR 53-555.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
Chairman Dini opened the hearing on A.B. 171.
Assembly Bill 171: Makes various changes relating to garages for repair of motor vehicles. (BDR 43-582)
Assemblywoman Vonne Chowning, District No. 28, presented A.B. 171. She prefaced her remarks stating that the committee had in the past six years dealt with automotive repair issues. She indicated the committee was very helpful last time and a bill was passed that helped businesses and consumers with regards to automotive repair. She informed the committee that since then all businesses had to give an estimate of charges and get the customer’s permission to perform additional repairs that were not on the estimate. A consumer bill of rights posted in businesses was among many positive results of the legislation.
Mrs. Chowning informed the committee by A.B. 171 the definition of “automobile” needed to be changed to that of “motor vehicle” so recreational vehicles and motor homes would be included.
Chairman Dini asked if the definition of “motor vehicle” was given. Mrs. Chowning pointed out the definition was included in Nevada Revised Statutes NRS 487.550 and read the definition of a motor vehicle:
. . . a passenger car, a mini motor home, a motor home, a recreational vehicle, or a motor truck as defined with the gross weight 10,000 pounds or less.
Mrs. Chowning further instructed Sections 2 and 3 exempted certain businesses because those businesses were already licensed through the Department of Motor Vehicles (DMV). In addition, Section 4 provided that if business failed to comply with a court order the DMV/PS could revoke their registration following a court hearing. It further stated once the business complied with the court order, their registration could be reinstated.
Mrs. Chowning informed the committee A.B. 171 came from the Automotive Repair Advisory Board that was in place as a result of prior legislation. The Automotive Repair Advisory Board, explained Mrs. Chowning, would now “sunset” July 2001. If the members of the board felt the need, they could still voluntarily meet to discuss problems that might arise.
Steve Yarborough, Nevada Gasoline Retailers and Garage Owners Association, and Vice Chairman, Automotive Repair Committee, commented A.B. 171 offered remedies to the consumer and was a workable bill that addressed the concerns of both sides.
Patricia Jarman-Manning, Commissioner of the Consumer Affairs Division, expressed she was proud that the Division, after being defeated in 1995, was able to “join forces” with industry statewide and a previous automotive repair committee to put together A.B. 171. She was also pleased to reveal that through the efforts of those involved and public education, the complaints concerning automotive repairs were now one third of what they were in 1995. It appeared the automotive repair industry was trying to solve the problems before they reached Consumer Affairs.
Assemblyman Beers asked how many court orders had not been complied with regarding Section 4, number 6. Russ Benzler, Administrator of the Compliance Enforcement Division of the Department of Motor Vehicles and Public Safety, addressed Mr. Beers question by referring to the incident that led to this addition to the bill. A gentleman had won a court order regarding an auto repair dispute. The repair shop would not enforce the court order. Upon the gentleman’s visit to the Department of Motor Vehicles, it was noted the repair shop was registered and had agreed to binding arbitration. DMV had to notify the gentleman they could send him through arbitration, in which case an arbitrator would be re-deciding a judge’s decision.
Assemblyman Beers asked if hybrid electric and gasoline cars would be considered motor vehicles. Mr. Benzler replied if they were designed to carry passengers on the road he believed they would be considered motor vehicles. Mr. Beers asked if such vehicles should be explicitly included in the definition in A.B. 171 now. Mrs. Chowning responded “motor vehicle” as defined already in NRS 487.550 said “a passenger car as defined in NRS 482.087.” Mrs. Chowning asked if the Research Analyst for the Commerce and Labor Committee would look up the statute and added if NRS 482.087 did not include hybrid electric and gasoline vehicles she would welcome an amendment that added them to A.B. 171.
Vance Hughey, Research Analyst, Legislative Counsel Bureau, stated NRS 482.087 defined “passenger car” as a “motor vehicle designed for carrying ten persons or less except a motorcycle, power cycle, or motor driven cycle.”
John Sande, representing the Nevada Franchised Auto Dealers Association, expressed they would support the bill as proposed.
