MINUTES OF THE ASSEMBLY COMMITTEE ON COMMERCE Sixty-eighth Session April 26, 1995 The Committee on Commerce was called to order at 3:40 p.m., on Wednesday, April 26, 1995, by the presiding Chairman, Larry Spitler in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda, Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Larry L. Spitler, Chairman Ms. Sandra Tiffany, Chairman Ms. Maureen E. Brower, Vice Chairman Mr. Dennis L. Allard Ms. Barbara E. Buckley Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. David E. Humke Mr. Michael A. (Mike) Schneider COMMITTEE MEMBERS EXCUSED: Mr. Richard Perkins, Vice Chairman GUEST LEGISLATORS PRESENT: Assemblywoman Vonne Chowning, Assembly District 28 STAFF MEMBERS PRESENT: Paul Mouritsen, Research Analyst OTHERS PRESENT: Patricia Morse Jarman, Consumer Affairs Rose McKinney-James, Department of Business and Industry Margaret Stanish, Attorney General's Office, Sr. Deputy Attorney General Warren Hardy, Nevada Association of Automotive Service Professionals Eldon Hardy, Nevada Association of Automotive Service Professionals John Marchioni, General Manager Superior Tires Steve Yarborough, Nevada Gasoline Retailers and Garage Owners Daryl Capurro, Nevada New Car Dealers' Association Patty Smith, Nevada Auto Body Association Following roll call, Chairman Spitler opened the hearing on A.B. 462. ASSEMBLY BILL 462 - Requires garages that repair motor vehicles to register with consumer affairs division of the department of business and industry. Opening testimony in favor of the bill was heard from the prime sponsor, Assemblywoman Vonne Chowning, Clark County Assembly District 28. Ms. Chowning told the committee the most frequent complaint she heard from her constituents over a period of four years, had to do with auto repair problems, and the second most frequent was used auto sales. Some of these complaints had been turned over to the Consumer Affairs Division, however, for the most part she listened to the blue collar workers and single mothers in her district, for whom it was necessary not only to have a vehicle for their day-to-day activities, but to also be able to trust the person to whom they entrusted their vehicle. In a span of 13 months, Ms. Chowning said she had received a stack of letters of complaint (Exhibit C - not reproduced for purposes of these minutes, but may be viewed in the Legislative Counsel Bureau Research Library) from citizens of Clark County. Although some cited situations wherein the customer may not have asked the right questions or should have taken someone with them, the majority of the letters truly reflected fraudulent activity. Most complaints were for transmission work, however, the next highest source of complaint was for air conditioning repair. Situations were related by Ms. Chowning in which repair estimates escalated into a much higher bill than the customer anticipated. Sometimes when this happened and the customer indicated they could not afford the repair, the garage mechanic would not even put the car back together so the customer could drive away. At other times, there were veiled threats to use a customer's credit card, or to put a lien on the vehicle. A.B. 462 was aimed at eliminating fraud and protecting consumers in an unregulated auto repair industry. The bill, which would create a new Division in Consumer Affairs called an Auto Repair Fraud Unit, was not designed to license garages, but rather to register the business with the Division. To fund the office, a $200/year fee would be imposed on each business location. While she preferred a sliding scale, there was no data or information available which would shed some light on how to base fees. Ms. Chowning believed only a few dishonest dealers made a bad reputation for the whole industry; and that honest dealers would be pleased to have the opportunity to deal with those dishonest dealers and have fraud eliminated. Continuing, Ms. Chowning explained the bill established protections for customers in new language which offered three options: 1) It presupposed a written estimate should be given the customer for any repair costing over $50; 2) if the customer did not want or need a written estimate, he could so stipulate; or 3) the customer could submit a waiver of options. Ms. Chowning pointed out the bill also mandated the Consumer Affairs Division: 1) To establish an "800" hotline; and 2) to launch and establish an education program which would lead to seminars, etc. Two years ago the legislature had been asked to let the garage owners clean up their own industry. Consequently, an Association was formed and mandatory arbitration instituted. This Association now had approximately 200 members and 50 businesses, however, this was a very small percentage of the approximately 1,500 to 1,600 businesses in the state. Thus, Ms. Chowning believed the Legislature should continue to work with the Association in an effort to prevent fraud in the auto repair industry. She also believed they should work towards a process of licensing mechanics. Three additional exhibits were submitted by the proponents: - Exhibit D - Article entitled, "Before You Leave Your Car Check out the Shop." - Exhibit E - Letters of Complaint. - Exhibit F - Memorandum to Senator William Raggio, dated March 10, 1995, from Patricia Morse Jarman, Commissioner of the Consumer Affairs Division. In response to Mr. Spitler's request for a synopsis of the complaints, Ms. Chowning submitted "Complaints - Car Buying, Repairs, Etc." (Exhibit G). In response to Mr. Spitler's second request, to explain what the $200 would do, Ms. Chowning said if $200/year was collected from each of the 1,500 businesses, they would derive approximately $300,000 which would allow the Consumer Affairs Division and the Attorney General to fund the fraud unit and to hire needed consultants. Additionally, Mr. Spitler asked if they could achieve their goals by bringing the Association under the "Deceptive Trade Practices," and then legislatively mandating they had to adhere to the provisions of A.B. 462, without setting up a bureaucracy. Never before had the auto repair been brought under Deceptive Trade Practices in Nevada, Ms. Chowning said, however, she was not opposed to this concept. Patricia Morse Jarman, Commissioner of the Consumer Affairs Division, came forward to explain she was there specifically in response to a request from Senator William Raggio. On January 30, 1995, in a Senate Finance Committee meeting, Senator Raggio had requested the Consumer Affairs Division, the Attorney General's Office and the Budget Office to derive a plan to address auto repair problems and the telemarketing funding issue. Currently, Ms. Jarman said, there was no attorney general assigned to deal with deceptive trade. An attorney had been requested for her division, but this had not been recommended. Ms. Jarman continued with a "real life" story of a consumer who received an estimate of $800 for repairs. Without informing the customer, the repairs had escalated to $1,600. This incident eventually brought the Consumer Affairs Office into the negotiations, and the dealer agreed to a $1,000 payoff. This was not an isolated incident, Ms. Jarman declared. Ms. Jarman pointed out there were some 1,647 automotive repair garages in the state, plus service stations, which also did repair, and the speciality department stores like Sears, for a total of approximately 2,500 auto repair businesses. Also, through the Employment Security Department it was learned there were some 5,280 mechanics in the state of Nevada. In conversations with Warren Hardy, Nevada Association of Automotive Service Professionals, there were suggestions that perhaps mechanics should be licensed. Although the industry had united to form the Nevada Association of Professional Automotive Repairmen, Ms. Jarman maintained only a small percentage of the industry had organized, and the number of complaints would indicate the problem of fraud in the industry had not greatly diminished. In an effort to carry out Senator Raggio's directive to derive a way to address the problems in automotive repair and telemarketing, Ms. Jarman said the Consumer Affairs office and the Attorney General's Office had worked together on a reorganization plan which would allow them to solve the problem. Currently, Consumer Affairs had two units in the Division -- the Deceptive Trade Practices unit and the Telemarketing Unit. Because Telemarketing was supported with dedicated funds, the Consumer Affairs office was left in a dilemma for funding. Since their request for an attorney had been denied, it was decided to reorganize in order to use people already on staff to address additional issues. She explained the Attorney General's Office had ten people dedicated to telemarketing, and the Consumer Affairs Division had seven people dedicated to telemarketing and two vacancies. They had recommended to Senator Raggio the following reorganization: 1) To reduce both staffs 50 percent, leaving the Attorney General's Office four attorneys, three investigators and support personnel. There would be 1.5 Deputy Attorney Generals dedicated to telemarketing, with one investigator and one secretary. The Consumer Affairs office would go from an allotted seven positions (with only five filled) to three -- one investigator and two program assistants. The remaining personnel would be dedicated to the automobile repair industry. She pointed out the Consumer Affairs Division had received 6,580 complaints in 1994. Auto related issues made up 3,200 of those, and 2,308 were specifically automotive repair problems. Additionally, she said she had been told the Better Business Bureau in Reno had been offered fifteen arbitration cases of which six had been arbitrated between January 1994 through April 1995. The Better Business Bureau in Las Vegas had entered into the binding arbitration in December 1994 and no cases had been arbitrated. Ms. Jarman insisted the problem begged action now. A.B. 462 would allow the Consumer Affairs Division to continue to address the issue, to reorganize and use present personnel and to assist the industry. She believed an interim study over the next