2007 California Vehicle Code Chapter 11. Consumer Recovery Fund

CA Codes (veh:12200-12217)

VEHICLE CODE

SECTION 12200-12217




12200.  The following definitions apply to this chapter:
   (a) "Application" means an application to the recovery corporation
for the payment of an eligible claim from the recovery fund that is
filed with the recovery corporation after January 1, 2009.
   (b) "Consumer" means a person who either (1) purchased or leased,
or became obligated to purchase or lease, a motor vehicle to be used
primarily for personal, family, or household purposes from a dealer
or lessor-retailer licensed under this code, or (2) consigned for
sale a motor vehicle that was used primarily for personal, family, or
household purposes to a dealer licensed under this code.
   (c) "Eligible claim" means an unsatisfied claim for economic loss,
not barred by the statutes of limitation, that accrues after July 1,
2008, as a result of the failure of a dealer licensed under this
code, or if applicable, a lessor-retailer licensed under this code,
to do any of the following:
   (1) Remit license or registration fees received or contractually
obligated to be paid from a consumer to the department.
   (2) Pay to the legal owner of a vehicle transferred as a trade-in
by a consumer to the dealer or lessor-retailer the amount necessary
to discharge the prior credit balance owed to the legal owner.
   (3) Pay to the lessor registered in accordance with Section 4453.5
of a vehicle transferred as a trade-in by a consumer to the dealer
or lessor-retailer the amount the dealer or lessor-retailer agreed to
pay to the lessor.
   (4) Pay the amount specified in a consignment agreement to a
consumer after the sale of a consigned vehicle.
   (d) "Participant" means a dealer licensed under this code or a
lessor-retailer licensed under this code.
   (e) "Recovery corporation" means the Consumer Motor Vehicle
Recovery Corporation.
   (f) "Recovery fund" means the consumer recovery fund established
by the recovery corporation pursuant to Section 12203 for the payment
of eligible claims.


12201.  (a) Participants shall maintain a corporation under the
Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with
Section 7110) of Division 2 of Title 1 of the Corporations Code) that
shall operate under the name "Consumer Motor Vehicle Recovery
Corporation."
   (b) The purpose of the Consumer Motor Vehicle Recovery Corporation
is to provide payments to consumers on eligible claims subject to
the requirements and limitations set forth in this chapter.
   (c) A participant may not charge or collect from a consumer a
separate fee or charge to recoup the fee paid by the participant
pursuant to Section 4456.3.
   (d) The State of California and its officers, agents, or employees
shall not be liable for any act or omission of the recovery
corporation or its directors, officers, agents, or employees.



12202.  (a) The recovery corporation shall have a board of directors
composed of six directors, as follows:
   (1) One public consumer representative member appointed by the
Director of Consumer Affairs who shall serve until the appointment is
revoked, another appointment is made, or until the appointed
director resigns. The consumer representative shall be either of the
following:
   (A) A current or former prosecutor with at least two years of
direct experience in the civil or criminal enforcement of consumer
protection laws, including laws prohibiting deceptive advertising and
unlawful and fraudulent practices.
   (B) A current or former employee of a government agency who has at
least two years of direct experience in one of the following:
   (i) The investigation, mediation, and resolution of consumer
complaints.
   (ii) Providing counseling, information, education, or referral
services to consumers.
   (iii) Administering a consumer protection program that provides
any of the services described in clause (i) or (ii).
   (2)  A representative of the Attorney General, who shall serve as
an ex officio, nonvoting member.
   (3) One member of the general public appointed by the Senate
Committee on Rules to a two-year term.
   (4) One member of the general public appointed by the Speaker of
the Assembly to a two-year term, except that the initial appointment
to the board of directors shall be for a one-year term.
   (5) Two participants, who shall be appointed by the Governor for
two-year terms, except that the initial term of the position of one
of the participant directors shall be for a one-year term.
   (b) A person is eligible to be nominated and to serve as a
participant director if the person satisfies all of the following
conditions:
   (1) The person's primary occupation, at the time of nomination and
continuously during the previous three years, has been as an owner
or general manager of a licensed dealer or lessor-retailer.
   (2) The person has not been convicted of a crime, including a plea
or verdict of guilty or a conviction following a plea of nolo
contendere.
   (3) The person is not subject to a judgment or administrative
order, whether entered after adjudication or stipulation, predicated
on that person's commission of an act of dishonesty, fraud, deceit,
or violation of this chapter or Chapter 5 (commencing with Section
17200) of Part 2 of Division 7 of the Business and Professions Code.

