[Federal Register Volume 75, Number 77 (Thursday, April 22, 2010)]
[Rules and Regulations]
[Pages 20925-20930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8320]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket No. NHTSA-2009-0174; Notice 2]


Petition for Approval of Alternate Odometer Disclosure 
Requirements

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Final determination.

-----------------------------------------------------------------------

SUMMARY: The State of Texas has petitioned for approval of alternate 
requirements to certain requirements under Federal odometer law. NHTSA 
is issuing this final determination granting Texas's petition.

DATES: Effective Date: May 24, 2010. Request for reconsideration due no 
later than June 7, 2010.

ADDRESSES: Requests for reconsideration must be submitted in writing to 
Administrator, National Highway Traffic Safety Administration, U.S. 
Department of Transportation, 1200 New Jersey Avenue, SE., Washington, 
DC 20590. Requests should refer to the docket and notice number above.
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78) or you may visit http://DocketInfo.dot.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov or the street 
address listed above. Follow the online instructions for accessing the 
dockets.

FOR FURTHER INFORMATION CONTACT: Andrew DiMarsico, Office of the Chief 
Counsel, National Highway Traffic Safety Administration, 1200 New 
Jersey Avenue, SE., Washington, DC 20590 (Telephone: 202-366-5263) 
(Fax: 202-366-3820).

SUPPLEMENTARY INFORMATION:

I. Introduction

    Federal odometer law, which is largely based on the Motor Vehicle 
Information and Cost Savings Act (Cost Savings Act) \1\ and the Truth 
in Mileage Act of 1986,\2\ as amended (TIMA), contains a number of 
provisions to limit odometer fraud and assure that the purchaser of a 
motor vehicle knows the true mileage of the vehicle. The Cost Savings 
Act requires the Secretary of Transportation to promulgate regulations 
requiring the transferor (seller) of a motor vehicle to provide a 
written statement of the vehicle's mileage registered on the odometer 
to the transferee (buyer) in connection with the transfer of ownership. 
This written statement is generally referred to as the odometer 
disclosure statement. Further, under TIMA, vehicle titles themselves 
must have a space for the odometer disclosure statement and States are 
prohibited from licensing vehicles unless a valid odometer disclosure 
statement on the title is signed and dated by the transferor. Titles 
must also be printed by a secure printing process or other secure 
process. TIMA also contains specific disclosure provisions on transfers 
of leased vehicles. Federal law also contains document retention 
requirements for motor vehicle dealers and lessors.
---------------------------------------------------------------------------

    \1\ Pub. L. 92-513, 86 Stat 947, 961 (1972).
    \2\ Pub. L. 99-579, 100 Stat. 3309 (1986).
---------------------------------------------------------------------------

    TIMA's motor vehicle mileage disclosure requirements apply in a 
State unless the State has alternative requirements approved by the 
Secretary. The Secretary has delegated administration of the odometer 
program to NHTSA. A State may petition NHTSA for approval of such 
alternate odometer disclosure requirements.

[[Page 20926]]

    The State of Texas has petitioned NHTSA for approval of alternate 
odometer disclosure requirements under TIMA. The Texas Department of 
Transportation proposes a paperless electronic title transfer scheme, 
described more fully in section IV, similar to the Commonwealth of 
Virginia's alternate odometer disclosure program, approved by NHTSA on 
January 2, 2009. 74 FR 643, 650 (January 7, 2009). Texas's proposal 
would not apply to, or in lieu of the provisions of Federal odometer 
law related to, leased vehicles, disclosures by power of attorney where 
the title is held by a lien holder, or transactions involving at least 
one out-of-State party.
    NHTSA initially determined that Texas's proposal satisfied Federal 
odometer law with limited exceptions, and preliminarily decided to 
grant Texas' petition on the condition that it amend its program or 
demonstrate that it meets the requirements of Federal law. See 74 FR 
59503 (November 18, 2009). To gain approval, Texas had to demonstrate 
that its program provides transferees a means for obtaining a paper 
title complying with TIMA's requirements,\3\ incorporates the ``brand'' 
requirement in its electronic titling process (the brand states whether 
the odometer reflects the actual mileage, reflects the mileage in 
excess of the designated odometer limit or differs from the actual 
mileage and should not be relied upon) \4\ and permits dealers to 
satisfy their obligation under Federal law to retain copies of odometer 
disclosure statements that they issue or receive.\5\ After careful 
consideration of comments, and the entire record, NHTSA has determined 
to grant Texas's petition. NHTSA's final determination analysis is set 
forth below in Section VI.
---------------------------------------------------------------------------

