Increases disclosures of automobile brokers.

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S5477-2011 Actions

• Sep 23, 2011: SIGNED CHAP.579
• Sep 12, 2011: DELIVERED TO GOVERNOR
• Jun 16, 2011: returned to senate
• Jun 16, 2011: passed assembly
• Jun 16, 2011: ordered to third reading rules cal.340
• Jun 16, 2011: substituted for a7767a
• Jun 16, 2011: referred to consumer affairs and protection
• Jun 16, 2011: DELIVERED TO ASSEMBLY
• Jun 16, 2011: PASSED SENATE
• Jun 13, 2011: AMENDED ON THIRD READING 5477A
• Jun 6, 2011: ADVANCED TO THIRD READING
• Jun 2, 2011: 2ND REPORT CAL.
• Jun 1, 2011: 1ST REPORT CAL.921
• May 25, 2011: REFERRED TO CONSUMER PROTECTION

S5477-2011 Meetings

Consumer Protection: Jun 1, 2011

S5477-2011 Calendars

Active List: Jun 13, 2011 , Floor Calendar: Jun 2, 2011 , Floor Calendar: Jun 6, 2011 , Floor Calendar: Jun 7, 2011 , Floor Calendar: Jun 13, 2011

S5477-2011 Votes

S5477-2011 Memo

BILL NUMBER:S5477

TITLE OF BILL:
An act
to amend the general business law, in relation to increasing disclosures
by automobile broker businesses

PURPOSE OR GENERAL IDEA OF BILL:
To regulate the practices of
automobile broker businesses in New York.

SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends �738 of the General
Business Law to require an automobile broker business ("broker") to
include a disclosure in all contracts regarding the automobile dealer
("dealer") from which the automobile was purchased, as well as any
consideration paid by a dealer to a broker for its services.

Section 2 amends �740-a and �740-b of the General Business Law to
require all brokers to comply with the confidentiality provisions
contained in �399-dd of the General Business Law, and to require
brokers to obtain a surety bond in the amount of $250,000.

Section 3 amends �741-a of the General Business Law to require brokers
to comply with the advertising provisions contained in Executive Law
�63(12), General Business Law Article 22A, and General Business Law
�396.

In addition, this section sets forth a list of advertising practices
that would be considered deceptive trade practices, i.e., certain
uses of asterisks, font size, text color, photographs and misleading
jargon.

Finally, this section requires brokers to disclose in all
advertisements that it is not a dealer, any fees imposed on a
consumer for services rendered, and that no vehicle service will be
provided by the broker.

Section 4 sets forth the effective date.

JUSTIFICATION:
The practices of brokers are not as strictly regulated
as those of dealers. Dealers are required to comply with a variety of
regulations pertaining to advertising, consumer disclosure and
management of items containing personally identifiable information.
However, brokers are held to lesser standards resulting in the
proliferation of anti-consumer and anti-business practices.
Consequently, broker practices should be more strictly regulated to
ensure that the public is properly informed and safeguarded against
the actions of unscrupulous brokers.

Currently brokers are not required to obtain a surety bond to operate
in New York. Furthermore, unlike dealers, brokers are not required to
make a significant investment to sell cars. Dealers are subject to
franchise agreements which typically contain a myriad of expensive
mandates and are also required to purchase all of the vehicles from


the manufacturer that they
offer for sale. In contrast, brokers have a limited personal stake in
the business, and, therefore, limited incentive to ensure consumers'
interests are protected. Therefore, brokers should be required to
obtain a surety bond to protect consumers against a broker's failure
to meet its obligations.

Brokers are also not required to comply with the same advertising
guidelines as a dealer. Many broker advertisements are misleading and
do not clearly indicate that a potential buyer would be doing
business with a broker and not a dealer. Brokers should be held to
the same advertising standards as dealers to protect against
deceptive trade practices and be required to disclose the nature of
their services to ensure consumers are accurately informed.

In addition, brokers should be required to disclose the method by
which its fee is determined. Some brokers claim to provide their
services "free to the consumer". However, such brokers are often
compensated by a dealer which is typically commission-based.
Consequently, the broker is incentivized to negotiate a better price
for the dealer than the consumer. Disclosing the fee structure will
enable a consumer to determine the validity of a broker's claims.

Furthermore, dealers are required to comply with a variety of laws
pertaining to the retention of personally identifying information
such as credit card information, social security numbers, addresses
etc. However, brokers are not held to these same standards because
many of the laws only apply to dealers despite the fact that dealers
and brokers obtain similar information in the course of doing
business. On Long Island, a broker is being sued for, among other
things, using consumer information to obtain loans without consent.
Brokers should be subject to the same requirements as dealers to
safeguard consumers against similar practices.

