On warranty and recall pay, Virginia dealers have protections

A Message from VADA President and CEO Don Hall

March 2023

I talk a lot in this column about VADA advocacy on bills that are visible to the industry and public — EV incentives, adopting California emissions standards to spur EV supply and adoption, and of course, our groundbreaking 2023 legislation to strengthen the franchise system.

Last month, Automotive News profiled a number of legislative actions in several states to close the historic gap between customer pay and warranty reimbursement for dealers and manufacturers.

Virginia wasn’t included — but only because we didn’t have legislation on the issue in 2023. In fact, Virginia was one of the early states to ensure dealers receive fair compensation for warranty and recall work. Our dealers have enjoyed the right to be paid for warranty work in the same amount as retail for a quarter century.

Warranty reimbursement has been an issue for as long as I can remember, and I’ve been in this business for four decades.

Many states that today are putting language in their laws to guarantee retail reimbursement are modeling their laws after Virginia’s precedent.

Some other states are enacting laws designating certain time manuals be used for calculating warranty repair amounts. For example, Illinois dealers receive 1.5 times the manufacturer’s time allowance.

In Virginia, we do not separate out the hourly rate and the time allowance in the statute. Tying warranty reimbursement to the “time guides” of manufacturers, as the Illinois statute does, cedes a lot of ground to manufacturers to manipulate amounts paid to dealers.

We 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.

Virginia was also one of the first states to enact legislation prohibiting surcharges by manufacturers as a way to recoup warranty reimbursement expenses from dealers. Some states had to compromise on the issue of surcharges.

Not Virginia.

Last year, VADA further strengthened our warranty/recall laws and also lobbied for and passed legislation requiring manufacturers to pay for rental vehicles related to those repairs, as well as any assistance given to customers for over-the-air updates when the customer brings in a vehicle for a software update.

Finally, Virginia Code offers strong protections for dealers facing chargebacks of warranty claims.

  • Virginia was the first state to limit chargebacks for warranty to six 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 notice is 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.

For those dealers wanting to fight for their reimbursement rights, Virginia Code has protections. A dealer who files for a hearing with the DMV Commissioner over its reimbursement amounts goes through a process of reviewing repair orders. Virginia creates a presumption the review will create a reasonable retail amount, leaving the manufacturer to have to show the amounts are unreasonable.

If you have questions on further details regarding Virginia warranty/recall reimbursement, contact Anne Gambardella, VADA’s Executive Vice President and General Counsel.