two years would be helpful in conjunction with the registration program, however, an interim study alone would not affect the problem. Margaret Stanish, Senior Deputy Attorney General of the Telemarketing and Consumer Fraud Unit of the Attorney General's Office, adamantly stated the intent was not only to protect consumers, but to protect the marketplace from deceptive businesses which gained unfair market advantage. A.B. 462 was not a licensing scheme, although the Association had promised to consider this direction and the possibility of licensing mechanics, in due course. Ms. Stanish then reviewed the bill, comparing new and old sections. She agreed there was room for improvement in the language, and recommended it be sent to a subcommittee for fine tuning. She clarified as follows: - Sections 9 and 10 outlined the scope of the bill, and intended to broadly cover motor vehicle repair. Section 10 excluded, to an extent, certain auto related industries such as emission control stations (doing only emission control within the purview of their license under NRS 445) and body shops (a facility doing only body work), which were already somewhat regulated. Mr. Spitler asked if this also excluded them from Section 22, the deceptive trade language. Ms. Stanish replied the emission control stations were entirely excluded from this statute, but body shops would still fall under deceptive trade practice law. In fact, she remarked, all businesses in Nevada currently fell under the deceptive trade practice law. Mr. Spitler and Ms. Stanish discussed the deceptive trade statutes. Ultimately, what A.B. 462 did, Ms. Stanish pointed out, was to take those provisions currently in NRS 597, improve those provisions and make them specifically deceptive trade practice statutes. - Section 11 was a registration provision, which established the $200 fee, per location, although garages with more than one location would only be required to submit one application. - Section 12 designated the Consumer Affairs Division as the responsible agency for issuing the registration. Ms. Stanish suggested this section needed to be revised in its wording, "The Division must approve an application." This was incorrect to the extent it implied they somehow had the authority to deny someone to conduct their business as might be done with a licensing scheme. - Section 13 dealt with the customer rights. Under current NRS 597, the consumer was only entitled to an estimate of repair if it was requested. If there was no such request, no estimate was given. Ms. Stanish thought this was not always made clear to the customer. Questioning section 13(a), Mr. Spitler asked Ms. Jarman if the budget was based on the toll free number being available 24-hours a day, 7 days a week. She replied, "no." Consumer Affairs currently was open from 7:00 a.m. to 6:00 p.m., and she anticipated the hours for the toll free number would also be 7:00 a.m. to 6:00 p.m. - Section 14 delineated what information had to be on the sign and this was an expansion of what was currently required under NRS 597. Section 14 was an absolutely necessary improvement in Nevada law, Ms. Stanish stated, which required a business to document and provide a written estimate (or Notice of Disclosure) unless the consumer indicated otherwise. This put the burden on the business rather than the consumer. The other improvement, Ms. Stanish pointed out, was in Section 14, lines 39 through 41, which required the business to spell out the method of calculation of the cost of repairs, i.e., labor, etc. Many complaints were based on a misunderstanding of what the consumer ought to be paying. However, the truly fraudulent activity was reflected in misrepresentation of the calculation of the cost. The new language would require a business to clarify this. Section 14 also contained an "early bird" exception in the language on page 4, lines 36 through 43, which stated if the consumer wanted to leave a car during off hours, or have it towed to a certain garage when the business was closed, they waived their right to receive an estimate of repair. However, Section 15 entitled the customer to be contacted with an estimate of what the repair work would be if the customer simply wanted a diagnosis. The remainder of the statute did not upset the present provisions, Ms. Stanish said, but better organized sections of NRS 597. Ms. Chowning indicated it was not her intention to include the language in Section 9, page 2, line 14. Also, she noted item 8, page 2, line 15, should have read, "Any other type of electrical or mechanical maintenance or repair of the mechanical or electronic system." Ms. Jarman pointed out there was a real need to educate consumers, also. To this end, Consumer Affairs had been giving seminars and one which had been well received was entitled, "How to Buy a Used Car." Indeed, she said, they were willing to work with industry to better inform the public at large. Mr. Spitler asked Ms. Stanish what presently precluded the Attorney General from investigating someone who had deceived the public in a vehicle repair. In