N.Y. Vehicle & Traffic Law § 465: Procedures relating to warranties and sales incentives

§ 465. Procedures relating to warranties and sales incentives. 1.

Every franchisor shall properly fulfill any warranty agreement and/or

franchisor's service contract, including but not limited to all warranty

repairs, extended warranty repairs, factory compensated repairs,

recalls, diagnostics, parts and other voluntary stop-sell repairs, and

shall compensate each of its franchised motor vehicle dealers for all

warranty, recall, diagnostic labor operations and parts where applicable

in amounts which reflect reasonable compensation for such work. For

purposes of this section, reasonable compensation shall be the

reasonable labor time allowances defined by the retail labor time guide

reasonably utilized by a franchised motor vehicle dealer for

non-warranty customer paid labor operations. All warranty claims and/or

claims under a franchisor's service contract made by franchised motor

vehicle dealers shall be paid within thirty days following their

approval. For diagnosis work, parts reimbursement, other than

components, systems, fixtures, appliances, furnishings, accessories and

features of a house coach that are designed, used and maintained

primarily for nonvehicular residential purposes, and for labor

reimbursement, reasonable compensation shall not be less than the price

and rate charged by the franchised motor vehicle dealer for like

services to non-warranty and/or non-service contract customers. For

purposes of this section, the price and rate charged by the franchised

motor vehicle dealer for parts may be established by submitting to the

franchisor one hundred sequential nonwarranty customer-paid service

repair orders or the number of sequential nonwarranty customer-paid

service repair orders written within a ninety day period, whichever is

less, covering repairs made no more than one hundred eighty days before

the submission, and declaring the price and rate, including average

markup for the franchised motor vehicle dealer as its reimbursement

rate. The reimbursement rate so declared shall go into effect thirty

days following the declaration and shall be presumed to be reasonable,

however a franchisor may rebut such presumption by showing that such

rate so established is unreasonable in light of the practices of all

other franchised motor vehicle dealers in the vicinity offering the same

line make. The franchised motor vehicle dealer shall not request a

change in the reimbursement rate more often than once in each calendar

year. In establishing the labor reimbursement rate, the franchisor shall

not require a franchised motor vehicle dealer to establish said rate by

a methodology, or by requiring information, that is unduly burdensome or

time consuming to provide, including, but not limited to, a transaction

by transaction calculation. For the purposes of this section, the

following parts or types of repairs shall be excluded from the parts

and/or labor calculations and the franchisor's reimbursement

requirements under this section: (a) parts sold at wholesale; (b) tires;

(c) routine maintenance not covered under any retail customer warranty

such as fluids, filters and belts not provided in the course of repairs;

(d) vehicle reconditioning; and (e) batteries replaced as part of a

routine maintenance operation. If the franchisor rejects the declaration

or attempts to rebut the declaration because of an error in the dealer's

submission, the franchisor shall identify with specificity the reason

for rejection and identify the error or errors within the submission. In

the event the franchisor rejects or rebuts the dealer's initial

declaration, the dealer shall have the opportunity, within sixty days to

resubmit the full and corrected declaration addressing the alleged error

or errors identified by the franchisor. The franchisor shall respond

within sixty days. The one hundred eighty day requirement for the repair

orders shall be stayed from the date of initial submission. In any

action or proceeding held pursuant to this subdivision, the franchisor

shall have the burden of proving that the rate declared by the dealer

was unreasonable as described in this subdivision and that the proposed

adjustment of the average percentage markup or rejection of the

submission is reasonable pursuant to the provisions of this subdivision.

A warranty claim timely made shall not be deemed invalid solely because

unavailable parts cause additional use and mileage on the vehicle.

2. All warranty or sales incentive claims shall be either approved or

disapproved within thirty days after their receipt. When any such claim

is disapproved the franchised motor vehicle dealer shall be notified in

writing of its disapproval within said period. Each such notice shall

state the specific grounds upon which the disapproval is based. Failure

to disapprove a claim within thirty days shall be deemed approval.

3. No franchisor shall conduct an audit or charge back any warranty

payment, or any sales, advertising or marketing incentive payment

("incentive payments") or otherwise hold a franchised motor vehicle

dealer liable for charges more than one year, or five years in the case

of fraud, after the date the franchisor made such payment to the dealer,

without providing a notice to a franchised motor vehicle dealer of, or a

mechanism that makes available to a franchised motor vehicle dealer,

information regarding errors or issues regarding such dealer's warranty,

sales, advertising or marketing incentive claims that are the subject of

the audit or chargeback. Nothing in this section shall be deemed to

grant a dealer the right to access any file held by the manufacturer

evaluating such dealer. In connection with a claim for warranty

reimbursements, the dealer's failure to document properly one part of a

warranty repair that contains more than one part shall not be the sole

basis to charge back the entire repair. A manufacturer shall not deny a

claim submitted under this section based solely on a dealer's incidental

failure to comply with a specific claim processing requirement, a

clerical error, or other administrative technicality, provided that the

failure does not call into question the legitimacy of the claim and that

the dealer corrects the claim according to franchisor guidelines.

4. A franchisor shall not charge a dealer back subsequent to the

payment of a warranty, sales, advertising or marketing incentive claim

unless a representative of the franchisor has met in person at the

dealership, or by telephone, with an officer or employee of the dealer

designated by the dealer and explained in detail the basis for each of

the proposed charge backs and thereafter given the dealer's

representative a reasonable opportunity at the meeting, or during the

telephone call, to explain the dealer's position relating to each of the

proposed charge backs. In the event the dealer was selected for audit or

review on the basis that some or all of the dealer's claims were viewed

as excessive in comparison to average, mean or aggregate data

accumulated by the franchisor, or in relation to claims submitted by a

group of other franchisees, the franchisor shall, at or prior to the

meeting or telephone call with the dealer's representative, provide the

dealer with a written statement containing the basis or methodology upon

which the dealer was selected for audit or review.

5. A franchisor shall not deny or charge back a payment for warranty

work claimed by the dealer unless the franchisor satisfies its burden of

proof that the dealer did not make a good faith effort to comply with

the reasonable written procedures of the franchisor or that the dealer

did not actually perform the work.

6. A franchisor shall not deny or charge back a sales, advertising or

marketing incentive payment made to a dealer unless the claim was

materially false or fraudulent or the dealer failed to reasonably

substantiate the claim in accordance with the manufacturer's reasonable

procedures.

7. After all internal dispute resolution processes provided through

the franchisor have been resolved, the franchisor shall give notice to

the dealer of the final amount of a proposed warranty, sales,

advertising or marketing incentive charge back. If the dealer institutes

an action pursuant to this article within thirty days of receipt of such

notice, the proposed charge back shall be stayed, without bond, during

the pendency of such action and until the final judgment has been

rendered in an adjudicatory proceeding or action as provided in section

four hundred sixty-nine of this article. The franchisor shall not impose

the chargeback, debit the dealer's account, or otherwise seek to obtain

all or any part of the chargeback funds from the dealer during the

thirty-day period in which the dealer has the opportunity to file an

action as set forth above.