[Federal Register Volume 84, Number 191 (Wednesday, October 2, 2019)]
[Rules and Regulations]
[Pages 52664-52704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20360]
[[Page 52663]]
Vol. 84
Wednesday,
No. 191
October 2, 2019
Part III
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Part 580
Odometer Disclosure Requirements; Final Rule
Federal Register / Vol. 84 , No. 191 / Wednesday, October 2, 2019 /
Rules and Regulations
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 580
[Docket No. NHTSA-2019-0089]
RIN 2127-AL39
Odometer Disclosure Requirements
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule.
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SUMMARY: This final rule is issued to fulfill a requirement in the
Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21) that
NHTSA establish regulations permitting states to adopt schemes that
allow electronic odometer disclosure statements in conjunction with
electronic titling systems associated with the transfer of interests in
motor vehicles. Amendments in this final rule allow odometer
disclosures in an electronic medium while maintaining and protecting
the existing system(s) ensuring accurate odometer disclosures and aid
law enforcement in prosecuting odometer fraud. To accomplish this goal,
the final rule amends prior regulations governing transactions made on
paper titles and similar documents allowing odometer disclosures to be
made in a purely electronic environment or through using paper
documents that are scanned and converted into electronic form and
stored in a state data system. This final rule also adds new sections
containing specific additional requirements only applying to electronic
disclosures to ensure the secure creation and maintenance of electronic
records. NHTSA is also amending the mileage disclosure exemption to
vehicles that are 20 years old or older.
DATES:
Effective date: This rule is effective December 31, 2019.
Petitions for reconsideration: Petitions for reconsideration of
this final rule must be received not later than November 18, 2019.
Incorporation by Reference: The incorporation by reference of
certain publications listed in the standard is approved by the Director
of the Federal Register as of December 31, 2019.
ADDRESSES: Petitions for reconsideration of this final rule must refer
to the docket and notice number set forth above and be submitted to the
Administrator, National Highway Traffic Safety Administration, 1200 New
Jersey Avenue SE, Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
For policy and technical issues: Mr. David Sparks, Director, Office
of Odometer Fraud, National Highway Traffic Safety Administration, 1200
New Jersey Avenue SE, Washington, DC 20590. Telephone: (202) 366-5953.
Email: [email protected].
For legal issues: Mr. Thomas Healy, Office of the Chief Counsel,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue
SE, Washington, DC 20590. Telephone: (202) 366-7161.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Summary of Requirements of the Final Rule
B. Costs and Benefits
II. Background
A. MAP-21
B. FAST Act Amendments
C. The Cost Savings Act, the Truth in Mileage Act and Subsequent
Amendments
1. The Cost Savings Act
2. The Truth in Mileage Act
3. Amendments Following the Truth in Mileage Act and the 1994
Recodification of the Cost Savings Act
D. Overview of NHTSA's Odometer Disclosure Regulations
E. Previous State Petitions for Approval of Electronic Odometer
Disclosure Schemes
F. Notice of Proposed Rulemaking
G. Summary of Comments to the NPRM
1. Scope of the Final Rule
2. Definitions
3. Identity of Parties to a Motor Vehicle Transfer and Security
of Signatures
4. Document or Record Security and System Security
5. Odometer Disclosures
6. Requirements for Electronic Transactions
7. Leased Vehicles
8. Document Retention
9. Power of Attorney
10. Exemptions
11. Miscellaneous Amendments
12. Other Comments
III. Final Rule and Response to Comments
A. Summary of the Final Rule
B. Supplemental Notice of Proposed Rulemaking
C. Scope of the Final Rule
D. Definitions
E. Identity of Parties to a Motor Vehicle Transfer and Security
of Signatures
F. Document or Record Security and System Security
G. Odometer Disclosures
H. Requirements for Electronic Transactions
I. Leased Vehicles
J. Document Retention
K. Power of Attorney
L. Exemptions
M. Miscellaneous Amendments
N. Other Comments
O. New Technologies
IV. Effective Date
V. Costs and Benefits
VI. Regulatory Notices and Analyses
I. Executive Summary
A. Summary of Requirements of the Final Rule
On Friday, March 25, 2016, NHTSA published a notice of proposed
rulemaking (NPRM) specifying potential amendments to part 580 allowing
states and other jurisdictions to establish electronic odometer
disclosure schemes allowing odometer disclosures required by the Motor
Vehicle Information and Cost Savings Act (Cost Savings Act) to be made
electronically (81 FR 16107). The odometer disclosure laws and
regulations protect purchasers of motor vehicles from odometer fraud.
See Public Law 92-513, 86 Stat. 947, 961-63 (1972).
The NPRM discussed the Moving Ahead for Progress in the 21st
Century Act of 2012's (MAP-21, or Pub. L. 112-141) direction that NHTSA
promulgate regulations permitting written odometer disclosures and
statements to be made electronically. To provide background and context
for the proposed rules, the NPRM examined the history and development
of existing odometer statutes and regulations from their inception in
the Cost Savings Act of 1972 (Pub. L. 92-513, 86 Stat. 947, 961-63
(1972)) through the Truth in Mileage Act (TIMA) and subsequent
amendments.\1\ The NPRM also noted that Sec. 24111 of the Fixing
America's Surface Transportation Act of 2015 (FAST Act, or Pub. L. 114-
94), allows states to adopt electronic odometer disclosure systems
without prior approval of the Secretary (``the Secretary'') of the
Department of Transportation until the effective date of the final rule
addressed by this notice. Id.
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\1\ Public Law 100-561 sec. 40, 102 Stat. 2805, 2817 (1988)
added Section 408(d)(2)(C) allowing use of secure power of attorney.
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 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). The Cost Savings Act, as amended by TIMA, was
repealed in 1994 and reenacted and recodified without substantive
change. Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387
(1994).
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The salient provisions of the odometer disclosure regulations, 49
CFR 580.5, 580.7 and 580.13, were described in the NPRM, including the
requirement that odometer disclosures must be made on the title
(Section 580.5(c)), the attestation made when executing the
[[Page 52665]]
disclosure (Sec. 580.5(e)), as well as security features incorporated
into titles and other documents to guard against tampering and
counterfeiting (Section 580.4). Recordkeeping requirements, which are
critical for effective detection and prosecution of odometer fraud,
were also addressed. As the NPRM proposed modifying exemptions from
disclosure in Sec. 580.17, the existing provisions of this section
were also described.
Because of their instructive value, the NPRM examined the petition
process by which states may seek approval of alternative odometer
disclosure schemes (Sec. 580.11) and petitions from Virginia,
Wisconsin, Florida, New York, and Texas seeking approval of electronic
disclosure systems. The NPRM observed such systems must minimize or
eliminate disclosures made on paper, provide adequate means for
verifying identities, link or merge disclosures with the record title,
and preclude duplicate electronic and paper titles. Additionally, the
NPRM stated electronic odometer disclosure systems must meet special
conditions involved in vehicle leasing, provide for adequate
recordkeeping and record retrieval, and accommodate interstate
transactions between electronic and paper title jurisdictions.
The NPRM observed the purpose of the odometer disclosure provisions
of the Cost Savings Act, as amended, is to protect consumers by
ensuring they receive valid representations of a vehicle's actual
mileage at the time of transfer. The Agency noted an additional purpose
of creating a system of records and a paper trail to facilitate
detection and prosecution of odometer fraud. Proposals set forth in the
NPRM sought to preserve these attributes while allowing jurisdictions
maximum flexibility in developing and deploying electronic titling and
odometer disclosure schemes. The NPRM proposed changing part 580 to
recognize physical and electronic documents by amending Sec. 580.1 to
add the option of electronic disclosures; Sec. 580.3 to add new
definitions and amend existing definitions to accommodate physical and
electronic filings; Sec. 580.4 to clarify separate requirements for
the security of physical disclosures and electronic disclosures; Sec.
580.5 to clarify methods of disclosure for physical and electronic
systems; Sec. 580.7 to add provisions allowing for the option of
electronic disclosures for leased motor vehicles; Sec. 580.8 to
include electronic copies among forms of disclosures that must be
retained and general requirements for that retention; Sec. Sec. 580.13
and 580.14 to allow use of a power of attorney to address interstate
transfers and added a new Sec. 580.6 (previously reserved), which
would contain unique requirements for electronic odometer disclosures.
Other amendments proposed in the NPRM sought to correct a typographical
error, update NHTSA's address, strike obsolete text in Sec. 580.12 and
extend the disclosure exemption in Sec. 580.17 from 10 years to 25
years.
After careful consideration of all available information, including
public comments submitted in response to the NPRM, the agency decided
to adopt amendments proposed by the NPRM for Sec. Sec. 580.1, 580.10,
580.11 and 580.12 without substantive change. Remaining amendments in
this final rule differ from proposals in the NPRM. Some of these
changes are minor. For example, the final rule replaces the word
``his'' with ``their'' and makes other modifications for gender
neutrality. Similarly, to enhance clarity, the final rule establishes
as definition of ``jurisdiction'' that encompasses states and
territories and replaces ``state'' wherever formerly used in part 580
with ``jurisdiction.'' This final rule also adopts additional
amendments to enhance clarity and accuracy. Section 580.2 is amended to
better describe the status of a vehicle upon termination of a lease,
and the term ``purchasers'' has been replaced with the more accurate
and less restrictive term ``transferees.'' Consistent with the former
amendment, the term ``dealer'' in Sec. 508.13(g) has been changed to
``transferee'' to reflect that those receiving ownership may include
persons or entities who are not dealers.
This final rule also implements significant changes to proposals
contained in the NPRM. Broad definitions of physical documents and
electronic documents NHTSA proposed have been discarded. Commenters
rightly observed these proposed definitions were not apt. The final
rule therefore contains new definitions for ``Access,'' ``Electronic
Power of Attorney,'' ``Electronic Title,'' ``Jurisdiction,'' and
``Printed Name,'' and revises ``Original Power of Attorney,'' ``Sign or
Signature,'' and ``Transferor.'' These more precise definitions are
applied throughout part 580 to facilitate transactions with physical
and electronic titles and powers of attorney. In contrast to the NPRM,
which did not provide for an electronic power of attorney but allowed
electronic reassignments, this final rule authorizes both under certain
circumstances. The definition of ``Sign or Signature'' has been
modified from our earlier proposal in that requirements for an
electronic signature require a National Institute of Standards (NIST)
level 2 authentication system rather than NIST Level 3. The final
rule's requirements for electronic titles and electronic powers of
attorney also diverge from the NPRM in allowing authorized
modifications to electronic records. In addition, the final rule more
clearly recognizes electronic titles and odometer disclosures may take
many forms, from scanned copies of paper documents to database entries.
Recognizing technologies such as ``pen pads'' may be used in electronic
titling and odometer disclosure systems and paper documents may, in
some jurisdictions, be employed in an electronic odometer disclosure
system, the final rule removes the NPRM's proposal to delete printed
names from electronic transactions. The final rule also modifies
requirements for scanning documents to allow document conversion in
black and white at a resolution of 200 dot per inch (dpi).
Recordkeeping requirements of Sec. Sec. 580.8 and 580.9 are changed
from our earlier proposal to allow more options for transferees and to
streamline the proposed rules for auctions. NHTSA has now adopted
provisions allowing electronic and paper powers of attorney when a
title is unavailable to a transferor because the title is lost,
physically held by a lienholder, electronically controlled by a
lienholder, or when an electronic title is inaccessible. Our NPRM also
proposed changing the exemption from mileage disclosure in Sec. 580.17
for cars 10 years old or older to 25 years old or older. The final rule
adopts an exemption for cars 20 years old or older and explicitly sets
out how this modified exemption will be applied.
B. Costs and Benefits
As discussed in Section V of this notice, the agency only performed
a detailed cost benefit analysis for the exemption amendments of this
final rule. With the exception changing the exemption from mileage
disclosure from 10 to 20 years this final rule imposes no mandatory
requirements. Amendments to part 580 simply allow jurisdictions the
option of adopting electronic title and odometer disclosure systems
without seeking prior approval from NHTSA. To the extent provisions in
this final rule may affect existing electronic title and odometer
disclosure systems in the small number of jurisdictions with such
schemes, the agency believes provisions of this final rule are
sufficiently flexible requiring little or no change. Since the FAST
Act's temporary suspension of the requirement that states must petition
NHTSA for
[[Page 52666]]
approval of alternative electronic odometer disclosure schemes ends on
the effective date of this final rule, states seeking to adopt such
schemes after that date must either comply with the provisions of this
final rule or petition the agency for approval of alternative
procedures.