    \3\ See Section 408(d)(2)(A)(i) of the Cost Savings Act, as 
added by TIMA, recodified at 49 U.S.C. 32705(b)(3)(A)(i) and 49 CFR 
580.4.
    \4\ See Section 408 of the Cost Savings Act, recodified at 49 
U.S.C. 32705, and 49 CFR 580.5(e).
    \5\ See Section 408 of the Cost Savings Act, recodified at 49 
U.S.C. 32705, and 49 CFR 580.8(a).
---------------------------------------------------------------------------

II. Statutory Background

    NHTSA reviewed the statutory background of Federal odometer law in 
its consideration and approval of Virginia's petition for alternate 
odometer disclosure requirements. See 73 FR 35617 (June 24, 2008) and 
74 FR 643 (January 7, 2009). The statutory background of the Cost 
Savings Act and TIMA, and the purposes behind TIMA, are discussed at 
length in NHTSA's Final Determination granting Virginia's petition. 74 
FR 643, 647-48. A brief summary of the statutory background of Federal 
odometer law and the purposes of TIMA follows.
    In 1972, Congress enacted the Cost Savings Act, among other things, 
to prohibit tampering of odometers on motor vehicles and to establish 
certain safeguards for the protection of purchasers with respect to the 
sale of motor vehicles having altered or reset odometers. See Public 
Law 92-513, Sec.  401, 86 Stat. 947, 961-63 (1972). The Cost Savings 
Act required that, under regulations to be published by the Secretary, 
the transferor of a motor vehicle provide a written vehicle mileage 
disclosure to the transferee, prohibited odometer tampering and 
provided for enforcement. See Id. at Sec.  408, 86 Stat. at 947.\6\ In 
general, the purpose for the disclosure was to assist purchasers to 
know the true mileage of a motor vehicle.
---------------------------------------------------------------------------

    \6\ In general, section 408 states that the Secretary shall 
prescribe rules requiring any transferor of a motor vehicle to 
provide a written disclosure to the transferee that includes the 
cumulative mileage on the odometer and if the odometer reading is 
known to be different than the miles the vehicle has actually 
traveled, a statement that the actual mileage is unknown.
---------------------------------------------------------------------------

