Brooke Conkle and Chris Capurso break down recent state-law developments affecting auto dealers and finance companies in California and Massachusetts.
In this episode of Moving the Metal: The Auto Finance Podcast, Brooke Conkle and Chris Capurso break down recent state-law developments affecting auto dealers and finance companies in California and Massachusetts. The discussion covers California's recent arbitration laws, including restrictions on venue, choice of law, and the scope of arbitration agreements, as well as open questions about federal preemption. Brooke and Chris also review Massachusetts' newly enacted junk fee regulations, highlighting requirements for price and fee transparency, trial offer disclosures, and cancellation mechanisms. They explain how these changes impact compliance, dealer oversight, and litigation risk — especially for businesses operating across multiple states. Tune in for a practical look at how evolving state laws are shaping the auto finance landscape.
Moving the Metal: The Auto Finance Podcast — State Law Roundup: Arbitration Changes and Junk Fee Rules in California and Massachusetts
Hosts: Brooke Conkle and Chris Capurso
Recorded: October 30, 2025
Aired: November 11, 2025
Brooke Conkle (00:09):
Welcome to Moving the Metal, the premier legally focused podcast for the auto finance industry. I'm Brooke Conkle, a partner in Troutman Pepper Locke's Consumer Financial Services Practice Group.
Chris Capurso (00:20):
And I'm Chris Capurso, an associate Troutman Pepper Locke's Consumer Financial Services Practice Group.
Brooke Conkle (00:25):
Today we'll be discussing recent state law updates impacting dealers and auto finance companies in Massachusetts and California. But before we jump in, let me remind you to please visit and subscribe to our blogs. We have two great ones that may be of interest to you, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And also we have a bevy of other podcasts that you might find interesting. The Consumer Finance Podcast, which as you might guess is all things consumer finance related, The Crypto Exchange devoted to trends, challenges, and legal issues in Bitcoin, blockchain, FinTech and RegTech, FCRA Focus, a podcast dedicated to all things credit reporting. And finally, Payments Pros, a great podcast focused exclusively on the payments industry. All of these insightful shows are available on your favorite podcast platform, so check 'em out. And speaking of those platforms, if you like what you hear, please leave us a review and let us know how we are doing.
We'd love to hear from you. Alternatively, please feel free to reach out to us directly. Our contact information can easily be found on the firm's website, troutman.com new and improved. If you enjoy reading our blogs or listening to our podcasts, please also check out our financial services mobile app to download. Simply go to your iOS or Android app store and search for Troutman Pepper Locke. Not only does our app have all of our blog content and podcast episodes in one handy place, it also has a listing of all of the firm's financially focused attorneys. So check it out and see what you think. For today, as I mentioned, we'll be discussing recent state law updates in California and Massachusetts. Chris, tell us a little bit about Senate Bill 940 in California.
Chris Capurso (02:10):
Yeah, we're going to be doing the arbitration round table today. And the first one is a bill that's actually been in effect since the beginning of the year, but this is a Senate Bill 940 and it makes a bunch of changes to California's arbitration rules. And I'll just summarize each of those. So first, it imposes restrictions on venue and choice of law. So any of your contracts out there, they're probably going to have venue selection, choice of law selection, things like that. This bill has a prohibition against requiring consumers to arbitrate claims outside of California or under the laws of another state. So just keeping things in California is the intent of that, and any contracts with that provision in it, the provision itself would be voidable second set bill 940 kind of gives a broad option for small claims court if the dispute would qualify for it, and even if there is an arbitration agreement in the contract.