To the limited extent this final rule impacts states and other
jurisdictions with electronic titles systems, the agency believes that
there is the potential for significant cost savings to be realized
through issuance of this final rule. These savings would first be
manifested through avoidance of legal and administrative costs to
prepare and submit petitions to NHTSA seeking approval of electronic
title systems. Moreover, by establishing uniform rules for electronic
title systems, this final rule facilitates adoption of electronic
disclosures and titles and the use of these mechanisms in vehicle
transactions. Currently, NHTSA estimates that there are at least 40
million odometer disclosures made every year in the United States.
Since the agency believes that electronic disclosure will be less
costly than paper disclosures, even a minor cost savings per disclosure
could lead to large societal savings. However, the agency does not have
any data on the extent to which this rule will incentivize their
existing practices. Certainly, this rule will make it far easier to
adopt electronic disclosures as states will no longer need to petition
NHTSA if the requirements of this final rule are met. It is reasonable,
then, to expect that more states will adopt this practice, but the
agency does not now have sufficient data to determine how this general
expectation will translate into quantifiable cost savings.
The final rule's modification of the vehicle age-based exemption
from odometer disclosure will impose costs and produce benefits. The
total cost of the change to the exemption in this final rule is
estimated to be from the minimum of $0.7 million in 2020 to the maximum
of $5.4 million in 2029 and later. If the rule can deter 5 percent of
rollbacks from affected vehicles the rule would eliminate $1.5 million
in annual consumer losses in 2020 and $7.5 million in such losses from
2029 forward.
II. Background and Summary of Final Rule
A. MAP-21
This document is being issued pursuant to the Moving Ahead for
Progress in the 21st Century Act of 2012 (MAP-21, or Pub. L. 112-141),
which amended Section 32705 of Title 49, United States Code. The
amendments required the Secretary to prescribe regulations permitting
any written disclosures or notices and related matters to be provided
electronically not later than 18 months after the date of enactment of
the Motor Vehicle and Highway Safety Improvement Act of 2012. Section
31205, 126 Stat. 761 (2012).
B. FAST Act Amendments
Section 24111 of the Fixing America's Surface Transportation Act of
2015 (FAST Act, or Pub. L. 114-94), signed into law December 4, 2015,
allows states to adopt electronic odometer disclosure systems without
prior approval of the Secretary. Any such system must comply with
applicable state and federal laws regarding electronic signatures under
15 U.S.C. 7001 et seq., meet requirements of 49 U.S.C. 32705 and
provide for ``appropriate authentication and security measures,''
Public Law 114-94 section 24111. States may only adopt electronic
odometer systems without prior approval of the Secretary until the
effective date of rules proposed in this notice. Id.
In providing states with the opportunity to implement electronic
odometer disclosure systems until the effective date of this final
rule, FAST Act amendments do not alter existing statutory odometer
disclosure requirements or their intent. Effective odometer disclosure
systems are essential to protecting consumers from odometer fraud and
must reduce or eliminate opportunities for such fraud to the greatest
practicable extent. Federal and state governments have an interest in
preventing such fraud.
This final rule and NHTSA's prior responses to state petitions for
approval of alternative disclosure schemes (discussed below) contain
guidance on potential strengths and weaknesses of electronic odometer
disclosure schemes.
C. The Cost Savings Act, the Truth in Mileage Act and Subsequent
Amendments
1. The Cost Savings Act
In 1972, Congress enacted the Motor Vehicle Information and Cost
Savings Act (Cost Savings Act) to, among other things, protect
purchasers of motor vehicles from odometer fraud. See Public Law 92-
513, 86 Stat. 947, 961-63 (1972).
To assist purchasers in knowing the true mileage of a motor
vehicle, Section 408 of the Cost Savings Act required the transferor of
a motor vehicle to provide written disclosure to the transferee at the
time of the transfer of ownership of the vehicle. See Public Law 92-
513, 408, 86 Stat. 947 (1972). Section 408 required the Secretary to
issue rules requiring the transferor to provide a written disclosure to
the transferee in connection with the transfer of the vehicle. 86 Stat.
962-63. The written disclosure was to include the cumulative mileage
registered on the odometer, or disclose the actual mileage is unknown,
if the odometer reading is known to the transferor to be different from
the number of miles the vehicle has traveled. The rules were to
prescribe the way information is disclosed under this section and in
which such information is retained. Id. Section 408 further stated if
any transferor violated any rules under this section or knowingly gave
a false statement to a transferee in making any disclosure required by
such rules is a violation. Id. The Cost Savings Act also prohibited
disconnecting, resetting, or altering motor vehicle odometers. Id. The
statute subjected violators to civil and criminal penalties and
provided for federal injunctive relief, state enforcement, and a
private right of action.
Despite these protections, there were shortcomings in odometer
provisions of the Cost Savings Act. In some states, the odometer
disclosure statement was not on the title; instead, it was a separate
document that could easily be altered or discarded and did not travel
with the title. Titles were not on tamper-proof paper, and mileage
disclosures could be easily altered. Problems were compounded by title
washing through jurisdictions with ineffective controls. In addition,
there were considerable misstatements of mileage on vehicles that had
formerly been leased vehicles, as well as on used vehicles sold at
wholesale auctions.
2. The Truth in Mileage Act
In 1986, Congress enacted the Truth in Mileage Act (TIMA), which
added provisions to odometer provisions of the Cost Savings Act. See
Public Law 99-579, 100 Stat. 3309 (1986). TIMA amendments expanded and
strengthened Section 408 of the Cost Savings Act.
Among other requirements, TIMA precluded the licensing of vehicles
unless several requirements were met by the transferee and transferor.
Titles must be printed by a secure printing process or other secure
process and must indicate the mileage and contain space for the
transferee to disclose the mileage in a subsequent transfer. The
transferee, when applying for a title, is required to provide the
transferor's (seller's) title, and if that title contains a space for
the
[[Page 52667]]
transferor to disclose the vehicle's mileage, that information must be
included, and the statement must be signed and dated by the transferor.
As to lease vehicles, TIMA stated NHTSA must publish rules
requiring the lessor of vehicles to advise its lessee(s) that the
lessee is required by law to disclose the vehicle's mileage to the
lessor upon the lessor's transfer of ownership of the vehicle.
Additionally, TIMA required auction companies establish and maintain
records on vehicles sold at the auction, including the name of the most
recent owner of the vehicle, the name of the buyer, the vehicle
identification number, and the odometer reading on the date the auction
took possession of the vehicle.
As amended by TIMA, section 408(f) (1) of the Cost Savings Act
provided its provisions on mileage statements for licensing of vehicles
(and rules involving leased vehicles) apply in a state, unless the
state has in effect alternate motor vehicle mileage disclosure
requirements approved by the Secretary. Section 408(f)(2) stated
``[t]he 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.''
3. Amendments Following the Truth in Mileage Act and the 1994
Recodification of the Cost Savings Act
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 Sec. 408(d)(2)(C). In 1990,
Congress amended Sec. 408(d)(2)(C) of the Cost Savings Act. The
amendment addressed retention of powers of attorneys by states and
provided the rule adopted by the Secretary not require 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).
Because of the 1994 recodification of various laws pertaining to
the DOT, the Cost Savings Act, as amended by TIMA, was repealed,
reenacted, and recodified without substantive change. See Public Law
103-272, 108 Stat. 745, 1048-1056, 1379, 1387 (1994). The statute is
now codified at 49 U.S.C. 32705 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). Provisions pertaining to
approval of state alternate motor vehicle mileage disclosure
requirements were recodified at 49 U.S.C. 32705(d).
D. Overview of NHTSA's Odometer Disclosure Regulations
The implementing regulations for the odometer provisions of the
Cost Savings Act, as amended, are found in part 580 of title 49 of the
Code of Federal Regulations (CFR). These regulations establish minimum
requirements for odometer disclosure, the form of certain documents
employed in disclosures, and the security of title documents and power
of attorney forms. The regulations also set rules for transactions
involving leased vehicles, set recordkeeping requirements including
those for auctions, and authorize the use of powers of attorney in
limited circumstances. Additionally, part 580 contains provisions
exempting certain classes of vehicles from disclosure regulations and
provides a petition process by which a state may obtain approval of
alternate disclosure requirements. The following paragraphs summarize
important aspects of the regulations.
Odometer disclosures must be made on a secure title, reassignment
document, or power of attorney when a vehicle is transferred to a new
owner. Section 580.5(c) requires a transferor to sign, and to print
his/her name on an odometer disclosure statement with the following
information: (1) The odometer reading at the time of transfer (not to
include tenths of miles); (2) the date of transfer; (3) the
transferor's name and current address; (4) the transferee's name and
current address; and (5) the identity of the vehicle, including its
make, model, year, body type, and VIN. The transferor must also, under
Sec. 580.5(e), certify whether the odometer reading reflects the
vehicle's actual mileage, disclose whether the odometer reading
reflects mileage in excess of the odometer's mechanical limit or, if
the odometer does not reflect the actual mileage, must state the
odometer reading should not be relied on. The transferee must
acknowledge the reading by signing the statement. Each title, at the
time it is issued to the transferee, must contain the mileage disclosed
by the transferor.
To ensure vehicles subject to leases of four months or more have
accurate odometer readings executed on titles at the time of transfer,
Sec. 580.7(a) requires lessors to provide written notice to the lessee
of the lessee's obligation to disclose the mileage of the leased
vehicle and penalties for failure to disclose the information. Before a
change in ownership of a leased vehicle, lessees are required by Sec.
580.7(b) to provide disclosures comparable to those required by Sec.
580.5(c) and (e), noted above, to the lessor along with the date the
lessor notified the lessee of disclosure requirements. Additionally,
the lessor must state the date the lessor received the lessee's
completed disclosure statement and must sign it. Under Sec. 580.7(d) a
lessor transferring ownership of a vehicle (without obtaining
possession) may indicate the mileage disclosed by the lessee on the
vehicle's title unless the lessor has reason to believe the lessee's
disclosure is inaccurate.
When a title is physically held by a lienholder or has been lost,
Sec. 580.13(a) allows a transferor to give the transferee a power of
attorney to execute the mileage disclosure on the title once it is
obtained by the transferee. Section 580.13(b) and (d) provide that the
transferor must disclose information identical to that required by
Sec. 580.5(c) and (e) on part A of the secure power of attorney form.
The transferee is required to sign the power of attorney form part A
and print his/her name. Id. In turn, Sec. 580.13(f) requires the
transferee, upon receipt of the transferor's title, to make on the
title exactly the mileage disclosure as disclosed by the transferor on
the power of attorney.
After part A of the power of attorney form has been used, part B
may be executed when a vehicle addressed on part A is resold. Part B of
the secure power of attorney form allows a subsequent transferee to
give a power of attorney to his transferor to review the title and any
reassignment documents for mileage discrepancies, and if no
discrepancies are found, to acknowledge disclosure on the title, while
maintaining the integrity of the first seller's disclosure. The
disclosure required to be made by the transferor to the transferee for
this transaction on part B of the power of attorney form tracks
information required to be made by the transferor to the transferee on
the title when ownership of a vehicle is transferred on a title under
49 CFR 580.5. Among other things, the power of attorney must contain a
space for the transferor to disclose the mileage to the transferee and
sign and date the form, and a space for the transferee to sign and date
the form.
To ensure disclosures made through a power of attorney are
accurate, Sec. 580.15 requires the person exercising the power of
attorney to certify, on part C of the form, that disclosures made on a
title or
[[Page 52668]]
reassignment document on behalf of the original seller are identical to
those found on part A of the power of attorney. This section also
requires a certification, when part B is used, that the mileage
disclosed and acknowledged under part B is greater than the mileage
disclosed in part A.
Titles, reassignment documents, and the power of attorney form must
be protected against counterfeiting and tampering by a secure printing
process or other secure process (Sec. 580.4). These titles,
reassignment documents, and powers of attorney must contain a statement
referring to federal odometer law and a warning that failure to
complete the form or providing false information may result in fines or
imprisonment. See Sec. 580.5(d). For a leased vehicle, the lessor is
obligated to provide the lessee with written notice of the obligation
to make a mileage disclosure, and that notice must contain the same
warnings (Sec. 580.7(a)). Except in the limited context of the proper
use of the power of attorney forms, no person shall sign an odometer
disclosure statement as the transferor and transferee in the same
transaction (Sec. 580.5(h)).