Mary Lau, Executive Director of the Retail Association of Nevada, conveyed their support for A.B. 171.
Kimberly R. Maxson-Rushton, Deputy Attorney General, Gaming Division, Office of the Attorney General, State of Nevada, voiced support of A.B. 171.
Russ Benzler, representative of the Department of Motor Vehicles, expressed their support of A.B. 171.
Chairman Dini closed the hearing on A.B. 171 and opened the hearing on A.B. 207.
Assembly Bill 207: Imposes certain restrictions and requirements upon transfer, registration, titling and operation of, and requires certain notices and disclosures regarding, motor vehicles that have sustained certain damages. (BDR 43-441)
Assemblywoman Buckley, District No. 8, spoke in support of A.B. 207 and described it as a measure that would protect consumers and businesses from the sale of damaged vehicles and provide for consumer safety. A.B. 207 stipulated that if a car sustained certain damages, those damages would have to be revealed. She added A.B. 207 contained the main components of S. 678, 106th Congress (1999). Ms. Buckley related that current Nevada law did not protect consumers. She revealed there was no law mandating upon sale that the buyer be notified of previous damage, no matter how serious the damage. She added if a vehicle was sold as salvage as a result of a “total loss insurance settlement, defined as damaged to the extent that the owner considers it uneconomical to repair,” and the vehicle was rebuilt, the vehicle would have to be reinspected and a salvage title issued. But, she expounded, there was nothing in the law to protect a vehicle that was almost a total loss from being rebuilt and sold without disclosure and a claim title. What constituted a total loss would be subject to interpretation. An owner could say a vehicle was not uneconomical to repair, and therefore avoid an inspection and the resultant salvage title. A.B. 207 would clarify the definition of salvage vehicles and require disclosure as to whether or not a vehicle was ever considered a salvage vehicle. The bill’s definition of salvage vehicle, one that had “sustained major damage, in a single incident, for which the cost of repair exceeds 65 percent of the fair retail market value of the vehicle immediately before the incident” was consistent with the recommendations adopted by the National Associations of Attorneys General. Ms. Buckley added that “rebuilt wrecks” were structurally unsafe and often sold to teenagers and young adults, the population who were at a higher risk of being involved in automobile accidents. She also stated that when a vehicle’s repair costs exceeded 65 percent of its fair retail market value, it was more likely to be structurally unsafe, and extremely difficult for the vehicle to be repaired to the manufacturer’s specifications of crash worthiness and safety.
A.B. 207 also clarified the definition and required disclosure of “flood damage vehicles.” The definition would reflect the recommendations adopted by the National Advisory Committee established by an act of Congress, which consisted of leading insurers and law enforcement agencies. Ms. Buckley asserted flood damage to vehicles could be concealed, therefore leaving the consumer unaware of damage to mechanical and electrical components of the vehicle. A.B. 207 defined flood damage as “damage caused by the submersion of the vehicle in water to such an extent that the water reaches over the engine or doorsill or enters the trunk or passenger compartment of the vehicle.”
Ms. Buckley noted an article in the Las Vegas Review Journal reported “a third of the estimated 75,000 cars flooded by Hurricane Floyd are starting to show up for sale nationwide.” Ms. Buckley expressed her certainty that many of these vehicles would be “unloaded” in Nevada because it did not have a law requiring disclosure of flood damage to vehicles.
A.B. 207 defined a nonrepairable vehicle as “a vehicle that has sustained major damage in a single incident for which the cost of repairs exceeds 90 percent of the fair retail market value of the vehicle immediately before the incident.” This would require that the vehicle be dismantled, the parts sold, and the vehicle never be rebuilt for use on the highways. This would also reduce the instances of “VIN switching” which Ms Buckley noted sometimes involved organized crime and contributed to vehicle thefts.
