August 2007

As Congress continues it’s summer recess, our Nations Energy Policy and, in particular, global warming, Corporate Average Fuel Economy proposals and greenhouse gas emissions remain active topics of discussion.

While there are 3 major CAFE proposals being considered by Congress, the one currently in the forefront is HR 2927.  Called the Hill-Terry CAFE Alternative, this Bill would separate standards for cars and trucks and require that the overall fleet average rise to 32 Miles Per Gallon for trucks and 35 for cars by 2022.  The CAFE debate will take center stage this Fall when the House Energy and Commerce Committee takes up this and other energy related issues.

When Congress returns from recess there will be other legislation affecting our industry up for consideration.  The Rent-To-Own Reform Act of 2007 is a Bill to amend the Consumer Credit Protection Act, to protect consumers from inadequate disclosures and certain abusive practices in rent-to-own transactions.

The Arbitration Fairness Act of 2007 would amend Chapter 1 of Title 9 of the United States Code, more commonly known as The Federal Arbitration Act.  The Bill states that Mandatory arbitration undermines the development of public law and is a poor system for protecting civil and consumer rights.  The Bill would prohibit a predispute arbitration agreement from being valid in a consumer dispute, that being where the subject of the transaction is for personal, family or household use.

With the war in Iraq still top priority, legislation has been introduced to protect our Servicemembers.  HR 1598, titled The Servicemember Credit Protection Act, would amend the Servicemembers Civil Relief Act to protect the credit of servicemembers deployed to an overseas combat zone and to facilitate awareness of a servicmember’s rights under the Act.  This would include a combat zone duty alert in their consumer file until notified by the Secretary of Defense that they no longer qualify for such an alert.

Federal Regulatory Developments

The REAL ID Act remains in the news and has become controversial due to concerns about privacy issues and funding.  Nationwide costs of complying with the Act are estimated at 11 to 25 billion dollars over 10 years, and concern has been raised that state DMV offices will be forced to pull resources from other areas, such as title processing and registrations, to comply.

 To date, Congress has appropriated only 40 million dollars for REAL ID programs.  In July, a proposal to provide 300 million dollars in federal funds to help states implement the Act was defeated in the Senate.  The failure of Congress to provide significant financial assistance for states to comply with Real ID Act will likely increase the call by states to either further delay or dismantle the federal program.

Activity at the State Level

With the State of California still pursuing its request to impose its own strict fuel efficiency regulations the U.S. Department of Transportation is still urging the Bush Administration to oppose such a request.  Following in their footsteps are the states of Florida, New Jersey and Michigan, which also are proposing legislation matching California’s standards for greenhouse gas emissions.

As the motor vehicle industry is well aware, not all biofuels are created equal. University of California- Berkeley researchers are proposing a biofuels rating system that will reflect the environmental impact of a fuel and help simulate the market for biofuels that are truly green.  The Renewable Fuel Standard, passed as part of the 2005 Energy Bill, calls for the use 7.5 billion gallons of renewable fuel per year by 2012.

The yardstick for measuring a fuels environmental performance is greenhouse gas emissions. Yet some studies show that ethanol made from corn releases as much or more greenhouse gas as gasoline derived from oil.  Since there is currently no standard method of rating the environmental performance of a biofuel, they are proposing that a rating system be implemented of the two stages biofuels are manufactured; the feedstock production and the refining production.

The collapse of the subprime home mortgage market appears to now be affecting the motor vehicle industry.  Car and truck buyers, especially those with lower credit scores, are finding it harder to get financing and are thus putting off vehicle purchases.

As a reminder, the federal minimum wage increased in July from $5.15 to $5.85 per hour.

Our case of the month deals with an issue that is seen everyday in motor vehicle dealerships; when does ownership and liability transfer in a motor vehicle transaction with a consumer?   While the issue seems at first glance to be a simple one, the answer varies state to state and recently went all the way to the Supreme Court in Michigan.