Part 580 establishes minimum requirements for record retention,
ensuring a paper trail sufficient to support detection and prosecution
of odometer fraud. Section 580.8(a) requires motor vehicle dealers and
distributors, who are required to issue an odometer disclosure, to
retain copies of each odometer statement they issue and receive for
five years. Lessors of leased vehicles must retain the odometer
statement they receive from their lessee for five years from the date
they transfer ownership of the leased vehicle (Sec. 580.8(b)). If a
power of attorney authorized by Sec. Sec. 580.13 and/or 580.14 has
been used, dealers must retain copies of the document for five years
(Sec. 580.8(c)). Section 580.9 requires auction companies to retain
the name of the most recent owner on the date the auction took
possession of the motor vehicle, the name of the buyer, the vehicle
identification number, and the odometer reading on the date the auction
company took possession of the motor vehicle for five years from the
date of sale. States are required, under Sec. 580.13(f) to retain the
original copy of the power of attorney authorized by Sec. 580.13(a) or
(b) and the title for a period of three years or a time period equal to
the state's titling record retention period, whichever is shorter.
Other sections of part 580 establish a petition process by which
states may seek assistance in revising their odometer laws (Sec.
580.10), may seek approval of alternative odometer disclosure schemes
(Sec. 580.11), and establish exemptions from the disclosure
requirements of Sec. Sec. 580.5 and 580.7 (Sec. 580.17). Exemptions
in 580.17 apply to transfers or leases for: (1) Vehicles with a Gross
Vehicle Weight Rating (GVWR) over 16,000 pounds; (2) vehicles that are
not self-propelled; (3) vehicles manufactured in a model year beginning
10 years before January 1 of the calendar year in which the transfer
occurs; (4) certain vehicles sold by the manufacturer to any agency of
the United States; and (5) a new vehicle prior to its first transfer
for purposes other than resale.
E. Previous State Petitions for Approval of Electronic Odometer
Disclosure Schemes
The Cost Savings Act, as amended by TIMA in 1986, contains a
specific provision on approval of state alternative odometer disclosure
programs. Subsection 408(f)(2) of the Cost Savings Act (now recodified
at 49 U.S.C. 32705(d)) provides NHTSA shall approve alternate motor
vehicle mileage disclosure requirements submitted by a state unless
NHTSA determines 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 Costs Savings Act were recodified to 49
U.S.C. 32705(b) and (c).)
Virginia, Wisconsin, Florida, New York, Texas, and Arizona filed
petitions with NHTSA seeking approval of electronic alternative
odometer programs under 49 U.S.C. 32705(d)). NHTSA has approved, in
whole or in part, five of these six petitions and not taken final
action on the Arizona petition, which was made moot by the passage of
section 24111 of the FAST Act and Arizona's adoption of a disclosure
system under that provision. Review of the systems proposed in these
petitions and the terms of NHTSA's actions in response to them,
illustrates the variations in schemes between jurisdictions and the
concerns raised by electronic odometer disclosure.
Petitions filed by three states, Virginia, Texas, and Wisconsin,
shared certain characteristics. In each case, the proposed alternative
odometer disclosure schemes applied only to intrastate transactions.
Each of the three proposals also relied on multi-factor authentication
to ensure the identity of persons executing the odometer disclosures.
All three proposals relied on substituting electronic versions of the
paper odometer disclosure form by maintaining the electronic form on
state-controlled systems. These systems also held data elements
comprising the electronic title.
Virginia petitioned NHTSA in December 2006 seeking approval of
electronic odometer disclosure for intrastate transfers of vehicles not
subject to liens. Virginia proposed using a paperless system where
users would enter the information and attestations found on paper
odometer disclosures into a state electronic system. The petition
stated unique personal identification numbers (PIN) and unique customer
numbers sent by conventional U.S. mail would be used with the
customer's date of birth (DOB) to create a verified account and
signature. Dealer users would provide lists of employees authorized to
make disclosures, and these individuals would get PINs by conventional
mail to verify their identity. In dealer sales, the employee PIN and a
dealer number would be used. Disclosures would be made in the same way
a paper disclosure would be made. The seller or transferor would fill
out an electronic form identical to the paper form and sign it
electronically. The buyer or transferee would examine the disclosure
and either accept it or reject it. Once accepted, the disclosure would
be linked to the electronic title, and the transferor would be
instructed to mail any paper title to the state.
A June 2008 petition by Texas sought approval of alternative
odometer disclosure requirements for intrastate transactions between
residents transferring vehicles not subject to liens. Texas proposed to
eliminate paper titles (except as requested), create electronic titles
and require in-state vehicle transfers to be made electronically.
Users, who would have to be Texas residents holding a valid state
identification credential, would be verified by matching four personal
data elements and two forms of identification against a state database.
Odometer mileage disclosures would be made by requiring both parties to
separately log into a secure website, make required disclosures and
verification of the mileage, and accept or reject the transaction. The
seller or transferor would then mail the paper title to the state for
destruction. The title and odometer disclosure would remain as an
electronic record, and the transferee could receive a secure paper
title on request.
Wisconsin filed a petition in September 2009 proposing an
electronic odometer disclosure scheme limited to intrastate
transactions where at least one party would be a motor vehicle dealer.
Identity verification would be based on customers entering a minimum of
three personal identifiers--name, address,
[[Page 52669]]
date of birth, product number, Driver License/ID number, and a Federal
Employer Identification Number or partial Social Security Number--in
the state system. Once verified, the user could begin the title
transaction. As with the Virginia and Texas petitions, Wisconsin's
proposal linked electronic odometer disclosures to the title record in
the state's database. Similarly, a title could not be transferred
unless the electronic odometer disclosure had been properly completed.
Again, if a paper title was needed, the Wisconsin DMV would print it on
secure paper with the odometer disclosure statement in the proper
location and format under existing rules.
Finding that the Virginia scheme would properly verify user
identities, provide security equivalent to the paper system, and create
an adequate system of records, NHTSA granted Virginia's request on
January 7, 2009 (74 FR 643). NHTSA granted the Texas petition on April
22, 2010 (75 FR 20925) after that state clarified the Texas system
allowed transferees to obtain a paper copy of the title meeting TIMA,
required dealers to retain copies of odometer disclosures, and required
disclosure of the brand (the brand states whether the odometer reflects
the actual mileage, reflects mileage in excess of the designated
odometer limit or differs from the actual mileage and is not reliable.)
Id. at 20928. NHTSA also noted since Texas would require persons with
an electronic title to submit any paper titles to Texas for
destruction, the proposal would prevent potential mischief caused by
duplicate titles. Id. at 20929. In a final determination published on
January 10, 2011, 76 FR 1367, the agency approved the Wisconsin
proposal based on its user verification scheme, the linkage of a
properly executed odometer disclosure to the electronic title, and the
existence of safeguards preventing the simultaneous existence of an
electronic and paper title.
Petitions filed by two other states, Florida and New York, differed
from other petitions as systems proposed relied, to differing degrees,
on the use of paper forms for executing the odometer disclosures. These
paper forms, which were not titles, reassignment documents or a power
of attorney specified under part 580, were employed to transmit
information either before entry into an electronic system or to
facilitate interstate transactions. Because paper documents are
employed in conjunction with an electronic system, these odometer
disclosure schemes can be referred to as ``hybrid'' systems because of
their reliance on paper and electronic information storage.
In December 2009, Florida proposed a hybrid electronic disclosure
system in December 2009 wherein the actual data entry into the state
system would be made by authorized tag agents using data terminals. For
private sales, authorized tag agents required transferors and
transferees to fill out odometer disclosures on paper forms. These
paper forms would be executed by both parties at the tag agent's
facility after each had verified their identity to the tag agent. The
tag agent would enter the data into Florida's system and create an
electronic title for the transferee, or upon request, provide the
transferee with a paper title. For dealer transactions, Florida
proposed transferors with e-title would complete a secure reassignment
form with odometer disclosure. When the dealer transferred that vehicle
to another transferee, both parties would complete another secure
reassignment form with an odometer disclosure. The dealer would take
both secure reassignment forms to a tag agency. The tag agent would
enter the disclosures, and the data needed to create an electronic
title or provide the transferor with the option of obtaining a paper
title. Similarly, a lessee of a leased vehicle with an e-title would
bring the vehicle to a dealership and make the odometer disclosure on a
secure physical document. The lessor would then sign a secure physical
power of attorney to the dealer authorizing the dealer to execute the
odometer disclosure on its behalf. The dealer would then sign a
physical secure reassignment form agreeing with the odometer
disclosure. When the dealer sold the vehicle to another buyer, the
dealer would take the various physical documents (bill of sale,
reassignment document, and power of attorney) to the tag agency, where
the tag agent would enter the required data and either create an
electronic title in Florida's system or have a paper title provided for
the buyer.
New York filed a petition with NHTSA in November 2010, seeking
conversion of the existing paper process for dealer transactions to an
electronic one. A transferor's odometer disclosure would be made on the
title and then recorded in New York's system by a specific dealer
employee whose identity had been verified. If that dealer sold a
vehicle to another licensed New York dealer, the selling dealer would
enter the current odometer reading, vehicle and seller and purchaser
information. The purchasing dealer would subsequently sign on, review
the selling dealer's odometer disclosure, and other data and accept or
reject the transaction. Subsequent New York dealer transfers would be
recorded in the same manner.
New York proposed that when a vehicle owned by a New York dealer is
sold to a retail purchaser, salvage dealer, out-of-state buyer, or
other non-New York dealer purchaser, the selling dealer would access
its system, enter odometer and other information, including the seller
and purchaser. A two-part sales receipt/odometer statement would be
created, and if correct, would be accepted by the buyer. The dealer
would then print a two-part sales receipt with a disclosure statement
on each part. The dealer would retain one part, and the purchaser would
be given the other, along with the original title acquired by the
dealer upon vehicle purchase.
NHTSA granted the Florida petition in part and denied it in part,
approving provisions for private party transactions but denying
proposed terms for dealer and leased vehicle transactions. 77 FR 36935
(June 20, 2012). Among other things, NHTSA observed dealer transactions
relied on odometer disclosures being made on documents other than the
title itself. This, in the agency's view, is inconsistent with TIMA's
command that disclosures be made on the title and not on a separate
document. Further, the Florida dealer transaction scheme allowed
issuance of new registrations after submission of a disclosure
statement on a physical reassignment document rather than on the title
itself, thereby violating the statutory requirement that a title with
an odometer statement must be submitted prior to registering the
vehicle. Florida's proposed requirements for leased vehicles were
denied on similar grounds because of the numerous times disclosures had
to be made on documents other than the title that did not meet security
and content thresholds. Finally, the use of a power of attorney, where
the lessor had access to the title, was inconsistent with TIMA.
NHTSA's initial determination denied New York's petition because it
used a non-secure receipt for odometer disclosure in transfers between
New York dealers and out-of-state buyers and was, therefore,
inconsistent with federal odometer law. 76 FR 65487, 65491 (Oct. 21,
2011). New York subsequently amended its proposal by replacing the non-
secure document with a secure state-issued paper, New York State MV-50
(Retail Certificate of Sale) form. The result of this change was a
consumer purchasing a vehicle from a dealer would then receive the
original title and odometer statement executed by the owner, who sold
the vehicle to the dealer, and the secure MV-50 form with
[[Page 52670]]
an odometer disclosure. Additionally, the mileage disclosed at the time
of the sale to the dealer and the mileage disclosed at the time the
dealer sold the vehicle to the subsequent retail purchaser would be
recorded in New York's system and available for viewing through a web
portal. The agency's final determination, 77 FR 50381 (Aug. 12, 2012),
granted the New York petition as amended. NHTSA found the employment of
the secure state-issued and numbered MV-50 form, in conjunction with
the odometer disclosure on the original seller's title and the
recording of these disclosures in New York's electronic system, met the
purposes of TIMA.
Processing foregoing petitions illuminated concerns relevant to
this final rule. Any electronic odometer disclosure system must follow
TIMA's command that odometer disclosures must be made on the title
itself, the electronic equivalent of that title, or a selectively
narrow set of tightly controlled secure documents. While jurisdictions
should be accorded a degree of flexibility in designing and executing
electronic titling and odometer disclosure schemes, an electronic
odometer disclosure system should minimize or eliminate odometer
disclosures on documents other than the title. Other concerns include
methods of transmitting secure paper documents, the means for verifying
the identity of transferors and transferees, the potential for the
simultaneous existence of paper and electronic titles and the problems
posed by interstate transactions between states with traditional and
electric systems.