A.B. 207 would also require disclosure of major damage to a vehicle, defined as “damage of any kind, sustained in a single incident, for which the aggregate cost of repair is $3,000 or more, unless that cost is attributable solely to cosmetic damage.” A.B. 207 also defined “cosmetic damage” as “damage to paint, glass, trim, tires or any other component of a motor vehicle that is purely cosmetic in nature.” Ms Buckley interjected this would help protect the consumer from a “false sense of security.” Ms. Buckley also expressed consumers needed to know of any prior damage that could void their warranty or service contract. She clarified that manufacturers, insurers and service contract providers had access to information of prior damage and that A.B. 207 would now provide that information for the consumer as well. A.B. 207 would require that titles be branded when the damages occurred and branded titles from other states be transferred to Nevada as well to reduce “title washing.”
Ms. Buckley concluded, stating A.B. 207 would better protect consumers who purchased used cars as well as others on the road with them. She added that since introduction of A.B. 207, she had received suggestions for amendments from several people who viewed A.B. 207 as a good bill. She added there were those who did not want change whom she felt “wanted to insure that money can still be made by laundering titles and passing unsafe vehicles on our roads.” Ms. Buckley asked Chairman Dini if A.B. 207 could be placed in a subcommittee to consider the suggestions made to improve it.
Ms. Buckley introduced Joseph McDermott, owner and founder of The Auto Inspector. She informed the committee that Mr. McDermott had been involved with cars most of his life. He had worked as a used car technician and was certified as a Master Automotive Technician and Master Auto Body Repairman.
Joseph McDermott, owner of The Auto Inspector, related his experiences with used cars, auctions and inspections involving “rebuilt wrecks.” He informed the committee one in four cars were used car sales and one to two percent of cars with laundered titles were easily getting through. He stated the Federal Trade Commission produced the Buyer’s Guide as a guideline for used car transactions and referred to it as “the worst document” A.B. 207 would help. He noted A.B. 207 would force disclosure of damages to protect the consumer and that presently there was no recourse under the law for the consumer. Mr. McDermott explained an individual had no obligation to disclose damages to his/her vehicle. Vehicles could be declared “totaled” by insurance companies, bought back by the owners, repaired and sold without any disclosures or title transfers. He added dealers were required only to disclose known damage and would simply state they knew of no damage. Mr. McDermott further related the need for controls regarding flood-damaged vehicles. He added they had severe problems, were not under warranty and were on the streets in Las Vegas. Mr. McDermott indicated vital areas on a vehicle that could be damaged by flood as well as the fact that black mold, resulting from flood damage, could be fatal. Also, because warranties were voided by “acts of God,” including floods, the purchaser of a flood-damaged vehicle could find himself without coverage under warranty. Mr. McDermott emphasized unibody vehicles were not meant to be repaired, such as being welded, and should be taken off the road. Mr. McDermott acknowledged the section of A.B. 207 that defined “major damage” would need to be addressed as it related to cosmetic damage versus structural damage. Mr. McDermott related his experience witnessing a vehicle inspection. The vehicle had been cut in half and welded together, the combination of a 1992 Toyota and a 1993 Toyota. Such vehicles, he added, were on the streets with clean titles.
Ms. Buckley indicated the Department of Motor Vehicles questioned her as to whether or not A.B. 207 should apply to private-on-private sales. She suggested to the committee this could best be addressed by a subcommittee.
Chairman Dini asked Ms. Buckley if she had a fiscal note. Ms. Buckley replied that from her discussion with DMV a fiscal note would stem from private-on-private sales and that would be another reason to address these sales in subcommittee.
Chairman Dini expressed it would not seem right to eliminate private sales. Ms. Buckley responded the subcommittee could investigate the pros and cons of eliminating private sales with regards to the consumer and the Department of Motor Vehicles.
Assemblyman Beers asked why a definite figure of $3,000 was used in one part of A.B. 207 and percentages in the rest of the bill. He also questioned the $3,000 figure as perhaps too low because he felt a vehicle damaged to the $3,000 level could be rebuilt to the manufacturer’s specifications.
Mr. McDermott responded it was difficult to state actual repair costs as percentages. He also explained vehicles could be repaired cosmetically to factory specifications but not structurally. He added any structural repair translated to being altered from the factory’s specifications.