    A major shortcoming of the odometer provisions of the Cost Savings 
Act was that they did not require that the odometer disclosure 
statement be on the title. In a number of States, they were on separate 
documents that could be altered easily or discarded and did not travel 
with the title. See 74 FR 644. Consequently, the disclosure statements 
did not necessarily deter odometer fraud employing altered documents, 
discarded titles, and title washing. Id.
    Congress enacted TIMA in 1986 to address the Cost Savings Act's 
shortcomings. It amended the Cost Savings Act to prohibit States from 
licensing vehicles after transfers of ownership unless the new owner 
(transferee) submitted a title from the seller (transferor) containing 
the seller's signed and dated statement of the vehicle's mileage, as 
previously required by the Cost Savings Act. See Public Law 99-579, 100 
Stat. 3309 (1986); 74 FR 644 (Jan. 7, 2009). TIMA also prohibits the 
licensing of vehicles, for use in any State, unless the title issued to 
the transferee is printed using a secure printing process or other 
secure process, indicates the vehicle mileage at the time of transfer 
and contains additional space for a subsequent mileage disclosure by 
the transferee when it is sold again. Id. Other provisions created 
similar safeguards for leased vehicles.
    TIMA added a provision to the Cost Savings Act, allowing States to 
have alternate requirements to those required under TIMA respecting the 
disclosure of mileage, with the approval of the Secretary of 
Transportation. It amended Section 408 of the Cost Savings Act to add a 
new subsection (f) which provided that the requirements of subsections 
(d) and (e)(1) respecting the disclosure of motor vehicle mileage when 
motor vehicles are transferred or leased shall apply in a State unless 
the State has in effect alternate motor vehicle mileage disclosure 
requirements approved by the Secretary. Subsection (f) further provided 
that the Secretary shall approve alternate motor vehicle mileage 
disclosure requirements submitted by a State unless the Secretary 
determines that such requirements are not consistent with the purpose 
of the disclosure required by subsection (d) or (e), as the case may 
be.
    In 1988, Congress amended section 408(d) of the Cost Savings Act to 
permit the use of a secure power of attorney in circumstances where the 
title was held by a lienholder. The Secretary was required to publish a 
rule to implement the provision. See Public Law 100-561 Sec.  40, 102 
Stat. 2805, 2817 (1988), which added Section 408(d)(2)(C). In 1990, 
Congress amended section 408(d)(2)(C) of the Cost Savings Act. The 
amendment addressed retention of powers of attorneys by States and 
provided that the rule adopted by the Secretary not require that a 
vehicle be titled in the State in which the power of attorney was 
issued. See Public Law 101-641 Sec.  7(a), 104 Stat. 4654, 4657 (1990).
    In 1994, in the course of the recodification of various laws 
pertaining to the Department of Transportation, the Cost Savings Act, 
as amended, was repealed, reenacted and recodified without substantive 
change. See Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387 
(1994). The odometer statute is now codified at 49 U.S.C. 32701 et seq. 
In particular, Section 408(a) of the Cost Savings Act was recodified at 
49 U.S.C. 32705(a). Sections 408(d) and (e), which were added by TIMA 
(and later amended), were recodified at 49 U.S.C. 32705(b) and (c). The 
provisions pertaining to approval of State alternate motor vehicle 
mileage disclosure requirements were recodified at 49 U.S.C. 32705(d).

III. Statutory Purposes

    As discussed above, the Cost Savings Act, as amended by TIMA in 
1986, contains a specific provision on approval of State alternate 
odometer disclosure programs. Subsection 408(f)(2) of the Cost Savings 
Act (recodified in 1994 to 49 U.S.C. 32705(d)) provides that NHTSA 
``shall approve alternate motor vehicle mileage

[[Page 20927]]

disclosure requirements submitted by a State unless [NHTSA] determines 
that such requirements are not consistent with the purpose of the 
disclosure required by subsection (d) or (e) as the case may be.'' 
(Subsections 408(d), (e) of the Cost Savings Act were recodified to 49 
U.S.C. 32705(b) and (c)). In light of this provision, we now turn to 
our interpretation of the purposes of these subsections, as germane to 
Texas's petition.\7\
---------------------------------------------------------------------------

    \7\ Texas's petition does not address disclosures in leases or 
disclosures by power of attorney. In view of the scope of Texas's 
petition, Texas will continue to be subject to current Federal 
requirements as to leases and disclosures by power of attorney, and 
we do not address the purposes of the related provisions.
---------------------------------------------------------------------------

    Our Final Determination granting Virginia's petition for alternate 
odometer disclosure requirements, after notice and comment, identified 
the purposes of TIMA germane to petitions for approval of certain 
alternate odometer disclosure requirements.\8\ 74 FR 643, 647-48 
(January 7, 2009). We restated these purposes in the notice of initial 
determination on the Texas petition, and provided an opportunity for 
comment. See 74 FR at 59503, 59505. We did not receive any comment on 
them. We ratify our previous adoption of the TIMA statutory purposes, 
which are summarized below.
---------------------------------------------------------------------------

    \8\ Since Virginia's program did not cover disclosures in leases 
or disclosures by power of attorney, the purposes of Sections 
408(d)(2)(C) and 408(e) of the Cost Savings Act, as amended, were 
not germane and were not addressed in the notice approving the 
Virginia program. See 74 FR 647 n. 12.
---------------------------------------------------------------------------

