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Section 25

Continuing Education Requirements / Recent Changes

bulls eye25.6 Car Buyers' Bill of Rights (AB 68)

The Car Buyer’s Bill of Rights makes major changes to rules and procedures affecting the retail sales of used vehicles for less than $40,000. If your dealership fits this category, we strongly encourage you to carefully read the sections below. They are full of valuable information and tips to help you easily comply with the Bill’s rules.

Bill of Rights Forms Kit

In the next section, look for another bulls eye symbol. There you will find a link to our Bill of Rights Kit. It contains forms, checklists, and other valuable tools to help you comply with the Bill of Rights. We are providing this complete kit at no cost as a complimentary service to our dealers. Thank you again for taking our course. Please recommend us to your dealer friends!
  1. Two Day Cooling Off Period

    1. Requirements
      1. Used motor vehicles dealers must
      2. Offer a Two Day Cooling Off Period Option to
      3. Retail buyers of vehicles sold for
      4. Less than $40,000.00.
      5. This excludes motorcycles and off-road vehicles.

        Note, as of January 1, 2007, RV’s are no longer excluded and must offer a cooling off period for purchases less than $40,000.
      6. The retail buyer can return the vehicle for any reason
      7. Within two days of taking delivery, provided that he or she has
      8. Driven fewer than 250 miles (or higher if the dealer agrees)
      9. The vehicle must be returned “Undamaged

        “Undamaged” means in substantially the same condition as at time of delivery, normal wear and tear excepted. The dealer gets to determine whether the vehicle is undamaged and in substantially the same condition as at time of delivery.

      10. Except for defects/problems that became evident after delivery.
      11. The Two Day Cooling Off Period option must be a separate document from the sales contract.
      12. This separate document will most commonly be referred to as the
        “Contract Cancellation Option Agreement”, or “Cancellation Agreement.” See details below.
      13. If the vehicle is returned, the dealer must cancel the contract and provide a Full Refund to the buyer within two days of the date of cancellation.

        “Full Refund” includes sales tax, and reg. fees, but not:
        1. The fee for the Cancellation Agreement (see below)
        2. The Re-Stocking fee (see below). Note that the fee for the Cancellation Agreement must be subtracted from the Re-Stocking fee.
        3. Note: You do not have to refund DMV fees if the buyer demands title at the sale and completes the registration themselves.

    2. Measuring the “2 Days” for the Cooling Off Period

      The two days of the cooling off period begin to run at time of delivery.

      The two days must be two regular business days for that dealer. In other words, if you sell the vehicle Friday evening at 7:00 p.m., and your dealership is open Saturday, but not Sunday, the buyer has until 7:00 p.m. Monday evening to return the car within the required two (business) day time period.

    3. Two Day Cooling Off Period Fee

      Graphic of Bills and Coins

      New Vehicle Code Section 11713.21 (a)-(d) allows the dealer to charge the following maximum amounts for the two day cooling off period option contract:

      1. Seventy-five dollars ($75) for a vehicle with a cash price of five thousand dollars ($5,000) or less.
      2. One hundred fifty dollars ($150) for a vehicle with a cash price of more than five thousand dollars ($5,000), but not more than ten thousand dollars ($10,000).
      3. Two hundred fifty dollars ($250) for a vehicle with a cash price of more than ten thousand dollars ($10,000), but not more than thirty thousand dollars ($30,000).
      4. One percent of the purchase price for a vehicle with a cash price of more than thirty thousand dollars ($30,000), but not more than forty thousand dollars ($40,000).

    4. Re-Stocking Fee

      The dealer may also charge a re-stocking fee. This fee must also be put in writing. The restocking fee shall not exceed the following:

      1. One hundred seventy-five dollars ($175) if the vehicle's cash price is five thousand dollars ($5,000) or less;
      2. Three hundred fifty dollars ($350) if the vehicle's cash price is less than ten thousand dollars ($10,000); and
      3. Five hundred dollars ($500) if the vehicle cash price is ten thousand dollars ($10,000) or more.

      Note: The dealer shall apply the cost of the option to cancel the contract toward the restocking fee. For example, if the vehicle is sold for less than $5,000, the dealer can charge $75.00 for the option to cancel the contract. If the buyer then elects to cancel the contract within the next two days, the dealer can also charge the $175.00 re-stocking fee. However, the dealer must credit the $75.00 already paid for the option to cancel at the time the sale was made to the restocking fee. So, in effect, the dealer gets to keep the original $75.00 collected for the option to cancel, and an additional $100.00 for the re-stocking fee.

    5. Trade Ins

      If, as part of the purchase, the buyer traded in a vehicle and was not charged for the cancellation option, the dealer shall return to the buyer, no later than the day following the day on which the buyer exercises the right to cancel the purchase, any motor vehicle the buyer left with the seller as a down payment or trade-in. If the dealer has sold or otherwise transferred title to the motor vehicle that was left as a down payment or trade-in, the dealer must pay the buyer either the agreed value of the vehicle as written into the contract or the fair market value, whichever is higher.