Ms. Buckley interjected A.B. 207 would not prevent the sale of a rebuilt vehicle; it would simply make the consumer aware the vehicle was rebuilt.
Assemblyman Nolan asked about vehicles declared “totaled” by insurance companies and kept by the owners were then “restored” and resold.
Mr. McDermott revealed this was, in fact, one way these vehicles were returned to the road. He explained the owners would buy the vehicle from the insurance company after the insurance company paid on the “total loss.” He remarked this practice should not be allowed; the vehicle should be purchased through the salvaged area. A.B. 207 would eliminate this problem. He reemphasized salvage or flood damaged vehicles needed to be disclosed and the consumer made aware of the potential problems.
Speaker Perkins questioned the definition of “major damage” in Section 8 “for which the aggregate cost of repair is $3,000 or more, unless that cost is attributable solely to cosmetic damage.” Stating a hypothetical situation, he asked if disclosure would be needed if there were $500 in structural damage and $2,500 in cosmetic damage.
Mr. McDermott responded any structural damage, even one dollar worth, would mean the vehicle was no longer structural as the factory intended it to be.
Speaker Perkins voiced his disagreement with the premise that a vehicle with one dollar of structural damage could not be brought back to factory specifications. He further noted the definition of “cosmetic damage” was left open to interpretation and needed to be better defined.
Mr. McDermott replied a “very, very minor amount of structural damage can be repaired but as a majority the vehicles are designed to absorb quite a bit of impact and there is more than just a few dollars of structural damage.”
Ms. Buckley acknowledged the definition of “cosmetic damage” needed change but stated the intent was to separate those vehicles with significant damage from the others.
Assemblyman Oceguera asked if a windshield could be part of a unibody construction. Mr. McDermott acknowledged there were vehicles in which the windshield and rear glass were structural components. Mr. McDermott agreed with Mr. Oceguera that A.B. 207 needed to better clarify the differences between structural damage and cosmetic damage.
Assemblyman Beers noted the words “structure” and “structural” were absent from A.B. 207 although most of the discussion involved these terms and stated they were “backing into the term structural by attempting to list everything that’s not structural” and wondered if that was the best approach.
Ms. Buckley suggested that perhaps the words “structure” and “structural” were not included in the definitions by the National Association of Attorneys General because they were trying to indicate that systems, as well as the structure, could be damaged.
Assemblyman Hettrick voiced his concern as well regarding the $3,000 cosmetic damage as referred to in Section 8. He suggested A.B. 207 needed to define system damage as well as structural damage. He interjected his concern as to how fair market value was determined as well and what decided a vehicle was “unrepairable.” He declared the intent of the bill was good but that serious consideration needed to be given to the definitions. Ms. Buckley agreed with Mr. Hettrick.
Assemblyman Goldwater asked if it was the insurance company that would sell the car. Mr. McDermott explained that if a vehicle were “totaled out” and the insurance company paid off on the vehicle, it would then belong to the insurance company. He added such vehicles were auctioned to a “salvage pool” and that was the main source of the problem vehicles. Furthermore, these vehicles, if not “branded to be salvaged,” could be sold to body shops, rebuilt, and put back on the road.
Assemblyman Goldwater suggested a rider might be added to insurance policies offering full replacement value for instances such as this. Mr. McDermott expressed they did not want to make it illegal for insurance companies to recoup their losses, but intended that vehicle damages be disclosed and the vehicles salvaged properly.
Kimberly Maxson-Rushton, Chief Deputy Attorney General, on behalf of the Attorney General’s Office expressed their support for A.B. 207. She specified the Attorney General’s Office was always in favor of legislation that provided for notice as well as disclosure to consumers and protected the citizens of Nevada.
Gary Wolff, Business Agent Lobbyist speaking on behalf of the Nevada Highway Patrol Association, pronounced any legislation that provided for disclosure and public safety was good. He stressed there were many dishonest people who would take advantage of opportunities to rebuild cars and put unsafe cars on the highway.