    One purpose of TIMA was to assure that the form of the odometer 
disclosure precluded odometer fraud. To prevent odometer fraud 
facilitated by disclosure statements that were separate from titles, 
TIMA required mileage disclosures to be on a secure vehicle title 
instead of a separate document. These titles also had to contain space 
for the seller's attested mileage disclosure and a new disclosure by 
the purchaser when the vehicle was sold again. This discouraged mileage 
alterations on titles and limited opportunities for obtaining new 
titles with lower mileage than the actual mileage.
    A second purpose of TIMA was to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title, and a requirement for 
the title issued by the State. This provision was intended to eliminate 
or significantly reduce abuses associated with lack of control of the 
titling process.
    Third, TIMA sought to prevent alterations of disclosures on titles 
and to preclude counterfeit titles through secure processes. In 
furtherance of these purposes, in the context of paper titles, under 
TIMA, the title must be set forth by means of a secure printing process 
or protected by ``other secure process.'' \9\
---------------------------------------------------------------------------

    \9\ Congress intended to encourage new technologies by including 
the language ``other secure process.'' The House Report accompanying 
TIMA noted that ```other secure process' is intended to describe 
means other than printing which could securely provide for the 
storage and transmittal of title and mileage information.'' H.R. 
Rep. No. 99-833, at 33 (1986). ``In adopting this language, the 
Committee intends to encourage new technologies which will provide 
increased levels of security for titles.'' Id. See also Cost Savings 
Act, as amended by TIMA, Sec.  408(d), recodified at 49 U.S.C. 
32705(b).
---------------------------------------------------------------------------

    Another purpose was to create a record of vehicle mileage and a 
paper trail. The underlying purposes of this record and paper trail 
were to enable consumers to be better informed and provide a mechanism 
for tracing odometer tampering and prosecuting violators. TIMA's 
requirement that new applications for titles include the prior owner's 
signed mileage disclosure statement on the title creates a permanent 
record that is easily checked by subsequent owners or law enforcement 
officials. This record provides critical snapshots of the vehicle's 
mileage at every transfer, which are the fundamental links of this 
paper trail.
    Finally, the general purpose of TIMA was to protect consumers by 
assuring that they received valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer disclosures.

IV. The Texas Program

    As explained in NHTSA's initial determination, Texas proposes an 
electronic title transfer system and to maintain electronic records of 
titles in the Texas Department of Transportation (TxDOT), Division of 
Vehicle Title and Registration (VTR) computer system. 74 FR 59503. 
According to Texas's petition, the ``title'' will exist as an 
electronic record with the TxDOT, but ``hard'' copies of the title can 
be generated if needed. The scope of its program is limited; Texas does 
not have alternate disclosure requirements for leased vehicles, 
disclosures of odometer statements by power of attorney for vehicles 
subject to a lien holder, or transactions involving at least one out-
of-State party. Accordingly, this final determination does not address 
odometer disclosure requirements germane to those transactions.
    The petition also states that the proposed system would require 
sellers to accurately disclose vehicle mileage and allow buyers to 
record, view and acknowledge receipt of the disclosure through a secure 
on-line transaction with TxDOT using the TexasOnline Authentication 
Service (TOAS). TOAS is described as a secure identity verification 
service that establishes electronic signatures \10\ by authenticating 
individuals against a database. TOAS allows TexasOnline to collect user 
data, which is then matched against four personal data elements and two 
forms of identification in the TexasOnline Authentication Database 
(TOAD) \11\ to authenticate and verify the identity of the user. TOAD 
data elements include: A Texas driver license or identification card 
number, current driver license or identification card audit number, 
date of birth, and the last four digits of the individual's social 
security number.
---------------------------------------------------------------------------

