HF 2197 (LSB 5822YH (4) 91)

HOUSE FILE 2197

BY  COOLING

A BILL FOR

An Act relating to franchisee compensation and time allowances for motor vehicle warranty services, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 322A.5, subsection 2, paragraph b, Code 2026, is amended by striking the paragraph and inserting in lieu thereof the following:
   b.  A franchiser shall pay the franchisee for warranty services, including for parts, labor, and diagnostics, an amount not less than the rates and labor times charged by the franchisee for like parts and services to retail customers, provided the rates and labor times are reasonable. A franchisee shall provide to the franchiser an itemized list of rates and labor times for warranty services performed by the franchisee.
    Sec. 2.  Section 322A.5, subsection 2, paragraph c, Code 2026, is amended to read as follows:
   c.  The franchiser shall provide to the franchisee a list of time allowances for the performance of warranty services. Time allowances for the performance of A franchisee shall perform warranty services, including diagnostic services, shall be in a reasonable and adequate for the services to be performed amount of time. 
    Sec. 3.  APPLICABILITY.  This Act applies to franchises under chapter 322A entered into or renewed on or after the effective date of this Act.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   Under current law, both a franchiser (a manufacturer or distributor of motor vehicles) and franchisee (a person who receives motor vehicles from the franchiser under a contract and who offers and sells such motor vehicles to the general public) are required to fulfill the terms of any express or implied warranty concerning the sale of a motor vehicle to the public. A franchiser must compensate a franchisee for the warranty services the franchiser requires the franchisee to provide. The franchiser is required to provide to the franchisee a schedule of compensation that specifies reasonable compensation the franchiser will pay to the franchisee for such warranty services, including for parts, labor, and diagnostics. The schedule of compensation must provide for the franchisee’s average percentage markup on parts, as calculated by the franchisee, and the franchisee’s retail labor rate, both of which must be approved by the franchiser. The franchiser must pay a franchisee for warranty parts and labor at least the franchisee’s retail rates for like parts and services, if those retail rates are reasonable. The franchiser is required to provide a list of reasonable and adequate time allowances for the performance of warranty services.
   This bill strikes the requirement for a franchiser to provide a schedule of compensation, and the related schedule provisions, and instead requires a franchiser to pay a franchisee for warranty services, including for parts, labor, and diagnostics, an amount not less than the rates and labor times charged by the franchisee for like parts and services to retail customers, provided the rates and labor times are reasonable. A franchisee is required to provide to the franchiser an itemized list of rates and labor times for warranty services performed by the franchisee. The bill also strikes the requirement for a franchiser to provide a list of time allowances for the performance of warranty services, and instead requires a franchisee to perform warranty services in a reasonable amount of time.
   The bill applies to franchises under Code chapter 322A entered into or renewed on or after July 1, 2026.