Chairman Dini asked Mr. Wolff if he had ever experienced a situation where the vehicle’s owners did not realize they had bought a salvage vehicle. Mr. Wolff responded he did not and stated law enforcement records did not contain that information. He further indicated if there were disclosures, the highway patrol could perform a more thorough investigation.
Patricia Jarman-Manning, Commissioner of the Consumer Affairs Division, expressed the Division’s support of the concept of A.B. 207 and noted she had expressed their concerns to Ms. Buckley and would like to work with the subcommittee.
Russ Benzler, Administrator of the Compliance Enforcement Division of the Department of Motor Vehicles, informed the committee the division approved of the intent of A.B. 207 to provide for disclosure, salvage history and prevent “intentional misrepresentations” in sales and transfers of vehicles. The division did have concerns with implementing A.B. 207. In addition to fiscal notes of approximately $350,000 the first year and $235,000 in the second year, primarily for additional investigators, the division was also concerned about the effect A.B. 207 would have on bringing “faster and more efficient service” to consumers. Enforcement of A.B. 207 would lengthen lines, increase time to process transactions, increase the number of visits to the DMV, and increase customer frustration when the processing of nonconforming titles or registrations were involved. A.B. 207, as is, would adversely affect industries involved with transferring vehicle ownership, especially concerning vehicle acquisitions from other states. Mr. Benzler added this could exclude Nevada businesses from the sales process. Complications would also be experienced by those entities involved with involuntary transfers of ownership such as repossessions and lien sales. Mr. Benzler indicated these concerns were conveyed to Ms. Buckley and the division would like to participate in work sessions or subcommittees to minimize the impact on the public yet still provide for the intent of A.B. 207.
Assemblywoman Sharron Angle, Assembly District 29, related her experience involving the purchase of a vehicle for her son wherein the previous damage had not been disclosed. After having the vehicle thoroughly checked at an auto body shop, she was notified the vehicle had been seriously damaged in an accident. She was told it had been “crunched and pulled back” and therefore lost the strength of the metal. She was also informed that any accident would crush the car and its occupants. She received a written statement of the vehicle’s condition from the body shop and took it to the dealer who sold her the vehicle. The dealer’s response was “This is buyer beware.” Ms. Angle emphasized her support of A.B. 207 and the importance of consumer awareness of the condition of vehicles purchased.
Chairman Dini asked Mrs. Angle if the situation was resolved with the dealer. Mrs. Angle replied it was not. It was “her problem.”
John Sande, representing the Nevada Franchised Auto Dealers Association, testified they had no objection to the intent of A.B. 207. Mr. Sande informed the committee 50 percent of vehicles sold by automobile dealers were the product of trade-ins. His concern was that the owner of a vehicle being traded in would conceal its previous damage from the automobile dealer, and the only way the dealer could be made aware of this were if he/she paid to have the vehicle inspected. He emphasized A.B. 207 needed to apply to everyone involved in automobile transactions. Mr. Sande also stated that only 5 complaints for damage disclosure out of 562,000 title transfers were filed with the DMV last year and that he and those he represented did not think there was a major problem with damage disclosure. His opinion was that Mr. McDermott’s testimony focused on fraudulent transactions involving illegal activities that could be addressed without affecting all consumers in Nevada. He added A.B. 207 would confuse consumers and others as to whether or not they should disclose damage. The definitions in A.B. 207, he suggested, needed to be fair to everyone and applicable to all types of vehicle disclosure. Lastly, Mr. Sande offered A.B. 207 would “make more sense” if it were national. Referring to Section 19 of A.B. 207, Mr. Sande pointed out that most used cars were acquired from auctions out of state and contended those auctioneers would rather not make transactions with Nevada dealers than comply with A.B. 207. That, he said, would seriously reduce the supply of used cars available to Nevada used car dealers. Mr. Sande reiterated that used car dealers were also victims of the lack of damage disclosure.
Assemblyman Oceguera commented he understood car dealers could check the Vehicle Identification Number (VIN) to research damage on a vehicle.