    \10\ The term ``electronic signature'' means an electronic 
sound, symbol or process, attached to or logically associated with a 
contract or other record and executed or adopted by a person with 
the intent to sign the record. 15 U.S.C. 7006(5) (2004).
    \11\ Currently, TexasOnline permits users to perform several 
services online, such as renewal of driver licenses, voter 
registration address changes, and ordering driving records.
---------------------------------------------------------------------------

    A purchaser or seller cannot access the proposed electronic title 
system unless the purchaser's or seller's identity, and status as a 
Texas resident, holding a valid Texas driver's license or 
identification card, is authenticated by TOAS. Therefore, the Texas 
petition asserts that out-of-state parties would be unable to initiate 
an electronic title transfer in an on-line transaction with TxDOT.
    Under Texas's proposal, completing a motor vehicle sale would 
require that the seller (transferor) and the purchaser (transferee) 
perform several steps. First, the seller's identity must be 
authenticated using TOAS. Once authenticated, the seller can access the 
TxDOT VTR Registration and Titles System (VTR system). The seller then 
selects a ``transfer of ownership'' transaction and enters the Vehicle 
Identification Number (VIN). The vehicle's information is automatically 
populated on the screen. The transferor is prompted to enter the 
vehicle sales price and odometer reading.\12\ After these data are 
entered, the VTR system will provide the transferor with a unique 
transaction number. The transferor must provide the unique transaction 
number to the transferee to complete the transaction.
---------------------------------------------------------------------------

    \12\ Texas's initial petition did not address the brand 
requirement. See 49 CFR 590.5(e). In response to NHTSA's initial 
determination, Texas submitted comments stating that it will 
continue to indicate/show the odometer reading and brand on paper 
titles and maintain an electronic record of the odometer reading and 
the brand.

---------------------------------------------------------------------------

[[Page 20928]]

    The transaction would remain in ``pending'' status until the 
transferee logs on to complete the transfer of ownership transaction. 
Meanwhile, the VTR system would automatically check the odometer 
reading entered by the transferor against VTR odometer records. If the 
odometer reading entered by the transferor is lower than in the State's 
records, the transaction will be immediately rejected.
    Once transferees log on to TexasOnline and are authenticated, TOAS 
will transfer them to the TxDOT VTR system where they can select 
``vehicle transfer of ownership'' and enter the unique transaction 
number obtained from the transferor. The transferee must enter the 
correct transaction number to continue. Once access is obtained, the 
transferee would verify the sales price, odometer reading and brand 
entered by the transferor. If all the data entered by the transferor 
are verified and acknowledged as correct by the transferee, ownership 
of the vehicle would pass to the transferee and an electronic title 
record would be established by the VTR system. The VTR system would 
then contact the transferor and request that the transferor's original 
paper title be mailed to the VTR for destruction.\13\
---------------------------------------------------------------------------

    \13\ According to the Texas petition, the previous title, 
regardless if it were electronic or paper, would be superseded by 
the ``new'' electronic title. The ``old'' title is invalidated in 
the VTR system and would be unable to transfer title in Texas.
---------------------------------------------------------------------------

    If the transferee does not agree with the information entered by 
the transferor, then the VTR system will reject the transaction. The 
transferor will have the opportunity to correct the sales price and 
odometer reading for the rejected transaction. The transferee would 
then re-verify the information to ensure its accuracy. A second 
discrepancy would result in cancellation of the electronic transaction.
    Texas's petition states that the same process, along with 
additional safeguards, will be used in dealer assignments and 
reassignments of vehicle ownership. According to Texas, such safeguards 
include requiring the dealership to notify VTR of the employees 
authorized to do titling activities for the dealership.\14\ This 
authorization will be stored in the TxDOT VTR system. To complete a 
transaction, the authorized employee will be required to enter his or 
her authorization number and the dealer number.
---------------------------------------------------------------------------

    \14\ Texas's petition did not address the dealer retention 
requirements as set forth in 49 CFR 580.8(a). In response to NHTSA's 
initial determination, Texas submitted comments stating that dealers 
will be provided with a paper or electronic record of any odometer 
disclosure.
---------------------------------------------------------------------------

