S.F. 2293 Section 1. Section 321.1, subsection 23, Code 2018, is 1 amended to read as follows: 2 23. “Established place of business” means the place actually 3 occupied either continuously or at regular periods by a 4 dealer or manufacturer where the dealer’s or manufacturer’s 5 books and records are kept and a large share of the dealer’s 6 or manufacturer’s business is transacted. If a dealer has 7 designated one established place of business for purposes of 8 keeping all the dealer’s books and records pursuant to section 9 321.63, “established place of business” also includes any place 10 actually occupied either continuously or at regular periods 11 by the dealer where a large share of the dealer’s business is 12 transacted but not where the dealer’s books and records are 13 kept. 14 Sec. 2. Section 321.63, Code 2018, is amended to read as 15 follows: 16 321.63 Different places of business. 17 1. If a transporter or dealer has an established place of 18 business in more than one city, the transporter or dealer shall 19 secure a separate and distinct certificate of registration and 20 number plates for each such place of business. 21 2. If a dealer has more than one established place of 22 business, the dealer may designate one such location in this 23 state for purposes of keeping all the dealer’s books and 24 records, regardless of the line-make of motor vehicles to 25 which such books and records pertain, by submitting a written 26 certification to the department in a manner approved by the 27 department. 28 Sec. 3. Section 322.19A, subsection 2, Code 2018, is amended 29 to read as follows: 30 2. A motor vehicle dealer may charge a documentary fee not 31 to exceed one hundred eighty dollars for each motor vehicle 32 sold in a transaction. Beginning January 1, 2019, and each 33 year thereafter, the maximum amount a motor vehicle dealer may 34 charge for a documentary fee as authorized by this section 35 -1- LSB 6125SV (1) 87 ns/rn 1/ 11

S.F. 2293 shall be subject to an annual percentage adjustment equal to 1 the percentage change in the consumer price index for all urban 2 consumers published in the federal register by the United 3 States department of labor, bureau of labor statistics. On or 4 before December 15 of each year, the department shall publish 5 the maximum amount a motor vehicle dealer may charge for a 6 documentary fee for the next calendar year calculated based on 7 the percentage change in the consumer price index for all urban 8 consumers for the most recent available twelve-month period, 9 rounded to the nearest whole cent. 10 Sec. 4. Section 322A.5, Code 2018, is amended to read as 11 follows: 12 322A.5 Warranties and recalls . 13 1. Every franchiser and franchisee shall fulfill the 14 terms of any express or implied warranty concerning the sale 15 of a motor vehicle to the public of the line-make which is 16 the subject of a contract or franchise agreement between the 17 parties. If it is determined by the district court that either 18 the franchiser or franchisee, or both, have violated an express 19 or implied warranty, the court shall add to any award or relief 20 granted an additional award for reasonable attorney fees and 21 other necessary expenses for maintaining the litigation. 22 2. a. A franchiser shall specify in writing to each of 23 the franchiser’s franchisees operating in this state the 24 franchisee’s obligations for preparation, delivery, and 25 warranty services related to the franchiser’s products. 26 The franchiser shall compensate the franchisee for the 27 warranty services the franchiser requires the franchisee to 28 provide, including but not limited to warranty and recall 29 obligations related to repairing and servicing motor vehicles 30 of the franchiser and all parts and components authorized 31 by the manufacturer to be installed in or manufactured for 32 installation in such motor vehicles. 33 b. The franchiser shall provide to the franchisee a 34 schedule of compensation that specifies reasonable amounts 35 -2- LSB 6125SV (1) 87 ns/rn 2/ 11

S.F. 2293 the franchiser will pay to the franchisee for such warranty 1 services, including for parts, labor, diagnostics, and other 2 related services. The schedule of compensation shall also 3 specify reasonable time periods under which the franchisee is 4 required to perform such warranty services. 5 (1) In determining reasonable amounts for parts, the 6 franchiser may add one to the franchisee’s average percentage 7 markup, which is the percentage difference calculated as a 8 decimal between the price paid by the franchisee for parts and 9 the price at which parts are sold by the franchisee at retail, 10 and multiply the result by the price paid by the franchisee for 11 the parts, including shipping and other charges. 12 (2) In determining reasonable amounts for labor-related 13 warranty services, the franchiser shall consider the prevailing 14 wage rates paid by other franchisees in the franchisee’s 15 community, not including wage rates paid for the performance 16 of routine maintenance such as tire service or oil service. 17 The franchiser may calculate the franchisee’s labor rate by 18 dividing the total amount of retail sales attributable to labor 19 for warranty services by the number of hours of labor spent to 20 generate the retail sales. 21 (3) (a) The franchisee may establish its average percentage 22 markup for parts or its labor rate by submitting to the 23 franchiser copies of one hundred sequential retail service 24 orders paid by the franchisee’s customers, or all of the 25 franchisee’s retail service orders paid by the franchisee’s 26 customers in a ninety-day period, whichever is less, for 27 services provided within the previous one-hundred-eighty-day 28 period. The franchiser shall not consider retail service 29 orders or portions of retail service orders attributable to 30 routine maintenance such as tire service or oil service. 31 (b) Within thirty days of receiving the franchisee’s 32 submission, the franchiser may choose to audit the submitted 33 orders. The franchiser shall then approve or deny the 34 establishment of the franchisee’s average percentage markup or 35 -3- LSB 6125SV (1) 87 ns/rn 3/ 11

