SENATE BILL REPORT

SB 6167

BYSenators von Reichbauer, Rasmussen, McCaslin, Smitherman, Matson, Moore, Johnson, Warnke, Bauer and Conner; by request of Attorney General

Regulating motor vehicle brokering and subleasing.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 11, 1990; January 16, 1990

Majority Report:  That Substitute Senate Bill No. 6167 be substituted therefor, and the substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Moore, Rasmussen, Smitherman, West.

Senate Staff:Walt Corneille (786-7416)

                  January 18, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, JANUARY 16, 1990

BACKGROUND:

Auto brokerage firms solicit people who are having difficulty making their car payments to enter into agreements with them to help the troubled car owner get rid of the vehicle and get out from under the payments.  The auto broker convinces the troubled car owner to enter into an agreement where the broker agrees to find someone to assume the liability on the vehicle.  The auto broker then finds an individual to either sublease or purchase the car and charges that person a fee usually between $500 and $2,000. 

Problems arise when the auto broker fails to tell the bank or financing company about the transfer of ownership.  The company holding the financing on the vehicle can legally repossess a car when it learns of the transfer.  As a result, both the buyer and the selling parties may be subject to an unexpected repossession of the vehicle.  If the lender or finance company repossesses the vehicle, the person who originally was having difficulty with the payments acquires a negative credit history and the person who took over the payments for a substantial fee loses the car. 

Recently the Attorney General's office brought two consumer protection lawsuits against several auto brokers in the western Washington area.  Several states have adopted statutes prohibiting these practices.

SUMMARY:

The unlawful brokering or subleasing of a motor vehicle is made a class C felony.  A violation of the act constitutes a crime under the criminal profiteering statute.  It is also made an unfair and deceptive act to engage in unlawful brokering or subleasing of a motor vehicle making that activity a violation of the Consumer Protection Act.

The unlawful brokering of a motor vehicle occurs unless the dealer pays off the lender within two business days after the acquisition of the vehicle, the dealer obtains a certificate of ownership provided it is not held by a security interest, and the dealer transfers the ownership upon sale of the vehicle.

A person engages in the unlawful subleasing of a motor vehicle when the vehicle's license contract contains terms prohibiting transfers or assignments, the person 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 contract or agreement without the company's consent and the person receives compensation for the services provided.

EFFECT OF PROPOSED SUBSTITUTE:

To assure that legitimate auto brokers are not subject to the act, all reference to unlawful brokering of a motor vehicle is changed to unlawful transfer of an ownership interest in a motor vehicle.

Language is clarified to assure that all the elements of the crime of unlawful subleasing or transfer of an ownership interest in a motor vehicle must be met before someone can be charged with the crime.

Unlawful transfer of an ownership interest in a motor vehicle is made an unlawful act or practice pursuant to the auto dealer licensing law.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Paula Selis, Attorney General's office (pro); Al Anderson, Attorney General's office (pro); Steven C. Gilyeart, National Vehicle Leasing Assoc. (pro); Heather Hamilton, Department of Licensing (pro); Jim Boldt, Washington Auto Dealers (pro)