Majority Chairman Wogan, Minority Chairman McCall, Representative Evans, Co-Sponsors of HB 767 and Members of the Committee, thank you for allowing me the opportunity to once again speak before you. As always, it is an Honor and privilege.
As some of you are aware, my law practice and that of my firm, Kimmel & Silverman, is limited to consumer warranty claims. Located in Ambler, Montgomery County, we are proud of our role these last 10 years in helping more than 15,000 people obtain satisfaction for their car problems.
Our clients are not charged for representation, as the automobile manufacturer is required to pay reasonable fees and costs under provisions of the Lemon Law. Because of this, Pennsylvania consumers have cost-free access to legal help in resolving their good faith warranty disputes.
The existing Lemon Law, one of the first to be enacted in the United States, has served the Commonwealth well. It currently provides consumers who both purchase and register their car in Pennsylvania, a means to obtain satisfaction, for substantial impairments first reported during the initial 12 months and 12,000 miles of use.
A presumption of lemon status occurs after the third unsuccessful repair attempt.
Over the last 18 years since the Lemon Law was passed (1983), the world has indeed changed and it is true, that the law needs updating. Auto industry and market changes mandate these occur in the near future, to ensure that the law continues to serve all Pennsylvania consumers fairly and reasonably.
I am pleased to endorse HB 767 as an excellent means to achieve these goals, with a few suggestions, and can say that the revisions will protect Pennsylvanians, not only today, but for the next 10 - 15 years.
There are two primary areas of change: Sections 2 and 10, relating to the inclusion of leased vehicles and title branding respectively. These will add significant, needed protections.
Regarding inclusion of lease transactions and the urgency behind that change, I have a few observations to share.
First, Lemon Law coverage for leased vehicles is common in sister states. New Jersey is perhaps the best example, due to proximity to the Commonwealth and frequency of business transactions with Pennsylvania consumers. Leased vehicle coverage in New Jersey has helped create uniform warranty practices.
Second, based upon my 10 years experience, it is clear to me that the automobile industry, foreign and domestic, has different customer satisfaction practices depending upon whether the car was leased or purchased. It is not an overstatement when I say that consumers who lease are treated with a callous indifference by the industry far more frequently than consumers who purchase their cars.
Third, though the auto industry may have you believe that it is in their best interest to keep both types of customers happy in such a competitive market, that statement does not reflect the reality that these two groups are dealt with in a widely disparate manner. Simply put, because the industry is statutorily exempt from buying back leased lemon cars, there is an under whelming effort to satisfy consumers who lease.
Fourth, according to research obtained from R.H. Polk a noted industry consultant, 20 percent of all passenger cars and 26 percent of all light utility trucks distributed in Pennsylvania in 2000, were leased. When compared to the single digit market existing in 1983, when the original law was passed, it is clear that a growing number of consumers have no recourse. These unsafe cars under present law, need not be removed from our highways.
Section 2 of HB 767 decisively closes the loophole of our current law and ensures all Pennsylvanians have a legal right to obtain satisfaction.
The other major change found in HB 767 involves Title Branding. In my opinion, it is a critical amendment to the current law, and is absolutely necessary for the protection Pennsylvania consumers. The goal of ensuring proper notice of a lemon vehicle to the next consumer is long overdue. In my practice there are frequent situations where consumers learn months or years later, that the used car they purchased from a dealer was a reacquired lemon, All cases I am aware of involve vehicles where the same problems, which caused the car to be re-acquired in the first place, still exist. These consumers also are not being told that a separate one-year warranty attaches to the car, pursuant to the Lemon Law.
Title branding is the single best means to prevent unsuspecting consumers from purchasing someone else's nightmare. The question in my mind however, is whether the best intentions of HB 767 will be realized by the present wording and/or whether purchasers will receive this important title information BEFORE buying a reacquired lemon car.
First, it is my belief that in its present form, HB 767 will not provide consumers with adequate and timely notice due to market realities. The vast majority of vehicles returned to manufacturers are quickly re-sold, well before a Certificate of Title is changed to reflect its status. Typically, it takes four to six weeks for such changes to be noted on the Certificate.
Second, used car dealers rarely allow consumers to see the Title during the sales presentation and in fact, there are a large percentage of sales, such as trade-in sales, where the dealer does not yet have the title itself before re-selling the car. That paperwork is done later and virtually ensures non-disclosure.
Third, if the car is financed, and most are, Title goes directly to the bank as security; the consumer is not given a copy. He or she may never find out the history at all under current law. HB 767 would not change this.
Fourth, industry practice is calculated to avoid disclosure to the retail consumer. One manufacturer has a practice of selling its reacquired lemons through a dealer auction, closed to the public, where cars are sold at substantially discounted prices because they are problem cars. The car is sold and immediately advertised for sale to the general public on the dealer's lot, in newspapers and other advertising, frequently listed as an "off lease vehicle". The average expected turnover of such a car almost guarantees that it car will be re-sold less than 15 days later. If not sold, typical practice is to send the vehicle to a second auction, open to trade buyers, such as Manheim Auctions, or to the general public such as Carriage Trade Auto Auction, where the car can be disposed of quickly, quietly and usually at a profit. Such a car usually is back on the road less than a month after the manufacturer bought it back from the consumer. This is not enough time for a consumer to be informed by the branding process.
Fifth, a reacquired vehicle, not disclosed as such to consumer, will one day be traded in on something else or otherwise sold. A consumer will be exposed to liability for failing to tell the dealer who is buying it from him facts which are unknown to him. A provision of law exposing a consumer to that type of liability, is clearly not intended.
Using these suggestions, the meaningful and timely disclosure of any "lemon" vehicle history is ensured under HB 767.
Majority Chairman Wogan, Minority Chairman McCall , Representative Evans, Co-Sponsors of HB 767 and Members of the Committee, I thank you for allowing me the opportunity to speak and offer these observations and welcome any questions you have, whether mentioned by me in this statement or otherwise.
Kimmel & Silverman, P.C.
30 East Butler Pike
Ambler, PA 19002