S-2951

AN ACT Relating to used motor vehicle warranties; adding a new chapter to Title 19 RCW; prescribing penalties; providing effective dates; and declaring an emergency.

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

NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Consumer" means any person who has entered into an agreement or contract for the transfer, lease, or purchase of a used motor vehicle, other than for purposes of resale or sublease, subject to a warranty under this chapter.

(2)(a) "Dealer" means any vehicle dealer as defined in RCW 46.70.011 not excluded by (b) of this subsection, engaged in the business of selling, offering for sale, leasing, or offering for lease used motor vehicles. A person is engaged in the business of selling used motor vehicles if such person has sold or leased five or more used motor vehicles in the preceding twelve consecutive months.

(b) "Dealer" does not include:

(i) Receivers, trustees, administrators, executors, guardians, or other persons appointed by, or acting under a judgment or order of, any court;

(ii) Public officers while performing their official duties;

(iii) Employees of dealers who are engaged in the specific performance of their duties as such employees;

(iv) Any person, firm, association, corporation, or trust, engaged in the selling of equipment other than vehicles, subject to registration, used for agricultural or industrial purposes;

(v) Any bank, trust company, savings bank, mutual savings bank, savings and loan association, credit union, and any parent, subsidiary, or affiliate thereof, authorized to do business in this state under state or federal law with respect to the acquisition and sale or other disposition of a motor vehicle in which the entity has acquired an interest as a lessor, lessee, or secured party; or

(vi) The state of Washington or any political subdivision thereof.

(3) "Purchase price" means all amounts charged for the purchase of a motor vehicle, including tax, license, finance charge, and the value of a trade-in vehicle.

(4) "Serious safety defect" means a malfunction or defect that impedes the consumer's ability to control or operate the motor vehicle for ordinary use or reasonable intended purposes or creates a risk of fire or explosion.

(5)(a) "Used motor vehicle" means any motor vehicle, registered in the state of Washington at the time of sale as a used motor vehicle, that is (i) not a new vehicle under chapter 19.118 RCW, (ii) not excluded by (b) of this subsection, and (iii) driven more than the limited use necessary in moving or road testing a new vehicle prior to delivery to a customer.

(b) "Used motor vehicle" does not include:

(i) Vehicles sold for less than a purchase price of one thousand five hundred dollars;

(ii) Leased vehicles when the value of the vehicle, as agreed by the dealer and the consumer, is less than one thousand five hundred dollars;

(iii) Vehicles with over one hundred twenty-five thousand miles;

(iv) Motorcycles;

(v) Vehicles built primarily for off-road use;

(vi) Trucks with nineteen thousand pounds or more gross vehicle weight rating;

(vii) Those portions of a motor home designated, used, or maintained primarily as a mobile dwelling, office, or commercial space; or

(viii) Vehicles over twenty years old.

(6) "Warranted parts" means, at a minimum, the following items: (a) All lubricated engine parts, water pump, fuel pump, manifolds, engine block, cylinder head, rotary engine housing, and fly wheel; (b) the transmission case, internal parts, and torque converter; (c) the front and rear drive axle housings, internal parts, shafts, and universal joints; (d) the brakes, including the master cylinder, vacuum assist booster, wheel cylinders, hydraulic lines, fittings, and calipers; (e) the radiator; (f) the steering gear housing, internal parts, pump, valve body, piston, and rack; (g) the alternator, generator, starter, and ignition system, excluding the battery; and (h) the windshield wiper motor.

(7) "Warranty" means the written undertaking by a dealer in connection with the sale or lease of a used motor vehicle, which requires the dealer to refund, repair, replace, maintain, or take other action to ensure the safety and fitness of the vehicle for its reasonable and ordinary use. The services, parts, and labor provided under the warranty shall be rendered at no extra charge beyond the purchase price of the vehicle.

