Public Wins and Loses in Sacramento

Busy hands are happy hands, according to legend, and in few places is it more obvious than in the hallowed halls of a state legislature--California’s, for instance.

New laws are proposed and immediately the ranks are formed with lobbyists on both sides of the issue girding their loins to do battle. And the number of lobbyists, the size of their expense accounts and the stridency of their outrage are limited only by the economic clout of those groups they represent, which see their own personal ox in the greatest danger of being gored.

And of the estimated 6,000 new laws introduced in every two-year session of the Legislature (about 3,000 a year) a preponderance of them involve consumer goods and services in some respect.

Now, as National Consumer Week (April 20-25) fades into the distance, the time has come to sit down with Thomas M. Cecil, deputy director of the California Department of Consumer Affairs, and review the status of legislation affecting the pocketbook--to see what floundered into passage last year and to see what still remains in the hopper, some sinking and some swimming.

Insurance Industry

And if the current session has singled out any one consumer issue for special attention, Cecil says, 1985-86 would have to go into the record books as “the year of the insurance industry, with at least 100 bills introduced dealing with some aspect of it.”

Even for an industry that, traditionally, finds itself under heavy legislative fire, the current onslaught is unusual and has the added distinction this year of also being at the heart of (and strongly supporting) the only initiative to make it to the ballot--the controversial Proposition 51. The so-called “deep pockets” initiative would sharply limit the share of damages for pain and suffering (but not economic losses) that any defendant would have to pay in personal-injury liability cases. It’s a longtime sore point with the insurance industry, which finds itself--in its opinion--picking up a disproportionate share of such claims in an increasingly litigation-oriented society.

The outlook for the initiative is fuzzy, however, because its principal supporter is currently riding the crest of a tidal wave of public unpopularity born of explosive increases in insurance premiums, cancellation or unavailability of insurance coverage for some private and municipal facilities deemed to be “high risk” and a cumulative, smoldering resentment by consumers of some longstanding insurance practices that they consider either arbitrary, unfair or both.

Pending Legislation

Still pending in the Legislature, for instance, are no fewer than four pieces of legislation aimed at just one long and hotly debated insurance practice: basing automobile insurance premiums on “territorial ratings” (where the car owner lives) rather than on the owner’s driving record. All four proposed bills would make the insurer’s driving record either the principal or the only basis for establishing premiums.

“Actually,” according to Timothy Dove, the Insurance Information Institute’s assistant regional manager, “territorial rating is just one of the categories in pricing policies, but it’s obviously the big one and the one that attracts the most attention. The philosophy behind it is that if you live in an area with certain characteristics, then you should pay rates that accurately reflect the actual losses in that area. Otherwise, those people living in a low-risk area are going to be subsidizing those living in high-risk areas.”

At the same time, Dove concedes, the industry’s contention that basing premiums on driving record, rather than address, would grossly penalize insurers in low-risk areas is entirely theoretical. No state has yet enacted the driving-record-only statute that would put the theory to the test.

The outlook for the legislation: “It’s hard to tell,” Cecil feels. “It seems to have wide public support, so this might be the year it could make it.”

But in the current session of the Legislature, one eagerly pursued bill aimed at the banking industry that seemed to have wide public support too has already bitten the dust--the measure introduced by Assemblyman Rusty Areias (D-Los Banos) that would have put a lid on the interest rate that banks and other institutions can charge on credit cards. Despite the fact that interest rates generally have been in a steep decline, credit card rates have remained at about 20% a year, or roughly twice the rate on other kinds of loans.

“The banks’ opposition,” according to the Department of Consumer Affairs’ Cecil, “took several approaches, the biggest one being that the cost of money is really only about 40% of the cost of handling credit cards; that they lost money on the cards for years when the prime rate was as high, or higher, than the rate they were charging, and that they, only now, are beginning to make a one or two percentage-point profit on them--by their figures, at least.”

Also, the banking fraternity contends, if any such limitation on interest rates is in order, it should be on a national basis because credit cards are widely offered across state lines and, theoretically at least, the consumer even now can “shop” nationally for better rates.

While the credit card bill was shot down in flames, another piece of legislation, broadening the state’s “lemon law” on new-vehicle sales, is still alive and kicking; although it may face some stiff going on the Senate side of the Legislature.

“As the law stands now,” Cecil says, “there are some clear inequities. Even when the manufacturer determines that you do have a lemon, for instance, you still don’t get a full refund. You don’t get back the sales tax, the registration fee, the finance charges prepayment penalty and things like that. Also, certain kinds of vehicles--off-road, RVs and motorcycles--aren’t covered at all.”

As now written, the new “lemon law” bill would make the state responsible for seeing that the various arbitration boards between consumers and manufacturers conform to Federal Trade Commission standards.

“It’s been abundantly clear,” Cecil says, “that the arbitration boards aren’t even being trained in California law. Many of them simply ignore the ‘lemon law,’ and the FTC rarely, if ever, monitors any of them.”

But against this background of consumer legislation that either fell by the wayside or is still in the works, some far-reaching bills actually passed into law during the past year.

Among them: legislation curbing some abuses in the tow-truck business, a law permitting the buyers of motor vehicles the right to cancel a service contract, legislation mandating that landlords pay interest on security deposits “held in bad faith” after the unit is vacated, a law requiring telephone-sales personnel to register with the state, a law requiring telephone companies to give subscribers the option of being eliminated from access to 976-prefix (fee) telephone numbers and a law prohibiting retailers from imposing a surcharge on customers using a credit card for a sale instead of paying by cash or check (although the retailer may still offer a discount to customers not using credit cards).

The sometimes-rancorous feuding between tow-truck operators, vehicle owners and private-property owners will, it is hoped, be cooled (not eliminated completely) by new regulations stipulating the size and the lettering on “No Parking” signs that can result in towing. The new rules will limit tow truck drivers to a maximum $20 fee from drivers returning to their car before it is actually towed. The bill also requires towing facilities to accept credit cards, will levy a stiff fine on them (four times the towing/storage charge) if the tow was improper and makes the towing operator responsible for damage to a car while being towed and stored. At the same time, however, private-property owners can be slapped with a fine (double the towing/storage charges) if their property was improperly posted and the waiting period wasn’t met.

The tenant-protection bill that became effective this year requires landlords to pay 2% per month interest on a security deposit improperly held by him and also clarifies the mushy definition of “reasonable wear and tear” on a rental property for which the tenant cannot be held liable.

In most respects--in retrospect--it was a fairly typical legislative year for the consumer: some wins, some losses and a host of issues that can be counted on to resurface with the regularity of the running of the grunion.

Don G. Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.