Template for a Certificate of Destruction for Hard Drives

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         IN THIS ISSUE                                        Page                                             MAY 6, 2003
         FTC SAFEGUARDS RULE                                      2        REMINDERS
          Effective May 23, 2003
                                                                           1.  Door Ding Protection Products                       11
         IDENTITY THEFT                                           4        2.  MVD Licensing Section                               12
                                                                           3.  Obtaining a Consumer Report                         12
         ATTORNEY GENERAL OF TEXAS                                         4.  Record Retention of Credit
          Going Out of Business Sales                             5                Applications                                    13
          MV Registration Fees May Not Fund                                5. Family & Medical Leave Act;
           Trauma Facilities                                      5                Americans with Disabilities Act;
          DPS Inspections of Vehicles With A                                       Title VII                                       13
           Texas Salvage Certificate                              6        6. Selling a Vehicle to a California
                                                                                   Resident                                        13
         TxDOT VTR DIVISION                                                7. Uniformed Services Employment
          Lienholders and Release of Lien       6                                  and Re-employment Act of 1994
          “Manufacturer Buyback” Titles                                            (USERRA)                                        14
          Newly Affected Emission Inspection                               8. OSHCON                                               15
           Counties                             7                          9. “Understanding Vehicle Financing”
          Revisions to Supporting Documentation                                     Brochure                                       15
           Required for Trusts                  8                          10. List of SDNs                                        15
          Title Transaction Supported by JP or
           Municipal Order Not Acceptable       8
          Registration of Fleet Vehicles        8                          ENCLOSURE
          Specialty License Plates              9
          Electronic Lien Title Program        10                          “The New CARFAX Report”

          International Truck and Engine
           Corporation vs. Brett Bray                            10
          “Blue Oval” Agreed Final Order                         10
          Settlement Agreement With Volvo
           Cars of North America, Inc.                           11
          Metal Dealer License Plates                            11

                                                                   Page 1

Texas Automobile Dealers Association   •   P.O. Box 1028/1108 Lavaca   •   Austin, Texas 78767-1028   •   (512) 476-2686   •   (800) 749-8232
Legal Bulletin                                                                      May 6, 2003

FEC SAFEGUARDS RULE                                 technical, and physical safeguards.
Effective May 23, 2003                                       1. Insure the security and confidentiality
See also “Legal Bulletin,” November 21, 2002         of customer information.
                                                             2. Protect against any anticipated threats
        The Federal Trade Commission (FTC)          or hazards to the security or integrity of such
issued its final Safeguards Rule requiring the      information.
establishment of standards by your dealership as             3. Protect against unauthorized access to
to the administrative, technical and physical       or use of such information that could result in
information that you attain on customers.           substantial harm or inconvenience to any
        This new rule is in addition to the         customer.
Privacy Rule under the Gramm-Leach-Bliley           Elements
Act, which became effective July 1, 2001 (See                •Designate an employee(s) to coordinate
“Legal Bulletin,” April 23, 2001;                   the security program. Have them periodically
“Memorandum,” July 16, 2001). The Privacy           report to the owner(s) regarding the status of the
Rule requires the dealership to disclose to         program.
finance, lease, and insurance customers how it               •Identify risks to the security,
uses and shares customer information.               confidentiality, and integrity of customer
        The Safeguards Rule requires the            information that could result in unauthorized
dealership to develop, implement, and maintain      disclosure, misuse, alteration, destruction, or
a written information security program as well      other compromise and assess the sufficiency of
as ensure that affiliates maintain appropriate      the safeguards in place to control these risks.
safeguards.                                                 The risk assessment should include the
                                                    following areas:
          “Customer information” is any record               1 .Employee training and management.
that contains nonpublic personal information                2.AlI information systems, including
about a customer, whether in paper, electronic,     network and software design, information
or other form, that is handled or maintained by     processing, storage, transmission, retrieval and
the dealership or on behalf of the dealership or    disposal.
its affiliates.                                             3 .Detection, prevention and response
          “Nonpublic personal information” is       measures for intrusions or other systems failures.
personally identifiable financial information               4.Vendor and service providers if these
including any information a consumer provides       third-parties allow access to customer
in order to obtain a financial product or service   information.
from the dealership, such as information from a
consumer report.                                    Employee Training and Management
                                                            Check references and employment history
Standards for Safeguarding Customer                 before hiring. Train and require employees to
In formation—Develop, implement, and                follow the dealership’s confidentiality and
maintain a written information security program     security standards. Limit access to customer
for the dealership that contains administrative,    information only to those employees who have a