(8) "Warranty period" means the following durations: (a) If the used motor vehicle has forty thousand miles or less at the time of original delivery to the consumer, the warranty shall be ninety days or four thousand miles, whichever comes first; (b) if the used motor vehicle has more than forty thousand miles, but less than eighty thousand miles at the time of original delivery to the consumer, the warranty shall be sixty days or three thousand miles, whichever comes first; or (c) if the used motor vehicle has eighty thousand miles or more, but less than one hundred twenty-five thousand miles at the time of original delivery to the consumer, the warranty shall be thirty days or one thousand miles, whichever comes first. If a consumer purchases a used motor vehicle from a dealer and subsequently sells it to another person within the warranty period, the warranty provided by the dealer does not remain with the used motor vehicle. If a consumer conveys or transfers the title of a used motor vehicle to a member of the consumer's immediate family, the warranty remains in effect for the duration of the warranty period.

NEW SECTION. Sec. 2. (1) No dealer shall sell or lease a used motor vehicle to a consumer without giving the consumer a written warranty which shall, at a minimum, cover all warranted parts for the warranty period.

(2) At the time of purchase, the dealer shall provide the consumer with (a) a written statement setting forth the mileage of the used motor vehicle at the date the consumer takes initial possession; and (b) a written statement that explains the consumer's rights under this chapter. The written statements shall be prepared and supplied by the attorney general and shall contain a toll-free number that the consumer can contact for information regarding the procedures and remedies under this chapter.

(3) For the purposes of this chapter, if a used motor vehicle does not conform to the warranty and the consumer reports the nonconformity during the term of the warranty period to the dealer who sold the used motor vehicle, the dealer or its agent shall make repairs as are necessary to conform the vehicle to the warranty, regardless of whether such repairs are made after the expiration of the warranty period.

(4) Upon request from the consumer, the dealer shall provide a copy of any report or computer reading regarding any inspection, diagnosis, or test-drive of the consumer's used motor vehicle performed on the vehicle while in the dealer's possession conducted prior to the sale.

(5) The dealer shall provide to the consumer each time the consumer's vehicle is returned from being diagnosed or repaired under the warranty, a fully itemized, legible statement or repair order indicating any diagnosis made, and all work performed on the vehicle including but not limited to, a general description of the problem reported by the consumer or an identification of the defect or condition, parts and labor, the date and the odometer reading when the vehicle was submitted for repair, and the date when the vehicle was made available to the consumer.

(6) No dealer may refuse to diagnose or repair any nonconformity covered by the warranty for the purpose of avoiding liability under this chapter.

(7) If a dealer does not possess the ability to repair a nonconformity, the dealer may elect to have the work performed by any responsible party, but such election does not interfere with the operation and protection of the warranty.

(8) The warranty period and out-of-service period shall be extended by any time that repair services are not available to the consumer as a direct result of a strike, war, invasion, fire, flood, or other natural disaster.

(9) The warranty periods shall be tolled during any period in which the used motor vehicle is out of service as a result of any repair attempt pursuant to any warranty created by this section. The applicable warranty period shall be extended thirty days from the date of completion of any repair required by this section as to the defect repaired if the warranty would otherwise have expired during such period.

NEW SECTION. Sec. 3. A dealer's warranty may exclude coverage for the following:

(1) Failure of a covered part caused by a lack of customary maintenance;

(2) Failure of a covered part caused by collision, abuse, negligence, theft, vandalism, fire, or environmental casualty and damage;

(3) Vehicles for which the odometer has been stopped or altered so that the vehicle's actual milage cannot be readily determined; or vehicles for which any covered part has been altered so that a covered part was thereby caused to fail;

(4) Customary services and the parts used in connection with such services such as seals, gaskets, oil, or grease unless required in connection with the repair of a warranted part;

(5) Motor tuneups;

(6) Failure due to racing or other competition;

(7) Failure caused by towing a trailer or other vehicle unless the used vehicle is properly equipped as recommended by the manufacturer;

(8) Vehicles used to carry passengers for hire;

(9) Vehicles rented to a third party;

(10) Repair of valves or rings to correct low compression or oil consumption which are considered normal wear;

(11) Property damage arising out of the failure of a warranted part; or

(12) Except as otherwise permitted by law, loss of use, loss of time, inconvenience, commercial loss, or consequential damages.

