Motor Vehicle Consumer Protections

Second Regular Session Seventy-fifth General Assembly STATE OF COLORADO INTRODUCED HOUSE BILL 26-1261 LLS NO. 26-0460.02 Jery Payne x2157 HOUSE SPONSORSHIP Mabrey and Ricks, SENATE SPONSORSHIP Weissman and Wallace, House Committees Senate Committees Business Affairs & Labor A BILL FOR AN ACT CONCERNING RIGHTS RELATED TO THE TRANSFER OF A MOTOR VEHICLE.

Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.) Under the "Uniform Consumer Credit Code", a creditor must give certain notices at least 20 days before repossessing collateral. For a vehicle that is required to be registered and that is a debtor's only vehicle (qualified motor vehicle), the bill extends this notice period to 60 days. A covered person with a qualified motor vehicle subject to a lien may cure the default during the 60 days by making the back payments plus Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.

Capital letters or bold & italic numbers indicate new material to be added to existing law. Dashes through the words or numbers indicate deletions from existing law.

delinquency or deferral charges. The bill prohibits disabling a qualified motor vehicle for the purpose of repossessing it. The bill creates a 48-day right to cure a default that led to a qualified motor vehicle being repossessed. The creditor must notify the covered person that owns the vehicle of the repossession within 48 hours and that the qualified motor vehicle is subject to disposition unless the debt is cured. Standards are set for the notice. If the covered person fails to cure the default within 48 days after the repossession, the secured party with the repossessed qualified motor vehicle may dispose of the qualified motor vehicle. If the covered person cures the default within 48 days after the repossession, the secured party shall return the qualified motor vehicle and restore the covered person's rights under the security agreement and the associated obligations under the consumer transaction or promissory note as though the default did not occur. The bill creates a right to return a qualified motor vehicle purchased from a dealer within 3 business days. For cases in which a consumer returns a motor vehicle, the bill creates certain requirements for the consumer and the dealer. Procedures are set for unwinding the financing agreement and any security agreement. A dealer must not charge or attempt to charge a consumer for unreasonable excess mileage or unreasonable cost of repairs or use a claim of excess mileage or repairs to delay compliance with the bill. A waiver of the right to return a motor vehicle is void as against public policy. In addition to any other remedies, a consumer harmed by a dealer's violation of the bill may recover actual damages, reasonable attorney fees and costs, and, for willful or knowing violations, treble damages. A violation of the bill is an unfair or deceptive trade practice under the "Colorado Consumer Protection Act".

Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add article 9.4 to title 5 as follows:

ARTICLE 9.4 Consumer Protections for Motor Vehicle Liens 5-9.4-101. Definitions.

AS USED IN THIS ARTICLE 9.4, UNLESS THE CONTEXT OTHERWISE REQUIRES:

(1) "COVERED PERSON" MEANS A NATURAL PERSON THAT ENTERS INTO A RETAIL INSTALLMENT CONTRACT OR LEASE FOR A QUALIFIED MOTOR VEHICLE.

(2) "DISABLE A MOTOR VEHICLE" MEANS ACTIVATING, INCLUDING BY REMOTE OR ELECTRONIC ACTIVATION, A DEVICE THAT PREVENTS NORMAL OPERATION OF A MOTOR VEHICLE.

(3) (a) "QUALIFIED MOTOR VEHICLE" MEANS A SELF-PROPELLED VEHICLE THAT IS:

(I) REQUIRED TO BE REGISTERED UNDER ARTICLE 3 OF TITLE 42, REGARDLESS OF WHETHER THE VEHICLE IS USED FOR PERSONAL, HOUSEHOLD, OR BUSINESS PURPOSES; AND

(II) THE ONLY MOTOR VEHICLE OWNED BY A DEBTOR.

(b) "QUALIFIED MOTOR VEHICLE" DOES NOT INCLUDE A FLEET VEHICLE AS DEFINED IN SECTION 42-1-102 (36).

"SECURED PARTY" MEANS A PERSON WITH A SECURITY INTEREST IN A MOTOR VEHICLE.

