Increases disclosures of automobile brokers.
Ayes (9): Zeldin, Ball, Fuschillo, Little, Marcellino, O'Mara, Hassell-Thompson, Huntley, Squadron
Excused (1): Adams
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.
STATE OF NEW YORK ________________________________________________________________________ 5477 2011-2012 Regular Sessions IN 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 DEPOSITSEXPLANATION--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.