BILL ANALYSIS
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Senate Research Center |
S.B. 1917 |
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89R10022 AND-F |
By: Middleton |
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Business & Commerce |
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4/23/2025 |
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As Filed |
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Concerns have been presented regarding fair reimbursement or compensation for warranty work done and parts from manufacturers or distributors. Automobile dealers have seen issues with a lack of a clear parts formula to calculate warranty reimbursement rates, surcharge fees that offset reimbursements, unfair pricing of specialty parts, and a lack of compensation for customer requested over-the-air updates. Texas auto manufacturers, distributors, and dealers have convened on multiple occasions to attempt solving this perceived issue. S.B. 1917 seeks to address these issues through amending Chapter 2301, Subchapter I, to clarify the warranty reimbursement language.
S.B. 1917 amends Chapter 2301, Subchapter I, of the Texas Occupations Code to create a definition for "goodwill repair," "parts," and "routine maintenance." Secondly, it adds the terms "recall," "over-the-air," and "preparation and delivery" to subsequent sections of the code to allow for reimbursement of those types of warranty work. Thirdly, it creates a parts formula for calculation of a reimbursement rate for warranty parts that mirrors the formula for the labor rate. Lastly, it amends the code to adjust the process for warranty reimbursement adjustment claims regarding adjudication, the time frame for a reimbursement, the standard of proof for a meritorious claim, surcharge fees, and special parts reimbursements.
As proposed, S.B. 1917 amends current law 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.
RULEMAKING AUTHORITY
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter I, Chapter 2301, Occupations Code, as follows:
SUBCHAPTER I. New heading: REIMBURSEMENT OF DEALER
Sec. 2301.4001. DEFINITIONS. Defines "goodwill repair," "part," and "routine maintenance."
Sec. 2301.401. New heading: WARRANTY, RECALL, PREPARATION, AND DELIVERY REQUIREMENTS. (a) Requires a manufacturer or distributor, on request, to provide to the Texas Department of Motor Vehicles (TxDMV) a copy of the current requirements the manufacturer or distributor imposes on its dealers with respect to certain obligations of the dealer, including duties under the manufacturer's or distributor's warranty and under a manufacturer's or distributor's recall.
(b) Provides that 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) Requires a manufacturer or distributor to fairly and adequately compensate its dealers for warranty, recall, over-the-air, and preparation and delivery work.
(b) Prohibits a manufacturer or distributor from paying or reimbursing 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 work, rather than similar nonwarranty work.
(c) Requires the manufacturer or distributor, in computing the amount of money a dealer charges a retail customer under Subsection (b) for labor, to use the formula, of the following formulas, that produces the fewest number of repair orders, rather than use the greater of:
(1) the average labor rate charged during the preceding six months by the dealer on 100 sequential repair orders, rather than 100 sequential nonwarranty repair orders, paid in part by a retail customer, exclusive of certain factors; or
(2) makes conforming changes to this subdivision.
Makes nonsubstantive changes.
(d) Provides that 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) Requires the manufacturer or distributor, in computing the amount of money a dealer charges a retail customer under Subsection (b) for parts, to 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 certain factors; 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 certain factors.
(f) Provides that 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) Requires a manufacturer or distributor, if the manufacturer or distributor supplies a part to a dealer at no cost or at a reduced cost for use in a repair, to 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) Provides that, for purposes of Subsection (g), the fair wholesale value of a part is the greater of certain values.
(i) Requires a manufacturer or distributor to compensate a dealer in accordance with this subchapter if 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 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. New heading: ADJUSTMENT OF RATE FOR WARRANTY WORK. (a) Authorizes a dealer to request an adjustment in the dealer's warranty work, rather than labor, rate. Requires that the request 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. Requires that the request 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. Makes a nonsubstantive change.
(b) Requires the manufacturer or distributor, not later than the 60th day after the date of receipt of a request under this section, to provide written notice to the requesting dealer of the approval, reduction, claimed material inaccuracy, or disapproval of the request. Requires that the submitted rate, if the manufacturer or distributor fails to respond before the 60th day after the date the request is received, take effect on the 60th day after the date the manufacturer or distributor receives the request. Requires the manufacturer or distributor, if the request is disapproved, reduced, or claimed to be materially inaccurate, to state in writing the reasons for the disapproval, reduction, or claimed material inaccuracy. Requires that the stated reasons for disapproval, reduction, or claimed material inaccuracy of the requested labor or parts rate contain certain information.
(c) Authorizes a requesting dealer to file a protest with the board of TxDMV (board) if the manufacturer or distributor disapproves or reduces a dealer's request or claims the request is materially inaccurate. Deletes existing text authorizing a requesting dealer to file a protest with the board if the manufacturer or distributor fails to respond within the time required by this section. Makes nonsubstantive changes.
(d) Authorizes the board, after a protest is filed, to uphold the manufacturer's or distributor's decision only if the manufacturer or distributor proves by clear and convincing evidence, rather than a preponderance of the evidence, that the disapproval, reduction, or claimed material inaccuracy of the request, rather than failure to respond, was reasonable.
(e) Makes conforming changes to this subsection.
(f) Prohibits a warranty labor rate or warranty parts rate established under this subchapter, except by agreement of the parties, from being adjusted more often than once a year.
Sec. 2301.404. TIME FOR PAYMENT. (a) Requires a manufacturer or distributor to pay a dealer's claim for reimbursement for warranty, rather than warranty work, recall, over-the-air, or preparation, rather than dealer preparation, and delivery work not later than the 30th day after the date of approval of the claim.
(b) Makes no changes to this subsection.
(c) Requires the manufacturer or distributor, if a claim is disapproved, to provide the dealer written notice explaining the reasons for the disapproval. Makes a nonsubstantive change.
Sec. 2301.405. CHARGE BACK TO DEALER. Makes no changes to this section.
Sec. 2301.406. PROHIBITED REQUIREMENTS FOR PAYMENT. (a) Creates this subsection from existing text. Prohibits a manufacturer or distributor from requiring, 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) Prohibits a manufacturer or distributor from recovering or attempting 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. Prohibits a manufacturer or distributor from adding 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. Provides that this subsection does not prohibit a manufacturer or distributor from increasing prices for a vehicle or part in the normal course of business.
(c) Prohibits a manufacturer or distributor from establishing or implementing 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. Provides that 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) Requires that compensation to a dealer for a part used in the performance of a recall, except as otherwise provided by this subsection, 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. Requires that the compensation to a dealer, if the part, irrespective of the part number, is in a dealer's current inventory, 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. Makes application of this Act prospective.
SECTION 3. Effective date: upon passage or September 1, 2025.