NHTSA's experience with petitions filed by Virginia, Texas,
Florida, New York, and others demonstrates states choose to create a
paperless system where all parties to a transaction make direct entries
into the system or may employ a ``hybrid'' scheme where paper forms are
employed as part of the process. As discussed below, some commenters
responding to the NPRM believed amendments proposed by NHTSA did not
adequately address the characteristics of such hybrid systems. An
additional concern raised by commenters, particularly states that had
previously had alternative odometer disclosure systems approved through
the petition process, was the applicability of provisions in the final
rule to those systems. The agency believes provisions of this final
rule are sufficiently flexible to minimize potential conflicts with
terms of our prior approvals of alternative odometer disclosure
schemes.
F. Notice of Proposed Rulemaking
The NPRM was published in the Federal Register on March 25, 2016
(81 FR 16107). This notice explained the Moving Ahead for Progress in
the 21st Century Act of 2012 (MAP-21, or Pub. L. 112-141) directed
NHTSA to prescribe regulations permitting any written odometer
disclosures or notices to be provided electronically. See section
31205, 126 Stat. 761 (2012). The proposed amendments sought to allow
odometer disclosures in an electronic medium while maintaining accurate
odometer disclosures and aiding law enforcement in prosecuting odometer
fraud. To accomplish this end, the proposal addressed electronic
signatures and identity verification, security concerns, record
retention, leased vehicle transfers, and interstate transactions
between jurisdictions with electronic and paper titles. The NPRM
proposed modifying odometer disclosure exemptions for transfers of ten
year old vehicles to transactions involving 25 year old vehicles. Other
proposed amendments addressed restructuring of part 580, corrections to
typographical errors and updating NHTSA's address.
Although Congress had directed that NHTSA promulgate regulations
allowing electronic odometer disclosures and, through the FAST Act
amendment discussed above, facilitated state adoption of electronic
odometer disclosure systems until the effective date of this final
rule, few jurisdictions have implemented schemes for electronic titles
and electronic odometer disclosure, either in whole or in part. Given
the nascent state of electronic titling and odometer disclosures, as
well as variations in existing title systems in states and territories,
the NPRM asked for comments on how prescriptive NHTSA's approach should
be. While more prescriptive requirements might better protect vehicle
buyers and force a degree of uniformity in future electronic systems,
such an approach by NHTSA could limit or hinder adoption of electronic
titling and odometer disclosure system. Additionally, a highly
prescriptive approach could be interpreted to be inconsistent with the
direction in MAP-21 to promulgate regulations that simply permit
electronic disclosures. The foregoing concerns prompted NHTSA to
specifically request comments in the NPRM on whether it should adopt a
minimalist approach or a more prescriptive set of rules.
NHTSA chose to propose modifications to the existing structure of
part 580 to accommodate electronic odometer disclosure schemes.
Accordingly, the NPRM sought to add new definitions in part 580.3 for
the terms ``Electronic Document,'' ``Physical Document,'' and ``Sign or
Signature.'' As proposed, ``Electronic Document'' would mean ``a title,
reassignment document or power of attorney that is maintained in
electronic form by a state, territory or possession that meets all the
requirements of this part.'' The NPRM proposed defining a ``Physical
Document'' as ``a title, reassignment document or power of attorney
printed on paper that meets all the requirements of this part.'' The
proposed definition of ``Sign or Signature'' encompassed both hand
written and electronic signatures and, for the electronic signature,
also specified that a valid electronic signature must incorporate an
identity authentication scheme equivalent to or greater than a NIST
Level 3 system. This definition also specified a valid electronic
signature must be made by the specific individual whose identity had
been verified, regardless of whether the person was signing as in
individual or as a representative of a business. The NPRM specifically
requested comments on the propriety and appropriateness of these
proposed definitions. In addition, the NPRM asked for comments on
implementation of identity verification for transferors and transferees
in electronic transactions, including what level of NIST verification
should be appropriate, whether car dealers should provide secure
computing services, and what security measures should be mandatory for
such services.
In contrast to a written signature, which through handwriting
analysis can be used to identify an individual even in the event of
forgery, an electronic signature is, without sufficient verification
and other safeguards, anonymous. Because of this, NHTSA proposed that a
valid electronic signature must be made by an individual. The NPRM also
asked for comments on whether any other requirements are necessary to
ensure investigators can back trace an electronic ``signature'' to
identify the individual and/or computer used in the electronic
equivalent of a paper trail or whether the proposed requirements could
be used to identify individuals making unauthorized alterations to
disclosure statements.
Consistent with its approach of modifying existing provisions of
part 580 to allow electronic odometer disclosures, NHTSA also proposed
amending Sec. 580.4, which governed security features of printed
forms, by creating a new paragraph (a) for paper documents and new
paragraph (b) for
[[Page 52671]]
electronic records. The requirements for paper documents remained
unchanged while the proposed paragraph (b) requirements set forth that
electronic titles, power of attorney forms, and reassignment documents
must be maintained in a secure environment and protected from
unauthorized modification, alteration, or disclosure. Paragraph (b)
also proposed that the system storing title and odometer disclosure
information must record dates and times when documents are created,
when odometer disclosures contained are signed, when documents are
accessed, and when any attempt is made to alter or modify documents.
The NPRM asked for comment on these proposals, including the degree to
which the security and authenticity requirements for electronic
documents appropriately matched those for paper documents.
The NPRM also addressed a bedrock concern of any electronic system
creating and maintaining records having financial import--system
security. Rather than attempt to specify security requirements, the
NPRM explained the agency made a tentative determination that such an
effort would be inappropriate given the comparatively slow pace of
rulemaking in comparison to the rapidly evolving and changing landscape
of cyber security. Just as software and hardware are constantly
evolving and improving, cyber-attacks and efforts to undermine the
security of electronic data systems are also changing rapidly and
frequently. Moreover, the NPRM noted potential risks to property
interests and commerce presented by insecure vehicle titling and
odometer disclosure systems would be addressed by the jurisdictions
creating these systems. The jurisdictions doing so would be better
positioned to assess security risks and craft appropriate responses.
The NPRM nonetheless requested comments on whether NHTSA should
establish minimum security requirements, including hardware and natural
disaster specifications, and if such security requirements should be
modeled on the Federal Information Security Management Act (FISMA)
framework.
Section 580.5 of part 580 dictates the content and manner of
odometer disclosure. The NPRM proposed adding the phrase ``whether a
physical or electronic document'' in Sec. 580.5(a) so the disclosure
requirements specified in Sec. 580.5 would apply to paper and
electronic transactions. Similarly, the NPRM also proposed amending
Sec. 580.5(c), governing the specific disclosures that must be made
when transferring title, by adding the phrase ``physical document'' in
instances of paper title transfers and ``electronic form incorporated
into the electronic title.'' to Sec. 580.5(c) for instances of
electronic title transfers. The agency also added a requirement that
disclosures in the case of electronic titles must be on an electronic
form incorporated into that title, that the electronic disclosure must
be incorporated into the electronic title, and, in jurisdictions with
electronic titles, reassignment documents could not be used in lieu of
making the odometer disclosure electronically. The agency also asked
for comments on the proposal that disclosures be made on an electronic
form incorporated into the electronic title.
Under Sec. 580.5(d), paper forms used to make odometer disclosures
must contain certain legal notices and warnings intended to ensure
those executing the forms are aware of their responsibilities and
potential liability when doing so. The NPRM proposed extending these
requirements to electronic disclosures transfers by amending Sec.
580.5(d), specifying that in instances of electronic transfer, the
required information must be displayed on the screen, and acknowledged
as understood by that party, before any signature can be applied to the
transaction. NHTSA also proposed amending Sec. 580.5(f), requiring
transferees to print their name on the disclosure and return a copy to
the transferor, to restrict its application to paper transactions only.
Because Sec. 580.5(f) also requires transferees to provide transferors
with a copy of the executed disclosure statement, the agency also
proposed electronic disclosure systems provide a means for parties
involved with the transaction to access copies of the disclosure.
Although this proposal expanded the paper requirement from making a
copy available to one party to both parties, NHTSA believed the burden
of making an electronic copy of the disclosure statement to both
parties rather than one would be minimally burdensome. The NPRM sought
specific comments on these proposed amendments.
Section 580.5(g) of part 580 addresses the situation in which a
vehicle has not been titled or where the existing paper title does not
have sufficient space for making an odometer disclosure. As explained
in the NPRM, NHTSA tentatively believed this provision should only
apply in jurisdictions where paper titles and odometer disclosures are
used. The agency thought any electronic titling system would have the
capability to accept disclosures for multiple transactions and could be
configured to accept an odometer disclosure immediately prior to
creation of the first electronic title. Accordingly, the NPRM proposed
limiting application of Sec. 580.5(g) to transactions employing paper
documents in jurisdictions without electronic title systems. The NPRM
asked for comments specifically addressing this proposal.
The NPRM also proposed adding a new Sec. 580.6 to part 580 to
create requirements resolving unique concerns posed by electronic
odometer disclosures. To ensure systems creating and maintaining
records provided a minimum level of security and certainty, the NPRM
sought to add Sec. 580.6(a)(1) requiring electronic records to be
retained in a format that cannot be altered and, further, that
indicates any attempts to alter it. As it is critical that parties to a
transaction are who they claim to be for ownership and law enforcement
purposes, the NPRM proposed in Sec. 580.6(a)(2), a requirement that
any electronic signature identify an individual. The section also
proposed if an individual is acting in a business capacity or otherwise
on behalf of any other individual or entity, that the business or
entity also be identified as part of that unique electronic signature.
Because the requirement to maintain or provide copies of paper
documents exists in various places within part 580, the NPRM proposed
accommodating these requirements in electronic disclosure systems by
establishing, in Sec. 580.6(a)(3), that any requirement in part 580 to
disclose, issue, execute, return, notify, or otherwise provide
information to another person is satisfied when a copy of the
electronic disclosure or statement is electronically transmitted or
otherwise electronically accessible to the party required to receive
the disclosure. Although the NPRM noted NHTSA discouraged the continued
use of paper documents in electronic disclosure jurisdictions, the
agency proposed accommodating ``hybrid'' systems such as those seen in
the Florida and New York petitions by creating Sec. 580.6(a)(7)
requiring that any physical documents used to make electronic
disclosures comply with the security and other requirements applicable
to paper documents in part 580.
The advent of electronic titles would not eliminate the demand for
paper titles, particularly because paper titles are likely to be
essential to completing interstate transactions between electronic and
paper jurisdictions. Moreover, paper titles will need to be accounted
for when electronic title systems are created. Since the
[[Page 52672]]
simultaneous existence of an electronic and a paper title would provide
fertile ground for odometer fraud, the NPRM proposed, in Sec.
580.6(a)(4) that any physical title replaced by an electronic title
must be destroyed after creation of the electronic title. The proposed
text of this section further provided that an electronic copy of the
physical title be recorded and maintained for five years and that the
electronic copy be retained in a format that cannot be altered and that
indicates any attempts to alter it. If a paper title needed to be
created from an electronic record, the NPRM proposed, in Sec.
580.6(a)(6), that only states or their authorized surrogates could
produce a secure paper title from an electronic record and that this
paper title must meet the security requirements applicable to paper
titles. Additionally, the proposed Sec. 580.6(a)(6) stated that
issuance of a paper title in an electronic title state must be
memorialized by a record stating the electronic title has been
superseded by a paper document that is the official title. As suggested
by the Texas petition seeking approval of alternative odometer
regulations, NHTSA also believed electronic title systems might have a
means of making a paper document available to vehicle owners who would
attest to the existence of an electronic title maintained by their
jurisdiction. The NPRM proposed adding a provision in Sec. 580.6(a)(5)
permitting jurisdictions to issue such a document if they chose to do
so. Because NHTSA anticipated electronic title and odometer disclosure
systems would rely on scanned documents at various times and under
various conditions, including interstate transactions from paper
jurisdictions to electronic jurisdictions, the NPRM proposed adding
Sec. 580.6(a)(7) specifying that any conversion of physical documents
to electronic documents must preserve the security features of the
physical document and be scanned at a resolution of not less than 600
dots per inch (dpi). Again, the NPRM sought specific comments on the
foregoing proposals.