PRIOR LEGISLATIVE HISTORY:
New Bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
This act shall take effect immediately.

S5477-2011 Text

                      S T A T E   O F   N E W   Y O R K
  ________________________________________________________________________

                                    5477

                         2011-2012 Regular Sessions

                              I N  SENATE

                                May 25, 2011
                                 ___________

  Introduced  by  Sen.  ZELDIN -- read twice and ordered printed, and when
    printed to be committed to the Committee on Consumer Protection

  AN ACT to amend the general business  law,  in  relation  to  increasing
    disclosures by automobile broker businesses

    THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
  BLY, DO ENACT AS FOLLOWS:


    Section 1. Paragraph (e) of subdivision 1 of section 738 of the gener-
  al business law, as added by chapter 616 of the laws of 1988, is amended
  to read as follows:

    (e) A description of any other services  and  an  itemization  of  the
  charges for each. SUCH DESCRIPTION SHALL INCLUDE DISCLOSURE OF THE AUTO-
  MOBILE  DEALER  FROM  WHICH THE AUTOMOBILE WAS PURCHASED, AS WELL AS ALL
  FEES, COMMISSIONS OR OTHER VALUABLE CONSIDERATIONS PAID BY AN AUTOMOBILE
  DEALER TO THE AUTOMOBILE BROKER BUSINESS FOR SELLING, ARRANGING, ASSIST-
  ING OR EFFECTING THE SALE OF AN AUTOMOBILE AS AGENT, BROKER, OR INTERME-
  DIARY BETWEEN THE CONSUMER AND THE AUTOMOBILE DEALER.
    S 2. The general business law is amended by adding  two  new  sections
  740-a and 740-b to read as follows:

    S  740-A.  CONFIDENTIALITY OF SOCIAL SECURITY ACCOUNT NUMBER.  AUTOMO-
  BILE BROKER BUSINESSES SHALL COMPLY WITH THE CONFIDENTIALITY  PROVISIONS
  CONTAINED  IN  SECTION  THREE HUNDRED NINETY-NINE-DD OF THIS CHAPTER, AS
  SUCH SECTION WAS ADDED BY CHAPTER SIX HUNDRED SEVENTY-SIX OF THE LAWS OF
  TWO THOUSAND SIX.
    S 740-B. AUTOMOBILE BROKER BUSINESS SURETY BOND. 1. AUTOMOBILE  BROKER
  BUSINESSES  SHALL  OBTAIN  AND  CONTINUE  IN  EFFECT A SURETY BOND IN AN
  AMOUNT OF TWO HUNDRED FIFTY THOUSAND DOLLARS EXECUTED BY A SURETY COMPA-
  NY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE BY THE INSURANCE DEPART-
  MENT OF THE STATE. THE BONDS SHALL BE APPROVED AS TO FORM BY THE  SECRE-
  TARY  OF  STATE  AND  SHALL  BE  CONDITIONED  ON  THE  AUTOMOBILE BROKER
  BUSINESS' PAYMENT OF ALL VALID BANK DRAFTS, INCLUDING CHECKS, DRAWN  FOR
  THE  PURCHASE  OF  MOTOR  VEHICLES  SAFEKEEPING OF ALL CUSTOMER DEPOSITS