NEW SECTION. Sec. 4. (1) If the dealer is unable to conform the used motor vehicle to the warranty by repairing or correcting any nonconformity after a reasonable number of attempts, the dealer shall, within thirty calendar days of a consumer's written request, repurchase the motor vehicle. The dealer may offer to replace the vehicle with a comparably priced vehicle, with such adjustment in price as the parties may agree. The consumer shall not be obligated to accept a replacement vehicle, but may elect to receive the refund provided under this section.

(2) When repurchasing the motor vehicle, the dealer shall refund to the consumer the purchase price, all collateral charges, and incidental costs, less a reasonable offset for use. When repurchasing the motor vehicle, in the instance of a lease, the dealer shall refund to the consumer all payments made by the consumer under the lease including but not limited to all lease payments, trade-in value or inception payment, security deposit, all collateral charges and incidental costs less a reasonable offset for use. The dealer shall make such payment to the lessor or lienholder of record as necessary to obtain clear title to the motor vehicle and upon the lessor's or lienholder's receipt of that payment and payment by the consumer of any late payment charges, the consumer shall be relieved of any future obligation to the lessor or lienholder.

(3) The reasonable offset for use shall be computed by multiplying the number of miles that the vehicle traveled directly attributable to use by the consumer times the purchase price, and dividing the product by one hundred thousand.

(4) A reasonable number of attempts are deemed to have been undertaken by the dealer to conform the vehicle to the warranty within the warranty period, if: (a) The same malfunction or defect has been subject to repair three or more times, within the warranty period, and the malfunction or defect continues to exist; or (b) the vehicle is out of service by reason of diagnosis or repair of one or more nonconformities for a cumulative total of fifteen calendar days during the warranty period.

NEW SECTION. Sec. 5. (1) A dealer is prohibited from reselling any motor vehicle determined or adjudicated as having a serious safety defect unless the serious safety defect has been corrected and the dealer warrants upon the resale that the defect has been corrected.

(2) After the replacement or repurchase of a motor vehicle determined to have a nonconformity or to have been out of service for fifteen or more calendar days pursuant to this chapter, the dealer shall notify the attorney general and the department of licensing of such replacement or repurchase, by certified mail or by personal service, upon receipt of the motor vehicle. If the nonconformity in the motor vehicle is corrected, the dealer shall notify the attorney general and the department of licensing of such correction.

(3) Upon receipt of the dealer's notification under subsection (2) of this section that the nonconformity has been corrected and upon the dealer's request and payment of any fees, the department of licensing shall issue a new title with information indicating the vehicle was returned under this chapter and that the nonconformity has been corrected.

(4) Before the resale, either at wholesale or retail, or transfer of title of a motor vehicle for which a new title has been issued under this subsection, the dealer shall warrant that the nonconformity has been corrected, and shall execute and deliver to the buyer a written instrument setting forth information identifying the nonconformity in a manner specified by the attorney general and indicating that it has been corrected.

NEW SECTION. Sec. 6. (1) Any agreement entered into by a consumer for the purchase or lease of a used motor vehicle that waives, limits, or disclaims the rights set forth in this chapter shall be void as contrary to public policy.

(2) If any dealer fails to give a written warranty as required by this chapter, the dealer shall be deemed to have given the warranty as a matter of law.

(3) The sale of motor vehicles is a matter affecting the public interest for the purpose of applying chapter 19.86 RCW. A violation of any responsibilities imposed upon dealers under this chapter is not reasonable in relation to the development and preservation of business. A violation of this chapter constitutes an unfair or deceptive act or practice in trade or commerce for the purpose of applying chapter 19.86 RCW.

(4) Consumers may pursue rights and remedies against dealers under any other law, including chapters 46.70 and 46.71 RCW. The provisions of this chapter supplement, but do not supplant, any other right, remedy, or relief available to any party under law.

