REPORT TITLE:
Motor Vehicle Rental Industry


DESCRIPTION:
Increases rental motor vehicle surcharge tax from $2 to
$        ; exempts persons renting a vehicle to replace a
vehicle being repaired; increases tour vehicle surcharge tax to
  ; repeals surcharge tax amendments after two years; places
surcharge moneys in general fund for two years; allows U-drive
operators to unbundle their airport concession rents and service
permit fees; allows motor vehicle rental businesses to receive
commissions from the sale of collision damage waivers.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        765
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO MOTOR VEHICLE RENTAL INDUSTRY.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                              PART I
 
 2      SECTION 1.  Section 251-2, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "251-2  Rental motor vehicle and tour vehicle surcharge
 
 5 tax.(a)  There is levied and shall be assessed and collected
 
 6 each month a rental motor vehicle surcharge tax of $2 a day,
 
 7 except that for the period of January 1, 2000, to December 31,
 
 8 2001, the tax shall be $            a day, or any portion of a
 
 9 day that a rental motor vehicle is rented or leased.  The rental
 
10 motor vehicle surcharge tax shall be levied upon the lessor[.];
 
11 provided that the tax shall not be levied on the lessor during
 
12 the period January 1, 2000, to December 31, 2001, if the lessor
 
13 is renting the vehicle to replace a vehicle of the lessee that is
 
14 being repaired.
 
15      (b)  There is levied and shall be assessed and collected
 
16 each month a tour vehicle surcharge tax of:
 
17      (1)  [$65] $     for each tour vehicle used or partially
 
18           used during the month that falls into the over
 
19           twenty-five passenger seat category; and
 

 
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 1      (2)  [$15] $     for each tour vehicle used or partially
 
 2           used during the month that falls into the eight to
 
 3           twenty-five passenger seat category.
 
 4      The tour vehicle surcharge tax shall be levied upon the tour
 
 5 vehicle operator."
 
 6      SECTION 2.  Section 251-5, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "251-5  Remittances.  All remittances of surcharge taxes
 
 9 imposed under this chapter shall be made by cash, bank draft,
 
10 cashier's check, money order, or certificate of deposit to the
 
11 office of the taxation district to which the return was
 
12 transmitted.  The department shall deposit the moneys into the
 
13 state treasury to the credit of the state highway fund[.]
 
14 provided that on July 1, 1999, the department shall deposit the
 
15 moneys into the state treasury to the credit of the state general
 
16 fund."
 
17                              PART II
 
18      SECTION 3.  The legislature finds that it will not be
 
19 deceptive or misleading to allow lessors in the motor vehicle
 
20 rental industry (U-drive) to separate out or "unbundle" their
 
21 airport concession rents and service permit fees.  This practice
 
22 is taking place in many tourist destinations which compete with
 
23 Hawaii.
 

 
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                                     H.B. NO.           H.D. 1
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 1      By allowing such "unbundling," U-drive lessees clearly will
 
 2 be able to see whether Hawaii's U-drive companies are providing
 
 3 them with a nationally-advertised or quoted daily rate.  Under
 
 4 Hawaii's current law which does not allow the separate statement
 
 5 of such expenses, tourist lessees often feel they are being
 
 6 cheated.
 
 7      While the legislature is aware of the continuing efforts by
 
 8 the National Association of Attorney Generals to update their
 
 9 guidelines relating to "unbundling" practices, the legislature
 
10 finds no problem with such practices as long as they fairly
 
11 disclose these expenses.
 
12      To avoid possible mistakes or abuses as to the separately
 
13 stated fees and charges, the legislature needs to ensure that
 
14 such "unbundling" is monitored and that reports are regularly
 
15 made to appropriate state agencies for purposes of addressing
 
16 violations. 
 
17      The purpose of this Part is to promote the understandable
 
18 and nondeceptive disclosure of airport concession rents and
 
19 service permit fees paid to the department of transportation for
 
20 access to public airports, while requiring U-drive lessors to
 
21 provide annual reports showing how such expenses were computed
 
22 and stating their total amounts.
 
23      SECTION 4.  Section 437D-8.4, Hawaii Revised Statutes, is
 

 
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                                     H.B. NO.           H.D. 1
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 1 amended to read as follows:
 
 2      "[[]437D-8.4[]]  License and registration fees.  (a)
 
 3 Notwithstanding any law to the contrary, a lessor may visibly
 
 4 pass on to a lessee:
 
 5      (1)  The general excise tax attributable to the transaction;
 
 6      (2)  The vehicle license and registration fee and weight
 
 7           taxes, prorated at 1/365th of the annual vehicle
 
 8           license and registration fee and weight taxes actually
 
 9           paid on the particular vehicle being rented for each
 
10           full or partial twenty-four hour rental day that the
 
11           vehicle is rented; provided the total of all vehicle
 
12           license and registration fees charged to all lessees
 
13           shall not exceed the annual vehicle license and
 
14           registration fee actually paid for the particular
 
15           vehicle rented; [and]
 
