DMV Suspends Driving School Licenses for Failure to Post Higher Bond

    SACRAMENTO, Calif.--March 6, 2001--The California Department of Motor Vehicles has shut down 13 California driver training schools that failed to comply with a new law increasing the bond they must post from $2,000 to a new level of $10,000. DMV notified the non-complying schools that their licenses have been cancelled retroactively to January 1, 2001, the date the new law went into effect.
    The new law (SB 1112 Knight) was passed to protect the public, because every year several driving schools go out of business after collecting tuition from customers but before delivering the training. Until now, this has resulted in some students losing some or all of the average $200 fees they pay in advance. The former bond of $2,000 was only enough to refund the money of 10 students per school. But in 1999, for example, when the Yield Driving School of Sacramento went out of business, DMV received inquiries from 27 people wanting to file claims with the bonding company -- almost three times more claimants than the bond could normally repay in full. DMV believes as many as 300 additional Yield students may have lost some or all of their prepaid fees but did not bother to file a complaint.
    Thirty-six driving schools went out of business the following year in 2000.
    "California requires all teenagers between the ages of 15-1/2 and 17-1/2 to sign up for driver training if they want a provisional license -- one of the most treasured possessions of a teenager," said DMV Director Steven Gourley. "Many teens and their families are hard-pressed to come up with that money. The State should do everything it reasonably can to make sure they don't lose that hard-earned money when a driver training school takes their money and then goes out of business. We believe this higher bond will go a long way toward ending that problem."
    Under the new law, the 549 California driving schools then in existence were supposed to have posted the higher bonds by January 1, 2001. But by January 3, 2001, only 169 had complied, so Gourley granted an extra four-week grace period through January 31, 2001. More than 350 additional schools complied during the grace period, but 10 of them voluntarily shut down, apparently unable or unwilling to post the higher bond. DMV mailed license cancellation notices to 23 driving schools that failed to comply with the new bonding law, including the 13 that did not voluntarily cease operations and the 10 that did. Schools that were not in compliance at the end of the grace period will have to reapply for licenses, post the higher bond, and be re-approved by the DMV before resuming operations.
    Students at schools that are shut down can telephone a special number at the DMV, (916) 657-6500, for assistance or questions.
    The 13 schools whose licenses were cancelled are: Oakland Institute of Automotive Technology in Oakland, Adrian/Associates Driving School in Lancaster, Huntington Park Driving School in San Diego, Murad Driving School in Chula Vista, Olympic Driving School in Compton, Coaches Driving/Safety School in Stockton, AA Driving School in Hesperia, Ready to Drive Safely Academy in San Diego, Armenian Ford Driving School in San Diego, John Lane Driving School in El Centro, Yamato Driving School in Los Angeles, Julio's Driving School in Los Angeles, and Oceanside Driving School in Oceanside.
    In addition to licensing driving schools, the DMV also licenses drivers, car dealers, and traffic violator schools, maintains driving records, registers and tracks official ownership of vehicles and vessels, and investigates auto and identity related fraud. The department is under the Business, Transportation and Housing Agency.