HBA-NLM, C.S.H.B. 3092 76(R)HBA-MPM, NLM, H.B. 3092 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3092 By: Siebert Transportation 9/16/1999 Enrolled BACKGROUND AND PURPOSE The Texas Motor Vehicle Commission Code provides for the licensing of manufacturers of motor vehicles and their franchised dealers and independent dealers, and includes regulations for relations between and among licensees. The purpose of this bill is to clarify definitions and other provisions contained in the code. H.B. 3092 provides that a person is eligible for appointment to the Texas Motor Vehicle Board (board) if the person is otherwise eligible under this Act and is a natural person who is either a dealer or is the bona fide owner of at least 20 percent of a dealer entity. This bill also requires a manufacturer or distributor to file with the board a copy of the current requirements the manufacturer or distributor places on its dealer with respect to the dealer's duties under the manufacturer or distributor's warranty, and vehicle delivery and preparation obligations. In addition, this bill provides restrictions on charges against a dealer under a manufacturer or distributor incentive program. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking previously delegated to the Texas Motor Vehicle Commission, now the Texas Motor Vehicle Board, is modified in SECTION 12 (Section 4.02, Article 4413(36), V.T.C.S.) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1.03, Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to redefine "broker,""lease facilitator," "lessor,""manufacturer," and "party." Redefines "rule" to substitute the Texas Motor Vehicle Board (board) for the Texas Motor Vehicle Commission and adds the definition of "towable recreational vehicle." Makes conforming changes. SECTION 2. Amends Sections 2.02(b), and (c), Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to delete language specifying that the executive director is a member of the board ex officio, and subsequent language authorizing or prohibiting the executive director to take certain actions with respect to board meetings. Makes a conforming change. SECTION 3. Amends Section 2.02, Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., by adding Subsection (c) to specify that a person is eligible for appointment to the board as provided by this section if the person is eligible as provided by this Act and is a natural person who is either a dealer or the bona fide owner of at least 20 percent of an entity that is the dealer. Provides that notwithstanding the terms of this subsection, a person is ineligible to serve on the board if the person's status as dealer is derived from a dealer or dealership in which a manufacturer or distributor owns an interest. SECTION 4. Amends Section 2.08(a), (b), and (c), Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to make conforming changes. SECTION 5. Amends Section 2.08A(c), Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to require the director, rather than the executive director, to notify the vice-chairman of the board if the director has knowledge that a potential ground for removal of the chairman of the board exists. Makes conforming changes. SECTION 6. Amends Sections 2.09(a) and (e), Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to delete the requirement that the board develop and implement policies regarding the separation of the policy making responsibilities and management responsibilities of it's Executive Director and board staff. Makes conforming changes. SECTION 7. Amends Section 2.13, Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to make conforming changes. SECTION 8. Repealer: Section 3.01A (Interaction With Department), Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.). This section requires the board, in coordination with the Texas Department of Transportation (department), to develop and implement policies that clearly delineate the policy-making responsibilities of the board and the management responsibilities of the department. This section also authorizes the department, by agreement with the board, to provide personnel and services to the board as needed to carry out purposes, powers, and duties of the board; and authorizes the board to delegate authority to personnel as needed. SECTION 9. Amends Section 3.02, Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to make conforming changes. SECTION 10. Amends Section 3.08(g), Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to delete the requirement that the board's written final decision or order be signed on behalf of the board by the director. SECTION 11. Amends Section 4.01B(a), Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to authorize the board to issue a license for a term of less than one year to coordinate the expiration dates of licenses in instances where a licensee must obtain more than one license to perform activities under this Act. Makes a conforming change. SECTION 12. Amends Section 4.02, Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to require the board, if it adopts a rule regulating off-site display or sale of towable recreational vehicles, to authorize the display and sale of the vehicles at a private event in a trade area that would not otherwise qualify for the event under the application of general participation requirements for organized dealer shows and exhibitions. Makes conforming and nonsubstantive changes. SECTION 13. Amends Section 5.02(b), Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., to make it unlawful for a manufacturer, distributor, or representative