TITLE 16.ECONOMIC REGULATION

Part 6. TEXAS MOTOR VEHICLE BOARD

Chapter 107. WARRANTY PERFORMANCE OBLIGATIONS

16 TAC §§107.1 - 107.11

The Motor Vehicle Board of the Texas Department of Transportation adopts amendments to §§107.1-107.11. Section 107.9 is adopted with changes to proposed text as published in the September 24, 1999 issue of the Texas Register (24 TexReg 8029). Amendments to §§107.1 - 107.8 and 107.10 - 107.11 are adopted without changes and will not be republished.

General changes to rule language.

The Motor Vehicle Commission was renamed the Motor Vehicle Board in 1992. The title of "executive director" was also changed to "director". The amendments change all references from "Commission" to "Board" and "executive director" to "director" throughout the chapter. Changes also make it clear that the procedures in the chapter apply to complaints filed under the lemon law for repurchase or replacement of a vehicle (§6.07 of the Motor Vehicle Commission Code) (Code) and to complaints filed for repair of a vehicle under general warranty agreements (§3.08(i) of the Code). Sections pertinent only to §6.07 or §3.08(i) are now clearly identified. Other amendments correct grammar, add acronyms to avoid repetition, and remove surplusage and gender-specific references.

Other changes specific to each section:

The> filed under §3.08(i) because general warranty complaints may be filed regarding used vehicles if they are still under warranty. Changes to §107.2 conform the section to the current practice of accepting complaints even if they do not initially include necessary information. The amendment adds converters and distributors as potential parties to a complaint, as permitted by the Code. Other amendments delete an obsolete filing fee amount, add provisions clarifying no filing fee is due for complaints filed under §3.08(i) and indicate failure to remit a fee under §6.07 may result in dismissal of the complaint.

Amendments to §107.3 clarify procedure references and Code provisions. Changes to §§107.4 and 107.5 add converters as entities who will be given notice and an opportunity to settle if a complaint is filed and give the Board the option of requiring a response from dealers.

Section 107.6, Hearings, is amended to delete the specific requirement that dealers be given notice of hearing, since all parties receive notice of hearing. Other changes make the section apply to warranty performance complaints as well as lemon law complaints, increase the amount of time to notify the Board of attorney appearances and clarify that evidence presented is subject to admission by the hearing examiner so consumers will understand that the right is not absolute. Additional changes delete the requirement that an expert be independent, to conform to current practice, and no longer require the presence of the expert at the hearing.

Changes to §§107.7(4) and 107.7(6) conform the sections to Government Code amendments concerning notification of a final order, effective September 1, 1999. Other changes to §107.7 allow hearings under both the lemon law and general warranty complaints and add language conforming the section to statutory time limit and appeal provisions contained in the Government Code and the Motor Vehicle Commission Code.

Amendments to §107.8 state that the section only applies to lemon law (§6.07) complaints unless otherwise indicated, and conforms the overall application of the section relating to serious safety hazards to the language in the statute. Additional amendments no longer set out the items included in the purchase price of a vehicle, but continue to exclude interest, finance charges and insurance premiums from the purchase price. Converters and distributors are included as entities who may have obligations under the section, as set out in the statute. The amendment to §107.8(9) conforms the section to the current practice of allowing reconsideration of the repurchase price for damage to the vehicle after the date of the hearing, instead of the date of delivery to the owner, since damage between the date of delivery and the date of hearing is considered at the hearing. Changes to §107.8(10) make it clear that the Board will issue a written order in both lemon law and warranty performance complaints when a hearing is held.

Amendments to §107.9 are adopted with changes to the proposed text. Concerning §107.9(a)(6), the Board agreed with comments that service contracts should not be subject to reimbursement as an incidental expense because the purchaser can cancel a service contract and obtain a refund for the unexpended time. The Board viewed service contracts as a type of insurance voluntarily purchased by a consumer, and did not approve §107.9(a)(6). As a result, §§107.9(a)(7) and (8), adopted without substantive change, are renumbered and adopted as §§107.9(a)(6) and (7).