   (4) The person is not a defendant in a pending criminal or civil
law enforcement action brought by a public prosecutor.
   (5) The person has not served as a participant director of the
recovery corporation at any time during the previous 18 months.
   (c) A director who does not qualify to be a participant director,
whose term has lapsed, or who otherwise becomes unable to serve shall
not continue to serve as a director.



12203.  (a) The recovery corporation shall establish a consumer
recovery fund for the payment of claims as provided in this chapter.
The recovery corporation shall receive funds from the department as
provided in Section 4456.3 and shall promptly notify the department
when the recovery fund balance reaches the amounts specified in
subdivision (b) of Section 4456.3.
   (b) The recovery corporation shall establish and maintain an
operations account within the recovery fund for the payment of costs
of operations and administration. The recovery corporation shall
prepare, prior to its fiscal year end, an estimated annual
operational budget projecting the costs of operations and
administration for the succeeding fiscal year, excluding the amount
paid for claims. The recovery corporation shall not expend more than
two hundred fifty thousand dollars (0,000) each fiscal year from
the operations account for the administration of this chapter.
   (c) The recovery corporation shall invest all funds received from
the department pursuant to Section 4456.3, and interest earned on
those funds, deposited in the recovery fund, in a federally insured
account or in federally insured certificates of deposit at a
California state or federally chartered bank or savings bank.
   (d) The recovery corporation holds all money in the recovery fund
in trust for the purposes provided in this chapter and shall disburse
funds only as provided in this chapter.
   (e) The recovery corporation shall separately account for
disbursements and collections. The accounting shall include a record
of each claim paid that indicates the name, address, and phone number
of each claimant receiving payment, the amount of the payment, and
the name of the participant for which a claim was paid. Quarterly
reports shall be provided to the office of the Attorney General,
Consumer Law Section, commencing on or before October 31, 2008, and
within 30 days after the end of each quarter thereafter.
   (f) The recovery corporation may adopt reasonable written bylaws,
rules, and procedures to carry out the purposes of this chapter. The
representative of the Attorney General may vote on the adoption of
bylaws, rules, and procedures notwithstanding paragraph (2) of
subdivision (a) of Section 12202.



12204.  (a) A consumer may file an application with the recovery
corporation for the payment of the consumer's eligible claim if a
dealer or lessor-retailer against whom the claim is asserted has
ceased selling and leasing motor vehicles to the general public or
has become subject to a petition in bankruptcy.
   (b) (1) The application shall be verified and shall set forth all
of the following information:
   (A) The consumer's name, address, and telephone number.
   (B) The amount of the eligible claim.
   (C) A description of the circumstances demonstrating an eligible
claim.
   (D) A statement indicating the consumer's belief that the dealer
or lessor-retailer has ceased selling and leasing motor vehicles to
the general public or has become subject to a petition in bankruptcy
and the reasons for this belief.
   (E) A statement indicating what action, if any, the applicant has
taken to recover the amount of the eligible claim.
   (F) A statement indicating that the consumer's application for
payment does not include any amount for which the consumer has
obtained recovery under the dealer's bond required by Section 11710.

   (2) Nothing in this chapter shall be construed to require a
consumer to bring a civil action to obtain recovery, file a
bankruptcy claim, or file a crime report with a law enforcement
agency in order to obtain payment of an eligible claim submitted to
the recovery corporation.
   (c) The application shall be accompanied by a copy of the
agreement between the consumer and the dealer or lessor-retailer,
unless the agreement is unnecessary to the recovery corporation's
determination of the validity of the claim.
   (d) If the eligible claim is based on the failure to remit license
or registration fees, the application shall be accompanied by
evidence demonstrating that the consumer paid money or other
consideration for the fees, or became obligated to pay the fees, and
that the fees had not been remitted. The eligible claim shall be
limited to the dollar amount of the license or registration fees not
remitted and a late charge or penalty.
   (e) If the eligible claim is based on the failure to pay the
proceeds of a consignment sale, the application shall be accompanied
by the consignment agreement, evidence that the consigned vehicle was
sold, and by the consumer's verified statement that the consumer did
not receive the portion of the proceeds of the sale to which the
consumer was entitled. The eligible claim is limited to the dollar
amount specified in a written consignment agreement to be paid to the
consignor.
   (f) If the eligible claim is based on the failure to pay the legal
owner of the consumer's trade-in vehicle, the application shall be
accompanied by a statement from the legal owner of the amount, if
any, that he or she received from the dealer or lessor-retailer. The
eligible claim is limited to the dollar amount necessary to discharge
the credit balance owing on the trade-in vehicle.
   (g) If the eligible claim is based on the failure to pay the
lessor of the consumer's trade-in vehicle, the application shall be
accompanied by a statement from the lessor of the amount, if any,
that the lessor received from the dealer or lessor-retailer. The
eligible claim is limited to the dollar amount necessary to pay the
lessor the total amount that the dealer or lessor-retailer agreed
with the consumer to pay the lessor.
   (h) The recovery corporation may require reasonable additional
information designed to facilitate payment of eligible claims.
   (i) (1) For claims that have accrued on or after July 1, 2008, and
before January 1, 2009, the application shall be filed within 18
months of the date upon which the dealer or lessor-retailer ceased
selling or leasing motor vehicles to the general public or became
subject to a petition in bankruptcy.
   (2) For claims that have accrued on or after January 1, 2009, the
application shall be filed within one year of the date upon which the
dealer or lessor-retailer ceased selling or leasing motor vehicles
to the general public or became subject to a petition in bankruptcy.