The agency also proposed several amendments to Sec. 580.7, which
governs odometer disclosures for leased vehicles. Leased vehicles
present challenges to the ordinary scheme for odometer disclosures
because lessors usually hold the title to the vehicle but seldom have
physical control over it. When a vehicle lease is terminated, the
lessee typically surrenders the vehicle to a dealer while the lessor is
responsible for making the required odometer disclosures on the title.
To facilitate transactions associated with terminating the lease, Sec.
580.7(a) required lessors to provide lessee with a written notice
explaining that the lessee must provide the lessor with an odometer
disclosure statement and that failure to do so, or to do so in
conformance with federal law, exposes them to criminal liability.
Section 580.7(b) and (c) state lessees must execute an odometer
disclosure statement with any transfer of ownership and provide this
disclosure statement to the lessor. In turn, the lessor is required by
Sec. 580.7(d) to execute the disclosure statement on the vehicle title
in conformance with the lessee's disclosure unless the lessor has
reason to believe the lessee's disclosure is inaccurate. The NPRM
proposed amending Sec. 580.7(a) to allow lessors to provide notices to
lessee electronically, proposed deletion of a printed name requirement
for electronic odometer disclosures by lessees in Sec. 580.7(b) and
proposed adding a new Sec. 580.7(e) stating an electronic system
maintained by a lessor must meet the proposed security requirements in
Sec. 580.4(b). The NPRM also requested comments on whether leased
vehicle electronic disclosures should be a required part of the
electronic system established by a jurisdiction or are best developed
by individual leasing companies.
Sections 580.8 and 580.9 include requirements for odometer
disclosure record retention by motor vehicle dealers and distributors
and by auction companies, respectively. Section 580.8(a) specifies
dealers and distributors must retain a ``Photostat, carbon copy or
other facsimile copy of each odometer mileage statement which they
issue and receive.'' Under both sections, records must be stored for
five years in a manner and method so they are accessible to NHTSA
investigators and other law enforcement personnel. The records must
also be stored so they are difficult or impossible to modify. The NPRM
proposed adding requirements in a new Sec. 580.8(d) and Sec. 580.9
that electronic odometer disclosure records kept by motor vehicle
dealers, distributors, and auction companies must be stored in a format
that cannot be altered and that indicates any attempts to alter the
document, consistent with the standards set forth in proposed Sec.
580.4(b). NHTSA requested comment on whether this requirement would be
sufficient to allow law enforcement to detect altered documents.
The agency also proposed modifications to the power of attorney
provisions in Sec. 580.13(a) and (b), to allow an individual with a
vehicle titled in an electronic title state to use a power of attorney
to sell a vehicle in a paper title state. This proposed expansion of
the use of a power of attorney, in conjunction with the agency's view
that the power of attorney provisions applicable to lost titles or
titles held by lienholders would no longer be needed in electronic
title jurisdictions, led the agency to propose adding the word
``physical'' in multiple places in Sec. Sec. 580.13(f), 580.14(a),
(e), and (f), and in 580.15(a) to restrict application of various
provisions to paper title jurisdictions. The NPRM asked commenters to
specifically address the need for the proposed power of attorney and if
an electronic power of attorney would also be needed or feasible.
Because Sec. 580.17(a)(3) exempts any vehicle, which is more than
10 years old from the odometer disclosure requirements and the average
age of the United States vehicle fleet has been trending upward to 11.5
years, the NPRM proposed raising the exemption to 25 years. The NPRM
also requested comments on whether the exemption should be eliminated.
Another group of amendments in the NPRM were proposed to correct
address changes and typographical errors as well as removing obsolete
provisions and providing redesignations needed to complete the final
rule.
G. Summary of Comments to the NPRM
NHTSA received 28 comments in response to the NPRM. Six comments
were filed by state motor vehicle departments: The Motor Vehicle
Division of the Arizona Department of Transportation (Arizona), the
California Department of Motor Vehicles (California), the Florida
Department of Highway Safety and Motor Vehicles (Florida), the Oregon
Driver and Motor Vehicle Services (Oregon), the Texas Department of
Motor Vehicles (Texas), and the Virginia Department of Transportation
(Virginia). State concerns were also addressed in comments from the
American Association of Motor Vehicle Administrators (AAMVA). Dealer
and auctioneer concerns were voiced by comments from the National
Automobile Dealers Association (NADA), the National Independent
Automobile Dealers Association (NIADA), the National Auto Auction
Association (NAAA), the Ohio Automobile Dealers Association (OADA),
Copart Inc. (Copart), Dealertrack Inc. (Dealertrack), and Insurance
Auto Auctions Inc. (IAA). Several trade associations acting on behalf
of lenders also submitted comments, including the National
[[Page 52673]]
Association of Federal Credit Unions (NAFCU), National Title Solutions
Forum of the American Financial Services Association (NTSF), the Credit
Union National Association (CUNA), the Credit Union Coalition of Texas
(CUCTX), and the Heartland Credit Union Association (HCUA).
Comments were also filed by insurance companies and insurance trade
associations: Allstate Corporation (Allstate), the Property Casualty
Insurers Association of America (PCIA), the American Insurance
Association (AIA), Liberty Mutual (Liberty), and the National
Association of Mutual Insurance Companies (NAMI). Other organizations,
such as the Electronic Signature and Records Association (ESRA), the
National Odometer and Title Fraud Enforcement Association (NOTFEA), and
the National Salvage Vehicle Reporting Program (NSVRP) also filed
comments. An individual, Thaddeus Lopatka, filed comments as well.
The commenters all favored regulatory changes that would allow
states to implement electronic odometer disclosures as part of an
electronic title system. The comments, however, differed in how this
goal should be achieved. While some comments did not address the
specifics of NHTSA's proposed amendments, others provided detailed
analyses of the regulatory text contained in the NPRM. The comments
also diverged on the extent to which NHTSA should exercise its
regulatory authority. While some commenters urged NHTSA to leave as
much as possible to the discretion of individual states, others felt
the agency should compel creation of a national electronic title and
odometer disclosure system by a specified date and impose penalties for
non-compliance. The agency's proposed modification of the ten-year
exemption was supported by most commenters and vociferously opposed by
others. For commenters who specifically addressed the agency's proposed
requirement that individual identities be established by NIST level 3
authentication, opposition was universal. Some commenters also voiced
reservations about the structure of the proposed amendments, which, in
their view, appeared to adopt an unduly narrow vision of how electronic
odometer disclosure and electronic titling systems would function. For
these commenters, NHTSA's proposal did not adequately address the
potential adoption of hybrid systems employing a mixture of paper
documents and electronic processes.
Two commenters, NADA and NAAA, suggested NHTSA issue an SNPRM prior
to issuing a final rule while two, NAMIC and Texas, suggested NHTSA
delay issuance of a final rule. NADA stated an SNPRM might be needed
because of the complex array of potential motor vehicle transfers and
potential variations between state systems that NHTSA needs to explore.
NAAA stated an SNPRM might be required to explore the effect of any
delays inherent in producing paper titles on exporting vehicles. Texas
stated the proposals put forward in the NPRM indicated an apparent
misunderstanding of current title processes and urged the agency to
work with stakeholders to draft clearer, more meaningful language.
NAMIC suggested delay so NHTSA could convene an assembly of state
officials with the goal of forging a national electronic titling and
odometer disclosure system.
1. Scope of the Final Rule
NHTSA's March 25, 2016, NPRM stated the agency's view that the
directive in MAP-21 to promulgate rules allowing electronic odometer
disclosure was intended only to facilitate this change without imposing
additional requirements on stakeholders (81 FR 16114). Nonetheless, the
NPRM requested comments on whether the proposals therein should be
extended to prevent, or limit, variation among the various state
systems.
Comments submitted in response to this solicitation were generally
split into two opposing positions. Several commenters urged creation of
a uniform national electronic title and disclosure system while others
urged the agency take a minimalist approach. Insurers favored the
former approach while most states embraced the latter. The AIA
contended allowing both paper and electronic disclosures complicated an
already cumbersome process. AIA urged NHTSA to require electronic
titling and odometer disclosure and warned the co-existence of
electronic and paper title and disclosure systems will inevitably lead
to fraud, title washing, errors, the inability to find the owner for
recalls, and a lack of consumer understanding of the process.
The organization further urged NHTSA to establish a date certain by
which all states must move to an electronic title and disclosure system
and establish penalties for jurisdictions not meeting this deadline.
NAMIC offered similar concerns about the potential complexity of co-
existing paper and electronic systems as well as potential issues
caused by incompatible state databases. As noted, NAMIC urged NHTSA to
convene meetings with states and other stakeholders to formulate a plan
for a more uniform electronic system. Although Texas adopted a position
that NHTSA's rulemaking should not be prescriptive and should grant
states as much leeway as possible in developing electronic title and
odometer disclosure systems and encouraged NHTSA to explore the use of
the U.S. Department of Justice's National Motor Vehicle Title
Information System (NMVTIS) as a national system to facilitate the
transfer of electronic titles. According to Texas, leveraging this
existing system would assist with mitigating any costs associated with
implementing a national electronic title transfer system and aid the
rate of adoption while easing the implementation process.
Among state commenters, Virginia stood alone in supporting an
expanded scope for the final rule. Virginia's concerns included the
possibility of broad variations among state systems that would hinder
interoperability and preclude the consistency required to allow
consumers to conduct interstate transactions. While Virginia advocated
rules to enforce consistency in security standards, its comments also
decried the proposed NIST authentication and minimum dot per inch
standards as well as the inability of traditional rulemaking to keep
pace with rapidly changing technologies. Texas, California, and Florida
offered comments stating the scope of the NPRM proposals should not be
expanded. Texas stated each jurisdiction should be able to facilitate
the electronic process for signatures as it determines appropriate.
California contended that initially, each state must be able to
implement an electronic odometer scheme within its own environment.
Florida echoed this sentiment while opining that flexibility is needed
as states first implement intrastate systems. AAMVA stated few states
had developed electronic title systems, and even fewer could support
fully electronic transactions or odometer disclosures. In AAMVA's view,
imposing restrictive requirements before all states have had the
opportunity to evaluate their existing systems and determine what such
a transition could look like would be premature. ESRA's comments also
endorsed a less restrictive regulatory approach stating the NPRM
proposals were sufficiently broad to enhance the adoption of e-odometer
and e-titling systems, and some level of variation would be acceptable
if state systems are technologically neutral and promote
interoperability.
[[Page 52674]]
2. Definitions
NHTSA proposed several changes to definitions found within Sec.
580.3 to accommodate electronic odometer disclosures within the
existing framework of part 580. The NPRM proposed new definitions for
the terms ``Electronic Document,'' ``Physical Document,'' and ``Sign or
Signature,'' where an electronic document is a title, reassignment
document, or power of attorney maintained in an electronic form; a
physical document is a paper document as used prior to the advent of
electronic disclosures, and sign or signature may either be a hand
written signature or an electronic sound, symbol, or process using an
authentication system to verify the signer's identity. As noted, the
NPRM sought comments on the appropriateness of the proposed
definitions.
One insurer, Liberty Mutual, four associations, AAMVA, NADA, CUCTX,
and HCUA, and three states, California, Virginia, and Texas, offered
comments in response to the definitions contained in the NPRM.
California voiced concerns the definition of electronic document
inappropriately inferred that electronic titles exist only as an
electronic image of a paper document when an electronic title may only
be a set of data elements maintained in a state database and not
necessarily a form. AAMVA also stated ``Electronic Record'' would be
more appropriate than ``Electronic Document'' and opined the proposed
definition of ``Electronic Document,'' and ``Physical Document,''
should both refer to lease disclosures required by Sec. 580.7. HCUA
stated the proposed definition should clarify that a database record
could serve as the title, disclosure, and audit trail. California
further noted the proposed definition included ``reassignment
document'' and ``power of attorney,'' which appears to conflict with
proposed language for Sec. 580.15, limiting powers of attorney to
paper transactions, which California also opposed. California suggested
Electronic Document should include or be restated as ``titling record''
and ``paperless or electronic title.''
Virginia believed the definition of ``sign or signature'' is
insufficient to address handwritten signatures on paper, handwritten
signatures captioned electronically on a pen pad, electronic signatures
for individuals, and electronic signatures for organizations verified
through authentication measures. NADA offered similar comment, stating
many of its dealer members used ``pen pads'' to capture signatures
electronically. CUCTX noted the proposed definition of ``Sign or
Signature'' applied only to electronic disclosure statements and should
be expanded to include other electronic documents to capture powers of
attorney as well.
