Bill Regulating Rental Vehicles Under Open Recall Needs Further Scrutiny

S. 921 Does Not Distinguish Between Serious and Minor Recalls 

Issue
To increase recall completion rates for rental vehicles, S. 921 would subject all rental cars under open recall to grounding within 24-48 hours.  Dealers do not want unsafe vehicles on the road.  The bill, however, is overly broad, since not all recalls require the grounding of a rental vehicle. The measure also gives large rental car companies a competitive advantage over smaller ones, and may make it uneconomical for some dealers to provide loaner or rental cars to their customers.

Background
S. 921, introduced by Sens. Chuck Schumer (D-NY) and Barbara Boxer (D-CA), would regulate rental and loaner vehicles fleets of 5 or more and takes the far-reaching step of subjecting these cars under any open recall to grounding within 24-48 hours.

Franchised dealers play a vital role in ensuring that recalled vehicles are made safe to drive. While dealers support improvements to the recall process that maximizes safety recall completion rates, S. 921 is a major departure from current vehicle safety recall practice.  Vehicle manufacturers issue “Do Not Drive” letters when recalls are of an urgent nature, and dealers support the immediate grounding of vehicles in this category.  Yet under S. 921, any rental vehicle could be grounded, potentially for weeks, based on a paperwork violation that does not impact consumer safety.

Key Points

• S. 921 is overly broad since it would ground every rental and loaner vehicle under open recall and fails to differentiate between recalls that involve a defect that should be immediately addressed and those with a negligible impact on safety.  This legislation would ground vehicles even if the recall did not actually impact passenger safety, such as an owner’s manual misprint.

• The bill does not reflect marketplace realities.  Recall remedies are often delayed when parts needed to fix the vehicle are unavailable through no fault of the dealer.  S. 921 acknowledges and purports to address this problem, but the standard in the bill for a “temporary fix” is a near impossible standard for automakers to meet and is unworkable in practice.

• This new federal mandate would regulate a dealership that offers loaner vehicles to their service customers the same as a multinational rental car company. A small business auto dealer with a loaner fleet of five vehicles would be subject to the same inspections, record-keeping, and regulatory burdens as rental car companies with thousands of vehicles.  S.921 also favors these big businesses by allowing large rental car companies additional compliance time.

Status
On May 21, NADA testified before a Senate Commerce subcommittee on S. 921. The Committee reported the bill by voice vote on July 30.  The Chairman of the Senate Commerce Committee, ranking Minority Member, and even a major sponsor of the legislation remarked during the markup that the bill needs further modifications before it is ready for full Senate consideration.  There is no House companion bill.  NADA urges Senators to address the flaws with S. 921 prior to the bill moving forward

March 2014