S.F. 2293 labor rate. If the franchiser approves the establishment of 1 the franchisee’s average percentage markup or labor rate, the 2 amounts calculated under this subparagraph shall go into effect 3 forty-five days after the date of the franchiser’s approval. 4 If the franchiser denies the establishment of the franchisee’s 5 average percentage markup or labor rate, the franchisee may 6 file a complaint with the department and a hearing shall be 7 held before the department of inspections and appeals. The 8 franchiser shall have the burden of proof to establish that 9 the franchiser’s denial was reasonable. If the department of 10 inspections and appeals finds the denial was not reasonable, 11 the denial shall be deemed a violation of this chapter and 12 the department of inspections and appeals shall determine 13 the franchisee’s average percentage markup or labor rate for 14 purposes of calculating reasonable amounts for the schedule of 15 compensation. In making such a determination, the department 16 of inspections and appeals shall not consider retail service 17 orders or portions of retail service orders attributable to 18 routine maintenance such as tire service or oil service. 19 (c) A franchiser shall not require a franchisee to 20 establish an average percentage markup or labor rate by a 21 methodology, or by requiring the submission of information, 22 that is unduly burdensome or time-consuming to the franchisee, 23 including but not limited to requiring part-by-part or 24 transaction-by-transaction calculations. 25 (d) A franchisee shall not request a change in the 26 franchisee’s average percentage markup more than once in any 27 one-year period. 28 (4) The amounts in the schedule of compensation shall 29 not be less than the amounts charged by the franchisee to 30 retail customers for such services, provided the amounts are 31 reasonable. 32 3. A franchiser shall not do any of the following: 33 a. Fail to perform any warranty obligation. 34 b. Fail to include in written notices of factory recalls to 35 -4- LSB 6125SV (1) 87 ns/rn 4/ 11

S.F. 2293 new motor vehicle owners and franchisees the expected date by 1 which the necessary parts and equipment will be available to 2 franchisees for the correction of the defects. 3 c. Fail to compensate any of the franchiser’s franchisees 4 operating in this state for repairs relating to a recall. 5 4. a. A claim made by a franchisee for warranty services 6 pursuant to this section shall be paid within thirty days after 7 the claim’s approval. A franchiser shall either approve or 8 deny a claim within thirty days after the franchiser receives 9 a claim if the claim is submitted on a form generally used by 10 the franchiser and the claim contains the information required 11 by the franchiser. If a franchiser does not deny a claim in 12 writing within thirty days after the receipt of the claim, the 13 claim shall be deemed to be approved by the franchiser and 14 payment shall be made to the franchisee within thirty days. 15 b. A franchiser may deny a franchisee’s claim for 16 compensation for warranty or recall services if the 17 franchisee’s claim is based on a repair not related to warranty 18 or recall services, the repair was not properly performed, 19 the franchisee lacks the required documentation for the 20 claim, the franchisee fails to comply with the terms and 21 conditions of the franchiser’s warranty or recall compensation 22 program, or the franchiser has a bona fide belief based on 23 factual evidence that the franchisee’s claim was submitted 24 containing an intentionally false or fraudulent statement or 25 misrepresentation. A franchiser may reject, but shall not 26 deny, a claim based solely on a franchisee’s unintentional 27 failure to comply with a specific claim processing requirement, 28 such as a clerical error, that does not otherwise affect the 29 legitimacy of the claim. If a claim is rejected for such a 30 failure, the franchisee may resubmit a corrected claim in a 31 timely manner to the franchiser. 32 c. The requirement to approve a claim within thirty days 33 or to pay an approved claim within thirty days as provided in 34 this subsection shall not be construed to preclude denials, 35 -5- LSB 6125SV (1) 87 ns/rn 5/ 11