response, she said, they were curtailed by funding, however, if general funding was available, she would not have to dedicate her staff to strictly telemarketing. The registration fee was not a substitute for telemarketing funds. Ms. Stanish explained the Governor had recommended the Attorney General's Office directly receive $500,000 from the general fund to free her staff to do deceptive trade practices, which would include auto repair. The auto registration fees would give the Consumer Affairs Division the ability to improve the use of their resources. As for whether the Attorney General's Office could legally go after auto repair fraud, Ms. Stanish said, "yes," she had statutory authority to go after any deceptive trade practice. Directing the question to Ms. Jarman, Mr. Spitler asked if, in fact, Senator Raggio had approved the $200 assessment proposed in A.B. 462. Ms. Jarman said, "no," this was Consumer Affair's response to Senator Raggio's request for a solution to the problem. Mr. Spitler then asked Ms. Jarman if the Consumer Affairs Division would have to lay off staff if A.B. 462 was not passed. She replied, "yes, sir." In an effort to clarify Sections 14 and 15, Ms. Giunchigliani noted throughout the bill the word "estimate" was used. Did this include labor and time? Ms. Stanish said under subsection 2 of Section 14, the language delineated what had to be contained in the estimate of repair. She believed the intent was for the language to include labor, but this could possibly be clarified. Ms. Giunchigliani also asked if by repealing sections of NRS 597 and moving them to NRS 598, whether body shops and emission control shops would be exempted. Basically, Ms. Stanish pointed out, sections in NRS 597 would be replaced with language from A.B. 462. The body shop would have to adhere to the requirements of A.B. 462 with the exception of the registration fee. The emission control stations were comprehensively regulated by a licensing scheme and were, therefore, not included in A.B. 462 in any way. In response to Ms. Giunchigliani's question, Ms. Stanish agreed that currently all businesses had to comport with the Deceptive Trade Practice Act, which was seen in NRS 598. NRS 598, she said, was what was referred to as a mini-FTP statute which delineated prohibited acts in business. To Ms. Jarman, Ms. Giunchigliani asked if the Consumer Affairs Division could publish in the newspaper, names of fraudulent businesses. Ms. Jarman said, "no," they were prohibited from mentioning any name of any business. While A.B. 462 would not enable that, there was a bill draft request in process which addressed the confidentiality issue. Ms. Jarman and Ms. Giunchigliani discussed future moves to license mechanics, and how this would be accomplished. Ms. Giunchigliani also wondered what authority the Consumer Affairs Division had to react to a complaint of auto repair fraud. To answer the question, Ms. Stanish said the Consumer Affairs Division would take the complaint and work towards investigating it. If it was decided a deception had occurred, it would then be referred to the Attorney General's Office for litigation or prosecution. A.B. 462 would allow this process to go ahead, however, this route was currently impossible due to the funding situation. Questioning the reference to licensing mechanics, Mr. Schneider asked Ms. Chowning if the industry was calling for mechanics to be "independent contractors." Ms. Chowning explained there were two different opinions in the industry. One group appeared to approve the licensing of mechanics on the premise the problems were caused by bad mechanics, not the business owner. However, the other group opposed this move. Ms. Chowning opined it was a two-pronged problem involving both mechanics and business owners. Referring to a statement by Ms. Jarman regarding binding arbitration, Mr. Allard asked if, indeed, there had been fourteen calls for binding arbitration and only seven cases which had actually gone to arbitration. According to the Reno office, she said, they had calls for fifteen arbitrations, but from January 1994 through April 1995 only six actual hearings had been conducted. Mr. Allard asked if Ms. Jarman's telemarketing budget was currently for $1.5 million. Ms. Jarman said it was this amount, however, they paid the Attorney General's Office $719,000 for their unit. During the course of aggressive telemarketing regulation and registration, many telemarketers had been run out or had changed occupations. There was no legislation which gave jurisdiction to this issue, however, it was being addressed. According to performance indicators provided to the Legislature, Mr. Allard observed, in 1994 there were 2,973 telemarketing complaints received and only 1,559 of those were closed. This was approximately 50 percent closed. If, in fact, six out of fifteen auto repair fraud cases had been arbitrated, without the provisions of A.B. 462, this record was nearly as good as the telemarketing record. Additionally, Mr. Allard pointed out, Consumer Affairs Division was only projecting a 50 percent closure. Ms. Stanish pointed out indicators which Mr. Allard referred to were cases the Attorney General's Office referred to Consumer Affairs Division. In fact, the Attorney General's Office was primarily responsible for telemarketing complaint handling, investigation and law enforcement. Mr. Allard and Ms. Stanish discussed telemarketing enforcement as opposed to automobile repair fraud, and the complaint process necessary to address each. Directing attention to certain points in the bill, Mr. Hettrick had the following comments: 1. On page 2, line 38, "Any other information required by the division ..." Mr. Hettrick was opposed to the broadness of the language. 