Middleton’s bill on paying franchised car dealers

The text as introduced · 2,350 words

89R10022 AND-F

By: Middleton
S.B. No. 1917

A BILL TO BE ENTITLED

AN ACT

relating to motor vehicle franchised dealers and the reimbursement

of motor vehicle franchised dealers by manufacturers and

distributors for warranty, recall, over-the-air, and preparation

and delivery work.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter I, Chapter 2301, Occupations Code, is

amended to read as follows:

SUBCHAPTER I. [ WARRANTIES: ] REIMBURSEMENT OF DEALER

Sec. 2301.4001. DEFINITIONS. In this subchapter:

(1) "Goodwill repair" means a repair made by a seller

for no charge that the seller is not obligated to make.

(2) "Part" includes:

(A) any component, electric vehicle battery,

engine, equipment, fixture, good, part assembly, software, or

transmission for a motor vehicle; and

(B) a replacement for a part listed in Paragraph

(A).

(3) "Routine maintenance" includes replacement of a

belt, bolt, brake pad, bulb, fastener, filter, fluid, internal

combustion engine vehicle battery, nut, rotor, or wiper blade, and

any other repair or service described as vehicle maintenance in the

owner information booklet or similar document provided to the

vehicle owner by the manufacturer or distributor.

Sec. 2301.401. WARRANTY, RECALL, PREPARATION, AND DELIVERY

REQUIREMENTS. (a) On request, a manufacturer or distributor shall

provide to the department a copy of the current requirements the

manufacturer or distributor imposes on its dealers with respect to

the dealer's:

(1) duties under the manufacturer's or distributor's

warranty and under a manufacturer's or distributor's recall ; and

(2) vehicle preparation and delivery obligations.

(b) Warranty , recall, or preparation and delivery

requirements placed on a dealer by a manufacturer or distributor

are not enforceable unless the requirements are reasonable.

Sec. 2301.402. RATE OF COMPENSATION. (a) A manufacturer or

distributor shall fairly and adequately compensate its dealers for

warranty , recall, over-the-air, and preparation and delivery work.

(b) A manufacturer or distributor may not pay or reimburse a

dealer an amount of money for warranty , recall, over-the-air, and

preparation and delivery work that is less than the amount the

dealer charges a retail customer for similar [ nonwarranty ] work.

(c) In computing the amount of money a dealer charges a

retail customer under Subsection (b) for labor , the manufacturer or

distributor shall use the formula, of the following formulas, that

produces the fewest number of repair orders [ the greater of ]:

(1) the average labor rate charged during the

preceding six months by the dealer on 100 sequential [ nonwarranty ]

repair orders paid in part by a retail customer , exclusive of :

(A) routine maintenance;

(B) tire, wheel, or wheel alignment;

(C) discounts to state agencies, insurers, or

warranty or service contract providers;

(D) state inspections;

(E) goodwill repairs;

(F) accessory installation;

(G) a manufacturer's or distributor's promotion

or service campaign; or

(H) repairs to a vehicle owned by the dealer, an

affiliate of the dealer, or an employee of either the dealer or

affiliate; or

(2) the average labor rate charged for 90 consecutive

days during the preceding six months by the dealer for

[ nonwarranty ] repairs paid in part by a retail customer , exclusive

of :

(A) routine maintenance ;

(B) tire, wheel, or wheel alignment;

(C) discounts to state agencies, insurers, or

warranty or service contract providers;

(D) state inspections;

(E) goodwill repairs;

(F) accessory installation;

(G) a manufacturer's or distributor's promotion

or service campaign; or

(H) repairs to a vehicle owned by the dealer, an

affiliate of the dealer, or an employee of either the dealer or

affiliate .

(d) The average labor rate under Subsection (c) is

determined by dividing the total charges for labor submitted by the

total number of hours charged for the repairs.