    6. The Contract Cancellation Option Agreement

      This is the agreement the buyer pays for and signs for the option to bring the vehicle back within two days of delivery. It must meet the following requirements:
      1. Must be a separate document from the sales document
      2. Must include the VIN and description of the vehicle
      3. Must specify a minimum of Two Business Days for cancellation
        “Two Business Days” means the next two days you are open for business.

      4. Must specify the maximum number of miles allowed (minimum of 250 required)
      5. Must specify the condition of the vehicle for return
      6. Must state the last date and time the buyer can cancel
      7. Must include a place for the buyer to sign electing the option to cancel
      8. Failure to offer the buyer this Cancellation Agreement is a cause for action against a dealer’s license.

    7. The Sales Contract

      1. Must include a new disclosure next to the place for the buyer’s signature notifying the buyer that a used vehicle (sold for under $40,000) may be returned and the purchase cancelled within the time frame specified in the Cancellation Option Agreement.
      2. Must contain the new two day cooling off period notice set forth in Section 2, “Cooling Off Period Notice” below.
      3. The form company providers now have these new disclosures inserted into their standard form conditional sales contracts. However, make sure to throw out all your old forms so they are not used by mistake.

    8. 2 Day Cooling Off Period Sign Posting You must remove your current “No Cooling Off Period” signs at the dealership. Then you will need to conspicuously display the new two day cooling off period notice, not less than eight inches high and ten inches wide, in each sales office and sales cubicle of your established place of business where written terms of specific sale or lease transactions are discussed with prospective purchasers or lessees. You will also need to place these new notices in each room of your established place of business where sale and lease contracts are regularly executed. These notices must state the following:


      California law does not provide for a "cooling-off" or other
      cancellation period for vehicle lease or purchase contracts.
      Therefore, you cannot later cancel such a contract simply because you
      change your mind, decide the vehicle costs too much, or wish you had
      acquired a different vehicle. After you sign a motor vehicle
      purchase or lease contract, it may only be canceled with the
      agreement of the seller or lessor or for legal cause, such as fraud.

      However, California law does require a seller to offer a 2-day
      contract cancellation option on used vehicles with a purchase price
      of less than $40,000, subject to certain statutory conditions. This
      contract cancellation option requirement does not apply to the sale
      of a motorcycle or an off-highway motor vehicle subject to
      identification under California law. See the vehicle contract
      cancellation option agreement for details."

      Note: This same notice must also appear in the conditional sale contract. By the time this law goes into effect, July 1, 2006, all of the form company providers should have this notice in their pre-printed contracts and related software. They should also be able to provide you the separate, standardized, “Cancellation Option Agreement” referred to in the last sentence of the No Cooling Off Period Notice above. Make sure to offer this Cancellation Option Agreement during every used vehicle sale. Also make sure to throw out all of your old, out-dated, contracts and forms.

    9. Trade in Vehicle Sold Before 2 Day Period Expires

      1. Where the Cancellation Contract was purchased:

        Where the buyer trades in a vehicle and also purchases the Cancellation Agreement, the dealer is prohibited from selling the trade in until the expiration of the two day period.
        If, however, the trade in is sold by mistake, (the dealer must prove the dealership has procedures in place to avoid this problem or else face a possible lawsuit), then the dealer must pay the buyer the fair market value of the trade in, or the value as stated in the contract, whichever is higher.

      2. Where the Cancellation Contract was not purchased:

        If the buyer was not charged for the Cancellation Contract, the dealer does not have to retain the trade in. However, the dealer must return the trade in if it is available, or refund the higher of the fair market value or the value stated in the contract.

    10. Prior Return Exception – No 2 Day Cooling Off Period Required

      The dealer does not have to offer a contract cancellation option to the buyer if the buyer has returned a vehicle to the dealer under a contract cancellation option within the prior 30 days.

    11. Handling Returns During 2 Day Cooling Off Period

      The vehicle is sold, for DMV paperwork purposes, as of the date the buyer signs the contract and takes delivery of the vehicle, even if they later return the vehicle during the 2 Day Cooling Off Period. Therefore, do not void the Reg 51, Report of Sale, even if you are still in possession of the Reg 51 when the vehicle is returned. The buyer’s operation of the vehicle during the 2 Day Cooling Off Period has caused DMV fees to be due so you must continue to process the paperwork according the to normal used vehicle rollback procedure. If you are unfamiliar with the rollback procedure, see Section 26.3 of these course materials to learn how to do a rollback.

      Also, do not allow the buyer to drive the vehicle on dealer plates after they have purchased it. That is prohibited, and it also exposes you to greater liability in case of an accident.

    12. Buyer’s Responsibilities

      1. Return the vehicle to the dealer within two business days
      2. Return the original contract and all original titling and registration documents provided
      3. Not exceed 250 miles (or higher agreed upon number)
      4. Vehicle must be free of all liens and encumbrances other than those arranged by the dealer or buyer at time of purchase.
      5. Must return vehicle in same condition, less normal wear and tear.

    13. Brokers and Consignment Dealers

      Yes, the Customer’s Bill of Rights law also applies to you. You must provide the buyer with 2 Day Cooling Off Period option for vehicles selling for less than $40,000, as well as comply with all the other requirements of Bill of Rights.