So even if you've got that arbitration agreement in your contract, if the dispute would otherwise qualify for jurisdiction within the small claims court, then the consumer can bring it in small claims court. Third is enhanced discovery rights. The bill amends the existing laws in California to explicitly allow depositions and discovery and arbitration proceedings subject to the arbitrator's approval. So this is somewhat different from the prior version, which did permit arbitration discovery if the parties incorporated the relevant provision into their agreement. And this change actually aligns with those available in civil court, including allowing arbitrators to issue subpoenas for discovery in any California arbitration. We've also got some separate kind of administrative requirements for arbitrators. There's some disclosure requirements for arbitrators, specifically disclosures around, for example, conflict of interest, just making sure that impartiality is kept, and also a certification program for alternative dispute resolution. Again, just another way to enforce impartiality as it were. And something that Brooke is going to talk about with the other bill discussing arbitration is kind of how does this interact with the Federal Arbitration Act? Is there a preemption here? Open questions, and Brooke's going to get into that with her discussion of Senate Bill 82.
Brooke Conkle (04:29):
That's right, Senate bill 82 will become effective in California in 2026. And the bill limits consumer arbitration agreements specifically in consumer use agreements. And that term is defined in the statute as an agreement to use, receive, or otherwise enjoy a good service, money or credit. And essentially this law will require that arbitration agreements really encompass only those claims arising out of and relating directly to the contract that includes the arbitration agreement. So the example that Chris and I use is essentially claims that relate to whether it's fraud or servicing claims related to a retail installment sales contract would be subject to an arbitration agreement. But if someone slips and falls in the dealership, that may or may not be related to the retail installment sales contract. And the chair of the California Senate Judiciary Committee said in response to the statute, no one should be denied their day in court because they clicked, I agree to a streaming trial or grocery app years ago.
SB 82 makes sure arbitration applies only to the contracts people actually sign not to everyday future disputes, corporations can dream up. So we're seeing here a statute that really looks to put limits on the scope of an arbitration clause. And just as Chris mentioned, there really could be some challenges to this statute under the Federal Arbitration Act, which actually close to a hundred years old. Chris, would you have thought I would not. Hey man, it's fit on the books a while. So the FAA as the Supreme Court has confirmed consistently is intended to be construed broadly. So does this limitation, California is looking to kind of reign in arbitration clauses, does that really sort of hue to the language of the Federal Arbitration Act? It's an open question. We may see challenges to Senate Bill 82, but it will become effective in January 2026. So one to watch out for Chris, another one that was recently enacted, the Massachusetts Junk Fee law. What's that one about?
Chris Capurso (06:43):
This is state law roundup number two. Last time we had coast to coast with Connecticut and Oregon. Now we go coast to coast with California and our fellow Commonwealth, the Commonwealth of Massachusetts. And this is another junk fee law, which is one of those things that again, even in these partisan times where it's like what is going to be a kind of bipartisan issue, this is one of the ones that usually comes up as everyone's probably going to be looking at junk fees if enough people complain about it especially. And Massachusetts has now, as of September 2nd, made their junk fee regulations active. So they're now actively enforcing those junk fee regulations. So what are they? They're aimed at deceptive pricing practices. If you're a longtime listener, you'll recall that we discussed the FTCs junk fee rule and how originally had this very broad reach. And then in our Requiem episode for the rules, we discussed how the junk fee rule really got cut down significantly to cover basically lodging and ticketing services.
Again, bipartisan issues. Massachusetts goes broader than that, and it really applies to most anything in retail. It definitely covers event ticketing, but it also includes travel subscription services, rental housing, restaurant and food service industry, much broader than the current FTC rule. And if you'll also recall the original FTC rule, the one that was broad, had a very specific exemption if the car's rule went into effect, which created this kind of bizarre moment in time. Now looking back on it when it was like, well, what if the junk fee rule goes into effect, but the car's rule does not, how do we deal with all this? And it turns out that was a nothing burger because neither one went effect as it was originally proposed into the CARS Rule case, not at all. So Massachusetts does have some interesting exemptions to consider. First off, there is a specific exemption for manufacturers and motor vehicle dealers, and of course I'm just going to be talking about the auto ones.
