HOUSE BILL REPORT

SSB 6167

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Rasmussen, McCaslin, Smitherman, Matson, Moore, Johnson, Warnke, Bauer and Conner; by request of Attorney General)

Regulating motor vehicle subleasing and ownership transfers.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (9)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Baugher, Beck, Crane, Day, Dorn, Inslee and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 1, 1990

BACKGROUND:

Auto brokering is a process in which a broker arranges for an individual to take over another individual's vehicle lease or purchase contract payments. The individual who takes over the payments gets possession of the vehicle, and is charged a fee for the broker's services.

Problems arise when a brokerage firm fails to assure that payments continue to reach the lessor or secured party.  This can result in an impaired credit rating for the first individual, who continues to be responsible under the terms of the lease or purchase contract.  Other problems arise when a brokerage firm fails to inform the lessor or secured party about a transfer of possession of the vehicle. This can result in a lawful repossession of the vehicle.

Washington law regulating the distribution and sale of vehicles does not prohibit the practice of auto brokering.

SUMMARY:

A new chapter is added to RCW Title 19, which regulates miscellaneous business practices.  Auto brokering is identified as two practices: facilitating the subleasing of a motor vehicle or facilitating the transfer of an ownership interest in a motor vehicle.

Unlawful subleasing of a motor vehicle occurs when the vehicle's lease contract contains terms prohibiting transfers or assignments; the person facilitating the transaction is not a party to the lease contract or security agreement; the person transfers the lease to a person who is not a party to the lease contract or security agreement without the written consent of the lessor or secured party; and the person receives compensation for the services provided.  Unlawful transferring of an ownership interest in a vehicle occurs when a dealer fails to pay off a secured party within two business days after the acquisition of a vehicle; the dealer fails to obtain title to the vehicle, unless the title is held by someone holding a security interest in the dealer's inventory; and the dealer fails to transfer title upon transfer of the vehicle.

The unlawful subleasing of a motor vehicle, as well as the unlawful transfer of an ownership interest in a motor vehicle, are class C felonies. A violation constitutes an act of criminal profiteering for purposes of applying the Criminal Profiteering Act.  A violation also constitutes an unfair and deceptive act for purposes of applying the Consumer Protection Act.  Original parties to a contract, however, are not subject to prosecution under any of the provisions of the new chapter.

The unlawful transfer of an ownership interest in a motor vehicle is also unlawful act under Chapter 46.70 of the RCW, which regulates the practices of vehicle dealers.

A private cause of action is created for individuals injured by acts prohibited by the new chapter.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Paula Selis, Office of Attorney General; Alfred Anderson, Office of Attorney General; Roy Robertson; and Heather Hamilton, Department of Licensing.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Some unlawful brokering practices amount to "scams" against banks and other lending institutions.  The office of the Attorney General has filed consumer protection suits against some brokers for unfair and illegal practices.

House Committee - Testimony Against:      None.