Senate Bill S5491

                                BILL NUMBER:S5491                REVISED 5/20/15

TITLE OF BILL:  An act to amend the vehicle and traffic law, in
relation to requiring retail motor vehicle dealers to disclose to
purchasers any markups in the cost of a motor vehicle as the result of
financing the cost thereof; and to amend the financial services law,
in relation to authorizing the financial frauds and consumer
protection unit to study motor vehicle dealer price markups

PURPOSE:  This bill requires auto dealers to disclose any financing
markups to consumers. It also allows the Department of Motor Vehicles
to take corrective action in the event that a dealership does not
comply, and allows consumers an avenue of recovery if the dealership
does not disclose this markup. This bill also authorizes the Financial
Frauds and Consumer protection Unit of the Department of Financial
Services to conduct a study on race impacts in auto dealer financing
markups and to make recommendations regarding the elimination of
practices that cause markups to have a race-based impact.

SUMMARY OF PROVISIONS:

Section 1: Amends Section 415 of the vehicle and traffic law to
require auto dealers to disclose any markups on the vehicle financing.
In the event that an auto dealer fails to disclose a markup, the
Department of Motor Vehicles shall have the power to suspend or revoke
the registration issued to such dealer. This section also entitles an
              

aggrieved purchaser to compensatory damages equal to the cost of the
financing markup and reasonable attorney's fees.

Section 2: Amends Section 404 of the financial services law to
authorize the Financial Frauds and Consumer Protection Unit of the
Department of Financial Services to conduct a study of the patterns
and practices of motor vehicle financing markups to identify
problematic practices, including race discrimination, and to make
recommendations for the elimination of such practices. This section
also directs the Unit to send the findings of its study to certain
parties.

Section 3: This act shall take effect on the first of January next
succeeding the date on which it shall have become a law.

EXISTING LAW:  Under current law, auto dealers do not have to disclose
any markup on the back end of the financing and generally have
discretion to add a cost of between 0-3% to the financing; this cost
is shouldered by the consumer.

JUSTIFICATION:  Dealerships earn additional revenue from the back-end
of the financing when they include a markup between 0-3% on the
financing. This is a legitimate means for dealerships to earn revenue
by facilitating financing for a buyer, but the buyer should be aware
that the dealership is charging them this extra fee to do so.

There is no transparency involving the markup and the consumer is
almost never aware this markup even exists. It incentivizes auto
dealers to seek more expensive financing (when that more expensive
financing allows a larger. dealer markup) and roll add-ons into the
financing to inflate back-end financing profits.


Additionally, Federal and advocacy organization investigations have
demonstrated that these markups are being applied in a
race-discriminatory fashion. One report found that in New York,
African-Americans were being subjected to dealer markups at a rate
311% higher than those given to Caucasians.

LEGISLATIVE HISTORY: This is a new bill.

FISCAL IMPLICATIONS: None.

LOCAL FISCAL IMPLICATIONS:  None.

EFFECTIVE DATE:  This act shall take effect on the first of January
next succeeding the date on which it shall have become a law.