(e) In computing the amount of money a dealer charges a

retail customer under Subsection (b) for parts, the manufacturer or

distributor shall use the formula, of the following formulas, that

produces the fewest number of repair orders:

(1) the average parts markup charged during the

preceding six months by the dealer on 100 sequential repair orders

paid in part by a retail customer, exclusive of:

(A) routine maintenance;

(B) tire, wheel, or wheel alignment;

(C) discounts to state agencies, insurers, or

warranty or service contract providers;

(D) state inspections;

(E) goodwill repairs;

(F) accessory installation;

(G) a manufacturer's or distributor's promotion

or service campaign; or

(H) repairs to a vehicle owned by the dealer, an

affiliate of the dealer, or an employee of either the dealer or

affiliate; or

(2) the average parts markup charged for 90

consecutive days during the preceding six months by the dealer for

repairs paid in part by a retail customer, exclusive of:

(A) routine maintenance;

(B) tire, wheel, or wheel alignment;

(C) discounts to state agencies, insurers, or

warranty or service contract providers;

(D) state inspections;

(E) goodwill repairs;

(F) accessory installation;

(G) a manufacturer's or distributor's promotion

or service campaign; or

(H) repairs to a vehicle owned by the dealer, an

affiliate of the dealer, or an employee of either the dealer or

affiliate.

(f) The average parts markup for Subsection (e) is

determined by dividing the total charges for parts submitted by the

total cost of the parts for which charges are submitted.

(g) If a manufacturer or distributor supplies a part to a

dealer at no cost or at a reduced cost for use in a repair, the

manufacturer or distributor shall compensate the dealer for the

dealer's cost for the part, if any, plus an amount equal to the

dealer's prevailing retail parts markup, multiplied by the fair

wholesale value of the part.

(h) For purposes of Subsection (g), the fair wholesale value

of a part is the greater of:

(1) the amount the dealer paid for the part or a

substantially identical part if presently owned by the dealer;

(2) the cost of the part as shown in the current price

schedule of the manufacturer or distributor or in a price schedule

issued by the manufacturer or distributor in the 24 months

preceding the date of performance of the repair; or

(3) the cost of a substantially identical part shown

in the current price schedule of the manufacturer or distributor or

in a price schedule issued by the manufacturer or distributor in the

24 months preceding the date of performance of the repair.

(i) A manufacturer or distributor shall compensate a dealer

in accordance with this subchapter if:

(1) a customer, manufacturer, distributor, or

third-party requests or seeks assistance from the dealer for an

over-the-air or remote installation, change, repair, update, or

amendment to any part, system, accessory, or function; or

(2) the dealer performs an over-the-air or remote

installation, change, repair, update, or amendment to any part,

system, accessory, or function.

Sec. 2301.403. ADJUSTMENT OF RATE FOR WARRANTY WORK [ LABOR

RATE ]. (a) A dealer may request an adjustment in the dealer's

warranty work [ labor ] rate. The request must be sent to the

manufacturer or distributor by certified mail, return receipt

requested, to the address specifically designated by the

manufacturer or distributor for such purpose or electronically if

the manufacturer or distributor has an established portal

specifically designated for such purpose and the manufacturer or

distributor has given notice to the dealer of the designated

address or portal, as applicable. The request [ and ] must state the

requested labor or parts rate and include information reasonably

necessary to enable the manufacturer or distributor to adequately

evaluate the request as provided by this subchapter .

(b) Not later than the 60th day after the date of receipt of

a request under this section, the manufacturer or distributor shall

provide written notice to the requesting dealer of the approval ,

reduction, claimed material inaccuracy, or disapproval of the

request. If the manufacturer or distributor fails to respond

before the 60th day after the date the request is received, the

submitted rate shall take effect on the 60th day after the date the

manufacturer or distributor receives the request. If the request

is disapproved, reduced, or claimed to be materially inaccurate,

the manufacturer or distributor shall state in writing the reasons

for the disapproval , reduction, or claimed material inaccuracy.

The stated reasons for disapproval, reduction, or claimed material

inaccuracy of the requested labor or parts rate must contain:

(1) an explanation of the reasons the request is

disapproved, reduced, or claimed to be materially inaccurate;

(2) evidence that substantiates each stated reason;

(3) if a material inaccuracy is alleged, a copy of the

calculations used by the manufacturer or distributor demonstrating

a material inaccuracy; and

(4) a proposed adjusted labor or parts rate, as

applicable .

(c) A requesting dealer may file a protest with the board if

the manufacturer or distributor[ :

[ (1) ] disapproves or reduces a dealer's request or

claims the request is materially inaccurate [ ; or

[ (2) fails to respond within the time required by this

section ].

(d) After a protest is filed, the board may uphold the

manufacturer's or distributor's decision only if the manufacturer

or distributor proves by clear and convincing [ a preponderance of

the ] evidence that the disapproval , reduction, or claimed material

inaccuracy of the request [ or failure to respond ] was reasonable.

