Pro-consumer/auto safety organizations urge Governor Newsom to veto bill backed by debt collectors and auto manufacturers

NEWS for IMMEDIATE RELEASE: October 5, 2023

Contacts: Rosemary Shahan, CARS, 530-759-9440
Michael Brooks, Center for Auto Safety, 202-328-7700 x 408
Megan Varvais, Public Justice, 510-566-7768

Pro-consumer/auto safety organizations urge Governor Newsom to veto bill backed by debt collectors and auto manufacturers

Unprecedented Attack on Low and Moderate Income Californians

SACRAMENTO, CA –  A large coalition of leading non-profit consumer and auto safety organizations based in California and Washington, D.C. is urging Governor Newsom to veto legislation backed by debt collectors and auto manufacturers who seek to evade being held accountable for engaging in illegal debt collection practices or selling seriously defective lemon cars.

The bill, SB 71, is authored by Senator Tom Umberg (D-Santa Ana) and co-authored by right-wing Republican Assemblymember Bill Essayli. SB 71 would significantly increase the dollar amount for legal disputes in “limited” civil courts, where consumers face numerous procedural barriers and often lack any legal representation, from $25,000 to $35,000.

If SB 71 is enacted, millions of low and moderate-income victims of illegal debt collection practices or defective auto lemons would lose access to “unlimited” civil courts where currently they can get the legal discovery they need to prove their cases.  Hapless consumers would also find it difficult or impossible to obtain legal counsel when they are up against giant corporations with legions of attorneys on their side.

The Alliance for Automotive Innovation wrote in favor of SB 71 that it would “reduce litigation,” fulfilling one of the Alliance’s top priorities –  denying auto lemon owners access to courts where the consumers almost always win.

“No other California governor has signed legislation to weaken California’s landmark auto lemon law,” said Rosemary Shahan, President of Consumers for Auto Reliability and Safety (CARS).  The original auto “lemon law” was signed into law by former Governor Ronald Reagan in 1970.

Since then, Democratic Governors Jerry Brown and Gray Davis, and Republican Governors Pete Wilson and Arnold Schwarzenegger all signed legislation spearheaded by CARS to improve and expand California’s auto lemon law – including strengthening protections against lemons with life-threatening safety defects, protecting small business owners and self-employed individuals such as real estate agents and landscapers who need safe, reliable vehicles to make a living and to keep their businesses afloat, and to protect active duty military personnel and their families who are stationed in or deployed from California, regardless where they purchased their lemon autos.

“If Governor Newsom signs SB 71, auto lemon owners who buy defective cars in California for less than $35,000 will suddenly go from having some of the best lemon-aid in the country to having some of the worst,” said Michael Brooks, Executive Director of the Center for Auto Safety.

SB 71 also threatens to inflict disparate harm on Black and Hispanic consumers. According to research into California’s civil courts, “Cases filed in California courts to collect consumer debts disproportionately burden Black and Hispanic borrowers. Data drawn from civil court records show that claims to collect defaulted consumer debts are filed at a higher rate against borrowers of color than against white borrowers. The type of creditor also varies by the borrower’s race and ethnicity. Black and Hispanic litigants are also less likely to be represented by an attorney. The distribution of case participation and outcome also varies by race, with fewer answers filed and more judgments entered against Hispanic and Black defendants.”[1]

Among the procedural barriers in “Limited” civil courts:

• • Severe limitations on discovery
  • Severe limitations on depositions (with rare exceptions, only one)
  • Drastically reduced time period for filing appeals, from 60 days to 30 days
  • Lack of access to appellate courts for appeals
  • Lack of authority to provide injunctive relief
  • Lack of access in many cases to civil penalties or punitive damages, which would otherwise serve to help deter violations of the law
  • Arbitrary cap on damages that a jury or judge can award, even if appropriate damages would exceed the jurisdictional amount

The official Assembly Judiciary Committee analysis of SB 71 says that it is supposed to “provide an accessible forum for resolving minor civil disputes.”  But as Megan Varvais, speaking on behalf of Public Justice, points out, “for most Californians, $35,000 is not a minor amount of money. California consumers need and deserve the full protection of the law.”

According to J.D. Power, complaints about new motor vehicles have risen sharply, with more consumers complaining about problems due to faulty electronics and errors in software.

[1] “The Unequal Burden of Debt Claims: Disparate Impact in California Debt Collection Cases,” by by Claire Johnson Raba, Debt Collection Lab, July 30, 2023, page 1. Posted at: https://debtcollectionlab.org/research/unequal-burden-of-debt-claims.

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