TRALA Member Testifies in Support of TRAC Legislation in Washington State
PACCAR Leasing testified on behalf of itself and TRALA this week in support of Senate Bill 5032 before the Washington Senate's Law and Justice Committee. A vote on SB 5032, which would reauthorize Terminal Rental Adjustment Clause (TRAC) leases in Washington, is likely to be taken in the next two weeks and currently there is no known opposition to the legislation making it likely for passage in its current form once it heads to the House chamber.
TRAC law is well-established in all 50 states as part of the Uniform Commercial Code that permits an upward or downward adjustment of rent to make up for any difference between the projected value and the actual value of a vehicle upon the termination of the TRAC lease. It provides an incentive for the lessee to maintain the vehicle in good operating condition and gives the lessor protection in the case of a lessee filing for bankruptcy.
Unfortunately, in 2012 Washington inadvertently eliminated their TRAC language during a periodic renumbering of the statutes by the state legislature. TRALA has worked with its key allies including both the American Automotive Leasing Association (AALA) and the Equipment Leasing and Finance Association (ELFA) to ensure TRAC language is reestablished in Washington State.
Olen Hunter, Director of Sales for PACCAR Leasing, testified in support of SB 5032 saying that TRACs are a critical model for many business-to-business leases. He went on to say that these leases allow lessees the flexibility to invest more capital into employees and equipment rather than purchasing brand new vehicles outright.
One provision that TRALA and all of its allies support that did not make it into the current legislative language is retroactivity. There still would be a gap in time between when the renumbering error took place in 2012 to when SB 5032 became law that could potentially lead to courts having to interpret whether a TRAC lease was indeed a "true" lease or whether it was a financial loan. TRALA and its allies have met and discussed this concern with the Senate Law and Justice Committee Chairman as well as other legislators but there is significant reluctance to include retroactivity as a matter of public policy.
To combat this issue, TRALA and its allies will ask the bill's sponsor to discuss not only the merits of the legislation but its intent while on the Senate floor during discussion of SB 5032. Given that TRAC language was on the books in Washington State from 1994 to 2012 and should be reestablished in 2015, TRALA is confident that the courts will accurately distinguish the difference between a TRAC lease and a bank loan for those vehicles that entered into a TRAC lease in years 2012-2014.
TRALA will continue to lobby state legislators to support SB 5032 over the next few weeks until it is accepted law. If you have any questions regarding this issue, please contact Jake Jacoby at email@example.com or at 703-299-9120.