Senate Bill S6543

                                 
BILL NUMBER: S6543

SPONSOR: SANDERS
 
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 registra-
tion 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 elim-
ination 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 0-3k 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 0-31 on the financing. This is a
legitimate means for dealerships to earn revenue by facilitating financ-
ing 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 involv-
ing 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-discrimina-
tory 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:

S.5491 (Klein) of 2015- referred to Transportation Committee

S.5491 (Klein) of 2016- referred to Transportation Committee

 
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.