to terminate or refuse to continue a franchise with a dealer or directly or indirectly force or attempt to force a dealer to relocate, a well as discontinue, a line-make or parts or products related to the line-make unless certain conditions are met. Deletes language making it unlawful for a manufacturer, distributor, or representative to fail to compensate its dealers for certain work and services required in connection with certain delivery and preparation obligations; or fail to compensate the dealer for parts, labor and other expenses to perform under or comply with a manufacturer's or distributor's warranty agreement, or require that a dealer file certain information regarding the labor unless actual time is the basis for reimbursement. Deletes language stating that the manufacturer or distributor is not required to pay dealers for warranty work that is less than that charged by the dealer to the dealer's retail customers for nonwarranty work. Deletes language requiring that all claims made by dealers for compensation for delivery, preparation, and warranty work be paid within a certain time frame and requiring that the claims be approved or disapproved within a certain time frame. Deletes language requiring the dealer, when a claim is disapproved, to be notified in writing. Deletes language providing that no approved, paid claim may be charged back to the dealer unless it is shown that the claim was false or fraudulent, that the repairs were not properly made or were unnecessary to correct a defective condition, or that the dealer failed to reasonably substantiate the claim according to reasonable written requirements of the manufacturer or distributor, if the dealer is notified of the requirements prior to the claim and if the requirements were in effect at the time of the claim. Deletes language prohibiting a manufacturer or distributor from auditing a claim after the expiration of two years following the submission of the claim unless certain conditions are present. Deletes language making it unlawful for a manufacturer, distributor, or representative to operate as a dealer except on a temporary basis and only if certain conditions exist. Makes conforming and nonsubstantive changes. SECTION 14. Amends the Texas Motor Vehicle Commission Code, Article 4413(36), V.T.C.S., by adding Sections 5.02A, 5.02B, and 5.02C, as follows: Sec. 5.02A. WARRANTY REIMBURSEMENT. (a) Requires a manufacturer or distributor to file with the board a copy of the current requirements the manufacturer or distributor places on its dealers with respect to the dealer's duties under the manufacturer's or distributor's warrant and vehicle delivery and preparation obligation. (b) Provides that warranty or delivery and preparation requirements placed on a dealer by a manufacturer are not enforceable unless reasonable, and are disclosed and filed in compliance with Subsection (a). (c) Requires a manufacturer or distributor to fairly and adequately compensate its dealers for warranty work. (d) Prohibits a manufacturer or dealer from paying or reimbursing a dealer an amount of money for warranty work that is less than that charged by the dealer to the dealer's retail customers for nonwarranty work of like kind. Requires the manufacturer or distributor, in computing the price of like kind-labor, to use one of two formulas. (e) Authorizes a dealer to request an adjustment in the dealer's warranty labor rate, and requires this request to be made by certified mail, return receipt requested. Requires the requesting dealer, in this request, to set forth the requested rate and to include information reasonably necessary for the manufacturer or distributor to evaluate the request. Requires the manufacturer or distributor, within 60 days after receiving the request, to notify the requesting dealer, in writing, of the approval or disapproval of the request. Requires the manufacturer or distributor, if disapproving the request, to set forth the reasons for the disapproval. Entitles a requesting dealer to file a protest if the manufacturer or distributor disapproves the request or fails to respond within the time set forth in this subsection. (f) Authorizes the board to uphold a manufacturer's or distributor's decision only if it is proved that the disapproval or the request or failure to respond was reasonable. Requires the board, if finding that the disapproval of the request or failure to respond was unreasonable, to put the requested rate into effect as of the 60th day after receipt of the request by the manufacturer or distributor. (g) Authorizes a warranty labor rate established as provided by this section to be adjusted no more often than annually, except by agreement of the parties. (h) Requires a manufacturer or distributor to pay a dealer's claim for reimbursement for warranty work or dealer preparation and delivery work within 30 days after approval of the claim. Provides that a claim that is not disapproved within 30 days after receipt by the manufacturer or distributor is considered approved. Requires the manufacturer or distributor, if the claim is disapproved, to provide the dealer written notice of the reasons for the disapproval. (i) Prohibits a manufacturer or distributor from attempting to recover money paid to the dealer to satisfy an approved claim except under specified circumstances. (j) Prohibits a manufacturer or distributor from auditing a claim filed under this section after a certain time period unless there are reasonable grounds to believe the claim was fraudulent or from requiring as a prerequisite to the