12205.  The recovery corporation shall develop a notice fully
explaining a consumer's right to make a claim from the fund, an
application form, and an explanation of how to complete the
application.  The notice, application, and explanation shall be in
English and Spanish and shall be provided to a person upon request.




12206.  (a) Within 30 days of receiving an application, the recovery
corporation shall notify the applicant, in writing, that the
application is complete or, if the application is incomplete, what
additional information is required.
   (b) (1) Within 60 days of the recovery corporation providing
notice to the applicant of a complete application, the recovery
corporation shall either pay the eligible claim from the fund as
prescribed in this chapter or deny the claim. A claim shall be deemed
granted unless the directors affirmatively vote to deny the claim.
   (2) The recovery corporation, for good cause, may extend the
60-day period not more than an additional 90 days to investigate the
accuracy of the application or evidence submitted by a dealer or
lessor-retailer.
   (c) A director shall not be involved in the decision of a claim if
the director has a financial interest in the outcome of the
decision; has a financial interest in or is employed by the
participant that is the subject of the claim; or has a familial or
close personal relationship with the claimant or an owner, officer,
director, or manager of the participant.



12207.  (a) Within 15 days of receiving a complete application, the
recovery corporation shall serve a copy of the complete application
and the following notice on the dealer or lessor-retailer that is the
subject of the claim:

      "NOTICE"

   "The attached application has been made to the Consumer Motor
Vehicle Recovery Corporation for payment of a claim allegedly arising
out of your conduct or omission. If you wish to contest payment, you
must file a written response to the application that describes any
evidence that you have showing that the application is inaccurate or
that payment from the fund is not authorized under Section 12200 and
following of the Vehicle Code, a copy of which is provided.
   "The allegations stated in the attached application may constitute
grounds on which disciplinary action may be taken to suspend or
revoke your license. In addition, the Department of Motor Vehicles
may suspend your license until you have repaid in full the amount
paid by the Consumer Motor Vehicle Recovery Corporation on the
attached application, plus interest at the rate of 10 percent per
annum."

   (b) The notice prescribed by subdivision (a), a copy of the
application for payment, and a copy of this chapter shall be served
on the dealer or lessor-retailer by personal service or certified
mail, return receipt requested, at the department's mailing address
of record for that licensee.


12208.  If the recovery corporation pays the claim, the amount of
the payment shall be the total of the amount of the eligible claim,
but in no event may the payment exceed thirty-five thousand dollars
(,000) for a transaction.


12209.  If the recovery corporation denies the claim, the recovery
corporation shall notify the applicant in writing of the denial, the
legal and factual bases for the denial, and the applicant's right to
contest the denial in writing within 60 days or any longer period
permitted by the recovery corporation. If the applicant does not
contest the denial within 60 days or an additional period reasonably
requested by the consumer, the decision shall be final. The recovery
corporation shall act on the applicant's objection within 30 days. If
the claim is denied in whole or in part, the applicant may seek
review in the superior court of any of the following counties in
which the office of the Attorney General maintains an office:
Sacramento, San Francisco, Los Angeles, or San Diego. Review shall be
limited to the written record before the recovery corporation and
any relevant evidence that could not have been previously presented
to the recovery corporation despite the applicant's reasonable
diligence. The superior court shall affirm the decision of the
recovery corporation if it is supported by substantial evidence.