                                               Page 2
Legal Bulletin                                                                     May 6, 2003

business reason for seeing the information.         that contains customer information. Effectively
Refer calls or other requests for customer          destroy hardware.
information to designated employees who have
safeguards training. Discipline employees who       Detection, Prevention, and Response
violate the dealership security standards.          Measures for Intrusions or Other Systems
 Information Systems, Including Network and                  Identify the dealership’s reasonably
 Software Design, Information Processing,           foreseeable risks to your customer information
 Storage, Transmission, Retrieval and               and the dealership’s safeguards.
 Disposal                                                    Is the customer information vulnerable to
         Lock rooms and file cabinets where         fire, flood, or vermin? Is the computer system
customer information is kept. Use strong            equipped with firewall and anti-virus
passwords (18 characters long). Consider the        protections? Is it password protected and
use of encryption. Limit access to customer         encrypted? Are passwords kept private? Is
information to those employees with a business      customer information only accessed by necessary
reason for seeing it. Ensure that storage areas,    employees? Is customer information kept in
including off-site storage, is protected against    locked filing cabinets or locked rooms? Is there
destruction or potential damage from physical       a process to report a security breach or
hazards, like fire or floods.                       misappropriation of customer information?
         It is recommended that sensitive                    After identifying the risks, determine
customer data should not be on a machine with       whether the dealership’s policies adequately
an internet connection.         Store electronic    address the risks. If they do not, implement a
customer information on a secure server that is     new policy to safeguard the customer
accessible only with a password or other            information.
security protection and is kept in a secure area.            Regularly monitor the dealership’s
Prohibit the use of passwords by anyone other       safeguards program.
than the individual to whom it belongs. Close
down access to customer information for             Vendor and Service Providers if Third Parties
employees who no longer work for the                Allowed Access to Customer Information
dealership, including deleting their passwords.             Select service providers that maintain the
Maintain a secure backup.                           appropriate safeguards for customer information.
        Credit card information and other           Require service providers, by contract, to
sensitive financial data needs a secure             implement and maintain safeguards.
connection so that the information is encrypted             A “service provider” is a person or entity
in transit.                                         that receives, maintains, processes, or otherwise
        Dispose of customer information in a        is permitted access to the dealership’s customer
secure manner—shred the information or              information through its services.
supervise its incineration. Erase all data when             Discuss the dealership’s security needs
disposing of computers, diskettes, magnetic         with your service providers and obtain written
tapes, hard drives, or any other electronic media   representations and warranties from them that

                                               Page 3
Legal Bulletin                                                                       May 6, 2003

 they will meet the dealership’s requirements.       such audit by (name of service provider).”
         NADA has recommended the following
 sample clauses and suggests, if used, that it be    Penalties
 reviewed for applicability:                                 The FTC can initiate an enforcement
         (1) “(Name of service provider) agrees to   action against the dealership for non-compliance
 implement and maintain physical, electronic,        (15 U.S.C. § 41 et seq.). Penalties may include
 and procedural safeguards as may be required by     monetary fines, injunctive relief, and long-term
 (name of dealership) from time to time in           consent decrees.
Dealership’s sole discretion in order to guard all
information and data relating to the Dealership’s
customers to which (name of service provider)        IDENTITY THEFT
has access pursuant to the teñns of this             See also “Legal Bulletin,” November 21, 2002
Agreement.       Such safeguards shall, at a
minimum, comply with applicable federal, state,              Walking hand-in-hand with the
and local laws and regulations.”; or,                dealership’s compliance with the FTC’s
         (2) “(Name of service provider)             Safeguards Rule, see above, is the need to
represents and warrants to (name of dealership)      prevent the use of fraudulent information to
that it presently maintains and will continue to     purchase a motor vehicle, parts, or service.
maintain and periodically test the efficacy of               According to the FTC’s 2001 report,
appropriate information security programs and        fraudulent automobile loans were 25% of all
measures designed to ensure the security and         identity-theft based loans.
confidentiality of ‘customer information’ (as                The FTC discusses some ways that
defined in 16 C.F.R. § 314.2(b)).            Such    identity thieves work:
information security programs and measures                     The thief opens a new credit account,
shall include appropriate procedures designed to     using your name, date of birth, and Social
(a) protect the security and confidentiality of      Security number. When the thief uses the credit
such information; (b) protect against anticipated    card and does not pay the bill, the delinquent
threats or hazards to the security or integrity of   account is reported on your credit report.
such information, and (c) protect against                      The thief calls your credit card issuer
unauthorized access to or use of such                and pretending to be you, changes the mailing
information that could result in substantial harm    address on your credit card account. Then the
or inconvenience to any customer of this             thief runs up charges on your account. Because
Dealership.     (Name of dealership) or its          your bills are sent to the thief’s address, you may
representatives and applicable governmental          not immediately realize there is a problem.
regulators may also audit the security programs              • The thief establishes cellular phone
and measures implemented by (name of service         service in your name.
provider) pursuant to this agreement and no fees             • The thief opens a bank account in your
or charges shall be imposed on the Dealer or         name and writes bad checks on that account.
Dealership, its representatives or applicable
governmental regulators in connection with any               If an identity theft occurs on the purchase