Adopted without changes were proposals requiring that incidental expenses be reasonable and verified, and clarifying that incidental expenses are not limited to the categories listed within §107.9. Also adopted without change was §107.9(a)(5), allowing reimbursement for loss or damage to personal property; §107.9(a)(7) {renumbered and adopted as §107.9(a)(6)}, allowing reimbursement for attorney fees if the complainant retains counsel after notification that respondent is represented by counsel and §107.9(a)(8) {renumbered and adopted as §107.9(a)(7)}, allowing reimbursement for after-market items. Section 107.9(c), which provides guidance to hearing examiners in considering whether items or accessories should be reimbursed, was also adopted, only changing the reference contained therein from 107.9(a)(8) to 107.9(a)(7).

Amendments to §107.10 extend the disclosure requirement to all vehicles reacquired by a manufacturer, converter or distributor. The disclosure statement at Attachment 1 is deleted and the Board or director is now allowed to prescribe the manner and form for disclosing that a vehicle has been reacquired. Additional changes clarify that manufacturers must provide information on vehicles transferred from out-of-state and require dealers to complete and return the disclosure statement within 60 days of the sale of a reacquired vehicle. Other changes remove non-original equipment manufacturer items or accessories from manufacturer warranty requirements and clarify that the Board, through its director, may provide or approve the warranty form.

The amendment to §107.11 clarifies that the director shall provide the Board with information about complaints resolved before and after hearings are set, rather than formal and informal resolutions of complaints.

The amendments provide a clearer understanding of the hearings process for lemon law and warranty performance complaints and conserve the time and resources of the agency and entities appearing before it. The amendments also create better notification to consumers concerning reacquired vehicles.

Proposed amendments were originally published in the July 23, 1999 issue of the Texas Register (24 TexReg 5638). The Board held a public hearing on the proposals at its September 9, 1999 meeting and tabled the matter after receiving oral comment. As a result of comments received, the July 23, 1999 publication was withdrawn and simultaneously republished with some revisions in the September 24, 1999 issue of the Texas Register (24 TexReg 8029). Additional comments were received after the republication and at the second public hearing held November 4, 1999.

Written comments were received from Specialty Equipment Market Association, Texas Automobile Dealers Association (TADA), DaimlerChrysler Motors Corporation, Recreational Vehicle Industry Association and Brett Bray, Motor Vehicle Division Director. The Board heard oral comment at its September 9, 1999 hearing from DaimlerChrysler Motors Corporation, Consumer's Union, Public Citizen and Texas Automobile Dealers Association. At the November 4, 1999 hearing, oral comment was received from Public Citizen, Texas Automobile Dealers Association, Consumer's Union, Watson Law Firm and Sherrod Vans of Jacksonville.

The original version of §107.8(3), concerning determination of the purchase price of a vehicle, was revised and republished in response to suggestions from TADA that the language be revised to simply indicate what is excluded from the purchase price of a vehicle instead of naming items included and excluded from the purchase price. No comments were received on the revised version of §107.8(3).

Comments against §107.9(a)(5), reimbursement for loss or damage to personal property, suggested that the language is too broad for recreational vehicles and suggestions were made to establish a method of determining the value of personal property and to set an upper limit for reimbursement. Another commenter urged that the provision constitutes a penalty to the manufacturer and goes beyond the authority of the statute. Comments were received from the Recreational Vehicle Industry Association, the Watson Law Firm and Sherrod Vans of Jacksonville.

Original amendments to §107.9(a)(6) added service contracts to the category of reimbursable incidental expenses. Comments in support of §107.9(a)(6) urged adoption to ensure that consumers are fully compensated for a cancelled service contract, including cancellation penalties. Public Citizen commented in support of §107.9(a)(6). Comments against the proposal asserted that service contracts should not be subject to reimbursement as an incidental expense because the purchaser can cancel a service contract and obtain a refund for the unexpended time. It was suggested that a pro rata refund for the time remaining on the contract be authorized because requiring a full refund for a service contract would result in unjust enrichment of the consumer. The Texas Automobile Dealers Association commented against 107.9(a)(6). As a result of these comments, the Board withdrew and republished §107.9(a)(6). The republished proposal included a provision that service contracts less cancellation refunds would be a reimbursable incidental expense. Comments in support of the proposal stated that consumers purchase service contracts for the years beyond the warranty period and should be reimbursed for an investment that is never realized because of the condition of the vehicle. Supporting comments were offered by Consumer's Union and Public Citizen. Comments against the proposal suggested that a service contract should be considered similar to insurance and that consumers are not entitled to reimbursement for insurance. Mr. Bray concurred with the latter view.