S.F. 2293 reductions, or chargebacks not otherwise prohibited under 1 section 322.2, subsection 13. 2 5. The obligations set forth in this section shall apply to 3 any franchiser as defined in this chapter and any franchiser of 4 new motor vehicle transmissions, engines, or rear axles that 5 separately warrants such components to customers. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This bill relates to motor vehicle dealers, franchisers, and 10 franchisees. 11 Under current law, a motor vehicle dealer’s or 12 manufacturer’s established place of business is the place 13 actually occupied either continuously or at regular periods by 14 the dealer or manufacturer where the dealer’s or manufacturer’s 15 books and records are kept and a large share of the dealer’s 16 or manufacturer’s business is transacted. If a dealer has an 17 established place of business in more than one city, the dealer 18 must secure a separate and distinct certificate of registration 19 and number plates for each such place of business. The bill 20 permits a dealer with more than one established place of 21 business to designate one such location for purposes of keeping 22 all the dealer’s books and records, regardless of the line-make 23 of motor vehicles to which the books and records pertain, 24 by submitting a written certification to the department of 25 transportation (DOT). The bill provides that if a dealer has 26 designated one established place of business for purposes of 27 keeping all the dealer’s books and records, “established place 28 of business” also includes any place actually occupied either 29 continuously or at regular periods by the dealer where a large 30 share of the dealer’s business is transacted but not where the 31 dealer’s books and records are kept. 32 Under current law, a motor vehicle dealer may charge a 33 documentary fee not to exceed $180 for each motor vehicle 34 sold in a transaction. A “documentary fee” is a fee that may 35 -6- LSB 6125SV (1) 87 ns/rn 6/ 11

S.F. 2293 be charged to a customer by a motor vehicle dealer for the 1 preparation of documents related to an application for motor 2 vehicle registration and an application for issuance of a 3 certificate of title, and the performance of other related 4 services for the customer. The bill provides that beginning 5 January 1, 2019, and each year thereafter, the maximum amount 6 a motor vehicle dealer may charge for a documentary fee shall 7 be subject to an annual percentage adjustment equal to the 8 percentage change in the consumer price index for all urban 9 consumers published in the federal register by the United 10 States department of labor, bureau of labor statistics. On or 11 before December 15 of each year, the bill requires the DOT to 12 publish the maximum amount a motor vehicle dealer may charge 13 for a documentary fee for the next calendar year calculated 14 based on the percentage change in the consumer price index for 15 all urban consumers for the most recent available 12-month 16 period, rounded to the nearest whole cent. By operation of 17 law, the maximum documentary fee permitted will be reduced 18 by $25 after the DOT has implemented a program allowing for 19 electronic applications, titling, registering, and funds 20 transfers for motor vehicles. 21 The bill requires a motor vehicle franchiser to specify 22 in writing to each of the franchiser’s franchisees operating 23 in this state the franchisee’s obligations for preparation, 24 delivery, and warranty services related to the franchiser’s 25 products. The franchiser must compensate the franchisee for 26 the warranty services the franchiser requires the franchisee 27 to provide, including but not limited to warranty and recall 28 obligations related to repairing and servicing motor vehicles 29 of the franchiser and all parts and components authorized 30 by the manufacturer to be installed in or manufactured for 31 installation in such motor vehicles. 32 The bill requires the franchiser to provide to the 33 franchisee a schedule of compensation that specifies reasonable 34 amounts the franchiser will pay to the franchisee for such 35 -7- LSB 6125SV (1) 87 ns/rn 7/ 11

S.F. 2293 warranty services, including for parts, labor, diagnostics, and 1 other related services. The schedule of compensation must also 2 specify reasonable time periods under which the franchisee is 3 required to perform such warranty services. 4 The bill specifies that in determining reasonable amounts 5 for parts, the franchiser may add one to the franchisee’s 6 average percentage markup, which is the percentage difference 7 calculated as a decimal between the price paid by the 8 franchisee for parts and the price at which parts are sold by 9 the franchisee at retail, and multiply the result by the price 10 paid by the franchisee for the parts, including shipping and 11 other charges. 12 The bill specifies that in determining reasonable amounts 13 for labor-related warranty services, the franchiser must 14 consider the prevailing wage rates paid by other franchisees in 15 the franchisee’s community, not including wage rates paid for 16 the performance of routine maintenance such as tire service or 17 oil service. Under current law, a franchisee’s community is 18 the franchisee’s area of responsibility as stipulated in the 19 franchise. The franchiser may calculate the franchisee’s labor 20 rate by dividing the total amount of retail sales attributable 21 to labor for warranty services by the number of hours of labor 22 spent to generate the retail sales. 23 The bill provides that a franchisee may establish its 24 average percentage markup for parts or its labor rate by 25 submitting to the franchiser copies of 100 sequential retail 26 service orders paid by the franchisee’s customers, or all of 27 the franchisee’s retail service orders paid by the franchisee’s 28 customers in a 90-day period, whichever is less, for services 29 provided within the previous 180-day period. The franchiser is 30 prohibited from considering retail service orders or portions 31 of retail service orders attributable to routine maintenance 32 such as tire service or oil service. 33 Within 30 days of receiving the franchisee’s submission, 34 the franchiser may choose to audit the submitted orders. The 35 -8- LSB 6125SV (1) 87 ns/rn 8/ 11