2. Page 3, line 1, he believed the language should be amended to read, "...approves an application for registration, the Division shall issue to the applicant ...". 3. Page 4, lines 44 and 45, Mr. Hettrick believed the language should be more specific. The word "reasonable" as used in connection with fees, required a clear definition if A.B. 462 passed. 4. Page 4, lines 46 through 48, contained very confusing and vague language, Mr. Hettrick opined. 5. Page 5, lines 3 and 4, also vague and confusing language. 6. Page 5, lines 25 and 26, the language, "... or the vehicle would be unsafe in a reassembled condition." Vague and needed definition. 7. Page 6, line 14, the language "Request or require ...," Mr. Hettrick pointed out, was affected by the language in Section 14, wherein the customer was offered the opportunity to reject an estimate of repair. 8. Page 7, lines 20 and 21, language regarding subcontracts for work needed to be clarified. 9. Page 7, line 22, "Fraudulently alters any contract ... ," language was subject to interpretation, Mr. Hettrick opined. Mr. Humke asked if A.B. 462 would require implementing regulations. Ms. Stanish answered, "yes." With respect to the specifications of the fine, there was a section which said the Commissioner must clarify the fines. Coming forward to comment on the bill, Rose McKinney-James, Director of the Department of Business and Industry, said she would focus on the areas which might require some clarification. She suggested they were considering two parallel issues and because certain members of the committee were active on the money committees, the comments offered by Ms. Jarman had sparked the need for them to review the manner in which the Consumer Affairs Division pursued its mission. The two areas serving as the primary sources of consumer complaints were telemarketing and automotive repair. The manner in which the telemarketing budget was supported was less than adequate. Ms. McKinney- James reviewed and discussed the events which had prompted the development of the bill. She stressed the proponents' willingness to work with industry, although it was only within the past day or so in which she had been able to discuss the bill with Mr. Capurro and Mr. Hardy and begin to address in a constructive way the obvious problem. She stated, "I happen to believe that when you have a problem with a segment of industry that you identify the problem and you go to them to assist you in dealing with the problem, and they are also responsible for funding that problem. We don't go to the basic consumer and say, `You're being ripped off, and oh, by the way, let's raise taxes so we can find a way to fix this.' There has been an expression of willingness by the industry to work with us, they put some things on the table yesterday that none of us have really had an opportunity to fully explore." Noting Ms. McKinney-James' reference to placing the financial burden on the business, Chairman Spitler suggested this might mean the business passed it on to the consumer. She agreed the consumer ultimately paid, no matter what direction it went. She did maintain, however, this cost to the consumer should be associated with the problem, not hidden in general taxes. The question was, would the proposal put forward in A.B. 462 fix the problem? If industry did not believe A.B. 462 would fix the problem, they all needed to work together because indeed, there was a problem, and Consumer Affairs had the responsibility of dealing with basic consumer complaints. Mr. Spitler expressed some caution and voiced his concern that through the process of transferring legal responsibility to the Attorney General, some consumers fell between the cracks. Ms. Tiffany believed the amount of the $200 fee should be given greater weight. Ms. McKinney-James acknowledged her position, but pointed out the $200 fee was based on what was charged by other states actively involved in the process, and looking at the requirements of the Division to adequately perform the responsibilities. Mr. Humke asked if Ms. McKinney-James would stipulate there was a cost not only to the state in regulating the industry, but that there was a cost to the industry in complying with the regulation. Ms. McKinney-James admitted there would be a cost over and above the registration if, indeed, they went forward with what industry had indicated was necessary. These costs would be