The original version of §107.(9)(a)(7) {renumbered and adopted as §107.9(a)(6)}, reimbursement for attorney fees as an incidental expense, was revised in response to comments against the proposal. The revision added the provision that consumer complainants prevailing in a lemon law proceeding could recover attorney fees only if they hired an attorney after notification that the respondent was represented by counsel. Comments against the original publication suggested that the lemon law procedure was designed so consumers would not need attorneys and allowing attorney fees would increase the use of counsel. Another commenter asserted that attorney fees are not incidental to the loss of the use of the vehicle and the legislature never intended reimbursement of attorney fees. It was also pointed out that out-of-state manufacturers and converters would face additional penalty if they retained local counsel. Another commenter suggested that if a complainant wants attorney fees, the appropriate remedy is to file a lawsuit under the Deceptive Trade Practices Act. Comments in favor of the proposal were that the provision would level the playing field and that attorney fees were a consequence of a nonconformity in a vehicle. Commenters stated that the Board clearly had the authority to adopt the provision. Comments against the original versions were received from TADA and DaimlerChrysler Motors Corporation. Commenting in favor of the original version were Consumers Union and Public Citizen. Comments against the revised version of §107.9(a)(7) {renumbered and adopted as §107.9(a)(6)} were that the consumers do not need attorneys because the administrative law judge protects the record and the process, and the process itself helps level the playing field. Other commenters stated that the legislature never intended for the Lemon Law to include attorney fees. Commenters asserted that the provision will encourage the involvement of attorneys, delaying the process and adding cost to the agency. Commenters also maintained that it is more economical for an out-of-state manufacturer to hire local counsel than send a representative to a hearing and suggested that manufacturers be awarded attorney fees when the complaint is frivolous or harassing. Commenters in favor of the proposal stated that the legislature gave the Board the discretion to determine what qualifies as an incidental expense and declined to set an upper limit on incidental expenses for this reason. Another commenter noted that attorneys are already in the process and this provision has self-limitations that will merely level the playing field. Comments against the revised proposal were received from TADA, the Watson Law Firm and Sherrod Vans of Jacksonville. Comments in favor the proposal were received from Public Citizen and Consumers Union.

Sections 107.9(a)(8) {renumbered and adopted as 107.9(a)(7)} and 107.9(c) concern reimbursement for accessories added to a vehicle at or after purchase. The sections were withdrawn and republished with revisions in response to comments. Commenting in favor of the original publication were TADA, Consumers Union, Public Citizen and the Specialty Equipment Market Association. Commenting against the original publication was DaimlerChrysler Motors Corporation. The revisions added provisions for deducting a reasonable allowance for use and requiring hearing examiners to consider the functionality of the accessories and whether they are original equipment manufacturer parts (OEM) or non-OEM parts. Commenting in favor of the revised publication was TADA, Public Citizen and Consumers Union. Commenting against were the Recreational Vehicle Industry Association, the Watson Law Firm and Sherrod Vans of Jacksonsville. Commenters in favor of the proposal stated that the rule is structured to allow an administrative law judge (ALJ) to make a reasoned decision about the nature and value of aftermarket accessories and gives the ALJ the authority to compromise when appropriate. Commenters opposing the proposal stated that it is too broad for recreational vehicles because there are many additional components in an RV. Commenters also opposed consideration of non-OEM parts. Another commenter suggested that there should be no distinction between OEM and non-OEM parts. Another asserted that the proposal conflicts with the requirement that a manufacturer restore a vehicle to factory specifications and offer a warranty after repurchase, and that a manufacturer may not be able to offer a warranty on aftermarket items.