NEW SECTION. Sec. 7. (1) Except as provided in section 12 of this act, the attorney general shall contract with one or more private entities to conduct arbitration proceedings in order to settle disputes between consumers and dealers as provided in this chapter, and each private entity shall constitute a used motor vehicle arbitration board for purposes of this chapter. The entities shall not be affiliated with any motor vehicle manufacturer, new motor vehicle dealer, or used motor vehicle dealer and shall have available the services of persons with automotive technical expertise to assist in resolving disputes under this chapter. No private entity or its officers or employees conducting board proceedings and no arbitrator presiding at such proceedings shall be directly involved in the manufacture, distribution, sale, or warranty service of any motor vehicle. Payment to the entities for the arbitration services shall be made from the used motor vehicle arbitration account.

(2) The attorney general shall adopt rules for the uniform conduct of the arbitrations by the boards whether conducted by a private entity or by the attorney general pursuant to section 12 of this act, which rules shall include but not be limited to the following procedures:

(a) At all arbitration proceedings, the parties are entitled to present oral and written testimony, to present witnesses and evidence relevant to the dispute, to cross-examine witnesses, and to be represented by counsel.

(b) A dealer or other persons shall produce records and documents requested by a party which are reasonably related to the dispute. If a dealer or other persons refuse to comply with such a request, a party may request the attorney general to issue a subpoena on behalf of the board.

The subpoena shall be issued only for the production of records and documents which the board has determined are reasonably related to the dispute, including but not limited to documents described in section 2 (4) and (5) of this act.

If a party fails to comply with the subpoena, the arbitrator may at the outset of the arbitration hearing impose any of the following sanctions: (i) Find that the matters which were the subject of the subpoena, or any other designated facts, shall be taken to be established for purposes of the hearing in accordance with the claim of the party that requested the subpoena; (ii) refuse to allow the disobedient party to support or oppose the designated claims or defenses, or prohibit that party from introducing designated matters into evidence; (iii) strike claims or defenses, or parts thereof; or (iv) render a decision by default against the disobedient party.

If a nonparty fails to comply with a subpoena and upon an arbitrator finding that without such compliance there is insufficient evidence to render a decision in the dispute, the attorney general shall enforce such subpoena in superior court and the arbitrator shall continue the arbitration hearing until such time as the nonparty complies with the subpoena or the subpoena is quashed.

(c) A party may obtain written affidavits from employees and agents of a dealer, other party, or from other potential witnesses, and may submit such affidavits for consideration by the board.

(d) Records of the board proceedings shall be open to the public. The hearings shall be open to the public to the extent practicable.

(e) Where the board proceedings are conducted by one or more private entities, a single arbitrator may be designated to preside at such proceedings.

(3) A consumer shall exhaust the used motor vehicle arbitration board process as provided in this chapter before filing any superior court action.

(4) The attorney general shall maintain records of each dispute submitted to the used motor vehicle arbitration board, including an index of used motor vehicles by year, make, and model.

(5) The attorney general shall compile aggregate annual statistics for all disputes submitted to, and decided by, the used motor vehicle arbitration board, as well as annual statistics for each dealer that include, but shall not be limited to, the number and percent of: (a) Replacement motor vehicle requests; (b) purchase price refund requests; (c) replacement motor vehicles obtained in prehearing settlements; (d) purchase price refunds obtained in prehearing settlements; (e) replacement motor vehicles awarded in arbitration; (f) purchase price refunds awarded in arbitration; (g) board decisions neither complied with during the forty calendar day period nor petitioned for appeal within the thirty calendar day period; (h) board decisions appealed categorized by consumer or dealer; (i) the nature of the court decisions and who the prevailing party was; (j) appeals that were held by the court to be brought without good cause; and (k) appeals that were held by the court to be brought solely for the purpose of harassment. The statistical compilations shall be public information.

(6) The attorney general shall submit biennial reports of the information in this section to the senate and house of representatives, with the first report due January 1, 1994.