   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD11150-02-1

 S. 5477                             2

  RELATED TO THE SALE OF A MOTOR VEHICLE BETWEEN THE TIME  OF  RECEIPT  OF
  SUCH  CUSTOMER  DEPOSIT AND THE TRANSFER OF GOOD TITLE TO THE VEHICLE TO
  THE CUSTOMER.
    2.  RECOVERY  AGAINST  A  BOND  MAY BE MADE BY A PERSON, INCLUDING THE
  STATE, WHO OBTAINS A JUDGMENT AGAINST THE AUTOMOBILE BROKER BUSINESS FOR
  AN ACT OR OMISSION ON WHICH THE BOND IS CONDITIONED IF THE ACT OR  OMIS-
  SION  OCCURRED  DURING THE TERM OF THE BOND. THE TOTAL LIABILITY IMPOSED
  ON THE SURETY UNDER THIS SECTION FOR ALL BREACHES OF THE BOND  CONDITION
  IS  LIMITED  TO THE FACE AMOUNT OF THE BOND. SUCH LIABILITY MAY INCLUDE,
  BUT IS NOT LIMITED TO, THE AMOUNT OF THE VALID  BANK  DRAFTS,  INCLUDING
  CHECKS,  DRAWN  BY  THE  AUTOMOBILE  BROKER BUSINESS FOR THE PURCHASE OF
  MOTOR VEHICLES. IN NO EVENT SHALL THE SURETY ON A  BOND  BE  LIABLE  FOR
  TOTAL  CLAIMS  IN EXCESS OF THE BOND AMOUNT, REGARDLESS OF THE NUMBER OR
  NATURE OF CLAIMS MADE AGAINST THE BOND OR THE NUMBER OF YEARS  THE  BOND
  REMAINED IN FORCE.
    3.  ANY  SURETY  ISSUING  A BOND PURSUANT TO THIS SUBDIVISION SHALL BE
  REQUIRED TO PROVIDE SIXTY DAYS' NOTICE TO THE SECRETARY OF  STATE  PRIOR
  TO THE EFFECTIVE DATE OF CANCELLATION OF THE BOND.
    S 3. The general business law is amended by adding a new section 741-a
  to read as follows:

    S  741-A.  ADVERTISING.  1. IN ADDITION TO THE PROVISIONS CONTAINED IN
  SECTION SEVEN HUNDRED FORTY-ONE OF THIS ARTICLE, AUTOMOBILE BROKER BUSI-
  NESSES SHALL COMPLY WITH THE ADVERTISING PROVISIONS CONTAINED IN SECTION
  SIXTY-THREE OF THE EXECUTIVE LAW, AS WELL AS SECTION THREE HUNDRED NINE-
  TY-SIX AND ARTICLE TWENTY-TWO-A OF THIS CHAPTER. IT  IS  HEREBY  FURTHER
  DECLARED TO BE A DECEPTIVE TRADE PRACTICE AND UNLAWFUL FOR AN AUTOMOBILE
  BROKER BUSINESS TO ENGAGE IN THE FOLLOWING:

    (A)  USE  OF  ONE  OR  MORE  FOOTNOTES OR ASTERISKS WHICH, ALONE OR IN
  COMBINATION, CONTRADICT,  CONFUSE,  MATERIALLY  MODIFY  OR  UNREASONABLY
  LIMIT A PRINCIPAL MESSAGE OF THE AD;
    (B)  USE OF ANY PRINT IN A TYPE SIZE LESS THAN TEN-POINT TYPE IN PRINT
  ADVERTISING;
    (C) USE OF COLOR CONTRASTS WHICH RENDER THE TEXT DIFFICULT TO READ;
    (D) USE OF INACCURATE PHOTOGRAPHS  OR  ILLUSTRATIONS  WHEN  DESCRIBING
  SPECIFIC AUTOMOBILES; AND
    (E)  USE OF ANY UNEXPLAINED ABBREVIATION OR JARGON WHICH IS CONFUSING,
  MISLEADING OR NOT READILY UNDERSTOOD BY THE GENERAL PUBLIC.
    2.  AUTOMOBILE BROKER BUSINESSES SHALL ALSO DISCLOSE THE FOLLOWING  IN
  ALL  ADVERTISEMENTS  IN ANY MEDIUM, AND SUCH DISCLOSURES SHALL NOT BE IN
  ANY FOOTNOTES OR ASTERISKS AND SHALL BE IN THE TOP HALF  OF  ANY  ADVER-
  TISEMENT IN A TYPEFACE NO SMALLER THAN THE LARGEST TYPEFACE OR FONT USED
  IN THE AD:

    (A)  THAT  THE  AUTOMOBILE BROKER BUSINESS IS NOT A LICENSED NEW MOTOR
  VEHICLE DEALER AS DEFINED IN SECTION FOUR HUNDRED FIFTEEN OF THE VEHICLE
  AND TRAFFIC LAW;
    (B) WHETHER ANY FEES MAY BE IMPOSED BY THE AUTOMOBILE BROKER  BUSINESS
  FOR SERVICES RENDERED. DETAILS OF SUCH COMPENSATION SHALL BE PROVIDED BY
  THE AUTOMOBILE BROKER BUSINESS UPON REQUEST BY THE CONSUMER; AND
    (C)  THAT  NO VEHICLE REPAIR, WARRANTY, OR OTHER SIMILAR SERVICES WILL
  BE PROVIDED BY THE AUTOMOBILE BROKER BUSINESS.
    S 4. This act shall take effect immediately.