"SECURITY INTEREST" HAS THE MEANING SET FORTH IN

SECTION 4-1-201 (35).

5-9.4-102. Applicability - conflict of laws.

(1) NOTWITHSTANDING COMMON LAW OR A PROVISION OF A CONTRACT, THIS ARTICLE 9.4 APPLIES TO THE ENFORCEMENT OF RIGHTS UNDER A SECURITY INTEREST IN A QUALIFIED MOTOR VEHICLE. A PROVISION OF A CONTRACT THAT WAIVES A RIGHT GRANTED UNDER THIS ARTICLE 9.4 IS VOID TO THE EXTENT NECESSARY FOR A COVERED PERSON TO RETAIN THE RIGHT.

(2) IF A PROVISION IN THIS ARTICLE 9.4 CONFLICTS WITH A PROVISION IN SECTION 4-9-609 OR ARTICLE 5 OF THIS TITLE 5, THE PROVISION IN THIS ARTICLE 9.4 GOVERNS TO THE EXTENT THAT THE CONFLICT APPLIES TO A SECURITY INTEREST IN A QUALIFIED MOTOR VEHICLE PURCHASED BY A COVERED PERSON.

5-9.4-103. Cure of default.

(1) AFTER A COVERED PERSON'S DEFAULT CONSISTING ONLY OF THE COVERED PERSON'S FAILURE TO MAKE A REQUIRED PAYMENT, A CREDITOR SHALL NOT, BECAUSE OF THE DEFAULT, ACCELERATE MATURITY OF THE UNPAID BALANCE OF THE OBLIGATION NOR TAKE POSSESSION OF OR OTHERWISE ENFORCE A SECURITY INTEREST IN A QUALIFIED MOTOR VEHICLE UNTIL SIXTY DAYS AFTER GIVING THE CONSUMER THE NOTICE OF RIGHT TO CURE DESCRIBED IN SECTION 5-5-110.

(2) UNTIL THE EXPIRATION OF THE TIME PERIOD DESCRIBED IN SUBSECTION (1) OF THIS SECTION, A DEFAULT CONSISTING OF A FAILURE TO MAKE A REQUIRED PAYMENT MAY BE CURED BY TENDERING TO THE CREDITOR THE AMOUNT OF ALL UNPAID SUMS DUE AT THE TIME OF THE TENDER, WITHOUT ACCELERATION, PLUS ANY UNPAID DELINQUENCY OR DEFERRAL CHARGES. CURING THE DEFAULT RESTORES THE COVERED PERSON'S RIGHTS UNDER THE AGREEMENT AS THOUGH THE DEFAULT DID NOT OCCUR.

(3) THIS SECTION DOES NOT APPLY:

(a) IF THE DEFAULT CONTINUES FOR ONE HUNDRED TWENTY DAYS OR MORE; OR

(b) TO A SECOND OR SUBSEQUENT DEFAULT.

(4) A SECURED PARTY MUST COMPLY WITH THIS SECTION IN ORDER TO TAKE POSSESSION OF A QUALIFIED MOTOR VEHICLE.

5-9.4-104. Disabling motor vehicle prohibited.

A SECURED PARTY SHALL NOT DISABLE A MOTOR VEHICLE FOR THE COVERED PERSON'S FAILURE TO MEET PAYMENT OBLIGATIONS UNDER THE PURCHASE TRANSACTION ASSOCIATED WITH THE SECURITY INTEREST OR PROMISSORY NOTE WHEN EXERCISING THE SECURED PARTY'S RIGHTS WITH RESPECT TO COLLATERAL.

Qualified motor vehicle - right to cure after repossession.

(1) A SECURED PARTY THAT HAS REPOSSESSED A QUALIFIED MOTOR VEHICLE SHALL NOT DISPOSE OF THE MOTOR VEHICLE UNTIL FORTY-EIGHT DAYS AFTER THE MOTOR VEHICLE IS REPOSSESSED.