payment of a claim that a dealer file a statement of the actual time of the labor involved unless the actual time of the labor is the basis for reimbursement. Sec. 5.02B. MANUFACTURER OR DISTRIBUTOR INCENTIVE PROGRAMS; PROCEDURES. (a) Prohibits a manufacturer or distributor, except as provided by Subsection (b), after the first anniversary of the ending date of a manufacturer or distributor incentive program, from charging a dealer money paid by the manufacturer or distributor as a result of the program or the cash value of a prize or other thing of value awarded the dealer as a result of the program; or auditing the dealer's records to determine compliance with the program's terms, unless there are reasonable grounds to believe that the dealer committed fraud. (b) Authorizes a manufacturer or distributor to make charge-backs to a dealer if after audit, the manufacturer or distributor has reasonable grounds to conclude that the dealer committed fraud with respect to an incentive program, notwithstanding Subsection (a). Sec. 5.02C. MANUFACTURER OR DISTRIBUTOR OWNERSHIP, OPERATION, OR CONTROL OF DELEARSHIP. (a) Defines "manufacturer" for purposes of this section. (b) Provides that a person or entity is controlled by a manufacturer if the manufacturer has the authority to directly or indirectly, by law or agreement of parties, to direct or influence the management and policies of the person or entity for purposes of Subsection (a). (c) Prohibits a manufacturer or distributor, except as provided by this section, from directly or indirectly owning an interest in a dealer or dealership, operating or controlling a dealer or dealership, or acting as a dealer. (d) Authorizes a manufacturer or distributor to own an interest in a franchised dealer, or otherwise control a dealership, for a period not to exceed 12 months from the date the manufacturer or distributor acquires the dealership if certain conditions apply. (e) Authorizes a manufacturer or distributor to temporarily own an interest in a dealership if a specific purpose in doing so is applicable with respect to dealerships that are underrepresented or lacking in purchaser resources. (f) Authorizes the board, on a showing by a manufacturer or distributor of good cause, to extend the time limit set forth in Subsection (d), but prohibits this limit from exceeding 12 months. Provides that an application for an extension after the first extension is granted is subject to protest by a dealer of same line-make whose dealership is located in the same county as, or within 15 miles of, the dealership owned or controlled by the manufacturer or distributor. (g) Authorizes a person who, on June 7, 1995, held a motor home dealer's license and a motor home manufacturer's license issued under this Act, to hold both of these licenses and to operate as both a manufacturer and dealer of motor homes, but of no other type of vehicle. SECTION 15. Amends Section 6.07(a), Teas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to redefine "owner" for purposes of this section. Makes a conforming change. SECTION 16. Amends Section 7.01(f), Texas Motor Vehicle Commission Code (Article 4413(36), V.T.C.S.), to authorize the board, notwithstanding the terms of this section, to suspend the enforcement of its order pending final determination of an appeal of that order as provided by this section. Makes a conforming change. SECTION 17. Amends Section 1A.01, Chapter 7, Acts of the 72nd Legislature, 1st Called Session, 1991 (Article 4413(36a), V.T.C.S.), to add the definition of "executive director." SECTION 18. Amends Section 1A.02, Chapter 7, Acts of the 72nd Legislature, 1st Called Sesion, 1991 (Article 4413(36), V.T.C.S.), as follows: Sec. 1A.02. (a) Includes the exceptions of Subsection (b) or (c), as added by this Act, when requiring the board to exercise its authority and perform duties under this article or other provision of law that is independent of the Texas Transportation Commission and the executive director and to advise, by and through the director, the department on certain matters. Deletes matters arising under the body of law known at the Texas Motor Vehicle Commission Code or its successors and other matters relevant to the licensing and regulation of motor vehicle manufacturers, distributors, converters, and dealers from the list of these matters. Further deletes from these matters the personnel needs of the Board and division. Makes conforming changes. (b) Makes personnel of the division personnel of the Texas Department of Transportation (department), and therefore, subject to the department's human resource rules and policies and the Texas Transportation Commission, except that, as applied to employees of the division, any and all powers granted to the executive director by those rules and policies shall reside with the director. (c) Requires the executive director, by and through the department's offices, to provide equipment, facilities, property, and services necessary to carry out the division's purposes, powers, and duties. Requires the executive director to be responsible for allocating department resources as deemed necessary and appropriate to meet the needs of both the division and the other department offices. SECTION 19. Emergency clause. Effective date: upon passage. (Please note that in SECTION 9, Section 3.02(b), there is reference to the "Commission's programs" (page 16, line 9). In a previous version of this bill, more specifically, the substituted house version, "commission" is replaced with "board." This could therefore be a nonsubstantive error.)