S.F. 2293 franchiser must then approve or deny the establishment of the 1 franchisee’s average percentage markup or labor rate. If the 2 franchiser approves the establishment of the franchisee’s 3 average percentage markup or labor rate, the amounts calculated 4 shall go into effect 45 days after the date of the franchiser’s 5 approval. If the franchiser denies the establishment of the 6 franchisee’s average percentage markup or labor rate, the 7 franchisee may file a complaint with the DOT and a hearing 8 shall be held before the department of inspections and appeals 9 (DIA). The bill provides that the franchiser shall have the 10 burden of proof to establish that the franchiser’s denial was 11 reasonable. If the DIA finds the denial was not reasonable, 12 the denial is deemed a violation of Code chapter 322A and 13 the DIA is required to determine the franchisee’s average 14 percentage markup or labor rate for purposes of calculating 15 reasonable amounts for the schedule of compensation. In making 16 the determination, the DIA is prohibited from considering 17 retail service orders or portions of retail service orders 18 attributable to routine maintenance such as tire service or oil 19 service. 20 The bill prohibits a franchiser from requiring a franchisee 21 to establish an average percentage markup or labor rate by a 22 methodology, or by requiring the submission of information, 23 that is unduly burdensome or time-consuming to the franchisee, 24 including but not limited to requiring part-by-part or 25 transaction-by-transaction calculations. The bill prohibits a 26 franchisee from requesting a change in the franchisee’s average 27 percentage markup more than once in any one-year period. 28 The bill provides that the amounts in the schedule of 29 compensation shall not be less than the amounts charged by the 30 franchisee to retail customers for such services, provided the 31 amounts are reasonable. 32 The bill prohibits a franchiser from failing to perform any 33 warranty obligation, failing to include in written notices of 34 factory recalls to new motor vehicle owners and franchisees the 35 -9- LSB 6125SV (1) 87 ns/rn 9/ 11

S.F. 2293 expected date by which the necessary parts and equipment will 1 be available to franchisees for the correction of the defects, 2 and failing to compensate any of the franchiser’s franchisees 3 operating in this state for repairs relating to a recall. 4 The bill provides that a claim made by a franchisee for 5 warranty services must be paid within 30 days after the claim’s 6 approval. A franchiser must either approve or deny a claim 7 within 30 days after the franchiser receives a claim if the 8 claim is submitted on a form generally used by the franchiser 9 and the claim contains the information required by the 10 franchiser. If a franchiser does not deny a claim in writing 11 within 30 days after the receipt of the claim, the claim shall 12 be deemed to be approved by the franchiser and payment shall be 13 made to the franchisee within 30 days. 14 The bill states that a franchiser may deny a franchisee’s 15 claim for compensation for warranty or recall services if 16 the franchisee’s claim is based on a repair not related to 17 warranty or recall services, the repair was not properly 18 performed, the franchisee lacks the required documentation for 19 the claim, the franchisee fails to comply with the terms and 20 conditions of the franchiser’s warranty or recall compensation 21 program, or the franchiser has a bona fide belief based on 22 factual evidence that the franchisee’s claim was intentionally 23 submitted containing a false or fraudulent statement or 24 misrepresentation. A franchiser may reject, but shall not 25 deny, a claim based solely on a franchisee’s unintentional 26 failure to comply with a specific claim processing requirement, 27 such as a clerical error, that does not otherwise affect the 28 legitimacy of the claim. If a claim is rejected for such a 29 failure, the franchisee may resubmit a corrected claim in a 30 timely manner to the franchiser. 31 The bill provides that the requirement to approve a claim 32 within 30 days, or to pay an approved claim within 30 days, 33 shall not be construed to preclude denials, reductions, 34 or chargebacks not otherwise prohibited under Code section 35 -10- LSB 6125SV (1) 87 ns/rn 10/ 11

S.F. 2293 322.2, subsection 13. Under current law, Code section 1 322.2, subsection 13, prohibits a manufacturer, distributor, 2 or importer of motor vehicles from reducing the amount of 3 compensation, or disallowing a claim, for warranty parts, 4 repairs, or services if 12 months or more have passed since the 5 claim was submitted. 6 The bill provides that the obligations set forth in the bill 7 apply to any franchiser who manufactures or distributes motor 8 vehicles and any franchiser of new motor vehicle transmissions, 9 engines, or rear axles that separately warrants such components 10 to customers. 11 -11- LSB 6125SV (1) 87 ns/rn 11/ 11