Wayne Frediani, Executive Director of the Nevada Franchised Auto Dealers Association, replied there were firms through which VIN numbers could be checked, but was not sure all would provide accurate data regarding salvage and flood vehicles.
Ms. Buckley indicated she would contact other states with damage disclosure laws in an attempt to devise better definitions for A.B. 207. Mr. Sande understood those disclosure laws were mostly new car damage statutes but also offered his assistance to obtain these laws.
Chairman Dini remarked that without a national disclosure law, it would be very difficult to obtain vehicles through auctions in other states. Mr. Sande confirmed this concern.
Chairman Dini asked what percentage of cars sold in Nevada came from auctions. Mr. Frediani responded he was not sure but estimated that of 300,000 vehicle sales last year, probably 130,000 were used car sales. He said he was told dealers purchase, on the average, about 40 percent of used vehicles through auctions. Chairman Dini indicated that could be as many as 40,000 to 50,000 cars to which Mr. Frediani agreed.
Assemblywoman Buckley commented if an auctioneer did not reveal prior damage information, the used car dealer could have the vehicle inspected and run checks on the VIN numbers. As long as the car dealer had no intent to defraud, A.B. 207 would simply be preventing the used car dealers from “turning a blind eye” to the title washing and major damage to the vehicles.
Mr. Sande admitted Ms. Buckley made a good point, but added that used-car dealers made “good targets;” the unsatisfied buyer of a used-car would most likely blame the dealers. Mr. Sande emphasized if the consumers who came to trade in their vehicles would sign a disclosure form making them liable, the used-car dealer would have some protection. He added that in this way the one who truly caused the problem would ultimately be the one who paid. He emphasized it was not the car dealer who knew the history of the car, but the one who traded it in at the dealership.
Assemblywoman Buckley made a comparison to odometer fraud wherein the car dealer would not know if the previous owner had altered the odometer reading. She added under Federal Law, it would have to be proven that the car dealer had knowledge of the odometer falsification. She contended that regarding hidden vehicle damage as well, what mattered was if the reseller intended to defraud. She acknowledged that sometimes the dealer was guilty, yet at other times was the victim.
Mr. Sande agreed that the dealer was often the victim and added that passage of A.B. 207 would enable the car dealers to pursue anyone who defrauded them. Referring to Section 25, paragraph 2, he emphasized dealers, for their own protection, would request disclosures from anyone trading in vehicles. He added A.B. 207 must address the responsibilities of all parties involved to provide disclosure for everyone’s protection.
Assemblyman Nolan asked Mr. Sande if it was not true that when used car dealers considered trade-ins, they had the vehicles inspected for structural damage and to assess their monetary value.
Mr. Sande replied that used car dealers “do the best inspection they can” and related that when he traded in his car it was not inspected before they made their offer to him.
Wayne Frediani, Nevada Franchised Auto Dealers Association, informed that at some auctions an inspection would be provided, if requested, for $100. On trade-ins, he related, an individual at the dealership would appraise the car based on visual, safety and structural, but added they were not “body shop people” therefore structural damage might not be noted.
Assemblyman Beers presented a hypothetical situation wherein he owned a vehicle that sustained major damage, went through the process, had his title “red marked” and wanted to sell the vehicle. He asked Mr. Sande if he could see this as unintentionally providing a pool of cars into which the poorer population would be buying.
Mr. Sande responded he had not thought that far ahead but would think on it and get back to Mr. Beers.
Chairman Dini stated there were dealers who dealt with cheaper cars. Buyers purchased these vehicles knowing of their lesser quality, but would do so because they needed the vehicle for work and that was all they could afford. He questioned whether most of those vehicles would pass inspection.
Assemblyman Oceguera expressed his concern for the consumer and the dealer in reference to Section 21. He asked Mr. Sande what a dealer or consumer would do with their vehicle if it were a salvage or flood vehicle.
Mr. Sande acknowledged there were limitations on to whom you could sell the vehicle without affixing a decal that indicated the damage. He related a dealer’s suggestion that if a vehicle sustained a certain amount of damage the insurance company should be required to dismantle the car, could use it for parts, and in this way the vehicle would be removed from the road.