in connection with certification and training of the mechanics generally responsibile for the problems. Beyond that, Mr. Humke pointed out, it meant a business would have to change most forms, purchase a sign, admit inspectors, and endure countless other costs which were presented throughout the bill. Warren Hardy, representing the Nevada Association of Automotive Service Professionals, introduced his uncle, Eldon Hardy, President of the Association and owner of Hardy's Automotive Services since 1957, and John Marchioni, General Manager of the 13-outlet Superior Tire Businesses in southern Nevada. Mr. Hardy also introduced Daryl Capurro, Nevada New Car Dealers' Association, Steve Yarborough, Nevada Gasoline Retailers and Garage Owners, and Patty Smith, Nevada Auto Body Association. Mr. Hardy said while they thoroughly agreed an individual had a right to be able to trust his mechanic, there were certain sections of A.B. 462 they had concerns about. Mr. Hardy then outlined the background and progress of the present legislation. He traced the progress through the formation of the Association and contact with the Department of Motor Vehicles who, he stated, had cooperated with them to the fullest extent. On the other hand, Mr. Hardy said they had not received the same degree of cooperation with the Consumer Affairs Division. Although there had been vocal support, attempts to work together during the past six months had not been fruitful. Mr. Hardy then distributed a table entitled "Nevada Association of Automotive Service Professionals - Industry Analysis" (Exhibit H). Mr. Hardy described their efforts in consumer education and the conduct of seminars on how to avoid being defrauded. He said they had sought public service announcements of the seminars which the Department of Motor Vehicles (DMV) had co-sponsored, however, Consumer Affairs had instructed his association they could not be a co-sponsor. Significant in their efforts was the signing of a binding arbitration agreement with the Better Business Bureau. He said they had also tried to work with Consumer Affairs in an effort to address the deficiencies in the estimating law. In summary, Mr. Hardy said they recognized they needed the assistance of DMV, the Consumer Affairs Division and the Legislature. Mr. Hardy opined A.B. 462 appeared to continue to only treat the disease. The industry, he stated, wanted to eliminate the disease. Thus, with the help of Ms. Chowning, they requested legislation to require binding arbitration, to require certification of mechanics, and to address the concerns regarding estimates. Additionally, he asked for interim time to implement measures. He said they had been told by staff the measures were too broad to try to deal with this legislative session. His Association was prepared, if legislative cooperation was received, to mandate certification of mechanics and mandate binding arbitration. Mr. Hardy believed the changes which A.B. 462 would require were only window dressing to charge the industry $200 to fund a system which had not been working. As an industry, they were willing to fund the necessary measures to fix the problem. They were not willing to continue to fund a program which was not going to work. Also, Mr. Hardy indicated in a conversation with Senator Raggio he was told the Consumer Affairs Division staff had been instructed to come back with a reasonable way to fund their budget. Eldon Hardy, Warren Hardy's uncle and President of the Nevada Association of Automotive Service Professionals, then more thoroughly reviewed Exhibit H. He did not believe the problems were so much fraud related or deceptive trade practices, as they were caused by a lack of training and the public perception of mechanics in the performance of very complicated automotive procedures. Eldon Hardy also related negative experiences in his dealings with Patricia Jarman and the Consumer Affairs Division. Mr. Hardy declared he was offended by language in A.B. 462 which appeared to portray all businesses in the automotive industry as thieves. In describing how their present system worked, Mr. Hardy indicated there was a member of the Association who was a "thorn in the side of Consumer Affairs," with eight or ten complaints on file over several years, with the Division. It was never proven this individual had done anything deceptive or illegal, but the Division was constantly threatening to put him out of business. This individual had now agreed to binding arbitration on any complaint filed against him, and the problems surrounding this individual were solved using the industry's own program. Mr. Hardy said he would somehow like to see some "teeth" put into a binding arbitration program, and a requirement for proof that a business was willing, and had in place, a program of binding arbitration through an association, the DMV or the Better Business Bureau. This would not increase the load for taxpayers, or enlarge government in any way. Additional testimony was offered by John Marchioni, General Manager of Superior Tires and in charge of the Association's