SSB 3170 (LSB 6125XC (4) 87)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON TRANSPORTATION BILL BY CHAIRPERSON KAPUCIAN)

A BILL FOR

An Act relating to motor vehicle dealers, franchisers, and franchisees.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 321.1, subsection 23, Code 2018, is amended to read as follows:
   23.  “Established place of business” means the place actually occupied either continuously or at regular periods by a dealer or manufacturer where the dealer’s or manufacturer’s books and records are kept and a large share of the dealer’s or manufacturer’s business is transacted.  If a dealer has designated one established place of business for purposes of keeping all the dealer’s books and records pursuant to section 321.63, “established place of business” also includes any place actually occupied either continuously or at regular periods by the dealer where a large share of the dealer’s business is transacted but not where the dealer’s books and records are kept.
    Sec. 2.  Section 321.63, Code 2018, is amended to read as follows:
   321.63  Different places of business.
   1.  If a transporter or dealer has an established place of business in more than one city, the transporter or dealer shall secure a separate and distinct certificate of registration and number plates for each such place of business.
   2.  If a dealer has more than one established place of business, the dealer may designate one such location in this state for purposes of keeping all the dealer’s books and records, regardless of the line-make of motor vehicles to which such books and records pertain, by submitting a written certification to the department in a manner approved by the department.
    Sec. 3.  Section 322.19A, subsection 2, Code 2018, is amended to read as follows:
   2.  A motor vehicle dealer may charge a documentary fee not to exceed one hundred eighty dollars for each motor vehicle sold in a transaction.  Beginning January 1, 2019, and each year thereafter, the maximum amount a motor vehicle dealer may charge for a documentary fee as authorized by this section shall be subject to an annual percentage adjustment equal to the percentage change in the consumer price index for all urban consumers published in the federal register by the United States department of labor, bureau of labor statistics. On or before December 15 of each year, the department shall publish the maximum amount a motor vehicle dealer may charge for a documentary fee for the next calendar year calculated based on the percentage change in the consumer price index for all urban consumers for the most recent available twelve-month period, rounded to the nearest whole cent.
    Sec. 4.  Section 322A.5, Code 2018, is amended to read as follows:
   322A.5  Warranties and recalls.
   1.  Every franchiser and franchisee shall fulfill the terms of any express or implied warranty concerning the sale of a motor vehicle to the public of the line-make which is the subject of a contract or franchise agreement between the parties. If it is determined by the district court that either the franchiser or franchisee, or both, have violated an express or implied warranty, the court shall add to any award or relief granted an additional award for reasonable attorney fees and other necessary expenses for maintaining the litigation.
   2.  a.  A franchiser shall specify in writing to each of the franchiser’s franchisees operating in this state the franchisee’s obligations for preparation, delivery, and warranty services related to the franchiser’s products. The franchiser shall compensate the franchisee for the warranty services the franchiser requires the franchisee to provide, including but not limited to warranty and recall obligations related to repairing and servicing motor vehicles of the franchiser and all parts and components authorized by the manufacturer to be installed in or manufactured for installation in such motor vehicles.
   b.  The franchiser shall provide to the franchisee a schedule of compensation that specifies reasonable amounts the franchiser will pay to the franchisee for such warranty services, including for parts, labor, diagnostics, and other related services. The schedule of compensation shall also specify reasonable time periods under which the franchisee is required to perform such warranty services.
   (1)  In determining reasonable amounts for parts, the franchiser may add one to the franchisee’s average percentage markup, which is the percentage difference calculated as a decimal between the price paid by the franchisee for parts and the price at which parts are sold by the franchisee at retail, and multiply the result by the price paid by the franchisee for the parts, including shipping and other charges.
   (2)  In determining reasonable amounts for labor-related warranty services, the franchiser shall consider the prevailing wage rates paid by other franchisees in the franchisee’s community, not including wage rates paid for the performance of routine maintenance such as tire service or oil service. The franchiser may calculate the franchisee’s labor rate by dividing the total amount of retail sales attributable to labor for warranty services by the number of hours of labor spent to generate the retail sales.
   (3)  (a)  The franchisee may establish its average percentage markup for parts or its labor rate by submitting to the franchiser copies of one hundred sequential retail service orders paid by the franchisee’s customers, or all of the franchisee’s retail service orders paid by the franchisee’s customers in a ninety-day period, whichever is less, for services provided within the previous one-hundred-eighty-day period. The franchiser shall not consider retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service.
   (b)  Within thirty days of receiving the franchisee’s submission, the franchiser may choose to audit the submitted orders. The franchiser shall then approve or deny the establishment of the franchisee’s average percentage markup or labor rate. If the franchiser approves the establishment of the franchisee’s average percentage markup or labor rate, the amounts calculated under this subparagraph shall go into effect forty-five days after the date of the franchiser’s approval. If the franchiser denies the establishment of the franchisee’s average percentage markup or labor rate, the franchisee may file a complaint with the department and a hearing shall be held before the department of inspections and appeals. The franchiser shall have the burden of proof to establish that the franchiser’s denial was reasonable. If the department of inspections and appeals finds the denial was not reasonable, the denial shall be deemed a violation of this chapter and the department of inspections and appeals shall determine the franchisee’s average percentage markup or labor rate for purposes of calculating reasonable amounts for the schedule of compensation. In making such a determination, the department of inspections and appeals shall not consider retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service.