16      (3)  The rental motor vehicle surcharge tax as provided in
 
17           section 251-2 attributable to the transaction[.]; and
 
18      (4)  The rents or fees paid to the department of
 
19           transportation under concession contracts, negotiated
 
20           pursuant to chapter 102, or service permits, granted
 
21           pursuant to title 19, Hawaii Administrative Rules,
 
22           provided that:
 
23           (A)  The rents or fees are limited to amounts that can
 

 
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                                     H.B. NO.           H.D. 1
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 1                be attributed to the proceeds of the particular
 
 2                transaction;
 
 3           (B)  The rents or fees shall not exceed the lessor's
 
 4                net payments to the department of transportation
 
 5                made under concession contract or service permit;
 
 6           (C)  The lessor submits to the department of
 
 7                transportation and the department of commerce and
 
 8                consumer affairs a statement, audited in
 
 9                accordance with generally accepted auditing
 
10                standards, that reports the amounts of the rents
 
11                or fees paid to the department of transportation
 
12                pursuant to the applicable concession contract or
 
13                service permit:
 
14                (i)  For all airport locations; and
 
15               (ii)  For each airport location;
 
16           (D)  The lessor submits to the department of
 
17                transportation and the department of commerce and
 
18                consumer affairs a statement, audited in
 
19                accordance with generally accepted auditing
 
20                standards, that reports the amounts charged to
 
21                lessees:
 
22                (i)  For all airport locations;
 
23               (ii)  For each airport location; and
 

 
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                                     H.B. NO.           H.D. 1
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 1              (iii)  For each lessee;
 
 2           (E)  The lessor includes in these reports the
 
 3                methodology used to determine the amount of fees
 
 4                charged to each lessee; and
 
 5           (F)  The lessor submits the above information to the
 
 6                department of transportation and the department of
 
 7                commerce and consumer affairs within three months
 
 8                of the end of the preceding annual accounting
 
 9                period or contract year as determined by the the
 
10                applicable concession agreement or service permit.
 
11           The respective departments, in their sole discretion,
 
12           may extend the time to submit the statement required in
 
13           this subsection.  If the director determines that an
 
14           examination of the lessor's activities is inappropriate
 
15           under this subsection, the director may conduct an
 
16           examination and charge a lessor an examination fee
 
17           based upon the cost per hour per examiner for
 
18           evaluating, investigating, and verifying compliance
 
19           with this subsection, as well as additional amounts for
 
20           travel, per diem, mileage, and other reasonable
 
21           expenses incurred in connection with the examination,
 
22           which shall relate solely to the requirements of this
 
23           subsection, and which shall be billed by the
 

 
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                                     H.B. NO.           H.D. 1
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 1           departments as soon as feasible after the close of the
 
 2           examination.  The cost per hour shall be $40 or as may
 
 3           be established by rules adopted by the director.  The
 
 4           lessor shall pay the amounts billed within thirty days
 
 5           following the billing.  All moneys collected by the
 
 6           director shall be credited to the compliance resolution
 
 7           fund.
 
 8      (b)  A representation by the lessor to the lessee which
 
 9 states that the visible pass on of the charges in [paragraphs (1)
 
10 to (3)] this section is mandatory or that it is a government
 
11 assessment upon the consumer shall be a per se violation of
 
12 section 480-2."
 
13                             PART III
 
14      SECTION 5.  In 1990, the legislature barred the payment of
 
15 commissions on the sale of rental vehicle collision damage
 
16 waivers because of lessee confusion about the nature of collision
 
17 damage waivers and the potential for abuse relating to their
 
18 sale.  At the time there were over thirty-five rental companies
 
19 operating in Hawaii, and related disclosure legislation in
 
20 section 437D-5, Hawaii Revised Statutes, which required a
 
21 boldface plain language description of the scope, optional
 
22 nature, and cost of the collision damage waiver, as well as of
 
23 the possibility that the lessee might already be covered by the
 

 
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                                     H.B. NO.           H.D. 1
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 1 lessee's personal automobile policy, had only been in existence
 
 2 since 1988.
 
 3      At present, there are fewer than fifteen rental companies in
 
 4 Hawaii and, in part due to the disclosure law, there exists much
 
 5 less of a basis to regulate the rental car industry through the
 
 6 prohibition of commissions on the sale of collision damage
 
 7 waivers.  In addition, the legislature finds that there are many
 
 8 segments of the tourism industry that pay commissions and
 
 9 evaluate or reward their employees based on their performance in
 
10 selling the various packages and programs offered by the
 
11 employer.  Given this, the legislature believes that the motor
 
12 vehicle rental industry should no longer be singled out by a law
 
13 barring the payment of commissions calculated in part from the
 
14 sale of collision damage waivers.
 
15      The purpose of this Act is to allow the motor vehicle rental
 
16 industry to receive commissions calculated in part from the sale
 
17 of collision damage waivers.
 