    Texas asserts that its proposed alternate odometer disclosure is 
consistent with Federal odometer law. As advanced by TxDOT, Texas's 
alternative ensures that a fraudulent odometer disclosure can readily 
be detected and reliably traced to a particular individual by providing 
a means for TxDOT to validate and authenticate individual identities 
through electronic signatures. As described above, the parties' 
electronic signatures are established and their identities 
authenticated through the four TOAD data elements: Texas driver's 
license or identification card number, driver's license or 
identification card audit number, date of birth, and the last four 
digits of social security number. TOAS then verifies the identity of 
the transferor and transferee through the submission of the required 
information. To conduct any transaction, both the transferor and 
transferee will have to authenticate their identity by submitting the 
correct data elements.
    Texas also asserts that its proposal provides a level of security 
equivalent to that of an existing disclosure on secure paper titles and 
that on-line identity authentication acts in lieu of an actual 
signature on the title. Furthermore, Texas states that the electronic 
odometer disclosure provided by the transferor will be available to the 
transferee at the time ownership of the vehicle is transferred.
    The Texas petition maintains that the electronic record and 
signature components of the proposal comport with the Electronic 
Signatures in Global and National Commerce Act (E-Sign), 15 U.S.C. 7001 
et seq. Current State law permits the creation of electronic 
certificates of title, but requires a paper certificate of title for 
all transfers of vehicle ownership. Tex. Transp. Code Ann. Sec.  
501.117. If its proposal were approved, Texas could pass pending 
legislation that would implement its proposed electronic title system.

V. Summary of Public Comments

    NHTSA received comments from three entities: (1) The State of 
Texas, (2) the Alabama Department of Revenue (Alabama), and (3) the 
National Auto Auction Association (NAAA). In general, Alabama and NAAA 
supported the Texas's petition.
    Texas's comments responded to NHTSA's requirements, in its initial 
determination, that Texas meet certain conditions for approval of its 
petition. Texas's comments respond to NHTSA's conditions that Texas 
demonstrate that its program (1) enables transferees to obtain a paper 
copy of the title that meets the requirements of TIMA, (2) permits 
dealers to retain a copy of all odometer disclosures that they issue 
and receive, and (3) requires disclosure of the brand, or demonstrates 
that these requirements are met. Texas submitted comments that indicate 
that the alternate odometer program will enable transferees to obtain a 
paper copy of the title if requested by the owner or lien holder. In 
addition, Texas stated that dealers will be provided with a paper or 
electronic record of the odometer disclosure. Finally, Texas responded 
that it will continue to require the odometer reading and brand on 
paper titles and maintain electronic copies of the odometer reading and 
brand.
    In addition to supporting Texas's petition, the State of Alabama 
requests that NHTSA allow all states to enact similar disclosure 
systems without the need to file separate petitions. Alabama adds that 
it recently implemented an electronic title application system, but 
must require paper as part of the process due, in part, to Federal 
odometer law. In Alabama's view, NHTSA's authorization for electronic 
titling will permit each State to determine its own method of secure 
identification and title transfers between motor vehicle owners.
    NAAA raises a concern that the Texas title transfer system could be 
an impediment for out-of-state wholesale purchasers and sellers because 
Texas's system differs from other States' title transfer systems.

VI. NHTSA'S Final Determination

    In this part, NHTSA considers the Texas program in light of the 
purposes of the disclosure required by subsection (d) of section 408 of 
the Cost Savings Act.\15\ We also respond to comments.
---------------------------------------------------------------------------

    \15\ Since Texas's program does not cover disclosures by power 
of attorney or transfers involving leased vehicles, the purposes of 
sections 408(d)(1)(c) and (e) of the Cost Savings Act as amended by 
TIMA are not germane. Thus, Texas continues to be subject to all 
Federal requirements that are not based on sections 408(d)(1)(A), 
(B), and (2).
---------------------------------------------------------------------------