Texas, which provided a ``redline'' version of part 580 along with
its written comments, suggested the definitions proposed in the NPRM be
expanded by adding a definition of ``Access'' encompassing the means of
entering, displaying and modifying previously stored data, ``Agent'' as
person appointed by a power of attorney or authorized to act for an
entity, ``Electronic title'' for electronic titles incorporating an
electronic reassignment format or process, ``Jurisdiction'' meaning a
state, territory, or possession of the United States of America,
``Mileage'' meaning the actual distance a vehicle has traveled,
``Printed Name'' meaning either the clear and legible name on a
physical document or an equivalent electronic record and ``Sign or
Signature'' meaning either a traditional hand-written signature on a
paper disclosure or an electronic sound symbol or process either
incorporating an authentication process or performed before an
authorized employee or agent of the jurisdiction. Liberty Mutual
suggested adding a definition for an electronically signed document
used specifically for title transfers for total loss vehicles.
NADA offered a similar comment to that provided by Texas and urged
NHTSA to add a clarifying definition of the term ``State'' to read
``any jurisdiction of the United States that issues motor vehicle
titles, and the authorized agent(s) for any such jurisdiction.''
3. Identity of Parties to a Motor Vehicle Transfer and Security of
Signatures
The definition of ``Sign or Signature'' proposed in the NPRM
specified a valid electronic signature must identify a specific
individual. This requirement stems from NHTSA's concern the comparative
anonymity of an electronic signature to a written signature could
frustrate identification of perpetrators of odometer fraud. This
proposed requirement also appeared in Sec. 580.6(a)(2) of the proposed
amendments. The agency received many comments in response to this
proposed requirement, and these comments are discussed below.
As proposed in the NPRM, the definition of ``sign or signature''
for an electronic document included an electronic sound, symbol, or
process using an authentication system equivalent to or greater than
Level 3 as described in NIST Special Publication 800-63-2, Electronic
Authentication Guideline, which identifies a specific individual. NHTSA
proposed incorporating the NIST Level 3 requirement into the definition
of an electronic signature because of agency concerns that electronic
odometer disclosures could easily be made by someone other than the
actual transferor or transferee involved in the transaction. The NPRM
requested comments on the appropriate NIST level as well as other forms
of verification and security, including whether dealers should be
required to provide secure computing services to transferors and
transferees.
Commenters addressing the issue uniformly opposed the proposed
requirement that identity verification for electronic odometer
disclosures must meet NIST Level 3. California noted NIST Level 3
authentication went beyond what is required for current paper
transactions. In California's view, prescribing a NIST Level 3 identity
authentication, which, among other things, could entail verification of
a government ID, such as a driver license, and a financial or utility
account, is unnecessary. California argued a Level 3 process would be
burdensome and impractical, if not impossible, to implement. California
contended the manner of identity verification be left to states at a
level strong enough to reasonably identify the signing party and should
not be set above NIST Level 2. Florida contended the cost and
complexity of implementing a Level 3 system may prohibit many states
from being able to provide electronic titles and odometer disclosures.
Further, Florida argued a Level 2 solution would still provide greater
security than the existing paper process. Virginia asked if use of pen
pad for electronic transactions done in person before a state employee
or agent--essentially replicating the present paper process--met NIST
Level 2 requirements.
Texas, like California, argued against any NIST level requirement
because jurisdictions should be responsible for the secure electronic
process just as they are for the existing security provisions for paper
documents. According to Texas, states have an interest in the security
of vehicle and odometer transactions equal to that of the federal
government and are more familiar with their jurisdiction's business
needs and those of its customers. Should NHTSA specify a NIST level,
Texas urged that it not be set above NIST Level 2. AAMVA noted the NPRM
proposal did not distinguish between electronic signatures being made
in the presence of a state employee or agent and remote
[[Page 52675]]
transactions. The association also urged the agency to not require NIST
Level 3 authentication and observed attaining this level of security
would be very difficult because of the requirement that all elements of
the system meet NIST Level 3. Further, AAMVA argued an attempt to force
all potential participating parties to comply with a standard set at
NIST Level 3 would ultimately lead to a common inability to do so.
Compared to the existing paper signature process, AAMVA stated NIST
Level 2 would be achievable and provide suitable assurance of identity.
Other stakeholders also argued against NIST Level 3 authentication.
Dealer groups OADA, NAAA, NIADA, and NADA stated obtaining and
maintaining a NIST Level 3 system would require significant investment
by states and dealers. This burden is not, in the view of these
commenters, necessary when compared to the benefits achievable with a
Level 2 system. These organizations also believe costs of Level 3
authentication would prevent states from attempting to employ
electronic title and odometer disclosure systems. Lender associations
and other entities also opposed the proposal to require Level 3
authentication. HCUA stated Level 2 authentication should be sufficient
while the NTSF argued Level 3 authentication was not required. In
NTSF's view, as supported by the ANSI X9. l 17-2012 ``Secure Remote
Access Mutual Authentication'' authentication framework, vehicle
transfers are relatively low risk transactions that do not require the
security provided by NIST Level 3. Further, NTSF observed the NIST
Standards are applicable to federal government computer systems and
should not be applied in this context. Finally, given the costs of
Level 3 for states and others, NTSF recommended the final rule replace
Level 3 with Level 2. ESRA observed the threat of financial loss
presented by fraudulent odometer disclosures is commensurate with Level
2 authentication and this level is adequate for odometer disclosures.
The NPRM also requested specific comments on whether dealers should
be required to provide secure computing services to transferors and
transferees. NIADA and IAA responded, noting NHTSA should be mindful
vehicle transfers are processed by many entities with different
resources and are not limited to dealers. In the view of these
commenters, imposing the foregoing requirement on a wide range of
potential parties to a transfer would be unduly burdensome.
NHTSA also asked for comments on whether any requirements beyond
those proposed in the NPRM would be needed or desired given the need
for an odometer disclosure system to provide an adequate paper trail to
identify the signer of an electronic odometer disclosure. Florida
stated electronic odometer disclosure systems provide more security
than the paper process. According to Florida, paper transactions do not
involve verifying signatures and titles or other reassignment documents
are often given to the transferee without being filled out so the
incomplete forms are filled out by the transferee. Because electronic
systems would require completeness and allow more frequent and accurate
mileage reporting, Florida argued NHTSA should not adopt more stringent
requirements in the Final Rule.
4. Document or Record Security and System Security
Prior to the issuance of this final rule, Sec. 580.4 set forth the
requirements for security features incorporated into paper documents
employed to perform odometer disclosures. These security features are
intended to prevent modification of existing disclosures and deter the
use of counterfeit documents. The NPRM proposed amending this section
through addition of new requirements for electronic documents or titles
intended to provide the same level of security for electronic records
as exists in secure paper documents. The proposed language would
require electronic titles, powers of attorney, and reassignment
documents to be maintained in a secure environment protecting the
record for unauthorized modification. This environment would be part of
a system that records when the document or record is created, when the
odometer disclosures within are signed, when documents are accessed,
and the date and time any attempt is made to alter the documents as
well as any alterations made in the document.
The NPRM first sought comment on whether the proposal appropriately
matched the security and authenticity requirement for electronic
documents to the existing requirements, which apply to paper documents.
While the NPRM contained a discussion outlining why the agency was not
proposing specific security standards for these storage systems, NHTSA
also asked for comment on whether the final rule should incorporate
more specific security requirements for systems used to create and
maintain electronic titles and odometer disclosures.
With the caveat that many commenters noted that the proposed
language referred to an electronic ``document'' when reference to an
electronic ``record'' would be more appropriate, this portion of the
proposed rule enjoyed general support with many commenters strongly
endorsing the agency's decision not to impose specific security
standards for electronic title and odometer disclosure systems. NAAA
and IAA noted the proposal required protection against unauthorized
changes but did not address how entry errors are to be corrected. NTSF
stated the requirement to track when records are accessed seemed to be
unduly burdensome given the nature of the records involved. ESRA
recommended NHTSA take an ``agnostic'' approach to electronic records
storage by allowing states to store electronic data and documents in
their secure data systems and to employ reasonable efforts to prevent
such records from being altered.
Some commenters believed the proposal was too prescriptive.
California noted paper documents should not be compared to an
electronic process and that it would be unnecessary to prescribe
anything more than maintaining electronic titling and odometer
disclosure information in a secure system or environment. Texas stated
the proposed requirements are more cumbersome than those for physical
documents, and jurisdictions should be given the same latitude for
electronic and physical documents. Virginia objected to the requirement
that attempts to alter or modify records be tracked. Virginia noted the
proposal did not distinguish between authorized and unauthorized
modification and that any unauthorized attempt at access should result
in denial of access and not creation of a record. AAMVA stated most
systems track dates and times on who accessed certain records and asked
NHTSA to exercise caution so requirements do not interrupt titling
agency business.
Comments supporting NHTSA's decision to not adopt specific system
security requirements were submitted by insurers, dealer associations,
lender groups, states, and others. Allstate stated that states should
have the flexibility to assess systems requirements that ensure
information security. Dealer groups NADA, OADA, and NIADA agreed with
NHTSA's approach, as did Dealertrack, stating that technology moved too
rapidly for effective regulation by rules. NADA and NTSF opined that
specific system security requirements would be counterproductive for
the same reason. ESRA recommended only general security standards and
safeguards be adopted to prevent obsolescence and to empower states
adopt systems they determine are most appropriate. CUCTX
[[Page 52676]]
also noted states have been, and should be, responsible for maintaining
secure electronic title records. Arizona stated specific security
standards would be too inflexible. Virginia urged any security
requirements be technology neutral to keep pace with changing threats.
Texas questioned the need for any security requirements given the
strong interest any jurisdiction would have in maintaining the security
and integrity of public records. AAMVA also questioned the need for
systems security requirements based on the history of states securely
maintaining data for many years. In AAMVA's view, specific system
security requirements would hinder states in their ability to protect
this data rather than enhance it.
5. Odometer Disclosures
NHTSA proposed several changes to Sec. 580.5, Disclosure of
odometer information, to accommodate electronic odometer disclosures.
The proposed amendments sought to ensure the content required in the
paper-based disclosure system would be carried forward into an
electronic environment. Therefore, where information was required to be
entered on the title under the paper system, the NPRM proposed, in
580.5(c), that the same information be entered in ``an electronic form
incorporated into the electronic title.'' Similarly, where notices of
potential liability for failing to meet certain requirements are
required on paper documents, 580.5(d) of the NPRM proposed the same
warnings be provided electronically for electronic transactions. At the
same time, differences between an electronic and a paper-based
transaction led the agency to propose differing requirements for the
two regimes. A requirement that a printed name be affixed to the
disclosure on a paper title in Sec. 580.5(f) was not carried forward
into the agency proposal for electronic transactions as sufficient
means independent of a hand-written signature should be available to
identify individuals executing electronic disclosures. Where the paper
based system requires the transferee to sign the executed disclosure
statement and return a copy to the transferor, Sec. 580.5(f) of the
NPRM proposed an electronic system make copies of the executed
documents available to the parties.
Comments addressing this portion of the agency's proposal supported
the proposed changes. These commenters nonetheless offered observations
and corrections, which they believed would better reflect the
characteristics of electronic odometer disclosure and electronic title
systems and clarify the proposals made in the NPRM. The proposal's
directive in 580.5(c) that an odometer disclosure be made on an
``electronic form incorporated into the electronic title'' led some
commenters to observe this nomenclature was inconsistent with any form
of electronic disclosure and electronic title system save those that
relied on scanning images of documents and storing these documents
electronically.
AAMVA observed NHTSA's approach seemed to transform a paper-based
disclosure process into an electronic disclosure by simply scanning
current documentation--the title, the reassignment, or the power of
attorney. The organization stated any reliance on a physical document,
whether scanned or not, does not constitute an electronic disclosure
system and should not provide the basis for an electronic disclosure
system. Instead, AAMVA noted, an electronic disclosure and title record
would be data fields making up an electronic record. HCUA offered
similar views, urging NHTSA to clarify that database records can be
substituted for scanned images of paper titles by state DMVs. NTSF also
stated it is important to note states maintain electronic title records
as database records and not scanned images of paper titles. The
organization contended the proposed rules wrongly indicated title and
disclosure documents must exist as embedded replicas of the
corresponding paper documents when the actual electronic record would
be an actual secure electronic database record of the transaction,
including the metadata supporting the authentication of the individual
executing the signature, as well as a full audit trail of transactional
data. ESRA offered similar comments about the nature of electronic
titles and recommended replacing the term ``form'' with the term
``statement'' when referring to electronic disclosure documents, and
using the term ``record'' instead of ``form'' when referring to
electronic titles. Texas argued it is paramount that NHTSA recognizes
what an electronic process is and allow latitude in their development.