There are other exemptions, but we're going to talk auto here because this is Moving the Metal. There's a specific exemption for manufacturers and motor vehicle dealers from compliance with very specific provisions of the junk fee rule, so long as the manufacturer or dealer complies with other specific provisions of the dealer and manufacturer advertising rules. And this is notable because one, the motor vehicle dealer, we'll use dealers here, the motor vehicle dealer is not exempt from everything under the rule. And specifically the one that is not covered by the exemption is misrepresenting that any fees, charges or other expenses are required by law. So everything else of what Brooke is going to discuss as far as at least price disclosures is cut out for dealers except for that one. So it says that absent this exemption, this would apply to dealers and manufacturers, which is notable, but also that dealers still have to consider some of this.
Another interesting exemption that has similarly interesting caveats is that advertisements, sales or renewals of credit that comply with either the Federal Truth in Lending Act and Regulation Z or Massachusetts enactment of essentially the Truth in Lending Act and its own Regulation Z shall constitute compliance with this whole thing, this whole junk fee rule. So credit that is subject to TILA and Reg Z is exempt from this junk fee rule for anyone paying attention out there. Leases are not specifically under Reg Z, they're under Reg M. So that creates kind of a question. I mean, the Consumer Leasing Act is technically housed in there around the Truth and Lending Act. But what does this mean for Reg M disclosures? Does this mean potentially lease could be covered, but then at the same time, dealers are exempt? It's just open questions. It makes you wonder where the line goes with some of these junk fees.
But much like any kind of regulatory item regarding junk fees, the concern is usually how's it enforced? What are the penalties? And this is something that can be enforced under the Massachusetts Consumer Protection Act and the attorney's general office oversees compliance. Now, Massachusetts is usually up there on the list of regulators that are usually doing something and violations can result in civil penalties up to $5,000 per violation. And again, this is something we always say, if an advertisement or something like that has a violation on it, multiply it by however many times it was produced, published, seen, whatever standard they want to use can add up to quite a bit. One final thing I do want to mention as well, and this kind of goes into the industry, is affected and Brooks are going to talk more about the specific requirements, but this rule does cover negative options.
And those exemptions I discussed – TILA, Reg Z, dealers – we've discussed in the past and in fact in the last state law roundup about negative options and cancellations as it relates to vehicle service contracts, gap, things like that. If they're on an automatic renewal or something like that, those would seemingly not be covered by these exemptions because the dealer one is specific to price disclosure and dealer Reg Z. Similarly kind of an advertising disclosure. But as far as an ongoing kind of cancellation mechanism, those would seem to be not included in these exemptions. So that's something very important to consider for those providing vehicle service contracts and gap contracts. But Brooke, I've talked enough about how it applies or who it applies to. What does it do?
Brooke Conkle (12:58):
Yeah, Chris, there are four key requirements of this new regulation that just as you mentioned, really strongly parallel those in the federal Junk Fees Rule. The first is price transparency, and that means that sellers must clearly disclose the total price of a product or service, including all fees before collecting payment information. So Chris, we've talked about this really kind of parallels the cash price that was included in the car rule and sort of the all in pricing that was required by the junk fee rule. Second is fee transparency, meaning that all fees must be disclosed, including their nature, purpose, and amount. Optional or waivable fees must be clearly identified with instructions to consumers on how to avoid those optional or waivable fees. To me, that's the one that seems frankly most difficult is describing how to avoid fees that are optional or waivable. The third requirement is trial offers.
Sellers must provide clear information about any financial obligations associated with trial offers, including how to cancel those trial offers. And finally, just as Chris mentioned, the negative option features, sellers must provide clear disclosures about recurring charges and provide a simple cancellation mechanism. And just as Chris mentioned, the two categories of recurring fees that we see most often in auto finance is one, satellite radio subscriptions and also Gap and other recurring sort of service contracts. So those would seem to be under these sort of provisions. So those are the key requirements. So Chris, how do auto finance companies and dealers comply with these requirements?