   (c)  A franchiser shall not require a franchisee to establish an average percentage markup or labor rate by a methodology, or by requiring the submission of information, that is unduly burdensome or time-consuming to the franchisee, including but not limited to requiring part-by-part or transaction-by-transaction calculations.
   (d)  A franchisee shall not request a change in the franchisee’s average percentage markup more than once in any one-year period.
   (4)  The amounts in the schedule of compensation shall not be less than the amounts charged by the franchisee to retail customers for such services, provided the amounts are reasonable.
   3.  A franchiser shall not do any of the following:
   a.  Fail to perform any warranty obligation.
   b.  Fail to include in written notices of factory recalls to new motor vehicle owners and franchisees the expected date by which the necessary parts and equipment will be available to franchisees for the correction of the defects.
   c.  Fail to compensate any of the franchiser’s franchisees operating in this state for repairs relating to a recall.
   4.  a.  A claim made by a franchisee for warranty services pursuant to this section shall be paid within thirty days after the claim’s approval. A franchiser shall either approve or deny a claim within thirty days after the franchiser receives a claim if the claim is submitted on a form generally used by the franchiser and the claim contains the information required by the franchiser. If a franchiser does not deny a claim in writing within thirty days after the receipt of the claim, the claim shall be deemed to be approved by the franchiser and payment shall be made to the franchisee within thirty days.
   b.  A franchiser may deny a franchisee’s claim for compensation for warranty or recall services if the franchisee’s claim is based on a repair not related to warranty or recall services, the repair was not properly performed, the franchisee lacks the required documentation for the claim, the franchisee fails to comply with the terms and conditions of the franchiser’s warranty or recall compensation program, or the franchiser has a bona fide belief based on factual evidence that the franchisee’s claim was submitted containing an intentionally false or fraudulent statement or misrepresentation. A franchiser may reject, but shall not deny, a claim based solely on a franchisee’s unintentional failure to comply with a specific claim processing requirement, such as a clerical error, that does not otherwise affect the legitimacy of the claim. If a claim is rejected for such a failure, the franchisee may resubmit a corrected claim in a timely manner to the franchiser.
   c.  The requirement to approve a claim within thirty days or to pay an approved claim within thirty days as provided in this subsection shall not be construed to preclude denials, reductions, or chargebacks not otherwise prohibited under section 322.2, subsection 13.
   5.  The obligations set forth in this section shall apply to any franchiser as defined in this chapter and any franchiser of new motor vehicle transmissions, engines, or rear axles that separately warrants such components to customers.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to motor vehicle dealers, franchisers, and franchisees.
   Under current law, a motor vehicle dealer’s or manufacturer’s established place of business is the place actually occupied either continuously or at regular periods by the dealer or manufacturer where the dealer’s or manufacturer’s books and records are kept and a large share of the dealer’s or manufacturer’s business is transacted. If a dealer has an established place of business in more than one city, the dealer must secure a separate and distinct certificate of registration and number plates for each such place of business. The bill permits a dealer with more than one established place of business to designate one such location for purposes of keeping all the dealer’s books and records, regardless of the line-make of motor vehicles to which the books and records pertain, by submitting a written certification to the department of transportation (DOT). The bill provides that if a dealer has designated one established place of business for purposes of keeping all the dealer’s books and records, “established place of business” also includes any place actually occupied either continuously or at regular periods by the dealer where a large share of the dealer’s business is transacted but not where the dealer’s books and records are kept.
   Under current law, a motor vehicle dealer may charge a documentary fee not to exceed $180 for each motor vehicle sold in a transaction. A “documentary fee” is a fee that may be charged to a customer by a motor vehicle dealer for the preparation of documents related to an application for motor vehicle registration and an application for issuance of a certificate of title, and the performance of other related services for the customer. The bill provides that beginning January 1, 2019, and each year thereafter, the maximum amount a motor vehicle dealer may charge for a documentary fee shall be subject to an annual percentage adjustment equal to the percentage change in the consumer price index for all urban consumers published in the federal register by the United States department of labor, bureau of labor statistics. On or before December 15 of each year, the bill requires the DOT to publish the maximum amount a motor vehicle dealer may charge for a documentary fee for the next calendar year calculated based on the percentage change in the consumer price index for all urban consumers for the most recent available 12-month period, rounded to the nearest whole cent. By operation of law, the maximum documentary fee permitted will be reduced by $25 after the DOT has implemented a program allowing for electronic applications, titling, registering, and funds transfers for motor vehicles.
   The bill requires a motor vehicle franchiser to specify in writing to each of the franchiser’s franchisees operating in this state the franchisee’s obligations for preparation, delivery, and warranty services related to the franchiser’s products. The franchiser must compensate the franchisee for the warranty services the franchiser requires the franchisee to provide, including but not limited to warranty and recall obligations related to repairing and servicing motor vehicles of the franchiser and all parts and components authorized by the manufacturer to be installed in or manufactured for installation in such motor vehicles. 