12210.  After the recovery corporation pays or rejects a claim, all
of the following apply:
   (a) Immediately upon payment, the recovery corporation shall be
subrogated to all of the consumer's rights against the dealer or
lessor-retailer to the extent of the amount of the payment.
   (b) The recovery corporation may bring an action to recover the
amount of the payment plus interest at the rate of 10 percent per
annum and shall be entitled to recover costs and reasonable attorney'
s fees.
   (c) Within 10 days of paying the claim, the recovery corporation
shall inform the department of the payment of the claim, the amount
of the payment, and the name and address of the dealer or
lessor-retailer that is the subject of the claim. Upon the department'
s request, the recovery corporation shall provide the department with
a copy of the claim application and other documents received by the
recovery corporation in connection with the claim.
   (d) Within 15 days of paying or rejecting the claim, the recovery
corporation shall serve the dealer or lessor-retailer that is the
subject of the claim with notice of the recovery corporation's
disposition of the claim in the manner provided for service in
subdivision (b) of Section 12207.
   (e) After the consumer receives payment of the eligible claim from
the recovery corporation, the consumer shall not seek to recover the
amount received from the recovery corporation for the eligible claim
from the dealer's bond required by Section 11710. Nothing in this
subdivision affects any other rights the consumer may have as
provided in Section 12217.



12211.  If the recovery corporation has insufficient funds to pay
all eligible claims, the recovery corporation shall pay eligible
claims in the order that the claim applications were received and
shall hold the remaining claims until funds are available to pay
those claims.



12212.  (a) Within 30 days after the close of the fiscal year or
other reasonable period established by the board of directors, the
recovery corporation shall make publicly available a statement of the
following information concerning the most recently concluded fiscal
year:
   (1) The number of claims and approximate dollar amount of the
claims received.
   (2) The total number of claims and total dollar amount of claims
paid.
   (3) The approximate number and dollar amount of claims denied or
abandoned.
   (4) The dollar balance in the recovery fund.
   (5) The dollar amount of fees received pursuant to Section 4456.3.

   (6) The administrative costs and expenses of the recovery
corporation.
   (b) The recovery corporation shall make publicly available within
15 days of approval by the board of directors or other reasonable
period established by the board of directors, the following
information:
   (1) The approved minutes of meetings of the board of directors.
   (2) The approved estimated annual operational budget projecting
the costs of operations and administration for the succeeding fiscal
year, excluding the amount to be paid for claims.
   (3) The approved bylaws, as amended, of the recovery corporation.

   (c) Information may be made publicly available as required by this
section by disseminating the information on an Internet Web site or
providing the information by electronic mail to a person who has
requested the information and provided a valid electronic mail
address.



12213.  The operation of the recovery corporation shall at all times
be subject to the examination and review of the Attorney General and
the Attorney General's representatives. The Attorney General and his
or her representatives may at any time investigate the affairs and
examine the books, accounts, records, and files used by the recovery
corporation.  The Attorney General and his or her representatives
shall have free access to the offices, books, accounts, papers,
records, files, safes, and vaults of the recovery corporation and may
copy any documents of, or in the possession of, the recovery
corporation.


12214.  The Attorney General or his or her representative may
determine that the recovery corporation has failed or ceased to
operate upon a finding that any one of the following has occurred
with respect to the recovery corporation:
   (a) The recovery corporation was not created.
   (b) The recovery corporation is dissolved.
   (c) The recovery corporation ceased to operate.
   (d) The recovery corporation is insolvent or bankrupt.
   (e) The recovery corporation failed to pay its operating costs.
   (f) The recovery corporation failed to pay any claim or judgment
in a timely manner.
   (g) The recovery corporation violated its articles of
incorporation or any law of this state.
   (h) The recovery corporation invested its funds in violation of
this chapter.
   (i) The recovery corporation has not diligently made a decision
upon a claim made by a person aggrieved.
   (j) The recovery corporation violated any section of this chapter.

   (k) The recovery corporation neglected or refused to submit its
books, papers, and affairs to the inspection of the Attorney General
or his or her representatives.



12215.  If the recovery corporation is dissolved or ceases to exist,
or if the Attorney General or his or her representative makes a
determination, pursuant to Section 12214, that the recovery
corporation has failed or ceased to operate, all outstanding debts,
obligations of the recovery corporation, and amounts due for services
rendered shall first be paid from the remaining assets, including
the recovery fund. The assets remaining, after settling those
liabilities, shall be distributed to the participants, less the costs
of that distribution.


12216.  All costs and expenses incurred by the Department of Justice
in the administration of this chapter shall be paid to the
Department of Justice by the recovery corporation. The Department of
Justice may institute an action for the recovery of costs and
expenses incurred in the administration of this article in any court
of competent jurisdiction.



12217.  Nothing in this chapter is intended to limit or restrict
actions, remedies, penalties, or procedures otherwise available
pursuant to any other provision of law.

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