(e) If the board does not determine by clear and convincing

evidence that the disapproval , reduction, or claimed material

inaccuracy of the request [ or failure to respond ] was reasonable,

the board shall order the requested rate into effect as of the 60th

day after the receipt of the request by the manufacturer or

distributor.

(f) Except by agreement of the parties, a warranty labor

rate or warranty parts rate established under this subchapter may

not be adjusted more often than once a year.

Sec. 2301.404. TIME FOR PAYMENT. (a) A manufacturer or

distributor shall pay a dealer's claim for reimbursement for

warranty [ work ] , recall, over-the-air, or [ dealer ] preparation and

delivery work not later than the 30th day after the date of approval

of the claim.

(b) A claim that is not disapproved before the 31st day

after the date of receipt is considered approved.

(c) If a claim is disapproved, the manufacturer or

distributor shall provide the dealer written notice explaining [ of ]

the reasons for the disapproval.

Sec. 2301.405. CHARGE BACK TO DEALER. (a) A manufacturer

or distributor may not charge back to a dealer money paid by the

manufacturer or distributor to satisfy a claim approved and paid

under this subchapter unless the manufacturer or distributor shows

that:

(1) the claim was false or fraudulent;

(2) repair work was not properly performed or was

unnecessary to correct a defective condition; or

(3) the dealer who made the claim failed to

substantiate the claim as provided by the manufacturer's or

distributor's requirements that were enforceable under Section

2301.401 at the time the claim was filed.

(b) A manufacturer or distributor may not audit a claim

filed under this subchapter after the first anniversary of the date

the claim is submitted unless the manufacturer or distributor has

reasonable grounds to suspect that the claim was fraudulent.

Sec. 2301.406. PROHIBITED REQUIREMENTS FOR PAYMENT. (a) A

manufacturer or distributor may not require, as a prerequisite to

the payment of a claim for reimbursement, that a dealer file a

statement of actual time spent in performance of labor, unless the

manufacturer or distributor intends to reimburse the dealer based

on the actual time spent on the repair in accordance with this

subchapter and the manufacturer or distributor has given timely

notice to the dealer that actual time is the basis for

reimbursement.

(b) A manufacturer or distributor may not recover or attempt

to recover any portion of the compensation due to a dealer for

warranty, recall, over-the-air, or preparation and delivery work by

reducing the amount due by a separate charge, surcharge, like

charge, other charge, supplemental charge, or a reduction in return

reserve allowance to the wholesale price paid by the dealer to the

manufacturer or distributor for any product, including motor

vehicles and parts. A manufacturer or distributor may not add any

additional charge to a dealer for a service such as an information

system or for the dealer's obtaining technical information and

repair assistance from the manufacturer or distributor. This

subsection does not prohibit a manufacturer or distributor from

increasing prices for a vehicle or part in the normal course of

business.

(c) A manufacturer or distributor may not establish or

implement a special part number for a part used in warranty, recall,

over-the-air, or preparation and delivery work if the result is

lower compensation to the dealer than as calculated under Section

2301.402. This subsection does not prohibit a manufacturer or

distributor from establishing or implementing a special part number

for recall tracking if required by federal law.

(d) Except as otherwise provided by this subsection,

compensation to a dealer for a part used in the performance of a

recall must be calculated using the price for the part listed in the

current parts catalog of the manufacturer or distributor or a parts

catalog issued by the manufacturer or distributor in the 24 months

preceding the date of the performance of the recall work, whichever

results in greater compensation to the dealer. If the part,

irrespective of the part number, is in a dealer's current

inventory, the compensation to a dealer must be calculated using

the price for the part from the manufacturer's or distributor's

parts catalog at the time the part was purchased for the dealer's

inventory.

SECTION 2. The changes in law made by this Act apply only to

warranty, recall, over-the-air, or preparation and delivery work

under Subchapter I, Chapter 2301, Occupations Code, as amended by

this Act, that commences on or after the effective date of this Act.

Warranty, recall, over-the-air, or preparation and delivery work

that commences before the effective date of this Act is governed by

the law in effect on the date the work was commenced, and the former

law is continued in effect for that purpose.

SECTION 3. This Act takes effect September 1, 2025.