WITHIN FORTY-EIGHT HOURS AFTER REPOSSESSING A QUALIFIED MOTOR VEHICLE, A SECURED PARTY SHALL NOTIFY THE COVERED PERSON THAT THE MOTOR VEHICLE HAS BEEN REPOSSESSED AND THAT THE MOTOR VEHICLE IS SUBJECT TO DISPOSITION FORTY-EIGHT DAYS AFTER THE DATE OF REPOSSESSION UNLESS THE COVERED PERSON CURES THE DEFAULT IN ACCORDANCE WITH SUBSECTION (3) OF THIS SECTION. THE NOTICE MUST INCLUDE:

(a) THE ACTUAL DATE THE QUALIFIED MOTOR VEHICLE IS SUBJECT TO DISPOSITION IF THE DEBTOR DOES NOT CURE THE DEFAULT;

(b) THE AMOUNT NECESSARY TO CURE THE DEFAULT UNDER SUBSECTION (3) OF THIS SECTION;

(c) THE ACCEPTABLE FORMS OF PAYMENT TO CURE THE DEFAULT; AND

(d) THE NAME OF, ADDRESS OF, AND TELEPHONE NUMBER OF THE SECURED PARTY.

(3) TO CURE A DEFAULT THAT CAUSED THE REPOSSESSION OF A QUALIFIED MOTOR VEHICLE, THE COVERED PERSON MUST PAY THE OVERDUE AMOUNT PLUS THE REASONABLE COST OF REPOSSESSING THE MOTOR VEHICLE.

(4) (a) IF A COVERED PERSON FAILS TO CURE A DEFAULT WITHIN FORTY-EIGHT DAYS AFTER THE REPOSSESSION OF A QUALIFIED MOTOR VEHICLE, THE SECURED PARTY MAY DISPOSE OF THE MOTOR VEHICLE IN ACCORDANCE WITH PART 6 OF ARTICLE 9 OF TITLE 4 AND ARTICLE 5 OF THIS TITLE 5.

(b) IF A COVERED PERSON CURES A DEFAULT WITHIN FORTY-EIGHT DAYS AFTER THE REPOSSESSION OF A QUALIFIED MOTOR VEHICLE, THE SECURED PARTY SHALL RETURN THE MOTOR VEHICLE AND RESTORE THE COVERED PERSON'S RIGHTS UNDER THE SECURITY AGREEMENT AND THE ASSOCIATED OBLIGATIONS UNDER THE PURCHASE TRANSACTION OR PROMISSORY NOTE AS THOUGH THE DEFAULT DID NOT OCCUR. THE COVERED PERSON'S OBLIGATIONS UNDER THE SECURITY AGREEMENT AND THE ASSOCIATED OBLIGATIONS UNDER THE PURCHASE TRANSACTION OR PROMISSORY NOTE RESUME AS THOUGH THE DEFAULT DID NOT OCCUR.

5-9.4-106. Enforcement - unfair or deceptive trade practice.

A VIOLATION OF THIS ARTICLE 9.4 IS AN UNFAIR OR DECEPTIVE TRADE PRACTICE UNDER THE "COLORADO CONSUMER PROTECTION ACT", AS DESCRIBED IN SECTION 6-1-105 (1)(rrrr).

SECTION 2. In Colorado Revised Statutes, add 44-20-130.5 as follows: 44-20-130.5.

Right to return - enforcement - unfair or deceptive trade practice - definitions - rules. (1) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES:

(a) "DEALER" MEANS A MOTOR VEHICLE DEALER OR A USED MOTOR VEHICLE DEALER.

(b) "QUALIFIED MOTOR VEHICLE" HAS THE MEANING SET FORTH IN SECTION 5-9.4-101 (3).

(2) (a) SUBJECT TO SUBSECTION (3) OF THIS SECTION, A CONSUMER WHO PURCHASES A QUALIFIED MOTOR VEHICLE FROM A DEALER HAS A RIGHT TO RETURN THE MOTOR VEHICLE TO THE DEALER WITHIN THREE BUSINESS DAYS AFTER THE LATER OF THE CONSUMER RECEIVING DELIVERY OF THE MOTOR VEHICLE OR THE CONSUMER PURCHASING THE MOTOR VEHICLE.