Other comments focused more narrowly. California stated electronic
and paper titles will only resemble each other to the extent they
contain the same information. Florida and Virginia simply stated they
supported the agency proposal to incorporate the odometer disclosure
into the electronic title. Texas strongly supported requiring odometer
disclosures to be made ``on'' the electronic title while noting it did
not support allowing a separate ``electronic'' or physical reassignment
apart from the electronic title. Because there would be unlimited
``space'' for mileage disclosure entries in an electronic title system,
Texas contended a reassignment process that is not specifically
attached to an electronic title should be prohibited. Arizona stated
requirements in Sec. Sec. 580.5(c) and 580.6(a)(7) regarding the use
of physical documents for a transfer being conducted electronically
appear to conflict and suggested the provisions in Sec. 580.6(a)(7)
take precedence with Sec. 580.5(c) being reworded to eliminate the
conflict.
The NPRM proposed amending Sec. 580.5(d) to provide the same
warnings and notices present on paper odometer disclosure forms also be
presented to parties executing an electronic disclosure. As presented
in the NPRM, the amendment stated, ``the information specified in this
paragraph shall be displayed, and acknowledged as understood by the
party, prior to the execution of any electronic signatures.'' Texas
supported including the proposed statements and warnings but contended
the electronic signature should be sufficient acknowledgement that
statements were read and understood. Therefore, Texas argued against
any additional acknowledgement such as a checkbox. IAA observed this
language did not provide adequate guidance on the sequence in which the
odometer disclosures would be executed and that if neither transferor
nor transferee may sign until the acknowledgement by both, it would be
difficult to envision the proper sequence of execution.
NHTSA also proposed amending Sec. 580.5(f), which specified
transferees receiving a paper odometer disclosure from a transferor
must sign the disclosure statement, print their name, and return the
signed copy to the transferor. The proposed amendment eliminated the
requirement for a printed name in electronic transactions and stated
electronic disclosure systems must provide a copy to the parties. With
one exception, all commenters responding to this proposal supported
elimination of the printed name requirement. California, Florida,
Virginia, NADA, NTSF, and AAMVA all supported eliminating the printed
name requirement in electronic disclosures, with most also stating
identity authentication employed in these systems would make the
printed name requirement superfluous. Texas, however, strongly opposed
elimination of the printed name requirement, explaining a printed name
would still be needed in electronic disclosures when an individual
employee of a business executed the disclosure on behalf of their
employer. California
[[Page 52677]]
opposed the proposal that electronic disclosure systems provide a copy
of the executed disclosure statement to the parties. In California's
view, states should have the option of choosing whether to make copies
available. NADA supported the proposal that systems make copies
available as did Texas. Texas also recommended more generic language to
require the jurisdiction to make it available.
An additional modification proposed in the NPRM sought to expand
the provisions of Sec. 580.5(g) to electronic systems. Section
580.5(g) addresses issues that may arise in sales when a brand-new
vehicle has not yet been titled or when an existing title for a used
vehicle does not have sufficient space to accommodate multiple
disclosures. In such an instance, the section provided that a separate
document could be used for the disclosure. To extend this section to
electronic disclosures, the NPRM proposed that in jurisdictions with
electronic title and odometer disclosure, the system shall provide a
means for making the disclosure electronically and incorporating it
into the electronic title when the title is created.
Commenters supported this proposal but noted potential difficulties
in implementing it. Some commenters suggested states have the option of
employing either a paper or an electronic system for these
transactions, even where the jurisdiction provided an electronic title
and odometer disclosure system. California and Virginia stated they
agreed with the proposal. Florida generally supported the concept but
observed the ability to use only an electronic means depended on
whether the Manufacturer's Certificate of Origin (MCO) is available
electronically or only on paper. According to Florida, if a
jurisdiction maintains electronic title and odometer disclosure systems
but the manufacturer has a paper MCO, the jurisdiction must have a way
to capture signatures from this paper document into the electronic
system. NADA voiced similar concerns and noted the uncertainty of
electronic versions of required documents being available until
electronic systems became universal. Texas did not support the
requirement for a secure electronic process for these transactions
since the paper system does not require use of a secure document,
manufacturers control the form of the MCO, and NHTSA did not propose
imposing requirements on manufacturers for the MCO.
Texas also suggested clarification to paragraph (g). Texas noted
the words ``or if the physical title does not contain a space for the
information required'' are no longer relevant because part 580 requires
all issued titles to contain space for the required information.
Additionally, Texas recommended the text specify when use of a separate
reassignment document is permitted. However, Texas would support
allowing (but not requiring) jurisdictions to employ an electronic
process.
6. Requirements for Electronic Transactions
Section 580.6, previously reserved for future use, was employed by
the NPRM as the vehicle for proposed new regulations establishing
requirements for electronic odometer disclosures. These proposals
sought to establish fundamental requirements for electronic odometer
disclosure systems that would protect against odometer fraud while
facilitating smooth and efficient transactions. The proposed
regulations address recordkeeping requirements, access to electronic
documents, identification of participants, conversion of paper records
to electronic records, the potential for simultaneous electronic and
paper titles, and the character of any paper documents employed as part
of an electronic title system.
The NPRM proposed adding Sec. 580.6(a)(1) requiring any electronic
record be retained in a format that cannot be altered and, further,
that indicates any attempts to alter it. Commenters addressing this
proposal supported it, providing the ban on alterations was limited to
unauthorized alterations. AAMVA supported NHTSA's intent to provide a
mechanism to track unauthorized access and alteration but warned
against language that would limit titling agency authority or impede
titling agency business. NAAA similarly urged the agency to ensure any
final rule include language allowing jurisdictions to employ an error
correction mechanism. ESRA again urged the agency to take an
``agnostic'' approach and allow states to employ reasonable efforts to
protect records. NADA similarly cautioned requirements protecting
record integrity be practical and appropriate for states, their agents,
and all other parties involved. California agreed protections were
needed to prevent unauthorized attempts to access and alter information
but urged caution against imposing disruptive requirements. Florida
requested NHTSA distinguish between authorized and unauthorized
alterations while Texas stated jurisdictions be allowed the latitude to
maintain electronic records in the fashion they feel is the most
secure. Virginia noted the proposal did not separate legitimate
corrections from unauthorized alterations but supported security
measures, record retention requirements, and audit and review.
Subsection 580.6(a)(2) of the agency's proposal creates a
requirement that any electronic signature identify an individual and,
further, that if the individual is acting in a business capacity or
otherwise on behalf of any other individual or entity, that the
business or entity also be identified as part of that unique electronic
signature. As explained in the NPRM, the agency believed this
requirement is needed both to facilitate identity authentication and to
create a record of the individual executing an electronic signature.
Commenters voiced opposing views on this proposal. While states and
some associations supported it, dealers and vehicle auction
organizations were strongly against it. Lender groups, NTSF and HCUA,
supported the proposal. AAMVA also supported the proposal, and ESRA
stated the requirement represented a best practice. California and
Florida offered support without elaboration while Virginia stated it
supports signatures applying to an individual and not to an
organization. Texas supported the requirement with the proviso that
there be no specific requirements on how this is to be accomplished.
NADA stated it had concerns about the proposal for several reasons.
The association noted transfers for odometer disclosure purposes do not
involve transferees taking title to the vehicle when that transferee is
a dealership, wholesaler, insurance company, auction, or a lessee.
Therefore, NADA argues the rules must accommodate a process by which
odometer disclosures are made on electronic documents without title
transferring (reassignments). NADA also questioned why agents acting on
behalf of licensed entities should have to sign as individuals if they
use the unique identifiers issued to their licensed employer. NADA
urged NHTSA to consider adopting two sets of electronic transaction
requirements, one for licensed entities such as dealers, distributors,
auctions, lessors, lenders, and their agents, and one for private
individuals. IAA, a vehicle auction company, stated the proposed rule
would, in its case, result in a single employee signing on behalf of a
host of vehicle owners bringing their vehicles for sale.
According to IAA, adoption of this requirement would necessitate
many thousands of unique electronic signatures, posing a huge burden on
the auction company and states processing the signatures. As NADA did,
IAA
[[Page 52678]]
observed auction houses were state-licensed and subject to state
regulation. As such, IAA argued states and licensees should be given
the latitude to fashion workable methods for identification. Copart,
another auction provider, offered the same observations about the
effect of this proposal on businesses that provide a venue for selling
large volumes of vehicles for many different owners. The company urged
NHTSA to seek a solution allowing various industry stakeholders to
develop reasonable methods for signing odometer disclosures. NAAA, a
group representing auctioneers, stated the proposal was not workable
for bulk processors like their members. In NAAA's view, creating
thousands of unique signature credentials for each auction would be
both a logistical nightmare and an opportunity for increased fraud. To
address these problems, NAAA suggested NHTSA issue a second notice of
proposed rulemaking incorporating comments from both industry
stakeholders and states before proceeding to a final rule.
The process of executing an odometer disclosure requires notices,
warnings, and instructions to be read, information to be supplied by
the transferor, acknowledgement and acceptance of the disclosure by the
transferee, and, in paper transactions, a copy of the signed disclosure
statement must be given to the transferor by the transferee. To enable
the needed access to text and other information in electronic
disclosure schemes, NHTSA proposed adding Sec. 580.6(a)(3), stating
any requirement in the regulations to disclose, issue, execute, return,
notify, or otherwise provide information to another person is satisfied
when a copy of the electronic disclosure or statement is electronically
transmitted or otherwise electronically accessible to the party
required to receive the disclosure. Two associations, AAMVA and ESRA,
and two states, California and Virginia, commented on this specific
proposal. AAMVA opposed the proposal, arguing the responsibility to
provide odometer disclosure information resides with the transferee and
transferor and should remain there. AAMVA also contended any
notification requirements should be transaction-based rather than the
process-based individual account method proposed by NHTSA. In AAMVA's
view, the NHTSA proposal would impose additional technology
requirements on states.
ESRA noted the federal Electronic Signatures in Global National
Commerce Act (``ESIGN'') establishes how a consumer may request a paper
copy of an electronic record. Arguably, therefore, precedence has been
set for permitting vehicle owners to obtain paper copies of e-titling
documents, including odometer disclosures, in any state e-titling
system. California argued states should not be required to provide the
access described, and Virginia stated it had no objections.
NHTSA explained in the NPRM that it expected implementation of
electronic titling and odometer disclosure systems would occur slowly,
and, for the foreseeable future, both paper and electronic title and
disclosure systems would coexist. As evidenced by the petitions for
approval filed with the agency, individual states are not likely to
shift their entire titling and odometer disclosure systems from paper
to electronic systems at one time, and it is inevitable that interstate
vehicle sales will involve vehicles moving from one type of
jurisdiction to another. The NRPM proposed adding two sections to 580.6
to address the issues posed by the co-existence of paper and electronic
systems. Section 580.6(a)(4) proposed requiring that a prior paper
title and odometer disclosure be copied electronically for retention by
the electronic system state and that the paper document(s) be destroyed
at the time they are converted to electronic documents. Further, the
electronic copy of the paper title would be retained in a system
allowing its retrieval for five years. Section 580.6(a)(6) proposed
that states maintaining an electronic title and odometer disclosure
system shall retain the capacity to issue physical titles meeting all
the requirements of this part. Once a physical title is created by a
state with an electronic title and odometer disclosure statement
system, the electronic record must indicate a physical title has been
issued and the electronic title and disclosure statement have been
superseded by the physical title as the official title.
The proposal further provided that electronic title and odometer
disclosure systems shall record the date on which the physical title
was issued and record the identity of the recipient of the physical
title as well as the owner(s) named on the physical title. Two
commenters, PCI and ESRA, supported these proposals without substantive
comment. AAMVA noted that use of physical documents should be strongly
discouraged in an electronic disclosure jurisdiction, but exchanging
electronic and paper title records will be necessary. According to
AAMVA, an active electronic title record and an active paper title
cannot coexist. However, AAMVA noted jurisdictions cannot reliably
ensure the destruction of existing physical documents. These paper
titles can be invalidated and the record superseded (as is current
practice), but the new jurisdiction of record has no control over
whether a transferor or transferee destroys the document. AAMVA also
stated that because states are currently required to perform a title
check prior to title transactions to determine if they have the most
current title issued, states already have a process in place to
validate that they are not dealing with an out-of-date or superseding
title.