Chris Capurso (14:44):
Yeah, so for dealers, I buried the lead a little bit. I'm sorry. This is something that our collective mentor, Alan would probably yell at me for being the journalism guy that he is. The exemption is for compliance with those laws or those regulations. So in the case of a dealer, you're exempt if you comply with the auto advertising, if you don't comply with those, if you failed those, that exemption's going to go out the window and you're technically subject to this type of thing because the exemption only applies when you comply. Same goes for a deal at Reg Z. If you have a deal at Reg Z violation, you're technically not complying, you're out of the exemption. So dealers, even if you're not specifically thinking about it because you're, oh, I'm subject to the Massachusetts dealer advertising laws and that's going to take me out of almost everything except misrepresenting that something is required by law, you got to be careful.
You got to just keep to the general tenants of advertising that we always talk about. You want everything to be clear and easy to read, especially as regards pricing information, total price, things like that. Any charges that are coming up, you want the display of the price to be clear and conspicuous. You want to know which fees are mandatory or optional. To Brook's point, this loan requires people to be told how to avoid these fees. And again, if you're somehow out of compliance with the dealer advertising regs, then you could be opened up to this. And just as far as the recurring charges, easy cancellation processes, I mean even though the federal click to cancel seems to be dead, states are really jumping into this arena as evidenced by this, as evidenced by Connecticut States are really looking into this because it's pretty clear this is something consumers are probably complaining about. So you want to have cancellation mechanisms that are not only clear to the consumer how to do it, but also easy for them to follow to the extent you can, making it so that the consumer can get out just as easily as they got in. That's kind of the federal click to cancel tenant, just trying to make it so it's something that a consumer is not going to complain about essentially. But that's kind of on the dealer side and service contract provider side. What does it mean for auto finance companies?
Brooke Conkle (16:59):
Well, for auto finance companies, both the Massachusetts regulation and the California laws really were back to essentially patchwork regulations. So if you are an auto finance business that operates in multiple states, then there are multiple changes that are going on for compliance purposes. So what works in one state may not work in another state. There may be heightened requirements in California, but maybe not Nevada heightened requirements in Massachusetts, but maybe not in Rhode Island. So kind of keeping up with what's going on in a state level. There's a lot going on and that requires more need for dealer oversight. So for auto finance companies, really checking on your dealers, what are they doing? What do the contracts that they're sending over to, what do they look like? Are they complying with state law? And then overall, an enhanced risk for litigation. We've talked about the holder rule, we know what the risks are there, but with additional requirements mandated by these regulations at the point of sale, there's more going on there that auto finance companies don't necessarily have a window into. So enhanced risk for litigation based on representations made before or at the point of sale that auto finance companies may not necessarily have data and insight into.
Chris Capurso (18:21):
And with that, we'll wrap it up for state law roundup number two, be on the lookout for the trilogy sometime in the future. Thank you to our audience for tuning in. Don't forget to check out our blogs where you can subscribe to the entire blog or just the specific content you find most helpful. That's the ConsumerFinancialServicesLawMonitor.com and the TroutmanFinancialServices.com blogs. And while you're at it, why don't you head on over to Troutman.com and sign up for our consumer financial services mailing list so you can stay abreast of current issues with our insightful alerts and advisories and receive invitations to our industry insider webinars. And of course, please mark your calendars for this podcast Moving the Metal, which we will be releasing every two weeks in 2025, except we are taking Thanksgiving week off. So we were going to talk about all the movies that we watch at Thanksgiving and all the foods that we eat. By the way, stuffing is the best side. I will fight to the death for that one. Brooke is shaking her head at disapproval at that one.
Brooke Conkle (19:20):
No, no mashed potatoes for the wind.
Chris Capurso (19:23):
I mean it's good, but stuffing salivating, thinking about it, just getting back to the original point. We are not having an episode the week of Thanksgiving, but we'll be having two in December. And as always, if you have any questions or if we can help in any way, please reach out to us. Until next time!
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