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 Legal Bulletin                                                                       May 6, 2003

  of a vehicle, the lienholder will likely recourse Corn. Code Ann. Ch. 17, Subchapter F, § 171.81
  the contract back to the dealership. In addition, (Vernon 2002).         Tn addition, the TMVC
  the person’s identity and credit that was stolen Advertising Rules prohibit a licensee from
  may look to the merchant for recourse.              willingly misrepresenting the ownership of a
          It is suggested that the dealership should business for the purpose of holding a liquidation
 not accept a copy, including a fax, of a driver’s sale, auction sale, or other sale which represents
  license or an insurance card.            Verify a that the business is going out of business (16
 customer’s consumer report along with the TAC § 105.30).
 information within the report. If a customer’s               To conduct a GOB sale, a person must
 address has recently changed, verify the new file an original inventory with the chief appraiser
 address. Compare the addresses on the credit of the appraisal district in which the person’s
 report, credit application and driver’s license. principal place of business in the state is located.
 Does the application give all of the numbers on A filing fee of $20 is required.
 a credit card or just partial numbers? Is the               After receiving the original inventory, the
 purchaser willing to purchase the vehicle at chief appraiser issues a permit for a GOB sale.
 MSRP and with many add-ons?                         The permit is valid for 120 days after the day it is
                                                     issued and it is not renewable. The permit is
         If the dealership falls victim to an required to be posted in a conspicuous place.
 identity theft, please notify the local police Before advertising a GOB sale, a copy of the
 department immediately.                             permit must be given to the person publishing or
                                                     broadcasting the GOB advertisement.
                                                             An item may not be sold at a GOB sale if
 ATTORNEY GENERAL OF TEXAS                           it was ordered after the beginning date of the
                                                     sale.    Every 30 days during the GOB sale, an
 Going Out of Business Sales in Texas                inventory of unsold goods is to be given to the
         The Attorney General of Texas, chief appraiser. After the permit expires, the
Consumer Protection Division, has advised that permit holder may not sell, at retail, an item
it is unlawful to advertise a going-out-of- covered by the permit.
business (GOB) sale without complying with                   The AG may bring an action to enjoin a
certain state laws.                                  violation as well as consider whether a violation
                                                     of the DTPA has occurred.
         A person may not conduct a sale
advertised with the phrase “going out of Motor Vehicle Registration Fees May Not
business,” “closing out,” “shutting doors Fund Trauma Facilities
forever,” or “bankruptcy,” or a similar phrase or (GA-0023)
word indicating that an enterprise is ceasing
business unless the business is closing all of its           Under article Vifi, § 7-a of the Texas
operations in a county and in all of the counties Constitution, revenues received from motor
immediately adjacent to that county and follows vehicle registration fees may be used only for a
the procedures required by the Tex. Bus. &           designated purpose.

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Legal Bulletin                                                                         May 6, 2003

           “Subject to legislative appropriation, condition in a manner understandable to a
  allocation and direction, all net revenues potential purchaser.
 remaining after payment of all refunds allowed                 A “non-repairable vehicle” is a late model
 by law and expenses of collection derived from motor vehicle that is damaged or missing a major
 motor vehicle registration fees and all taxes, component part to the extent that the total
 except gross production and ad valorem taxes, estimated cost ofrepairs to rebuild or reconstruct
 on motor fuels and lubricants used to propel the vehicle is equal to or greater than an amount
 motor vehicles over public roadways, shall be equal to 95% of the ACV of the vehicle in its
 used for the sole purpose of acquiring rights-of pre-damaged condition.
 way, constructing, maintaining, and policing                   A “salvage motor vehicle” is a late model
 such public roadways, and for the administration motor vehicle, other than a late model vehicle
 of such laws as may be prescribed by the that is a non-repairable motor vehicle, that is
 Legislature pertaining to the supervision of damaged to the extent that the total estimated
 traffic and safety on such roads; and for the cost of repairs is equal to or greater than an
 payment of the principal and interest on county amount equal to 75% of the ACV of the vehicle
 and road district bonds or warrants.  .              in its pre-damaged condition (Texas
          Unless listed, motor vehicle registration Transportation Code Ann. § 501.091 l(a)(8)).
 fee revenues may not be diverted to a purpose                  A “late model motor vehicle” is of the
 that is not listed; thus, article VIII, § 7-1 of the same model year as the current calendar year or
 Texas Constitution does not permit the use of one of the 5 calendar years preceding that
motor vehicle registration fees to fund trauma calendar year (Texas Transportation Code Ann.
 facilities.                                          § 501.0911(a)(6)).
                                                               TxDOT by rule, has provided for a third
DPS Inspections of Vehicles With a Texas type of title for a damaged vehicle, a “Texas
Salvage Certificate                                   Salvage Certificate.” These certificates are
(GA 0022)                                             issued for vehicles that have sustained damage
                                                      that is less than 75% of the ACV and do not
          A vehicle with either a non-repairable require a DPS inspection (43 TAC §
motor vehicle certificate of title or a salvage 17.8(b)(1)(C)). The new certificate of title
motor vehicle certificate of title may not be includes the notation “Rebuilt Salvage” but need
operated on a public highway. A vehicle that not otherwise describe or disclose the vehicle’s
has been issued either of these certificates of former condition.
title and that has been rebuilt may be issued a
new regular certificate of title only if the owner
of the vehicle submits an application to TxDOT TxDOT-VEHICLE TITLES AND
that includes a statement from a DPS officer REGISTRATION DIVISION
who has inspected the vehicle.
          The new certificate of title must (1) bear Lienholders and Release of Lien
on its face the words “Rebuilt Salvage” and (2)                To streamline requests for certified copies
describe or disclose the vehicle’s former             of titles, TxDOT suggests that dealers have

                                                 Page 6
Legal Bulletin                                                                        May 6, 2003

owners sign an Application for a Certified Copy       claim. In addition, a letter advising ofthe remark
of a Texas Certificate of Title for a Motor           is being sent to the current owner and lienholder,
Vehicle, Form VTR-34 in lieu ofthe lienholder.        if applicable. If a vehicle is transferred and the
Upon receipt of the release of lien, the dealer       motor vehicle record reflects the “Legal Restraint
may file for a certified copy of a title on behalf    CR90000” remark, VTR will manually place the
ofthe customer. The required documentation is:        remark on the new motor vehicle record.
        • Release of lien on lienholder’s original            The title transaction consists of a
letterhead;                                           completed Application for Texas Certificate of
        • Form VTR-34 executed by the vehicle         Title (Form 130-U), a Request to Issue
owner; and,                                           Negotiable Certificate of Title without
          Copy of the vehicle owner’s photo ID.       Registration (Form VTR-13 1), the properly
                                                      assigned certificate of title, and $13.00 title fee.
    In addition, the dealer may sign the Form         No sales tax is due. In order to distinguish these
VTR-34 for the owner as Power of Attorney             types of title transactions, the box for
(POA) in lieu of the lienholder. The required         “Exemption Claimed Under the Motor Vehicle
documentation is:                                     Sales and Use Tax Law because” (Form 130-U,
        • Release of lien on lienholder’s original    block number 21) must be checked and then
letterhead;                                           indicate “Manufacturer Buyback.”
        ‘Form VTR-34 executed by the dealer
as POA for the owner;                                 Newly Affected Emissions Inspection Counties
        • Copy of the vehicle owner’s photo ID;       (Registration and Title Bulletin #046-03)
        • Copy of Form VTR-271-A;
        • Letter of signature authority on original           Effective May 1, 2003, four counties in
letterhead from the dealer, a business card, or a     the Houston area and five counties in North
copy of an employee ID for the person signing         Texas join those counties currently requiring a
as POA for the owner; and,                            motor vehicle emissions inspection and
           Copy of photo ID for the person            maintenance program (JIM).
signing Form VTR-34 as POA for the owner.                     Current JIM counties are: Collin, Dallas,
(VTR Letter from Stephen Palmer, Manager,             Denton, El Paso, Harris, and Tarrant. On May 1,
Operations Branch, VTR Division, February 7,          2003, Brazoria, Ellis, Fort Bend, Galveston,
2003).                                                Kaufman, Johnson, Montgomery, Parker, and
                                                      Rockwall become JIM counties.
“Manufacturer Buyback” Title Remark                           According to DPS, the test-on-resale
(Registration and Title Bulletin #140-02)             provisions do not apply to vehicles currently
                                                      registered or titled in an affected county and
        VTR is now placing “Legal Restraint”          subject to a retail sale.
remarks indicating a “90000 CR file number                    If a vehicle is subject to a retail sale and
series” on all motor vehicle records which            is currently titled or registered in one of these
involve a vehicle reacquired by a manufacturer        counties, even if the county became an JIM
to resolve a lemon law complaint or warranty          county May 1, 2003, the vehicle is not required

                                                 Page 7
Legal Bulletin                                                                         May 6, 2003

to be emissions tested before a retail sale and       advised not to accept a motor vehicle title
subsequent title application (Texas                   transaction supported by a JP or Municipal
Transportation Code § 548.301).                       Judge’s order. The following options are
VTR Revisions to Supporting Documentation                      1. A tax collector’s hearing;
,çquired for Trusts                                            2. A bonded title; or,
(Registration and Title Bulletin #047-03)                      3. File a petition in county court. The
                                                      department, as well as any other interested
        A copy of a Trust Agreement is no             parties, must be made a party to the proceedings.
longer required as supporting documentation
when the title applicant/recorded owner is a          Registration of Fleet Vehicles
trust.                                                (43 TAC § 17.49; 27 TexReg 10766)
        One of the following must support an
application for title, request for a certified copy            Registration ofmultiple motor vehicles in
of title, or transfer of title when the title         a fleet is available under the following
applicant/recorded owner is a trust:                  conditions:
         1. A properly completed Affidavit of                  1. No fewer than 5 vehicles are registered
Trust; or,                                            as a fleet.
        2. A Statement of Fact signed by the                   2. All vehicles in a fleet must be
trustee(s) which includes the name of the             registered to the same person.
person(s) who appointed the trustee(s); states                 3. Each vehicle must currently be titled
whether or not the Trust Agreement is on file         in Texas or be issued a registration receipt, or the
with the county clerk and if so, the number           registrant must submit an application for a
under which it is recorded.                           certificate oftitle or registration for each vehicle.
                                                              Application for fleet registration must be
Title Transaction Supported by JP or                  on a form prescribed by TxDOT, VTR and
Municpl Judge Order Not Acceptable                    accompanied by required documentation and
(Registration and Title Bulletin 128-02)              fees.
                                                              The registration period for a fleet will
        According to VTR, when a Justice ofthe        expire on the same date. The department will
Peace (JP) or a Municipal Judge holds an              issue distinguishing insignia for each vehicle in
examining trial to determine the proper               a fleet which may not be transferred between
disposition ofproperty which has been allegedly       vehicles, owners, or registrants.
stolen, the JP or Municipal Judge may issue an                A registrant may add a vehicle to a fleet
order to release the property to the person           at any time during the registration period. An
determined to be the rightful owner. However,         added vehicle will be given the same registration
a JP or Municipal Judge order in this instance is     period as the fleet and will be issued fleet
not acceptable to support an application for a        registration insignia. A vehicle may be removed
motor vehicle certificate of title.                   from a fleet at any time during the registration
        County tax assessor collectors are            period and the registrant shall return the fleet

                                                Page 8
Legal Bulletin                                                                         May 6, 2003

 registration insignia for that vehicle to the         S. Congress—Senate; and, U. S. Judge.
 department at the time the vehicle is removed                 The application must be accompanied by
 from the fleet.                                       the prescribed fees as well as any necessary
         If the number of vehicles in a fleet falls    evidence for the specialty plate.
 below five during the registration period, fleet              If the vehicle for which the specialty
 registration will remain in effect. If the number     license plates, symbols, tabs, or other devices are
 of vehicles in a fleet is below five at the end of   issued is currently registered, the owner must
the registration period, fleet registration may be     surrender the license plates currently displayed
 canceled. In the event of cancellation, each         on the vehicle, along with the corresponding
vehicle shall be registered separately and the         license receipt, before the specialty license plates
registrant shall immediately return all fleet         will issue.
registration insignia to the department.                       Ifthe vehicle is titled in a name other than
         When a fleet is first established, the       that of the applicant, the applicant must provide
department will charge a registration fee for         evidence of having the legal right of possession
each vehicle for 12 months. A currently               and control of the vehicle.
registered vehicle will be given credit for any                In the case of a leased vehicle, the
remaining time on its separate registration.          applicant must provide a copy of the lease
         When a vehicle is added to an existing       agreement verifying that the applicant currently
fleet, the department will charge a registration      leases the vehicle.
fee that is prorated based on the number of                    The owner of a vehicle with specialty
months of fleet registration remaining.               license plates, symbols, tabs, or other devices,
         When a vehicle is removed from fleet         may transfer the specialty plates between
registration, it will be considered to be             vehicles by filing an application through the
registered separately. The vehicle’s separate         county tax assessor-collector if the vehicle to
registration will expire on the date that the fleet   which the plates are transferred is titled or leased
registration would have expired. The registrant       in the owner’s name and meets the vehicle
must pay the statutory replacement fee to obtain      classification requirements for that particular
regular registration insignia before the vehicle      specialty license plate, symbol, tab, or other
may be operated on a public highway.                  device.
                                                               The following specialty plates are non-
Specialty License Plates                              transferable between vehicles:
(43 TAC § 17.20, 17.24, 17.28, 17.50; 28 Tex                   1.     Antique Vehicle and Antique
Reg 1522)                                             Motorcycle license plates and Antique tabs;
                                                               2. Former Military Vehicle license plates
        The department is now permitting the          and registration numbers;
local tax assessor-collector to issue specialty                3. Classic Auto, Classic Truck, and
and exempt license plates. Plates that must still     Classic Motorcycle license plates and Texas
be applied for directly to the department             Classic validation stickers;
include: Congressional Medal of Honor; State                   4. Parade license plates;
Judge; State Official; U. S. Congress—House; U.                5. Forestry Vehicle license plates; and,

                                                Page 9
 Legal Bulletin                                                                         May 6, 2003

        6. Log Loader license plates.                           Judge Nowlin, Chief United States
                                                       District Judge, Western District, issued an Order
Electronic Lien Title (ELT) Program                    on March 28, 2003, in the above-styled cause of
(43 TAC § 17.11; 27 TexReg 10764)                      action.
                                                                International Truck, a manufacturer of
          The ELT Program provides a voluntary         medium and heavy duty trucks and mid-range
 electronic method for the department to               diesel engines, has sold used trucks at facilities it
 exchange lien and title infonnation with              owns in Dallas and Houston since the mid-i 970s.
 lienholders.                                          Effective September 1, 1999, § 5.02C(c) of the
          ‘To participate, a lienholder must enter     TMVC Code prohibits a manufacturer or
 into a contract with the department. An               distributor of motor vehicles from acting in the
 application for title recording an electronic lien    capacity of a dealer in Texas.
 is filed in the usual manner with a county tax                Mr. Bray, as Division Director of the
 assessor-collector. The department notifies the       TMVC, declined to renew International’s general
 lienholder electronically of the date the lien is     distinguishing numbers.
 recorded which is then verified by the                        International brought this cause of action
 lienholder.                                           seeking a declaratory judgment that the statute
         When a lien is satisfied, the lienholder     does not apply to the sale of used vehicles or that
electronically notifies the department within 10      the provision violates the United States
days. The ELT remark and the lien is removed          Constitution.
from the record and a title is printed in the name             The Order holds that § 5.02C(c), applies
of the owner of record and mailed to the address      to manufacturers selling used vehicles as well as
specified by the lienholder.                          new vehicles and the provision “bears a
         A lienholder may also request removal        reasonable relationship to the State’s legitimate
of the ELT remark and provide the lienholder          purpose in controlling the automobile retail
with a paper title.                                   market. Control over the supply, whether direct
         When requested by a lienholder, the          or indirect, allows a manufacturer potential
department will reassign a lien electronically to     leverage over dealers of used cars that presents a
a new lienholder if the new lienholder meets all      vertical integration issue within the State’s power
requirements for participation in the ELT             to regulate.”
program.                                                       International Truck has filed a Notice of
         The department will not issue a certified    Appeal.
copy of a title with an ELT remark.
                                                      “Blue Oval” Agreed Final Order

MOTOR VEHICLE DIVISION RULINGS                                An Agreed Final Order In the Matter of
                                                      the License ofFordMotor Company, Docket No.
International Truck and Engine Corporation            00-0772-ENF is before the Board at the June,
vs. Brett Bray                                        2003, meeting.
                                                              Without admitting any violation and

                                                Page 10
Legal Bulletin                                                                        May 6, 2003

continuing to deny that Ford Motor Company            a dealer owns, operates, or permits to be operated
committed a violation ofthe TMVC Code, Ford           on a public street or highway.
agrees to cease and desist no later than March                The Board’s rules provide that metal
31, 2005, those activities in the Blue Oval           dealer license plates “shall be attached to the rear
program that allegedly violate § 5.02(b)(20)          license plate holder of vehicles on which such
and (21).                                             plates are to be displayed” (16 TAC § 111.9).
        Ford also agrees to reimburse TxDOT
$40,000 for litigation and investigative
expenses.                                             REMINDERS

Settlement Agreement with Volvo Cars of                1. Door Ding Protection Products
North America, Inc.                                           Certain door ding protection products
                                                      have been reviewed by the Office of Consumer
         A Settlement Agreement has been              Credit Commissioner (OCCC). If making the
reached with Volvo Cars of North America,             product available at the dealership, please
lic., and Star Motor Cars, Hoy-Fox Automotive         consider the following information.
Market, and James Mears Motors, Inc., whereby                 According to the OCCC, in order to be
Volvo agrees to discontinue their 2002 Volvo          included as an itemized charge in the amount
Margin Structure and Added Value Bonus                financed on a motor vehicle installment sales
program.                                              contract, the product should be insurance, a
         The new agreed-upon program is not           service contract, or a warranty [as authorized by
discriminatory between Texas Volvo dealers nor        Subchapter C, Finance Code § 348.005) or an
does it result in a disparity in margin               accessory or service related to the sale and thus
percentages available to Texas Volvo dealers.         able to be included in the cash price (Id., §
         Volvo is, to the best of its ability,        348.004).
structuring and implementing its 2003 program                 Certain door ding or dent protection
in compliance with TMVC Code §                        products do not satisfy the insurance or warranty
5.02(b)(20)(A), 5.02(b)(20)(B) and 5 .02(b)(2 1).     categories. With respect to the service contract
In addition, Volvo agrees, to the best of its         standards under the Service Contract Regulatory
ability, to structure and implement any future        Act, Art. 9034, the Act requires that a provider of
margin structures in compliance with the TMVC         a service contract must be registered and comply
Code.                                                 with certain other provisions of the Act as well as
                                                      provide for the repair of a product for operational
Metal Dealer License Plates                           or structural failure caused by a defect in
                                                      materials or workmanship or by normal wear.
        Only one metal dealer license plate is                If the product is not insurance, a
displayed on a vehicle since only one plate for       warranty, or a service contract, then it may not be
each tag number is manufactured in Huntsville         included on the motor vehicle retail installment
and issued to a dealer. It is not required that two   contract and financed as an itemized charge.
metal dealer tags be displayed on a vehicle that              Whether the product is an accessory or a

                                                Page 11
Legal Bulletin                                                                       May 6, 2003

service related to the sale and thus an item that    time for mailing, monetary deposit, application
can be included within the cash price of the         review, protest check, if applicable, and license
vehicle is another issue and would need to be        printing before the opening of a new dealership
reviewed on a product specific basis.                or the expiration of a current license, please
        The product can also be available for        submit the application or renewal and
sale, but not financed on the motor vehicle retail   information at least 30 days in advance.
installment contract if it does not meet the                  It is also recommended that the dealership
statutory criteria.                                  submit amendment applications for the addition
        If you have any questions, contact the       of a line-make 30 days prior to the anticipated
OCCC, local counsel, or the TADA legal               first day of sale.
department.                                                  A failure to include all required
                                                     attachments will also delay the issuance of a
2. MVD Licensing Section                             license. However, it is understood that certain
        The Licensing Section of the Motor           documents are not available until the closing on
Vehicle Division (TxDOT) processes over              the property or the sale of the dealership and so
20,000 applications each year. With only 12          in this instance, submit the application with all
licensing clerks, the processing time for both       other available attachments as soon as possible
new applications and license renewals may take       before closing.
over four weeks.                                              Please remember that if a new dealership
        In order timely to receive the               or an amendment application is protested, a
dealership’s new license, license amendment, or      license cannot be issued unless the protest is
renewal license and renewal dealer plate             resolved in favor of the new or relocating
stickers, submit the application and required        dealership’s favor.
information as soon as possible.
        All applications with money attached         3. Obtaining a Consumer Report
should be submitted to the P.O. Box on the                   The Fair Credit Reporting Act, §
application form. The United States Postal           604(a)(3)(F) permits a consumer reporting
Service will deliver overnight mail to P. 0.         agency (CRA) to provide a consumer report to
Boxes.     Delivering the form with money            any party who has a “legitimate business need for
attached to the Motor Vehicle Division will          the information in connection with a business
delay processing time because all money must         transaction that is initiated by the consumer.”
first be sent to the Comptroller of Texas for                According to the Federal Trade
processing and deposit.                              Commission (FTC), this provision does not allow
        The Motor Vehicle Division has recently      a dealership to obtain a consumer report on a
begun accepting credit cards for payment of          person who simply comes to an automobile
licensing fees and other moneys owed. Credit         dealership and requests information from a
card forms are sent with the license application     salesman about one or more automobiles. A
and contain pertinent instructions.                  request for general information about products
        All license applications are processed in    and prices offered does not, by itself, involve a
the order received. In order to allow adequate       “business transaction initiated by a consumer.”

                                               Page 12
Legal Bulletin                                                                         May 6, 2003

         A consumer report may be obtained only       parent with a serious health condition; and, (4)
in those circumstances in which the consumer          because a serous health condition makes the
clearly understands that he or she is initiating a    employee unable to perform one or more of the
purchase or lease of a vehicle and the seller has     essential functions of the job.
a legitimate business need for the consumer                    During FMLA leave, an employer
report information in order to complete the           maintains the employee’s existing level of
transaction.                                          coverage under a group health plan. At the end
         The dealership may obtain a consumer         of FMLA leave, an employer places the
report with the consumer’s written permission         employee into the same or an equivalent job.
and it is recommended that written permission                  An FMLA “serious health condition” is
be obtained prior to obtaining a consumer             an illness, injury, impairment, or physical or
report.                                               mental condition that involves inpatient care or
                                                      continuing treatment by a health care provider.
4. Record Retention of Credit Anplications            An ADA “disability” is an impairment that
       Under the Equal Credit Opportunity Act,        substantially limits one or more major life
§  202.12, applications for credit are to be          activities, a record of such an impairment, or
preserved for 25 months (12 months for                being regarded as having such an impairment.
business credit). Retain an original or a copy of              Some FMLA serious health conditions
any application, any information required to be       may be an ADA disability; yet, a serous health
obtained concerning characteristics of the            condition may not be a disability because the
applicant, and any other written or recorded          condition is not an impairment or because the
information used in evaluating the application        impairment is not substantially limiting.
and not returned to the applicant at the                       Title VII does not allow a covered
applicant’s request.                                  employer to discriminate on the basis of race,
                                                      color, religion, sex, or national origin when
5.     Family and Medical Leave Act;                  administering family leave.
Americans With Disabilities Act; Title VII
        The Family and Medical Leave Act              6. Selling a Vehicle to a California Resident
(FMLA) covers private employers with 50 or                    California adopted a law in 1976 which
more employees.          The Americans with           provides that no California resident or business
Disabilities Act (ADA) and Title VII cover            shall import, deliver, purchase, rent, lease,
private employers with 15 or more employees.          acquire, or receive a new motor vehicle unless
        Under the FMLA, an eligible employee          the motor vehicle has met Calfornia emission
may take up to 12 workweeks of leave during           standards (California Health and Safety Code §
any 12-month period for one or more of the            43150 et seq.).
following reasons: (1) birth of a child, and to               Under California’s statute, a vehicle is
care for the newborn child; (2) the placement of      considered “new” if it has an odometer reading
a child with the employee through adoption or         of less than 7,500 miles. This sale prohibition
foster care, and to care for the child; (3) to care   also extends to the importation or sale of new
for the employee’s spouse, son, daughter, or          vehicle engines that are not certified to California

                                                Page 13
Legal Bulletin                                                                         May 6, 2003

 emission standards.                                  manufacturer on the label.
         Anyperson who violates this prohibition              If the vehicle is California certified, the
 is liable for a civil penalty of $5,000 per          label will state that the vehicle conforms to
 violation (Id., § 43154(a)). in addition, a          California regulations or that it is legal for sale in
 vehicle that is the subject of a violation will be   California.. If a vehicle is federally certified, the
 denied California DMV registration and will be       label states that the vehicle conforms to U.S.-
 required to be removed from the state.               EPA regulations, but no mention will be made of
         Exceptions to the 7,500 mile rule are: (1)   meeting California requirements.
 when a California resident obtains the vehicle as
part of an inheritance or divorce settlement; (2)     7. Uniformed Services Employment and Re
when a California resident purchases the vehicle      employment Act of 1994 (USERRA)
 to replace a California registered vehicle that               The USERRA protects and grants rights
 was stolen while out-of-state; or, (3) when a        to employees who are absent from work as a
 California resident purchases the vehicle to         result of “service in the uniformed services.”
replace a California registered vehicle that was               “Uniformed services” includes active
destroyed or if inoperative beyond reasonable         duty or reserve service in the U. S. Army, Navy,
repair while out-of-state (Id., § 43151(b)). A        I\4arine Corps, Air Force or Coast Guard; service
California resident on active military duty           in the U. S. Army or Air National Guard, service
outside of California may return to California        in the Commissioned Corps of the Public Health
with a new vehicle that is not certified to           Service, and any other category of persons
California requirements if it was registered in       designated by the president of the United States
the state of last military service and certified to   in a time of war or emergency. Absences for
federal emission standards. Finally, a person         training, weekend drills, summer camps and
moving to California from another state may           fitness-for-duty examinations are also included.
register a new federally certified vehicle if it               The provisions of the Act apply
was first registered by the owner in his home         regardless ofthe length of time the employee has
state. When applying to register any vehicle that     worked for the employer.          The USERRA
meets one of the exceptions, the applicant must       prohibits an employer from discriminating or
show proof, such as a court order, police report,     retaliating against an applicant or employee
repair invoice, military transfer orders, etc., to    because of membership, application for
the California DMV to qualify for an                  membership, performance of service or
exemption.                                            obligation to perform service in a branch of the
         An emission control label indicating         uniformed services.
whether the vehicle is manufactured to meet                    A returning employee may not be
California andlor U. S. standards is on all 1971      terminated except for cause within one year after
and newer vehicles. The emission control label        the date of re-employment if the military leave
should be affixed to the engine compartment or        period was 181 days or longer or within 180 days
under the hood with the words “VEHICLE                after the date of re-employment if the military
EMISSION CONTROL INFORMATION” and                     leave period was between 31 and 180 days.
the corporate name or trademark of the                         Returning active duty employees are to be