education program. He traced his long experience in the field and the eventual position of being in charge of Superior Tire in Las Vegas. It was clear that in Las Vegas there were too many cars and not enough people to take care of them. Mr. Marchioni continued with a description of his quest to better educate mechanics in the necessary computer skills, and the creation and development of four-year apprenticeship programs (Exhibit I, Exhibit J, Exhibit K and Exhibit L). Mr. Marchioni asserted all high school students wishing to go into the industry today went to schools in California, Arizona or Utah which offered industry certification. Ms. Tiffany stated she liked the idea of "self policing," and opined each industry had a fairly good idea of who the "bad" guys were. Additionally, she wished to see some truly effective way to address the problems. In this respect, she believed the agency dealing with Deceptive Trade Practices, along with the Better Business Bureau, the Department of Motor Vehicles and the Automotive Association were the most effective agencies. She discussed binding arbitration, and was told by Warren Hardy in a binding arbitration the Association ordinarily issued a judgment, and the matter then went to a court hearing if further measures were needed. Ms. Tiffany then asked if the Association possessed the needed legal authority to perform binding arbitration. Eldon Hardy explained the program in place with the Better Business Bureau was a unilateral binding arbitration program -- binding upon the repair shop, not the customer. He suggested the state could help bring all businesses into the Association. In order for the process to truly work, the Better Business Bureau representatives said the binding arbitration would have to be on both parties. Warren Hardy believed the Association would benefit if the DMV or Consumer Affairs Division would instruct the consumer not to leave his vehicle with any business not offering binding arbitration. This would lead to numerous sign-ups for binding arbitration agreements immediately. To Mr. Hardy, Ms. Buckley observed she sensed an objection to the fees proposed in A.B. 462. She questioned the feelings on the rest of the amendments to the Deceptive Trade, and the remainder of the bill. Mr. Warren Hardy said they supported whatever measures were necessary to bring the automotive industry fully under deceptive trade practice laws. The trouble with the bill, as it stood, Warren Hardy said, was that it made violation of the estimate law a deceptive trade practice. Thus, as a business owner, if he needed to revise an estimate, the consumer would have to return to the shop and sign for the revised estimate. Mrs. Brower asked Mr. Hardy if the language was crafted more specifically in respect to fee proposals and his concerns regarding the estimates, whether he would support the rest of the bill. He indicated affirmatively. In reference to the comment that self-policing would be more productive than going through Consumer Affairs, Ms. Buckley asked Mr. Marchioni whether he would be willing to support the creation of a board and the fees necessary to support a board such as the State Contractors' Board. Mr. Marchioni said he would. Mrs. Brower asked Warren Hardy if there was a plan developed to bring more members into the Association. He said they were working on this every day, and it was an area in which the DMV and Consumer Affairs could be very helpful. She also asked if the plan the Association had set out was realistic. Mr. Hardy said they believed they had the solution in place. The only thing lacking was the perpetuation of the solution, and they needed the Legislators' help in doing that. Responding to Ms. Giunchigliani's question regarding the fee for the Better Business Bureau's binding arbitration, Eldon Hardy was not certain whether this was $325 or $375 per year for a single location. Mr. Marchioni added it also depended on the number of employees at a particular location. Mr. Hardy told Ms. Giunchigliani a person did not have to join the Better Business Bureau to partake of binding arbitration, but the person/business did have to belong to the Association. The Association's fees were $200/year per location with a reduced fee of $50 for more than one location. Ms. Giunchigliani, Eldon Hardy and John Marchioni discussed the manner in which they envisioned mechanics being certified. Ms. Giunchigliani asked what the average hourly rate was for mechanics. Eldon Hardy said the dealerships were currently charging around $60/hour and the independent shops were charging about $50/hour. Discussion continued. Steve Yarborough, President of the Nevada Gasoline Retailers and Garage Owners' Association, submitted his written testimony (Exhibit M), and read his remarks into the record. Additionally, Mr. Yarborough called attention to copies of applicable NRS sections attached to Exhibit M. At the conclusion of his written testimony, Mr. Yarborough pointed out the allusions to a high number of complaints needed to be compared to the number of repairs which took place