    Under the Cost Savings Act, as amended by TIMA, the standard is 
that NHTSA ``shall'' approve alternate motor vehicle mileage disclosure 
requirements submitted by a State unless NHTSA determines that such 
requirements are not consistent with the purpose of the disclosure 
required by subsection (d) or (e) as the case may be. The purposes are 
discussed above, as is the Texas alternate program.
    The State of Alabama and NAAA agreed with the initial 
determination. Alabama also proposed that NHTSA authorize all states to 
implement

[[Page 20929]]

electronic odometer disclosure so each state could determine its own 
methodology for odometer disclosure. This approach is not within the 
scope of Texas's petition or NHTSA's initial determination. NHTSA is, 
therefore, unable to address such a request. In addition, while we 
appreciate Alabama's view that NHTSA should provide a general 
authorization for electronic odometer disclosure, the Cost Savings Act 
does not authorize such an approach. The Cost Savings Act established 
odometer disclosure requirements for general application. Alternate 
odometer requirements in individual states are authorized under Section 
408(f)(2), which requires individual state petitions.
    NAAA added that Texas's alternate program could create an 
impediment for out-of-state wholesale purchasers and sellers who are 
unaware of the electronic transfer requirements. These comments fall 
outside of the scope of Texas's petition and do not implicate whether 
or not Texas's proposed alternate requirements are consistent with 
TIMA's purposes. As a practical matter, NAAA would prefer uniform State 
systems and that Texas's alternate electronic odometer program 
accommodate practices in other States. That approach is not consistent 
with TIMA's requirement that NHTSA approve individual State alternate 
mileage disclosure requirements if statutory conditions are met.
    We now turn to whether the Texas program is consistent with TIMA's 
purposes. As explained above, a purpose of TIMA is assuring that the 
form of the odometer disclosure precludes odometer fraud. NHTSA has 
determined that Texas's proposed alternate disclosure requirements 
satisfy this purpose. Under Texas's proposal, the ``title'' will reside 
as an electronic record with the TxDOT, but a hard copy of the title 
will be generated upon request. Texas's proposed system will, 
therefore, continue to have the odometer disclosure on the virtual 
``title'' itself, as required by TIMA, and not as a separate document. 
As to TIMA's requirement that the title contain a space for the 
transferor to disclose the vehicle's mileage, the Texas electronic 
title contains a data element that is required for the transaction, 
which is consistent with the space requirement. Hard copies of these 
electronic titles will provide a separate space for owners to execute a 
proper odometer disclosure in keeping with TIMA and current practice.
    Another purpose of TIMA is to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title and a requirement for 
the title issued by the State. NHTSA has determined that Texas's 
proposed process satisfies this purpose. The proposed on-line title 
transfer process requires disclosure of odometer information before the 
transaction can be completed. One item of odometer information omitted 
from Texas's initial submission was the statement whether the odometer 
reflects the actual mileage or if the actual mileage is unknown, 
commonly referred to as the ``brand.'' See 49 CFR 580.5(e). Texas's 
comments indicate that its electronic disclosure requirements will 
require the transferor to state the brand. Following the disclosure of 
the odometer information and if the transaction is successful, the VTR 
system will retain an electronic title, which includes a record of the 
transaction and the odometer disclosure information. Once the 
transaction is complete, transferors are instructed to mail the 
existing title to the VTR for destruction.\16\
---------------------------------------------------------------------------

    \16\ If the transferor does not return the existing title to 
VTR, the existing title will be invalid once the vehicle transfers 
to the transferee.
---------------------------------------------------------------------------