   The bill requires the franchiser to provide to the franchisee a schedule of compensation that specifies reasonable amounts the franchiser will pay to the franchisee for such warranty services, including for parts, labor, diagnostics, and other related services. The schedule of compensation must also specify reasonable time periods under which the franchisee is required to perform such warranty services.
   The bill specifies that in determining reasonable amounts for parts, the franchiser may add one to the franchisee’s average percentage markup, which is the percentage difference calculated as a decimal between the price paid by the franchisee for parts and the price at which parts are sold by the franchisee at retail, and multiply the result by the price paid by the franchisee for the parts, including shipping and other charges.
   The bill specifies that in determining reasonable amounts for labor-related warranty services, the franchiser must consider the prevailing wage rates paid by other franchisees in the franchisee’s community, not including wage rates paid for the performance of routine maintenance such as tire service or oil service. Under current law, a franchisee’s community is the franchisee’s area of responsibility as stipulated in the franchise. The franchiser may calculate the franchisee’s labor rate by dividing the total amount of retail sales attributable to labor for warranty services by the number of hours of labor spent to generate the retail sales.
   The bill provides that a franchisee may establish its average percentage markup for parts or its labor rate by submitting to the franchiser copies of 100 sequential retail service orders paid by the franchisee’s customers, or all of the franchisee’s retail service orders paid by the franchisee’s customers in a 90-day period, whichever is less, for services provided within the previous 180-day period. The franchiser is prohibited from considering retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service.
   Within 30 days of receiving the franchisee’s submission, the franchiser may choose to audit the submitted orders. The franchiser must then approve or deny the establishment of the franchisee’s average percentage markup or labor rate. If the franchiser approves the establishment of the franchisee’s average percentage markup or labor rate, the amounts calculated shall go into effect 45 days after the date of the franchiser’s approval. If the franchiser denies the establishment of the franchisee’s average percentage markup or labor rate, the franchisee may file a complaint with the DOT and a hearing shall be held before the department of inspections and appeals (DIA). The bill provides that the franchiser shall have the burden of proof to establish that the franchiser’s denial was reasonable. If the DIA finds the denial was not reasonable, the denial is deemed a violation of Code chapter 322A and the DIA is required to determine the franchisee’s average percentage markup or labor rate for purposes of calculating reasonable amounts for the schedule of compensation. In making the determination, the DIA is prohibited from considering retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service.
   The bill prohibits a franchiser from requiring a franchisee to establish an average percentage markup or labor rate by a methodology, or by requiring the submission of information, that is unduly burdensome or time-consuming to the franchisee, including but not limited to requiring part-by-part or transaction-by-transaction calculations. The bill prohibits a franchisee from requesting a change in the franchisee’s average percentage markup more than once in any one-year period.
   The bill provides that the amounts in the schedule of compensation shall not be less than the amounts charged by the franchisee to retail customers for such services, provided the amounts are reasonable.
   The bill prohibits a franchiser from failing to perform any warranty obligation, failing to include in written notices of factory recalls to new motor vehicle owners and franchisees the expected date by which the necessary parts and equipment will be available to franchisees for the correction of the defects, and failing to compensate any of the franchiser’s franchisees operating in this state for repairs relating to a recall.
   The bill provides that a claim made by a franchisee for warranty services must be paid within 30 days after the claim’s approval. A franchiser must either approve or deny a claim within 30 days after the franchiser receives a claim if the claim is submitted on a form generally used by the franchiser and the claim contains the information required by the franchiser. If a franchiser does not deny a claim in writing within 30 days after the receipt of the claim, the claim shall be deemed to be approved by the franchiser and payment shall be made to the franchisee within 30 days.
   The bill states that a franchiser may deny a franchisee’s claim for compensation for warranty or recall services if the franchisee’s claim is based on a repair not related to warranty or recall services, the repair was not properly performed, the franchisee lacks the required documentation for the claim, the franchisee fails to comply with the terms and conditions of the franchiser’s warranty or recall compensation program, or the franchiser has a bona fide belief based on factual evidence that the franchisee’s claim was intentionally submitted containing a false or fraudulent statement or misrepresentation. A franchiser may reject, but shall not deny, a claim based solely on a franchisee’s unintentional failure to comply with a specific claim processing requirement, such as a clerical error, that does not otherwise affect the legitimacy of the claim. If a claim is rejected for such a failure, the franchisee may resubmit a corrected claim in a timely manner to the franchiser.
   The bill provides that the requirement to approve a claim within 30 days, or to pay an approved claim within 30 days, shall not be construed to preclude denials, reductions, or chargebacks not otherwise prohibited under Code section 322.2, subsection 13. Under current law, Code section 322.2, subsection 13, prohibits a manufacturer, distributor, or importer of motor vehicles from reducing the amount of compensation, or disallowing a claim, for warranty parts, repairs, or services if 12 months or more have passed since the claim was submitted.
   The bill provides that the obligations set forth in the bill apply to any franchiser who manufactures or distributes motor vehicles and any franchiser of new motor vehicle transmissions, engines, or rear axles that separately warrants such components to customers.