Prohibits rental car companies from discriminating on the basis of geographical location

Summary of provisions

Section 1 of the bill amends the general business law by adding a new section 391-s which would prohibit rental vehicle companies from refusing to rent, imposing any additional charge, or imposing any additional terms, conditions or privileges on the rental of a vehicle based on the geographic location of the residence of the renter. In addition, this section would subject violations to a civil penalty of not more than $1,000 and create a limited private right of action for individuals aggrieved under the law. Individuals could sue to enjoin and recover actual damages or $250, whichever is greater. The court could also award increased damages not to exceed three times the actual damages, up to $1500, for willful or knowing violations, as well as reasonable attorneys' fees, to a prevailing plaintiff.

Justification

At various times, vehicle rental companies choose to tack on an onerous surcharge to rent a vehicle, in addition to the basic rate, based on where the renter lives, without regard to the location the consumer actually takes possession of the vehicle or uses it. Such surcharges have been particularly prevalent for renters living in the Bronx, Brooklyn, and Queens, and they have often been added even if the consumer is renting a vehicle from an out-of-state location.

The New York City Council attempted to outlaw this discriminatory practice by enacting a local law in 1992. The validity of the law was promptly challenged in federal court by Hertz Corporation, which successfully sued to enjoin the City from enforcement, pending a decision on the merits. In a 2002 decision, the federal district court found that the local law was invalid because New York City, as a locality, did not have the power to regulate prices in the manner the City sought to regulate them, because the City's local law violated the federal. Sherman Act. See Hertz Corp. v. City of New York, 212 F.Supp.2d 275 (2002). The court's ruling was based on an earlier decision in the same case by the U.S. Court of Appeals for the Second Circuit, in which the court found that the City did not benefit from immunity under the Sherman Act that is available to state governments. See Hertz Corp. v. City of New York, 1 F.3d 121 (2d Cir. 1993).

In 1997, the Assembly Consumer Affairs and Protection Committee conducted an investigation and public hearing on consumer grievances about car rental company discriminatory practices. The Committee

published its findings in the report "The Business Practices of the Rental Vehicle Industry." With respect to geographic discrimination alone, the report includes allegations of: being denied a rental vehicle due to living "in a high crime area" (American Rental Systems); being charged over $100 above a quoted price for the same rental car from a different location "because a lot of people in the Bronx steal cars" (Budget Car Rental Agency); being refused the vehicle of the consumer's choosing "because it is the policy of Enterprise not to furnish any residents of 718 area codes with vehicles such as Cadillacs or Park Avenues;" and being "informed that if I was flying in as a passenger they would be glad to rent me a car. If I committed the crime of living in the neighborhood they would not" (Budget).

Many of the companies whose practices were examined in the report subsequently refrained voluntarily from the practice of geographic price discrimination. However, as of 2006, Hertz was still charging $56 extra for Bronx residents, $34 extra for Brooklyn residents, $15 extra for Queens residents, and $3 extra for Manhattan residents. The increased rates were charged to persons residing in those boroughs whenever they rented a car at a Hertz outlet in the New York metropolitan area, New Jersey, southern Connecticut, or eastern Pennsylvania. Budget Rent-A-Car also had similar charges at that time.

A survey conducted by the office of Manhattan Borough President Scott Stringer in November 2010, found that Hertz, Budget, and most other major companies were not engaging in geographic price discrimination at that time, but the Dollar and Thrifty companies were requiring Brooklyn residents pay $55 extra per day, Bronx residents to pay $53 extra per day, and Queens residents to pay $11 extra per day.

While practices of rental car companies have varied over time, and generally trended away from practicing geographic discrimination, this bill would establish that it is the policy of the State of New York not to permit corporations doing business in our state to discriminate against customers based on where they live. With the federal court having found that the City of New York does not have the power to protect its residents in this way, the State should act, rather than leaving it up to the corporations themselves, which have demonstrated a poor track record in this area, to do the right thing.

Legislative history

2011: A05952 (Kavanagh) - Consumer Affairs and Protection 2010: A00510A (Kavanagh) - Consumer Affairs and Protection

Fiscal impact on the state

None.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law.