(b) IF A CONSUMER RETURNS A QUALIFIED MOTOR VEHICLE UNDER THIS SECTION, THE DEALER, WITHIN THREE BUSINESS DAYS, SHALL:

(I) REFUND THE AMOUNTS ACTUALLY PAID BY THE CONSUMER FOR THE RETURNED VEHICLE MINUS THE FEES DESCRIBED IN SUBSECTION (3)(c) OF THIS SECTION AND ANY COST OF REPAIRING THE RETURNED VEHICLE AS DESCRIBED IN SUBSECTION (3)(e)(II) OF THIS SECTION;

(II) TAKE ALL NECESSARY STEPS TO UNWIND OR CANCEL ANY FINANCING OR LEASING ARRANGEMENTS RELATED TO THE RETURNED VEHICLE; AND

(III) IF THE CONSUMER TRADED IN A VEHICLE AS PART OF THE TRANSACTION:

(A) RETURN THE TRADE-IN VEHICLE TO THE CONSUMER IN SUBSTANTIALLY THE SAME CONDITION IF THE DEALER STILL OWNS THE VEHICLE; OR

(B) PAY THE CONSUMER THE AGREED TRADE-IN VALUE STATED IN THE PURCHASE CONTRACT IF THE DEALER NO LONGER OWNS THE VEHICLE.

(3) TO EXERCISE THE RIGHT TO RETURN A QUALIFIED MOTOR VEHICLE, A CONSUMER MUST:

(a) RETURN THE QUALIFIED MOTOR VEHICLE TO THE DEALER'S PLACE OF BUSINESS DURING NORMAL BUSINESS HOURS WITHIN THE THREE-BUSINESS-DAY RETURN PERIOD;

(b) SIGN THE CERTIFICATE OF TITLE OF THE QUALIFIED MOTOR VEHICLE AND TRANSFER THE CERTIFICATE OF TITLE TO THE DEALER;

(c) PAY A REASONABLE RESTOCKING FEE AND ANY REASONABLE EXCESS MILEAGE FEE, AS EACH IS DETERMINED PURSUANT TO SUBSECTION

(4) OF THIS SECTION;

(d) RETURN ALL ITEMS RECEIVED AS PART OF THE TRANSACTION; AND

(e) (I) RETURN THE QUALIFIED MOTOR VEHICLE IN SUBSTANTIALLY THE DELIVERED CONDITION, NOT INCLUDING ORDINARY WEAR AND TEAR AND REASONABLE MILEAGE; OR

(II) PAY THE REASONABLE COST, NOT TO EXCEED ONE-HALF OF ONE PERCENT OF THE VALUE OF THE QUALIFIED MOTOR VEHICLE AT THE POINT OF SALE, OF REPAIRING THE MOTOR VEHICLE TO SUBSTANTIALLY THE DELIVERED CONDITION.

(4) IF A QUALIFIED MOTOR VEHICLE IS RETURNED PURSUANT TO THIS SECTION, A DEALER MAY CHARGE A REASONABLE RESTOCKING FEE OF TWO HUNDRED DOLLARS OR MORE BUT NOT TO EXCEED THE LOWER OF SIX HUNDRED DOLLARS OR ONE AND ONE-HALF PERCENT OF THE TOTAL SALE PRICE OF THE RETURNED MOTOR VEHICLE.

RESTOCKING FEE, THE DEALER MAY CHARGE AN EXCESS MILEAGE FEE TO COMPENSATE THE DEALER FOR EXCESS MILEAGE BEYOND REASONABLE MILEAGE. BOTH THE RESTOCKING FEE AND THE EXCESS MILEAGE FEE ARE DEDUCTED FROM THE CONSUMER'S REFUND. THE DEALER SHALL NOT REQUIRE THE CONSUMER TO PAY THE RESTOCKING FEE OR THE EXCESS IN ADDITION TO THE MILEAGE FEE BEFORE RETURNING THE QUALIFIED MOTOR VEHICLE PURSUANT TO THIS SECTION.