    14. Vehicle Condition  Forms

      Dealers should prepare written vehicle condition reports to be completed at the time the vehicle is delivered to the buyer.   This will document the condition of the vehicle at delivery.  If the vehicle is returned with additional damage, the dealer can reject the vehicle, and the buyer is not entitled to a refund under the Bill of Rights.

      The dealer gets to decide what is inspected and its condition at both the time of delivery and if the vehicle is returned. However, make sure to also have the buyer sign vehicle condition report indicating they agree with the reported condition of the vehicle at the time they took delivery. As part of the sale, the dealer can also contract to inspect and re-try (test drive) the vehicle if it is returned within the Two Day Cooling Off Period.

      Dealers can anticipate that DMV will require these forms to be maintained as part of their sale records. Samples of these forms are included in our Bill of Rights Kit. Our students can download them free of charge at the Bill of Rights Kit link found at the end of this section.

  2. Bill of Rights “Certified” Used Vehicle Advertising Rule

    The Bill of Rights restricts which vehicles may be advertised/promoted as “Certified.” The following vehicles may not be advertised/promoted as “Certified:”

    1. Vehicles where the odometer reading is inaccurate;
    2. Vehicles reacquired by its manufacturer or a dealer pursuant to federal or state warranty laws;
    3. Vehicles where the title has been inscribed with a negative notation such as “Lemon Law Buyback” or “salvage;”
    4. Vehicles that have sustained damage substantially impairing its use or safety;
    5. Vehicles that have sustained frame damage;
    6. Vehicles where the dealer has not provided the buyer with a completed inspection report that indicates all of the components inspected;
    7. Vehicles where the dealer disclaims any warranty of merchantability; or
    8. Vehicles sold “AS IS.”

      A dealer may not advertise a vehicle as “certified” unless prior to the sale the buyer is provided a completed inspection report showing all items inspected under the certification program.

      A violation of the new “certified” rules is actionable under
      1. The Consumer Legal Remedies Act
      2. Unfair Competition Law
      3. Business & Professions Cod 17500 prohibiting false/misleading advertising; and
      4. Any other applicable law

  4. Bill of Rights Dealer Arranged Financing Rules

    The Car Buyer's Bill of Rights now requires:

    • Disclosure of customer credit scores,
    • Disclosure of certain additional products and services and their costs, and
    • Finance Charge Limits between 2% and 2.5%

    1. Disclosure of Credit Scores

      A dealer who arranges financing, makes a credit sale, sells or otherwise transfers a conditional sales contract must disclose any three digit credit score obtained from the credit agency.
      The disclosure must:

      a. Be a separate document which includes the
      b. Name and address of the seller at the top
      c. States the 3 digit credit score
      d. States the name/address/phone of any credit agency providing a score, and
      e. The range of scores established by that credit agency.

    2. Disclosure of Additional Products and Services and Their Costs

      The Bill of Rights expands the categories of optional items, listed in Civil Code Section 2982, whose costs must be separately itemized in conditional sale contracts.

      If the sale or lease includes any of the following:

      1. A service contract or maintenance plan
      2. Insurance product
      3. Theft deterrent or protection product
      4. Debt cancellation agreement (“gap” insurance), or
      5. Exterior or interior surface protection

    3. Then the dealer must provide the buyer a separate written disclosure providing:

    4. A description and cost of each item
    5. Total cost of all items
    6. The amount of the installment payment if the buyer purchases the items, and
    7. The amount of the installment payment if the buyer does not purchases the items.

    This disclosure must include the name and address of the dealer, and the date at the top of the document.

    If, after this disclosure has been provided to the buyer, the buyer changes his/her mind as to which items they want, you must create a new disclosure form. Hand writing in new items, or crossing out items the buyer no longer wants, will not be acceptable.

    Failure to provide the buyer these disclosures is a cause for action against a dealer’s license and is a misdemeanor crime!

  5. Finance Charge Limits Between 2% and 2.5%

    When assigning a conditional sales contract, dealers are now limited to the following finance charges:

    2 ½% for contracts up to 60 months
    2% for contracts over 60 months

    These limits do not apply when:

    1. The dealer bears the entire risk of the buyer’s financial performance;

    2. The assignment is more than 6 months after the date of the conditional sales contract.

      Receiving an amount higher than the authorized rate(s) is a cause for action against a dealer’s license and is a misdemeanor crime! However, if the dealer can prove the overcharge was

      1. An isolated incident; and
      2. A bona fide (real/honest) error; and
      3. The dealer has reasonable procedures to guard against such errors; and
      4. Upon notice of the error the dealer promptly remited the excess back to the buyer;
      5. Then the dealer may avoid the penalties above.

  • “Adjusting” the Numbers

    Dealers may not add charges for goods or services after negotiating the deal terms unless they obtain the buyer’s informed consent in writing.

    Dealers also may not inflate down payments, installment payments, or extend the maturity of a sale or lease contract for the purpose of disguising the actual charges or goods or services to be added by the dealer to the contract

    Failure to uphold this law is a cause for action against a dealer’s license.

    photo of handcuffs

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