Assemblyman Oceguera restated his question that if he as the consumer had a salvage vehicle he would have to do the same as dealer. Mr. Sande affirmed Mr. Oceguera was correct under A.B. 207 because it applied to any person.
Daryl Capurro, Managing Director, Nevada Motor Transport Association, asked that if A.B. 207 was passed, it be treated as was A.B. 171 and laws regarding repair estimates whereby commercial vehicles were excluded. Commercial vehicle transactions, he noted, dealt with a different type of buyer and seller. He explained buyers were the trucking companies who used their own mechanics to review vehicles before purchase. They were also subject to federal motor carrier safety rules and regulations that went beyond the content of A.B. 207. He would like the definition of “motor vehicle” in A.B. 207 to be the same as in A.B. 171 in which Nevada Revised Statutes (NRS) 487.550 was cited.
Jim Gibson, Attorney, speaking on behalf of Robert P. Ellis, President, CEO and owner of B & E Inc. and B & E Salvage, informed the committee he would address A.B. 207 from the viewpoint of salvage dealers.
Mr. Gibson explained that Mr. Ellis’ business involved the sale of “total loss vehicles and recovered theft vehicles for insurance companies, some rental car agencies, used-car dealers and out of state consigners.” He added B & E Salvage was a licensed state salvage pool and licensed used car dealer that sold to 900 registered buyers of whom none were rebuilders. B & E Salvage was restricted by law to sell only to licensed new or used car dealers, rebuilders or auto wreckers. Licensing was a requirement for those who chose to do business with B & E Salvage. Vehicles sold by B & E Salvage were either total loss vehicles or recovered theft vehicles. The concern of B & E Salvage was not the intent of A.B. 207, but rather the suggestions made regarding the way salvage dealers did business. Mr. Gibson related two instances to demonstrate how Chapter 487 already governed salvage transactions.
Before presenting his two examples, Mr. Gibson explained how insurance companies acquired vehicles. Insurance companies bought vehicles from the consumer if they were considered total loss, or paid for the vehicles if they were stolen.
First, if an owner’s vehicle was declared salvage and he wanted to buy it back from the insurance company, law required the insurance company to give notice to the state that it was an “owner retention vehicle.” The state would then cancel the title and only a salvage title would remain.
Secondly, regarding automobile auctions, NRS 487 required the insurance company to provide a bill of sale salvage on the state DMV form to whomever acquired the vehicle, which would be part of the title that went to the auctioneer. Upon sale at the salvage auction, the auctioneer would submit the documentation to the state and the salvage title would be issued. Mr. Ellis felt that NRS 487 adequately protected the consumer.
Mr. Gibson claimed that protection was absent when a vehicle was damaged out of state and the title, for whatever reason, remained “clean.” If that vehicle came into the state and the consumer could not detect the damages, NRS 487 fell short. He added that perhaps any law not equivalent to federal legislation or interstate compact would fall short. He expressed that unless A.B. 207 reached the individual consumer, the concerns would not be adequately addressed. An individual who had an uninsured loss (no insurance company involved) would manage to sell his car to a rebuilder without disclosure.
Mr. Gibson related to the committee the instance involving a vehicle Mr. Ellis acquired through an auction that was sold to a Utah dealer on a clean title, a vehicle that looked to be in perfect condition. The dealer had paid $30,000 and consigned it for sale to move it quickly. Mr. Ellis’ policy for out-of-state vehicles, unless they were theft recoveries, was to treat them as total loss vehicles. Mr. Ellis researched Carfax and discovered that on the same day it was given a clean title, a bill of sale salvage title was also issued. However, the car was sold on a clean title. This legislation would not reach that transaction unless someone happened upon the information, as did Mr. Ellis.
