The California Automobile Sales Finance Act (AFSA) protects consumers from excessive finance charges and hidden costs by requiring that automobile sales contracts disclose all items of cost. An extremely important provision of the AFSA is the Single Document Rule contained in Civil Code section 2981.9. Under the Single Document Rule ("SDR"), every conditional sales contract "shall contain in a single document all of the agreements of the buyer and seller with respect to the total cost and the terms of payment for the motor vehicle."
There has been much confusion over how to interpret the SDR. In a recent opinion, 8 Ops.Cal.Atty.Gen. (2009) (the "Opinion"), the California Attorney General rejected what had been the prevailing interpretation. Under the prevailing interpretation, all agreements need not be contained on a single piece of paper, but any agreement not so contained must be physically attached to and clearly cited on the face of the conditional sales contract form. The Opinion dismissed any requirement that all agreements be contained or referenced
in a single sheet of paper, finding that the SDR is satisfied if the document consists of multiple pages that are attached to each other and integrated such as through inclusive sequential numbering.
Appropriate procedure prior to the Opinion would require evidence of true incorporation by reference and integration of every collateral document into a single document. In order to minimize any SDR risk, the dealer would need to insert a description of the incorporated document followed by the words "attached to and made a part of this agreement." The dealer would then attach the original incorporated document to the original contract and then attach a copy of the document to each copy of the contract, including the customer’s copy, using staples or some other bonding agent. To be extra careful, the dealer would then place a corresponding statement on the first page of the attached document that "this document is attached to and made a part of," followed by the name and date of the contract form being used. The Opinion directs that it is now possible to satisfy the SDR requirement for automobile sales contracts if the document consists of multiple pages that are attached to each other and integrated by means such as inclusive sequential pages numbering (e.g. "1 of 4," "2 of 4," etc.).
While the process of selling an automobile would be greatly simplified if the Opinion were binding authority, there is reason for automobile dealers to proceed with caution in relying on the Opinion’s interpretation. We agree with the Attorney General’s finding that application of the rules of statutory construction and the relevant case law lead to the conclusion that the SDR does not require that all of the agreements of the buyer and seller with respect to the total cost and the terms of payment for the motor vehicle be contained on a single sheet of paper. It is, however, currently far less clear that the SDR does not mandate that all such agreements be referenced on a single sheet of paper. The Attorney General relies merely on the absence of any such articulated requirement coupled with pragmatic considerations to support his rejection of the prevailing interpretation. There is simply insufficient case law to determine with any degree of certainty how a court would rule on this issue. Stay tuned for my analysis of the Opinion for those interested in the legal reasoning
Erica A. Stuckey