(5) (a) (I) A SECURITY INTEREST, PROMISSORY NOTE, OR FINANCING INSTRUMENT FOR THE PURCHASE OF A QUALIFIED MOTOR VEHICLE FROM A DEALER DOES NOT TAKE EFFECT UNTIL THE FOURTH BUSINESS DAY AFTER THE LATER OF THE CONSUMER PURCHASING THE MOTOR VEHICLE OR THE CONSUMER RECEIVING DELIVERY OF THE MOTOR VEHICLE.

(II) UPON NOTICE FROM A DEALER THAT A PURCHASE CONTRACT HAS BEEN CANCELED UNDER THIS SECTION, A HOLDER OF A SECURITY INTEREST, PROMISSORY NOTE, OR FINANCING INSTRUMENT SHALL PROMPTLY:

(A) REVERSE THE OBLIGATIONS OF THE CONSUMER UNDER THE SECURITY INTEREST, PROMISSORY NOTE, OR FINANCING INSTRUMENT; AND

(B) REFUND THE PAYMENTS RECEIVED FROM OR ON BEHALF OF THE CONSUMER.

(b) THIS SUBSECTION (5) DOES NOT APPLY IF THE CONSUMER HAS FINANCED THE PURCHASE OF A QUALIFIED MOTOR VEHICLE WITHOUT GRANTING A SECURITY INTEREST IN THE MOTOR VEHICLE TO OBTAIN THE FINANCING.

(6) A DEALER SHALL NOT:

(a) CHARGE OR ATTEMPT TO CHARGE A CONSUMER FOR UNREASONABLE EXCESS MILEAGE OR UNREASONABLE COST OF REPAIRS;

OR

(b) USE A CLAIM OF EXCESS MILEAGE OR REPAIRS TO DELAY COMPLIANCE WITH THIS SECTION.

(7) A WAIVER OF THE RIGHT TO RETURN A QUALIFIED MOTOR VEHICLE UNDER THIS SECTION IS VOID AS AGAINST PUBLIC POLICY.

(8) (a) A VIOLATION OF THIS SECTION IS AN UNFAIR OR DECEPTIVE TRADE PRACTICE UNDER THE "COLORADO CONSUMER PROTECTION ACT", AS DESCRIBED IN SECTION 6-1-105 (1)(qqqq).

(b) IN ADDITION TO ANY OTHER REMEDIES, A CONSUMER HARMED BY A DEALER'S VIOLATION OF THIS SECTION MAY RECOVER ACTUAL DAMAGES, REASONABLE ATTORNEY FEES AND COSTS, AND, FOR A WILLFUL OR KNOWING VIOLATION, TREBLE DAMAGES.

(9) THE BOARD MAY ADOPT RULES TO IMPLEMENT AND ENFORCE THIS SECTION. THE RULES MAY INCLUDE DEFINITIONS FOR "REASONABLE MILEAGE", "ORDINARY WEAR AND TEAR", "REASONABLE RESTOCKING FEE", AND "UNREASONABLE COST OF REPAIRS".

SECTION 3.

In Colorado Revised Statutes, 6-1-105, add (1)(qqqq) and (1)(rrrr) as follows:

6-1-105. Unfair or deceptive trade practices - definitions.

(1) A person engages in a deceptive trade practice when, in the course of the person's business, vocation, or occupation, the person:

(qqqq) VIOLATES SECTION 44-20-130.5;

(rrrr) VIOLATES ARTICLE 9.4 OF TITLE 5.

SECTION 4.

Act subject to petition - effective date - applicability. (1) This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 12, 2026, if adjournment sine die is on May 13, 2026); except that, if a referendum petition is filed pursuant to section 1

(3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2026 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.

(2) This act applies to motor vehicle sales made on or after the applicable effective date of this act.