NJ CAR tracks dozens of bills pending in the New Jersey Legislature. This article focuses on two pending bills that will allow dealerships to be more responsive to consumers’ needs. Introduced during the 2020-2021 legislative session, they are part of an effort to modernize customers’ transactional experiences with dealerships. On track to move to the Governor’s desk for his final action, their legislative status marks an ongoing trend toward the modernization of dealership operations that benefit consumer transactions.
A5033 authorizes licensed new car dealerships to sell motor vehicles online and allows the buyer and the dealer to acknowledge all motor vehicle transaction documents by electronic signature. Additionally, the legislation establishes requirements for used car dealers, including maintaining office space in the state and displaying clear signage. The bill would require that the New Jersey Motor Vehicle Commission (NJ MVC) accept documents signed via e-signature. Introduced in November 2020, the bill had been voted out of the Assembly Transportation and Independent Authorities Committee and the full Assembly by January 12, 2021. Its Senate counterpart S3279 was introduced on December 14, 2020, and awaits review in the Senate Transportation Committee.
Authorizing the use of e-signatures and e-transmission of documents for the purchase of vehicles benefits consumers and local neighborhood dealerships in many ways. It creates a better user experience for the consumer by allowing the consumer to sign remotely. It creates a more efficient sales experience for the dealer by minimizing paper usage and storage and expediting the transactional experience. Also, as a protective measure against COVID, allowing e-signatures and e-transmissions reflects good public health policy when at-risk and health-conscious populations seek safer ways to purchase their vehicles.
The early days of the state-imposed COVID restrictions yielded multiple Executive and Administrative Orders intended to balance public health and safety with the need to preserve essential services. The experience demonstrated quickly why modernizing the vehicle purchase experience is important. On March 21, 2020, New Jersey Governor Phil Murphy signed Executive Order No. 107 (EO 107), identifying car dealerships as essential retail businesses. However, to decrease contact, EO 107 restricted the business activity only to auto maintenance and repair services. Subsequent administrative orders were executed to clarify that car dealerships were permitted to sell vehicles online (Administrative Order No. 2020-6 signed on March 30, 2020, and No. 2020-10 signed on April 27, 2020). However, because the MVC does not accept documents signed via e-signature, customers must still come to the dealership to sign the necessary paperwork.
Two of the bill’s primary sponsors explained A5033’s connection to COVID:
Assemblyman Daniel Benson said, “The COVID-19 pandemic has forced every industry to adapt and innovate the way it does business. The auto industry is no exception. Though many of us are used to visiting a dealership and buying a car in person, we can now envision a future where purchasing a car online is commonplace. This bill removes regulatory hurdles.“
Assemblyman Anthony Verrelli commented, “We must continue finding ways to keep people safe and help businesses stay afloat. Online car sales offer customers convenience, comfort and, during the pandemic, safety. Just as people can sign many other legally binding documents online, there’s no reason car buyers shouldn’t be able to electronically sign papers to purchase a vehicle.”
The MVC has raised concerns about the bill. The bill does not impose any actions on the MVC nor require the commission to create new systems. Instead, the bill authorizes the MVC to acknowledge that electronic signatures secured from customers on transaction documents are valid, including electronic signatures on powers of attorney. Currently, the MVC recognizes powers of attorney with wet signatures from customers. This bill seeks to modernize that recognition. The MVC’s acceptance of a customer’s electronic signature on a power of attorney will authorize the dealer’s execution of the documents necessary for the sale, which is not different from what takes place today when a consumer provides a wet signature on a power of attorney. The MVC has also voiced concerns the bill may encourage consumer fraud, but we believe that concern to be misplaced. Today’s consumers understand the benefits of e-signature and the convenience of online consumer transactions.
The second bill, A1366, addresses consumers’ need for flexibility in their transportation options. It allows licensed new car dealers to designate any car in their inventory as a subscription vehicle. Under this bill, a consumer who signs up for a car subscription would pay to use the car for a monthly fee (including insurance, roadside assistance and maintenance) and would not own the vehicle. The consumer would return the car after the subscription. The bill requires that the MVC design a license plate with an “S” designation and a marking indicating “Subscription Vehicle.” Since its introduction on January 14, 2020, the bill was voted out of the Assembly Transportation and Independent Authorities Committee and the full Assembly. On October 8, 2020, it was referred to the Senate Transportation Committee, where it awaits a hearing date. Its Senate counterpart (S2256), introduced on March 16, 2020, also awaits a hearing in that committee.
In explaining why A1366 is important to consumers, Assemblyman Benson, one of the bill’s three primary sponsors, stated, “Not every driver is interested in buying or leasing a car for the long-term. Subscription vehicles offer a more flexible option for drivers not looking to make a lengthy commitment, while still providing access to important benefits like insurance.”
Recognizing the bill’s much-needed boost during the COVID pandemic, Assemblywoman BettyLou DeCroce offered, “This bill will deliver a much-needed boost to another industry struggling due to the COVID-19 pandemic. My father owned car dealerships for over 50 years, so I understand firsthand the important role auto dealerships play in New Jersey and that they need to be protected.”
This initiative to authorize motor vehicle dealers to offer subscription vehicle programs began in the 2018-2019 legislative session. Recommendations of improvements to the bill resulted in the bill being replaced by an Assembly Committee Substitute. This new version was re-introduced this legislative session as A1366, demonstrating the appeal of subscription vehicle programs as an additional competitive tool among franchise dealerships in New Jersey.