(7) The attorney general shall adopt rules to implement this chapter. Such rules shall include uniform standards by which the boards shall make determinations under this chapter, including but not limited to rules that provide:

(a) A board shall find that a nonconformity exists if it determines that the consumer's used motor vehicle has a defect, serious safety defect, or condition that substantially impairs the use, value, or safety of the vehicle.

(b) A board shall find that a reasonable number of attempts to repair a nonconformity have been undertaken if: (i) The same malfunction or defect has been subject to diagnosis or repair three or more times during the warranty period, and the malfunction or defect continues to exist; or (ii) the vehicle is out of service by reason of diagnosis or repair of one or more nonconformities for a cumulative total of fifteen calendar days during the warranty period.

(c) A board shall find that a dealer has failed to comply with section 4 of this act if it finds that the dealer has failed to correct a nonconformity after a reasonable number of attempts and the dealer has failed, within thirty days of the consumer's written request, to repurchase the vehicle or replace the vehicle with a vehicle identical or reasonably equivalent to the vehicle being replaced.

(8) The attorney general shall draft and provide forms to be used by dealers and provide consumers with information regarding the procedures and remedies under this chapter.

NEW SECTION. Sec. 8. (1) A consumer may request arbitration under this chapter. To initiate the arbitration process, the consumer shall submit the request to the attorney general. Within ten days after receipt of an arbitration request, the attorney general shall make a reasonable determination of the cause of the request for arbitration and provide necessary information to the consumer regarding the consumer's rights and remedies under this chapter. The attorney general shall assign the dispute to a board, except that if it clearly appears from the materials submitted by the consumer that the dispute is not eligible for arbitration, the attorney general shall provide the consumer and dealer with the reasons for refusing to assign the dispute and advise the consumer of any procedures necessary to file the arbitration.

(2) Dealers shall submit to arbitration if such arbitration is requested by the consumer within two months from the date of the expiration of the warranty period if the consumer's dispute is deemed eligible for arbitration by the board.

(3) The used motor vehicle arbitration board may reject for arbitration any dispute that it determines to be frivolous, fraudulent, filed in bad faith, res judicata, or beyond its authority. Any dispute deemed by the board to be ineligible for arbitration due to insufficient evidence may be reconsidered by the board upon the submission of other information or documents regarding the dispute that would allegedly qualify for relief under this chapter. Following a second review, the board may reject the dispute for arbitration if evidence is still clearly insufficient to qualify the dispute for relief under this chapter. A rejection by the board is subject to review by the attorney general or may be appealed under section 9 of this act.

A decision to reject any dispute for arbitration shall be sent by certified mail to the consumer and the dealer, and shall contain a brief explanation as to the reason therefor.

(4) The arbitration board shall award the remedies under section 4 of this act if it finds a nonconformity and that a reasonable number of attempts have been undertaken to correct the nonconformity. The board shall award reasonable costs and attorneys' fees incurred by the consumer in connection with board proceedings where the dealer is represented by counsel.

(5) It is an affirmative defense to any claim under this chapter that: (a) The alleged nonconformity does not substantially impair the use, value, or safety of the vehicle; or (b) the alleged nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations of the vehicle.

(6) The board shall have forty-five calendar days from the date the board receives the request for arbitration to hear the dispute. If the board determines that additional information is necessary, the board may continue the arbitration proceeding on a subsequent date within ten calendar days of the initial hearing. The board shall decide the dispute within sixty calendar days from the date the board receives the request for arbitration.

The decision of the board shall be delivered by certified mail or personal service to the consumer and the dealer, and shall contain a written finding of whether the vehicle meets the standards set forth under this chapter.

(7) The consumer may accept the arbitration board decision or appeal to superior court, pursuant to section 9 of this act. Upon acceptance by the consumer, the arbitration board decision shall become final. The consumer shall send written notification of acceptance or rejection to the arbitration board within sixty days of receiving the decision and the arbitration board shall immediately deliver a copy of the consumer's acceptance to the dealer by certified mail, return receipt requested, or by personal service. Failure of the consumer to respond to the arbitration board within sixty calendar days of receiving the decision shall be considered an acceptance of the decision by the consumer.

