March 1, 2023
You may have seen recent stories about legislative activity in other states on warranty reimbursement. These stories reported on the work of dealer associations around the country to ensure dealers are paid for warranty work the same as retail.
If you have asked yourself what VADA is doing, we have an answer that should not surprise you: Virginia was one of the early states to ensure dealers receive fair compensation for warranty work. Virginia dealers have had retail reimbursement rights for a quarter century.
A quarter century?
That’s right. Virginia has not had to scurry to catch up with the trend to provide dealer rights to proper warranty compensation. Virginia law has long protected a dealer’s right to be paid for warranty work in the same amount as retail. Many states are only now putting language in their state laws to guarantee retail reimbursement, a right Virginia dealers have enjoyed for over 25 years.
Other states are enacting laws that designate certain time manuals to be used for calculating warranty repair amounts. Illinois dealers get 1.5 times the manufacturer’s time allowance. Why doesn’t VADA do this?
Virginia law requires manufacturers to pay dealers the same “amount” for warranty and retail repairs. It does not separate out the hourly rate and the time allowance in the statute. We continue to have a concern about tying warranty reimbursement to the time guides of the manufacturers as the Illinois statute does. That approach cedes a lot of ground to the manufacturers to manipulate the amounts paid to dealers. We still believe our statute’s focus on the amount of compensation as opposed to time guides is the stronger language for a dealer wanting to fight the issue.
In other states where dealers got retail reimbursement, the manufacturers are imposing surcharges on new vehicles. Can that happen in Virginia?
Virginia was one of the very first states to enact legislation prohibiting any surcharges by manufacturers as a way to recoup warranty reimbursement expenses from dealers. Some states improving their franchise laws had to compromise on the issue of surcharges. As a pioneer on the issue, Virginia’s law on warranty reimbursement prevents surcharges. Additionally, manufacturers must fully compensate dealers for rental car expenses related to warranty repairs and for assistance given to customers for over-the-air updates when the customer brings in a vehicle with a problem with an update.
What about recalls?
Virginia law specifically requires dealers to be paid their retail amounts for work done under recalls.
What about chargebacks?
Virginia Code offers strong protections for dealers facing chargebacks of warranty claims. Here are some important points:
- Warranty chargebacks are limited to 6 months. Virginia was the first state to limit chargebacks for warranty to 6 months.
- A dealer cannot be charged back for simply failing to follow all the manufacturer’s procedures for processing claims as long as reasonable documentation is presented by the dealer. Chargebacks based on hyper-technical mistakes made on paperwork can be challenged.
- A manufacturer must give the dealer 40 days notice after the end of any internal dispute process of the manufacturer before any chargeback is collected from the dealer. So a dealer’s open account cannot be charged until this notice has been given.
- If a dealer contests the chargeback by requesting a DMV hearing, the manufacturer cannot collect the money until the DMV Commissioner has issued a final decision. Virginia was the first state to enact protection against collection from your open account until you have had the opportunity to challenge a manufacturer’s proposed action, balancing the leverage between factory and dealer over chargebacks.
Enforcing my rights can be difficult. How am I protected under VA law?
If a dealer wants to fight for their reimbursement rights, Virginia Code has protections. A dealer who files for a hearing with the Commissioner over its reimbursement amounts goes through a process of reviewing repair orders. Virginia Code creates a presumption that the review will create a reasonable retail amount, leaving the manufacturer to have to show the amounts are not reasonable. Additionally, as the complaining party (i.e. the one who filed for the hearing), if the dealer prevails, they may be able to recover attorneys fees.