NADA REGULATORY REVIEW

The following is excerpted from NADA’s Spring/Summer Regulatory Review publication.  These excerpts reflect some of the less reported regulatory issues NADA has been addressing over the past several months on behalf of dealers.  For a copy of the full publication go to http://www.nada.org/Publications/Regulatory+Review/default.htm

EPA/NHTSA Issue Final Rule on Fuel Economy Labels

EPA/NHTSA issued a final fuel econ­omy label rule in late May, rejecting a proposal that would have made new vehicle purchasing decisions more dif­ficult by evaluating automakers or fuel types unfairly with letter grades. When they roll out in MY 2013, the new labels will provide consumers with an enhanced ability to shop for vehicles with different powertrain technologies and fuel types. This new information should improve the vehicle shopping and purchasing process; however, it also is expected to raise questions and concerns dealership sales personnel should be prepared to address. For example, the labels will compare a vehicle’s emissions perfor­mance against all vehicles, as opposed to those within the same class. Also, since a vehicle’s five year estimated fuel cost is compared to a hypothetical “average new vehicle,” it will be of limited value. Regulatory Affairs has begun working with EPA on an outreach strategy.

Commercial Truck CAFE/GHG Standards

Last November, NHTSA and EPA for­mally issued a joint truck CAFE/GHG proposal. In January, Regulatory Affairs filed a detailed set of comments address­ing the proposal which followed up on hearing testimony presented by ATD Chairman Kyle Treadway last November.  A draft joint final rule is under review by OMB and a final rule is expected to issue in July.

EPA Reverses Course on Used Oil and Waste Tires

Regulatory Affairs testified in June 2010 on an EPA proposal to severely restrict how used oil and waste tires are managed. The proposal would have required dealerships to send these com­mon motor vehicle services wastes only to strictly-regulated solid waste incinerators, eliminating the wide range of legitimate burners that historically recover the heat value from used oil and tires or recycle them into new products. August 2010 comments argued that used motor oils and tires should be treated as traditional fuels exempt from the definition of solid waste, stressing the long history of care­fully tailored regulation, the sensitive nature of their recycling markets, the benefits of on-site used oil recycling in space heaters and other burners, and the need to maximize the collection of do-it-yourselfer (DIY) used oil. Moreover, since used tires are never discarded, they should not be “solid waste”.

Several EPA related were rules issued in February. Fortunately, they contained none of the proposed restrictions that would have undermined the ability of dealerships to burn used oil collected from DIYs in space heaters. A dealer­ship’s willingness to collect DIY oil is a key element of its eligibility for the NADA-supported federal Superfund exemption for used oil that was issued in the 1990s. EPA effectively has left its used-oil burning rules untouched, allowing dealerships to continue to burn the used oil they collect, including from DIYs, in space heaters if vented to the atmosphere and under 500,000 BTUs/ hour in size (assuming no state laws to the contrary). Dealerships that send used oil off-site for fuel processing should con­tinue to take steps to prevent contamina­tion during storage, and to separately collect and ship any DIY used oil they collect. Regarding scrap tires, EPA’s final rules allow undiscarded used tires to be treated as traditional fuels and to be burned in of non-incinerator units.

EPA Issues New Air Conditioning Rule

In February, EPA issued a final rule approving HFO-1234yf for use in light-duty motor vehicle air conditioning (A/C) systems. Regulatory Affairs’ com­ments filed in 2009 and 2010 focused on flammability and cost concerns. When used properly, HFO-1234yf can reduce the environmental impact of motor vehi­cle A/C systems. It has a global warming potential that is 99.7 percent less than the current refrigerant, HFC134a, and no ozone-depleting potential. By using HFO-1234yf, automakers will earn credits toward their MY 2012-16 fuel economy/GHG reduction targets. EPA plans to issue a rule later this year on the servicing of HFO-1234yf vehicle A/C systems

FRB Proposes Temporarily Exempting Dealers from Small Business Credit Application Data Requirements

As requested by Regulatory Affairs, the Federal Reserve Board has proposed tem­porarily exempting motor vehicle dealers engaged in indirect (three-party) vehicle financing transactions from a new, com­prehensive data collection and reporting requirement that is scheduled to take effect July 21, 2011.

Section 1071 of the Dodd-Frank Law, which takes effect on the Designated Transfer Date, imposes a new require­ment on financial institutions (including motor vehicle dealers) that receive credit applications from a small business or a women-owned or minority-owned busi­ness. The purpose of the new require­ment, which amends the ECOA, is to “facilitate enforcement of fair lending laws.”

Section 1071 requires financial insti­tutions to inquire into whether a credit applicant is a small business or a women-owned or minority-owned business and to maintain a record of responses to the inquiry that is separate from the credit application. Applicants may refuse to provide this information. The employee(s) involved in making a deci­sion on the credit application may not have access to the applicant’s response unless the financial institution deter­mines that it is not feasible to prevent such access, whereupon the financial institution must provide the applicant with a certain notice. Should the credit applicant provide the information, the financial institution must

• compile and itemize eight fields of data related to the credit applicant and the credit requested;

• retain the data for a period of three years;

• submit the data to the federal govern­ment on an annual basis; and

• make it available to the public upon request.

The financial institution must ensure that the collected information generally does not contain any personally identifi­able information concerning an individ­ual who is connected with the business credit applicant.

Because dealers will require additional direction from the government before they can be expected to carry out these duties, Regulatory Affairs met with Board staff on several occasions to sug­gest and request that the Board exercise its authority under ECOA to temporarily exempt dealers from the duties imposed by section 1071 until the effective date of final regulations explaining those duties. The Board’s announcement adopts Regulatory Affairs’ proposal for motor vehicle dealers covered by the dealer exclusion from the authority of the new Consumer Financial Protection Bureau (which is set forth in section 1029 of the Dodd-Frank Law) and seeks public com­ments on its proposal. Regulatory Affairs will file a comment supporting the pro­posal and expects that the Board will issue a final rule adopting it.

With regard to finance operations not covered by the dealer exclusion (e.g., deal­ers’ buy-here-pay-here operations and the finance operations of the assignee-finan­cial institutions to which dealers assign credit contracts), CFPB General Counsel Leonard Kennedy recently issued a mem­orandum stating that “financial institu­tions’ obligations under section 1071 do not go into effect until the Bureau issues necessary implementing regulations.”