throughout the state each year. Chairman Spitler announced he would ask Ms. Chowning, Ms. McKinney-James and Ms. Jarman to meet with Mr. Hardy and his other representatives to: 1) See if a mutual agreement could be found on the bill; and 2) for Ms. Chowning to clear up the technical amendments identified by Mr. Hettrick. Once this was done, the committee would again hear the bill based on what the group had agreed upon. Daryl Capurro, Executive Director of Nevada Franchised Auto Dealers Association indicated most of his comments had been covered. He agreed there were a number of serious errors in the bill, however, he was concerned that much of what was being covered as new ground was, in fact, covered within the provisions of NRS 597, the very sections which were being repealed in the bill under automotive repairs, and then being reconstituted in the rest of the bill. He said they were not opposed to the licensing of repair facilities under a particular structured situation through the Department of Motor Vehicles. Currently, he pointed out, the dealerships were licensed with the Department of Motor Vehicles, salesmen and auto body shops were similarly licensed, and mechanics were certified with respect to the emission inspection program. With so many entities licensed and certified through the Department of Motor Vehicles, Mr. Capurro did not believe it was logical to be licensed through the Consumer Affairs Division. He believed the DMV not only had a much greater knowledge of the automotive business, they also had the structure available to enforce the laws already on the books. Patty Smith, Executive Director of the Nevada Auto Body Association, submitted an exhibit delineating the various bills dealing with the automotive industry (Exhibit N). She stated her Association's objection to the bill, and pointed out the discussion and motivation for A.B. 462 was dealing with only 3 to 4 percent of the claims in the entire state of Nevada. She believed if there were problems in Clark County, city and county licenses should be tightened to put dishonest dealers out of business. Also, since most garage businesses were "mom and pop" operations, most could not afford another $200 assessment. She said if her association had been included in prior discussions, they would have been told there were moves being made to better inform the customers, and they were working with the Insurance Commissioner, Alice Molasky, to develop a pamphlet entitled, "Customer Right to Know." Ms. Smith described the other activities being initiated to educate the public. Since these things were in place, she remarked the Association saw A.B. 462 as redundant. Although it was disguised as a consumer rights bill, it would not provide the customer with better services, it would not guarantee a more honest business operation and it would not expedite a repair. It would provide $300,000 to $500,000 for the Business and Industry, Consumer Affairs Division, so they could conduct the telemarketing function. If, indeed, telemarketing was not functioning correctly, it should be moved back to the Attorney General's Office, Ms. Smith opined. Ms. Giunchigliani asked Ms. Smith if her organization supported the binding arbitration component advocated by the groups from the south. Ms. Smith said this was the first she had heard about it, but she was sure their Board of Directors would be more than happy to discuss it. However, she pointed out, the Governor's Automotive Affairs Board was in place already. Ms. Giunchigliani clarified the funds, if the bill was enacted, would, indeed, not be directed to telemarketing, however, Ms. Smith was not convinced of this. Ms. Buckley said she understood the DMV was unwilling to assume the responsibility of policing the automotive fraud issue. Mr. Capurro said they supported the concept during the last session when the bill proposed DMV's involvement. He suggested a representative of the DMV who was present offer his assessment of the situation. Noting the presence of Ray Sparks, Acting DMV Director, Chairman Spitler requested that he work on A.B. 462 with the industry and Ms. Chowning. Ms. Buckley did not believe it would be satisfactory to merely discuss the issues with Ms. Chowning, and then come back with a recommendation of an interim study or mandatory arbitration. This would not get at the problems her constituents had. Mr. Capurro said he did not support binding arbitration as a legislative matter, although they did support arbitration. He reiterated his group's willingness to be licensed, which was, in fact, a significant concession, with significant impact. The Chairman stated A.B. 462 would be brought back into a work session, however, this would be so noted on the agenda. There being no further testimony or business to be addressed, Chairman Spitler adjourned the meeting at 6:35 p.m. RESPECTFULLY SUBMITTED: Iris Bellinger, Committee Secretary APPROVED: ________________________________ Chairman, Larry L. Spitler ________________________________ Chairman, Sandra Tiffany Assembly Committee on Commerce April 26, 1995 Page