Pub. 2 2020-2021 Issue 4

23 High-Tech CaliforniaMust Update Its Low-Tech Vehicle Sales Laws C alifornia businesses are global leaders in adopt- ing innovative new tech- nologies, and California’s franchised new car dealers are no exception. During the initial COVID-19 shutdown orders in March and April, many dealers quickly pivoted to on- line sales with remote delivery. And many more dealers are implement- ing technology to enhance customer experience, increase productivity and ease compliance burdens. For example, dealers are utilizing prod- ucts like Reynolds’ docuPAD to visu- alize F&I options for customers, and dealers are implementing electronic solutions offered by companies like ComplyAuto and HR Hotlink to com- ply with California’s complex privacy and employment laws. Unfortunately, California’s antiquat- ed laws on records retention and e-contracting hold the retail auto- motive industry back from realizing obvious benefits in efficiency and consumer experience. The DMV’s requirement that dealers physically retain documents pertain- ing to the sale or lease of a motor vehicle is a prime example of an absurdly antiquated requirement. It is wasteful — documents electroni- cally executed must be printed and retained physically, which creates unnecessary paper waste. It is costly — California’s real estate is among the most expensive in the world, and devoting precious space for physical retention is pricey. And it is inefficient — dealers must ensure that their employees adequately maintain and dispose of physical documents ac- cording to DMV requirements. Unfortunately, the DMV recently doubled down on requiring dealers to physically retain these documents when it approved a revised rule on records retention earlier this year. Over the past several years, CNCDA repeatedly asked DMV leadership to end its requirement that dealers physically retain documents pertain- ing to sale or lease transactions for 18 months. Unfortunately, the DMV’s response was to reduce the physical retention requirement from 18 months to 90 days. (Title 13 of the California Code of Regulations, Section 272.02.) While this is an improvement over the status quo, it fails to allow dealers to realize the benefits of an electronic records retention process. Under the DMV’s new rule, the pro- cess is still unnecessarily wasteful, costly and inefficient. California’s two-decade-old Uniform Electronic Transactions Act (Cal UETA) is also a needless obstacle to modernization. Cal UETA gener- ally provides that electronic signa- tures are valid under California law. However, it exempts vehicle sales and lease contracts from its scope. 1 (Civil Code section 1633.3.) In previ- ous legislative sessions, CNCDA attempted to remedy this omis- sion, but our attempts have been stymied by so-called consumer advocates that have favored the current Byzantine system involving wet signatures on multiple lengthy paper documents. Despite setbacks, CNCDA remains committed to modernizing these un- necessary and burdensome laws. In an era where dealers are expected to compete with actors like Carvana (who transact business online), it is absurd to hold franchised new car dealers to outdated requirements. We are cautiously optimistic that the legislature in 2021 may agree. 3 1 Cal UETA does not prevent dealers from using e-signatures for vehicle sale and lease docu- ments, as such transactions are allowed by fed- eral law, and it is highly likely that a court would find that federal law overrides any conflict with state law on the enforceability of vehicle sale and lease documents. However, Cal UETA should be harmonized with federal law on this issue to prevent any ambiguity. Anthony Bento Director of Legal and Regulatory Affairs