18      SECTION 6.  Section 437D-8.5, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "437D-8.5  Commissions.  (a)  No lessor or officer,
 
21 employee, agent, or other representative of the lessor shall pay
 
22 or receive a direct commission for selling collision damage
 
23 waivers.  Any violation of this section shall be an unfair or
 

 
Page 9                                                     765
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        

 
 1 deceptive act or practice as provided in section 480-2.
 
 2      (b)  As used in this section, ["commission for selling
 
 3 collision damage waivers"] "direct commission for selling
 
 4 collision damage waivers" includes any compensation, bonus,
 
 5 award, or remuneration, [whether direct, indirect, or otherwise,]
 
 6 which is calculated by means of a formula, process, evaluation,
 
 7 or other [mechanisms which considers sales of collision damage
 
 8 waivers as a factor in any manner.  "Commission for selling
 
 9 collision damage waivers" also includes any performance
 
10 evaluation which could be used in determining promotions, raises,
 
11 or other personnel decisions, or any other device which serves to
 
12 encourage the sale of collision damage waivers.] mechanism by
 
13 which a person is able to calculate the amount of any
 
14 compensation, bonus, award, or remuneration based directly on the
 
15 sales of collision damage waivers."
 
16      SECTION 7  Section 437D-8.6, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "437D-8.6  Collision damage waiver statistics.  [Lessors]
 
19 (a)  Each lessor shall submit [data or information] a report to
 
20 the director regarding [their] its sale of collision damage
 
21 waivers in a given year and amounts expended to repair damage to
 
22 rental vehicles caused while the vehicles are subject to the
 
23 collision damage waiver.  
 

 
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                                     H.B. NO.           H.D. 1
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 1      (b)  Lessors shall maintain all records reflecting these
 
 2 statistics.
 
 3      (c)  Neither the director, nor any other employee of the
 
 4 department of commerce and consumer affairs, nor any other person
 
 5 appointed by the director as provided by law, shall release or
 
 6 divulge any of the information or data required by this section,
 
 7 except as may be requested by the legislature, or as required or
 
 8 allowed by rules adopted pursuant to section 437D-18.
 
 9      (d)  By January 1, 2000, each lessor shall submit a report
 
10 to the director on its compensation plans for employees who
 
11 assist or direct the sale of the collision damage waivers as of
 
12 January 1, 1999, which shall include details on all factors used
 
13 to calculate employee compensation.
 
14      (e)  By January 1, 2001, and each year thereafter, each
 
15 lessor shall submit a report to the director that includes
 
16 details on the following:
 
17      (1)  Compensation plans of the lessor that reflect all
 
18           factors, including indirect commissions for selling
 
19           collision damage waivers, used to calculate employee
 
20           compensation;
 
21      (2)  Performance standards or benchmarks that are used in
 
22           determining promotions, raises, or other personnel
 
23           decisions;
 

 
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                                     H.B. NO.           H.D. 1
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 1      (3)  Any other device used by the lessor to encourage the
 
 2           sale of collision damage waivers;
 
 3      (4)  Records of all written, telephonic, and in-person
 
 4           consumer complaints relating to collision damage waiver
 
 5           sales for the year reported;
 
 6      (5)  A schedule of amounts charged for each collision damage
 
 7           waiver product offered;
 
 8      (6)  The number of rental agreements entered into in each
 
 9           month of the year reported;
 
10      (7)  The number of each type of collision damage waiver sold
 
11           in each month of the year reported;
 
12      (8)  Gross revenues for each type of collision damage waiver
 
13           sold in each month of the year reported;
 
14      (9)  For each collision damage waiver reported pursuant to
 
15           subsection (d), amounts expended by lessees to repair
 
16           damage to rental motor vehicles where the payment for
 
17           damages falls within the scope of the collision damage
 
18           waiver; and
 
19     (10)  All cost factors used by the lessor to determine the
 
20           amounts charged for each collision damage waiver
 
21           offered."
 
22                              PART IV
 
23      SECTION 8.  If any provision of this Act, or the application
 

 
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 1 thereof to any person or circumstance is held invalid, the
 
 2 invalidity does not affect other provisions or applications of
 
 3 the Act which can be given effect without the invalid provision
 
 4 or application, and to this end the provisions of this Act are
 
 5 severable.
 
 6      SECTION 9.  Statutory material to be repealed is bracketed.
 
 7 New statutory material is underscored.
 
 8      SECTION 10.  This Act shall take effect on January 1, 2010;
 
 9 provided that:
 
10      (1)  Section 1 shall take effect on January 1, 2010;
 
11      (2)  The amendments set forth in sections 1 and 2 of this
 
12           Act shall be repealed on January 1, 2002, and sections
 
13           251-2 and 251-5, Hawaii Revised Statutes, shall be
 
14           reenacted in the form in which they read immediately
 
15           prior to the effective date of this Act; and
 
16      (3)  Parts II and III shall be repealed on June 30, 2001.