    Another purpose of TIMA is to prevent alterations of disclosures on 
titles and to preclude counterfeit titles through secure processes. 
VTR's alternate disclosure requirements appear to be as secure as 
current paper titles. Electronic recording of odometer readings and 
disclosures decreases the likelihood of any subsequent odometer 
disclosure being altered by erasures or other methods. As we understand 
Texas's proposal, once the transaction is completed, the VTR system 
stores an electronic version of the title unless the transferee 
requests it.
    Under the VTR system, all subsequent transfers may be performed 
through the on-line process. Each time an on-line transfer occurs, the 
VTR system stores the electronic version of the title, and issues a 
paper title only upon request. Since the title remains in electronic 
form under State care and custody, the likelihood of an individual 
altering, tampering or counterfeiting the title is significantly 
decreased. These electronic records are maintained in a secure 
environment and any attempted alteration would be detected by the 
system. Finally, if a transferee requests a paper title, the VTR will 
issue a paper title that complies with TIMA's requirements.
    Another purpose of TIMA is to create a record of the mileage on 
vehicles and a paper trail. The underlying purposes of this record 
trail are to better inform consumers and provide a mechanism to trace 
odometer tampering and prosecute violators. In NHTSA's view, the 
proposed electronic title transfer system will create a scheme of 
records equivalent to the current ``paper trail'' now assisting law 
enforcement in identifying and prosecuting odometer fraud. Under the 
Texas proposal, creation of a paper trail starts with the establishment 
of the electronic signatures of the parties. The system's procedures 
for validating and authenticating the electronic signature of each 
individual through TOAS and TOAD and the electronic signatures of the 
transferor and transferee are reliable, readily detectable and can 
easily be linked to particular individuals.\17\ Because using an 
electronic signature employs data elements such as the Texas driver 
license or identification card number, driver license or identification 
card audit number, date of birth and last four digits of the 
individual's social security number, the VTR system can validate and 
authenticate such individual electronic signatures. This authentication 
process also allows the VTR system to trace the individuals involved in 
the transaction. Furthermore, Texas's comments indicate that the VTR 
system will enable dealers to retain a paper or electronic copy of all 
odometer disclosures that they issue and receive. The Texas system 
meets the purposes of creating a paper trail since the VTR system will 
have histories of odometer disclosures linked to individuals for each 
title transfer. These electronic records will create an electronic 
equivalent to a paper based system that will be equally valuable to law 
enforcement.
---------------------------------------------------------------------------

    \17\ Electronic signatures are generally valid under applicable 
law. Congress recognized the growing importance of electronic 
signatures in interstate commerce when it enacted the Electronic 
Signatures in Global and National Commerce Act (E-Sign). See Public 
Law 106-229, 114 Stat. 464 (2000). E-Sign established a general rule 
of validity for electronic records and electronic signatures. 15 
U.S.C. 7001. It also encourages the use of electronic signatures in 
commerce, both in private transactions and transactions involving 
the Federal Government. 15 U.S.C. 7031(a).
---------------------------------------------------------------------------

    Finally, TIMA's overall purpose is protecting consumers by assuring 
that they receive valid representations of actual vehicle mileage at 
the time of transfer. Here, Texas's proposed alternate disclosure 
requirements include several characteristics that would assure that 
representations of a vehicle's actual mileage would be as valid as 
those found in current paper title transfers. These characteristics 
include identity and residency authentication, an automatic system 
check of the reported mileage against previously reported mileage, and

[[Page 20930]]

transferee verification of the data reported by the transferor.\18\ In 
addition, by providing rapid access to records of past transfers, the 
scheme proposed by Texas could potentially provide superior deterrence 
to odometer fraud when compared to the current paper title system.
---------------------------------------------------------------------------

    \18\ Further protection is provided by the VTR system itself. 
The system automatically cross references the odometer reading 
entered by the transferor against the odometer reading on the VTR 
system. If the odometer reading entered by the transferor is lower 
than the mileage recorded in the VTR system, the VTR system will 
immediately reject the transaction.
---------------------------------------------------------------------------

    For the foregoing reasons, and upon review of the entire record, 
NHTSA hereby issues a final determination granting Texas's petition for 
requirements that apply in lieu of the Federal requirements adopted 
under section 408(d) of the Cost Savings Act. Other requirements of the 
Cost Savings Act continue to apply in Texas. NHTSA reserves the right 
to rescind this determination in the event that future information 
indicates, in operation, Texas's alternative requirements do not 
satisfy one or more applicable requirements.

    Issued on: April 7, 2010.
David Strickland,
Administrator.
[FR Doc. 2010-8320 Filed 4-21-10; 8:45 am]
BILLING CODE 4910-59-P