Mr. Gibson indicated they also had concerns about the specific provisions of A.B. 207 as it defined “major damage” in Section 8, and the $3,000 damage threshold. For example, if a Lexus was in an accident in which the two front airbags were activated, those two airbags alone would cost $5,000 to be replaced. Mr. Gibson revealed the Lexus was designed to sustain a certain amount of collision without there being structural damage. He claimed the $3,000 threshold encumbering the titles would be a serious problem and needed to be addressed.
Another concern was with respect to water damage. In Mr. Ellis’ experience, if there was water over the doorsill of the vehicle that did not reach the portion on which the seats rest, the only portion that might be reached was sealed wires and no computer components would be affected. He also informed the committee that in some instances computer components could be affected but replaced and the vehicle restored to the condition in which, after the repairs, it would not be considered a damaged vehicle.
Because insurance companies were not in the habit of paying cars off that were not total losses or stolen, Mr. Ellis did not see the abuses that were complained of in discussion of A.B. 207. He claimed 1 percent to 2 percent of vehicles were sold in violation of the law. Based on this low number Mr. Gibson suggested the laws we had were working. He further invited that if “fine tuning” needed to be done, it needed to include private transactions because that was where the real opportunity for abuse existed. In closing, Mr. Gibson asserted his and Mr. Ellis’ opposition to A.B. 207 in its current form.
Assemblywoman Buckley cited the incident involving the Mercedes, having a branded title as well as a clean title, as an example of the abuse A.B. 207 was trying to address and inferred that Mr. Gibson, in relating this information, saw the abuse of which she spoke. Ms. Buckley also pointed out that Mr. Ellis’ “due diligence” and disclosure was good practice and exactly what would be codified by A.B. 207. Mr. Ellis would be able to tell the dealer he knew of the vehicle’s condition and that he would disclose such information at the auction. This would significantly lower the selling price and inform the prospective purchaser of the vehicle’s true condition. But if the dealer did not like Mr. Ellis’ plan he might choose to cancel the consignment and sell to another without disclosure, with the title being “washed.” Then there would be a trail showing the dealer’s intent to defraud.
Mr. Gibson clarified that Carfax information was not “real time” information. Therefore, the purchaser who bought it on clean title was unable to discover its true condition since the information was not yet available to him. By the time the vehicle was ready for auction, however, the information was available. Mr. Gibson’s point was that Mr. Ellis was lucky the Carfax information was available. He did reiterate, however, that because Mr. Ellis treated all out-of-state cars, other than theft recovery vehicles, as total losses, there would not have been a problem anyway. He added that Mr. Ellis would have no objection to there being some kind of restriction, such as he had in his practice, if it did not implicate federal law. Mr. Gibson repeated the reason the Utah dealer was defrauded was because the information was not available to him in time. He further added the vehicle was sold on a salvage title.
Assemblyman Nolan asked Mr. Gibson if he knew whether or not automobile manufacturers had any type of guidelines available to car dealers and auctioneers that addressed specific damages to vehicles and provided suggestions as to what the disposition of those vehicles should be.
Mr. Gibson replied he did not know of any such information. He did state, however, they were aware of specifications and tolerances. Tolerance information was made available by the manufacturer for the purpose of adjusting frames and bringing them back into tolerances. He did not know if the information was provided for the purpose of repairing frames, but noted it was used for that purpose. Other than the specifications and tolerances that were made available for “virtually every part that matters on a vehicle,” neither Mr. Gibson nor Mr. Ellis was aware of any other guidelines.
Chairman Dini thanked Mr. McDermott for his earlier testimony and added that he provided a different perspective not always available. Chairman Dini, because of the importance of A.B. 207, chose to appoint a subcommittee and indicated he wanted it to be regional because all areas of the state were affected. Chairman Dini appointed Assemblywoman Buckley, Assemblyman Goldwater, Assemblyman Beers, Assemblyman Hettrick and Assemblywoman Leslie to the subcommittee.
Chairman Dini adjourned the hearing at 5:55 p.m.
RESPECTFULLY SUBMITTED:
Darlene Nevin
Committee Secretary
APPROVED BY:
Assemblyman Joe Dini, Jr., Chairman
DATE: