When to check for open recalls, under new federal law

When to check for open recalls, under new federal law

The federal highway bill passed in December 2015 has two provisions relating to recalls that dealers need to keep in mind.

The first provision requires dealers to check for open recalls on vehicles of the brand(s) they sell that are in for service, if the –franchise operating or other agreement” between the dealer and manufacturer requires such a notification. The bill would allow a manufacturer to withhold fair compensation for recall repairs to a dealer who does not do so (although the franchise agreement may separately require reimbursement).

As a best practice, a dealer should have service advisors check for open recalls on all vehicles of the brand(s) for which it is franchised and notify the owners when there is an open recall. Whether the franchise agreement requires such notification or not, franchisors will likely impose that obligation through a unilateral revision of the dealer agreement or by a bulletin incorporated in the dealer agreement.

The second provision requires that — as of June 1, 2015 — rental companies with an average of 35 or more rental vehicles in their fleet in a calendar year will be required to ground recalled rental vehicles until the recall is remedied. The Safe Car Rental Act does not say whether dealer loaner vehicles are rental vehicles and whether rental vehicles owned by a dealer in several separate dealership locations are regulated as one fleet. The U.S. Secretary of Transportation has been directed to develop regulations on the issue, on which the industry may comment.

Thanks to attorney and Kindred-Line member Michael Charapp of Charapp & Weiss, LLP, for providing this information.