Duck or Unicorn: When is a Rental Car Not a Rental Car?

ACRA believes that all companies in the business of renting motor vehicles to consumers for a profit must abide by the same set of rules and pay the same taxes and fees.

There is an old saying that if something walks like a duck, looks like a duck, and goes “quack” repeatedly, chances are you are looking at a duck.

Recently, however, new entrants into the car rental industry — so-called peer-to-peer car rental companies or personal motor vehicle rental companies — have insisted to federal and state legislators and regulators that they are not car rental companies. Instead, they say they are more akin to a unicorn — a mythical beast never seen before but should be treated with reverence and differently than other beasts, just because they have a different business model.

ACRA members welcome all forms of competition from all corporate “beasts.” But they are steadfast in their view that the playing field must be level between competitors, the consumer safety safeguards must apply to all, and all entities in the business of renting motor vehicles to consumers for a profit must abide by the same set of rules and pay the same taxes and fees.

Over the past few years, many federal and state legislators have concluded that fundamental federal and state consumer protection, insurance, and tax provisions must apply to other new entrants into the ride-hailing (Uber and Lyft) and hotel (Airbnb) industries. Therefore, these protections and rules should be applied to the personal motor vehicle rental companies such as Turo and Getaround.

The transactions are the same — whether one is examining a traditional car rental company or a personal vehicle rental company, possession of a vehicle is temporarily transferred (1) for use according to the contracted terms; (2) for a short period of time; (3) by an individual; and (4) if the activity is intended to produce a profit.

As a result, the fundamental federal and state regulation of these transactions should be the same with respect to consumer protections and disclosures, insurance, and taxes and fees properly imposed on car rental transactions by the federal and state governments.

For example, if one were to buy the arguments of the personal motor vehicle rental companies, these companies would be permitted to do the following:

• Engage in age, gender, race, and ethnicity discrimination in determining which customers should be permitted to rent a vehicle.

• Sell insurance products to consumers despite the fact that the personal vehicle rental company is not licensed to sell these products in the state, and the individuals selling these products have not been trained in state insurance law and disclosure requirements.

• Sell collision damage waiver products to consumers without the price caps currently in place in some states and without the requirements on advertising and disclosures required for all other car rental transactions in each state.

• Rent cars to consumers with open federal safety recalls, including vehicles with defective Takata airbags, without remedying those defects prior to the rental or disclosing these defects to the renter.

• Exempt these transactions from state business and special taxes that apply to other car rental transactions and support millions in state spending. Avoid payment of the airport concession fees paid by every other airport user for the right to pick up consumers or passengers at airports in the state.

• Decide unilaterally whether the insurance of the owner of the rented vehicle, the personal vehicle rental company, or the renter will be “primary” or “secondary” under state law.

• Escape potential vicarious or negligent entrustment liability in states with such laws, despite the fact that such potential liabilities are not disclosed to the owners of the vehicles.

Simply stated, personal motor vehicle rental companies are “ducks,” not “unicorns,” and should be regulated just like every other duck in the competitive “pond.”

ACRA members welcome the competition from new entrants with different business models, but only if all competitors are recognized as ducks by federal and state authorities and are governed as such.

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