Section 107.10(4) requires manufacturers to disclose to subsequent retail purchasers when a vehicle was reacquired pursuant to a warranty claim. The section was expanded after its original publication to include all vehicles reacquired as the result of a warranty claim, rather than just those reacquired pursuant to a lemon law claim and brought into the state of Texas, because lemon law and warranty claim relief vary from state to state. One commenter urged that no punitive action be taken against a dealer who does not return the disclosure form to the Board if the dealer does not receive it from the manufacturer. Another commenter stated that the language was too broad for the RV industry because recreational vehicles have so many additional components not covered by the manufacturer warranty. It was suggested that the section only apply to the chassis of recreational vehicles. Other commenters asserted that the requirement will discourage goodwill settlements and could be considered an unconstitutional taking to label a vehicle as a lemon when it has not been adjudicated as such. Comments against the proposal were received from TADA, the Recreational Vehicle Dealers Association, the Watson Law Firm and Sherrod Vans of Jacksonville.

The amendments are adopted under the Texas Motor Vehicle Commission Code, §3.06, which provides the Board with authority to adopt rules as necessary and convenient to effectuate the provisions of the Code and to govern practice and procedure before the Board.

Texas Motor Vehicle Commission §§3.08(i) and 6.07 are affected by the amendments and repeal.

§107.9.Incidental Expenses.

(a)

When a refund of the purchase price of a vehicle is ordered, the complainant shall be reimbursed for certain incidental expenses incurred by the complainant from loss of use of the motor vehicle because of the defect or nonconformity which is the basis of the complaint. The expenses must be reasonable and verified through receipts or similar written documents. Reimbursable incidental expenses include but are not limited to the following costs:

(1)

alternate transportation;

(2)

towing;

(3)

telephone calls or mail charges directly attributable to contacting the manufacturer, distributor, converter, or dealer regarding the vehicle;

(4)

meals and lodging necessitated by the vehicle's failure during out - of - town trips;

(5)

loss or damage to personal property;

(6)

attorney fees if the complainant retains counsel after notification that the respondent is represented by counsel; and

(7)

items or accessories added to the vehicle at or after purchase, less a reasonable allowance for use.

(b)

Incidental expenses shall be included in the final repurchase price required to be paid by a manufacturer, converter, or distributor to a prevailing complainant or in the case of a vehicle replacement, shall be tendered to the complainant at the time of replacement.

(c)

In regards to the cost of items or accessories presented under subsection (a)(7) of this section, the hearing officer shall consider the permanent nature, functionality and value added by the items or accessories and whether the items or accessories are original equipment manufacturer parts (OEM) or non-OEM parts.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 6, 2000.

TRD-200001697

Brett Bray

Director

Texas Motor Vehicle Board

Effective date: March 26, 2000

Proposal publication date: September 24, 1999

For further information, please call: (512) 416-4899


16 TAC §107.12

The Motor Vehicle Board of the Texas Department of Transportation adopts the repeal of §107.12, Contested Cases under General Warranty Provisions: Decisions and Final Orders, as published in the September 24, 1999 issue of the Texas Register .

The Appropriations Act of 1997, House Bill 1, Article IX, §167 requires that each state agency review and consider readoption of each rule adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative Procedure Act). Such reviews shall include an assessment by the agency as to whether the reason for adopting or readopting the rule continues to exist. The Board conducted a review of Title 16, Chapter 107, relating to Warranty Performance Obligations, at its June 10, 1999 meeting.

As a result of its review, the Board determined that §107.12, Contested Cases under General Warranty Provisions: Decisions and Final Orders, is unnecessary, since proposed amendments to §107.7 incorporate the authority contained in §107.12. Section 107.12 states that the director has authority to conduct hearings and issue final orders in warranty performance complaints filed under Section 3.08(i) of the Texas Motor Vehicle Commission Code (Code). Amendments to §107.7 now authorize the director to conduct hearings and issue final orders in complaints filed under both §6.07 and §3.08(i) of the Code, relating to lemon law and warranty performance complaints respectively, making §107.12 redundant.

No comments were received concerning the repeal.

The repeal is adopted under the Texas Motor Vehicle Commission Code, §3.06, which provides the Board with authority to adopt rules as necessary and convenient to effectuate the provisions of the Act and to govern practice and procedure before the agency.

Motor Vehicle Commission Code §§3.08(i) and 6.07 are affected by the proposed repeal.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 6, 2000.

TRD-200001696

Brett Bray

Director

Texas Motor Vehicle Board

Effective date: March 26, 2000

Proposal publication date: September 24, 1999

For further information, please call: (512) 416-4899