                                                Page 14
Legal Bulletin                                                                      May 6, 2003

given their former job or an equivalent position     received from the consultant for a minimum of 3
as well as re-employed at the seniority, pay and     days or until all hazards are corrected.
benefits level at which the employee would have      Information on other hazards as well as proposed
been if he or she had not left for military          correction methods must also be made available
service.                                             to employees.
         During the employee’s absence, an                   To request a consultation from OSHCON,
employer cannot require the employee to use or       call 1-800-687-7080 or complete the online
take accrued vacation or other paid leave as part    request        form        available         at:
of their military leave.                             www.twcc.

 8. OSHCON                                           9.     “Understanding Vehicle Financing”
        The Occupational Safety and Health           Brochure
Consultation (OSHCON) program is a free-non-                 A new brochure intended to assist
regulatory service available to small, private       customers regarding the financing of their
Texas employers. The consultants can evaluate        vehicles is now complete. The brochure is ajoint
an employer’s current safety and health              project between NADA and the educational arm
programs and identify areas in the workplace         ofthe American Financial Services Associations
that do not meet OSHA safety and health              in cooperation with the Federal Trade
standards.                                           Commission.
         OSHCON is a program ofthe Workers’                  The dealership may want to laminate a
Health and Safety Division of the Texas              copy and place a copy in every sales and F & I
Workers’ Compensation Commission and is              office or distribute one to each customer. The
available to a private business with less than 250   cost for 25 is $13.75, including shipping and
employees at the consultation site and no more       handling. The dealership may also obtain a price
than 500 employees at all sites controlled by the    break for 1000 copies or more.
employer.                                                    Ordering is available online at:
        The OSHCON program does not issue            www.afsaef.çg and click “Publications;” call toll
fines or citations; however, when a business         free, 1-888-400-7577; or, send a written request
requests and agrees to an OSHCON                     to AFSAEF, 919 l8” Street, N.W., Dept. UVF,
consultation, the business agrees to correct any     Washington, D.C. 20006.
serious hazards or imminently dangerous                      A Spanish edition is expected to be
situations that might be identified.           The   available later in the year.
abatement period to correct any   serious hazards
is decided upon between the business and the         10. List of SDNs
OSHCON consultant. If a hazard cannot be                      A dealership should check the Office of
corrected within the abatement period, then the      Foreign Assets Control (OFAC) List of Specially
business should request an extension.                Designated Nationals (SDN) before entering into
        In addition, OSHA standard 1908.6(e)(8)      a transaction with a person or entity. The OFAC
requires the business to post the list of serious    restrictions prohibit all U. S. persons from
hazards and correction due dates when it is          engaging in transactions with certain sanctioned

                                               Page 15
 Legal Bulletin                                           May 6, 2003

  countries, governments, or specially designated
  organizations or individuals.
          With respect to individuals and entities
 identified as terrorists or supporters ofterrorism,
 the sanctions prohibit all U. S. persons from
 transacting or dealing in any property or interest
 in property, ofthe designated party. There is no
 minimum dollar threshold and a “transaction”
 includes the sale of an automobile as well as the
 sale of parts or service.
         According to Executive Order 13224,
 signed by President Bush on September 23,
 2001: “any transaction or dealing by United
 States persons or within the United States in
 property or interests in property blocked
 pursuant to this order is prohibited, including
but not limited to the making or receiving of any
 contribution of funds, goods, or services to or
 for the benefit of those persons listed in the
Annex of this order or determined to be subject
to this order.”
         The SDN list is available and updated
periodically by accessing the Department of
Treasury                       on-line:
www.ustreas. ov/offices/enforcement/ofac/sdn
         Fines for violations can include criminal
penalties ranging from $50,000 to $10,000,000
and imprisonment ranging from 10 to 30 years
for willful violations. Civil penalties can also
range from $11,000 to $1,000,000.
         U. S. persons are expected to exercise
“due diligence” in determining whether a
prohibited person is involved in’a proposed

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