NEW SECTION. Sec. 9. The consumer shall have one hundred twenty calendar days from the date of rejection to file a petition of appeal for de novo review in superior court. At the time the petition of appeal is filed, the consumer shall deliver, by certified mail or personal service, a conformed copy of such petition to the attorney general.

(1) Upon receipt of the consumer's acceptance of the arbitration board decision, the dealer shall have forty calendar days to comply with the arbitration board decision or thirty calendar days to file a petition of appeal for de novo review in superior court. At the time the petition of appeal is filed, the dealer shall deliver, by certified mail or personal service, a conformed copy of such petition to the attorney general. If the attorney general receives no notice of petition of appeal after forty calendar days, the attorney general shall contact the consumer to verify compliance.

(2) If, at the end of the forty calendar day period, neither compliance with nor a petition to appeal the board's decision has occurred, the attorney general may impose a fine of one thousand dollars per day until compliance occurs or until a maximum penalty of twenty-five thousand dollars accrues unless the dealer can provide clear and convincing evidence that any delay or failure was beyond its control or was acceptable to the consumer as evidenced by a written statement signed by the consumer. If the dealer fails to provide such evidence or fails to pay the fine, the attorney general shall initiate proceedings against the dealer for failure to pay any fine that accrues until compliance with the board's decision occurs or the maximum penalty of twenty-five thousand dollars results. Where the attorney general prevails in an enforcement action regarding any fine imposed under this subsection, the attorney general shall be entitled to reasonable costs and attorneys' fees. Fines and recovered costs and fees shall be returned to the used motor vehicle arbitration account.

NEW SECTION. Sec. 10. (1) If the dealer appeals the arbitration board decision, the court may require the dealer to post security for the consumer's financial loss due to the passage of time for review.

(2) If the consumer prevails, recovery shall include the monetary value of the award, attorneys' fees and costs incurred in the superior court action, and, if the board awarded the consumer replacement or repurchase of the vehicle and the dealer did not comply, continuing damages in the amount of twenty-five dollars per day for all days beyond the forty calendar day period following the dealer's receipt of the consumer's acceptance of the board's decision in which the dealer did not provide the consumer with the free use of a comparable loaner replacement motor vehicle. If it is determined by the court that the party that appealed acted without good cause in bringing the appeal or brought the appeal solely for the purpose of harassment, the court may triple, but at least shall double, the amount of the total award.

NEW SECTION. Sec. 11. A five-dollar arbitration fee shall be collected by the dealer from the consumer upon execution of a retail sale or lease agreement. The fee shall be forwarded to the department of licensing at the time of title application for deposit in the used motor vehicle arbitration account hereby created in the state treasury. Moneys in the account shall be used for the purposes of this chapter, subject to appropriation.

At the end of each fiscal year, the attorney general shall prepare a report listing the annual revenue generated and the expenses incurred in implementing and operating the arbitration program under this chapter.

NEW SECTION. Sec. 12. If the attorney general is unable at any time to contract with private entities to conduct arbitrations under the procedures and standards in this chapter, the attorney general shall establish one or more used motor vehicle arbitration boards. Each such board shall consist of three members appointed by the attorney general, only one of whom may be directly involved in the sale or service of used motor vehicles. Board members shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060 and shall be compensated pursuant to RCW 43.03.240.

NEW SECTION. Sec. 13. Sections 1 through 12 of this act shall constitute a new chapter in Title 19 RCW.

NEW SECTION. Sec. 14. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 15. (1) Section 11 of this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect June 1, 1992.

(2) Sections 1 through 10 and 12 of this act shall take effect January 1, 1993, except that the attorney general may take such actions as are necessary to ensure that the used motor vehicle arbitration boards are established and operational on January 1, 1993.