NADA concurred in the need for a process to convert ``official'' e-
odometer records to ``official'' paper records and that only state or
their authorized agents should be allowed to do so. In NADA's view,
records of such conversions should be retained. Florida stated the
proposed rules mirror its current practices as it scans and stores
paper titles electronically and converts e-titles to paper for various
reasons. According to Florida, it presently stores the history of title
conversions from one form to another and invalidates the inactive title
while paper titles are printed by Florida or an authorized entity.
Florida, nonetheless, requested NHTSA not dictate that only states can
print titles in the event future developments allow for other means of
producing these secure documents. Florida also noted it would be
difficult for states to ensure paper titles are destroyed after
conversion to electronic titles and suggested that the rule provide
that a prior physical title be destroyed or otherwise rendered void.
California noted its procedure for converting paper titles to
electronic calls for the paper title to be scanned and stored, and the
original is destroyed. However, California felt the five-year storage
requirement proposed in Sec. 580.6(a)(4) is burdensome and suggested a
four-year requirement. Virginia supported the proposals without
substantive comment while Texas also stated the proposals mirrored its
current practice. However, Texas also noted jurisdictions cannot
control the submission of physical documents and would have to prevent
issuance of title until such time the documents were surrendered to
comply with the proposals.
An individual providing comments, Lopatka, stated NHTSA should
alternatively consider adopting a system by which individual
titleholders may create official physical copies of their own records
from the electronic system. Mr. Lopatka conceded that allowing
individuals to print their own records from the electronic system might
reduce the level of security associated with the transaction to some
degree but that
[[Page 52679]]
allowing them to do so would lessen burdens on states implementing
electronic title and disclosure systems.
Based in part on its experience in processing petitions for
approval of alternative disclosure schemes, NHTSA also proposed a new
Sec. 580.6(a)(5) giving jurisdictions with electronic title and
odometer disclosure systems the option of providing vehicle owners with
a paper record of ownership, including odometer disclosure information,
so long as the document clearly indicates it is not an official title
or odometer disclosure for that vehicle. Almost all commenters
supported this proposal provided the document issued could not be
employed as a counterfeit title. ESRA noted providing a non-negotiable
copy of a paper title is a standard practice in some states supporting
electronic titling programs today. NADA concurred with the proposal,
recognizing that some dealership customers may wish to be provided with
paper printouts. NTSF supported the proposal as this practice is
currently used in some states with electronic lien and title programs
but stated it should not be required. California and Florida also
agreed with the proposal if it remains permissive. Virginia opposed
using the language ``paper record of ownership'' because of potential
fraud and suggested the term ``title receipt.'' Texas also supported
states having this option provided issuing such a document was
discretionary. Lopatka argued against allowing states to provide an
unofficial ownership document, stating that merely requiring clear
disclosure that the physical copy is an unofficial record may be
insufficient to prevent this fraud and abuse.
The agency's NPRM observed electronic title and odometer disclosure
systems have the potential to reduce opportunities for odometer fraud
by eliminating or reducing the use of paper documents in vehicle
transfers. Nonetheless, the agency's experience in processing petitions
seeking approval of alternative odometer disclosure schemes
demonstrated states may choose to implement electronic title and
odometer disclosure systems in ways that will still require the limited
use of paper documents. To ensure the security of transactions
employing such documents, the NPRM proposed a new section, Sec.
580.6(a)(7), requiring any physical documents used to make odometer
disclosures for entry into and electronic title and odometer disclosure
system to comply with the existing requirements of part 580. AAMVA
agreed to the extent that continued use of physical documents is
necessary in an electronic system, any physical documents used must
comply with regulatory requirements. NADA did not object to the
proposal while California supported it without substantive comment.
Arizona observed the requirements in the proposed Sec. Sec. 580.5(c)
and 580.6(a)(7) appeared to conflict and suggested that Sec.
580.6(a)(7) take precedence and Sec. 580.5(c) be reworded to eliminate
the conflict. Texas stated that it fully supported this proposal,
particularly as it would apply to powers of attorney but encouraged
NHTSA to review other sections of its proposed rules because the agency
believes other sections may imply such a scenario is not permissible.
Another issue addressed in the NPRM is the need to ensure odometer
disclosure records converted from paper to an electronic form do not
lose their value in that process. The NPRM therefore proposed such a
conversion must maintain and preserve the security features in the
document so alterations or modifications can be detected in the
electronic version. The proposal, found in Sec. 580.6(a)(8), also
required that scanning be made in color at a resolution of 600 dpi.
Comments received in response to this proposal were unanimously
opposed to the requirement that scanning be conducted at 600 dpi, and
some commenters noted that scanning or imaging need not be in color.
Dealertrack stated that a 600 dpi and color scanning requirement are
well beyond current industry standards and should be reconsidered. NADA
opposed the proposal as unduly burdensome on states and their agents.
In NADA's view, NHTSA should adopt a standard that requires no more
than a black and white scan of 300 dpi PDF, TIFF, or equivalent. OADA
recommended NHSTA not impose any minimum technological standards and
instead leave that to the discretion of the individual state motor
vehicle administrators. AAMVA contended a 600-dpi scan is excessive,
and the NPRM provides no clear evidence or case study to support a
high-resolution standard. According to AAMVA, a 600-dpi resolution
unnecessarily increases the file size to the point that storage and
transmission of title histories sent via email become overly expensive
and burdensome. This burden, AAMVA's view, provides no meaningful
benefit as documents are but one part of establishing an odometer fraud
case.
ESRA stated NHTSA should take a technology and standard-neutral
position and allow states to choose reasonable standards. NTSF
recommended NHTSA abandon scanning and resolution requirements because
of variations in document and font sizes among states. In NTSF's view,
states already have appropriate scanning resolution requirements, and
NHTSA should leave this issue to state regulation. Arizona stated
scanning documents at the NHTSA proposed resolution would adversely
affect system performance and impose data storage costs and recommended
states retain the ability to balance between system performance and
scanned image quality. In Arizona's view, any requirement should be
limited to requiring detail sufficient to preserve the features of the
original document. California also strongly disagreed with the
proposal, contending the standard be left to states and not set above
200 dpi in black and white. Florida echoed the comments of Arizona and
California, citing greatly increased storage, transmission, and
scanning costs.
According to Florida, color scans are not optimal, and NHTSA should
allow states to set their own scanning standards. Texas observed
jurisdictions have a strong interest in the accuracy of title records
and bear the responsibility for assuring their validity. According to
Texas, scanning at the proposed resolution in color produced a loss of
visibility to security features, such as the ``VOID'' watermarks, which
are apparent at lower dpi black and white scans. Texas also noted NHTSA
did not impose a dpi requirement when approving its petition for
alternative disclosure, and Texas had been employing a minimum 200 dpi
standard with good results. Texas urged striking any dpi requirement
and allowing jurisdictions to ensure the security of their process,
particularly as the cost of scanning at the NHTSA-proposed resolution
would be prohibitive. Virginia also opposed requiring 600 dpi color
scans for cost and feasibility reasons. In Virginia's view, the
regulation should not set a dpi standard but noted 300 dpi is
reasonable. Lopatka urged the agency to more fully consider if states
must scan physical titles with sufficient resolution to preserve
security features or if preserving details such as the clarity of the
titleholder's signature is sufficient.
The comments submitted by Texas also suggested adding two more
subsections to 580.8. One of the subsections would provide an
electronic means for completing a transaction where the transferor
holds a physical title that has been lost. According to Texas, adding
this paragraph, which would authorize the transferor to execute an
electronic or physical power of attorney, would save costs and reduce
fraud because it would eliminate the
[[Page 52680]]
need for the transferee to obtain a physical title, only to transfer it
electronically and make disclosure electronically. The second addition
put forward by Texas would explicitly state that separate reassignment
documents may not be used with an electronic title. Texas explained
that because electronic titles have no physical limitation on the
number of reassignments that can be incorporated into an electronic
title, a separate reassignment document is not needed and should not be
allowed. Texas also argued allowing physical reassignment documents
with electronic titles could result in increased odometer fraud.
7. Leased Vehicles
Section 580.7 of part 580, Disclosure of odometer information for
leased motor vehicles, establishes requirements for odometer disclosure
for vehicles which, because of their leased status, are physically
controlled by a lessee while the lessor holds the title. Because these
vehicles are frequently transferred by the lessee to a transferor, this
section establishes special procedures to ensure mileage information is
provided by the lessee to the lessor. The lessor then executes the
odometer disclosure on the title using the information provided by the
lessee unless the lessor believes the lessee's mileage information is
inaccurate. As NHTSA explained in the NPRM, NHTSA is not aware of any
reason why electronic disclosures could not be made for leased
vehicles, and the NPRM proposed revisions which would allow lease
disclosures to be made on paper documents or electronically. Although
the proposal did not require any action on the part of states or other
jurisdictions to accommodate electronic disclosures for leased
vehicles, the NPRM asked for comments on whether such a requirement
should be implemented.
Commenters submitting responses to this portion of the NPRM
rejected any suggestion that states or other jurisdictions be required
to make any accommodation for leased vehicle disclosures. NTSF
recommended this requirement be left up to states implementing
electronic odometer system. According to NTSF, specific regulations to
be implemented by states may be needed for electronic processing of the
practice by which a lessor can obtain an odometer disclosure from the
lessee. NIADA also stated electronic disclosures for leased vehicles
should be left to states to develop in conjunction with the leasing
companies operating in their jurisdiction. NADA did not address the
role of states but supported the NHTSA proposal to enable electronic
lessor-lessee notices and electronic lessee-lessor disclosures. NADA
also stated minimum requirements for these end-of-lease situations
should be established because leasing companies have been a significant
source of odometer fraud. AAMVA opposed involving states in
transactions made between the lessee and the lessor and that a state's
only involvement should be to accept completed documents. AAMVA also
noted the term ``physical document'' used in the proposed amendments
could create confusion as the proposed definition of this term included
a title, reassignment document, or power of attorney. California also
indicated leased vehicle transactions should only involve lessors and
lessees. Florida noted states were not involved in the leased vehicle
disclosure process and should not be compelled to participate now.
As observed by AAMVA, Florida also questioned the use of term
``physical document'' in the proposed amendments. Texas found the
proposal to be particularly concerning. Texas rejected any role for
states in this process but observed the use of term ``physical
document'' and language stating leased vehicle disclosure be made
within an ``electronic document'' implicated states (and other title
issuing jurisdictions) because of the specific definitions NHTSA
proposed for these terms in the proposal. In addition, Texas
recommended allowing the lessors to comply with this section without
imposing the security requirements proposed by NHTSA as doing so would
provide a disincentive to adopting an electronic process. Virginia,
unlike any other commenter, supported including electronic disclosures
of leased vehicles as part of the electronic system established by a
jurisdiction but did not elaborate further.
8. Document Retention
Sections 580.8 and 580.9 include requirements for odometer
disclosure record retention by motor vehicle dealers and distributors
and by auction companies, respectively. The NPRM proposed to amend
these requirements to include electronic copies or electronic documents
as an acceptable form of record. The proposal also added a requirement
in 580.8 that dealer electronic records must be retained in a format
which cannot be altered and which indicates any attempts to alter it.
The comments addressing this proposal questioned whether extending
the paper record requirements for dealers and auction houses would be
necessary in jurisdictions with electronic title and odometer
disclosure systems because these jurisdictions would be required to
securely store electronic title and odometer disclosure data. Some
commenters also questioned the accuracy of some of the terms proposed
in the amendments. California stated the proposals are not needed
because it maintains the titling record of a vehicle, to which only
authorized access is permitted. Florida supported the proposed
amendments but asked NHTSA to reconsider the storage or retention of
paper records altogether given state recordkeeping. Texas argued that
where jurisdictions facilitated the electronic odometer disclosures
needed to create a new title, it would be burdensome for dealers to
retain this information. According to Texas, dealers would have to
extract the information or require the jurisdiction to provide it, and
Texas perceived no benefit from this burden. Texas also contended the
requirements for auctioneers proposed by NHTSA were overbroad,
particularly in requiring secure storage as auctions only need to log
transactions and not store odometer disclosures. Texas also observed
that use of the term ``physical document'' in the proposal was
inappropriate as that term is defined by the NPRM. In contrast to other
states, Virginia stated records kept by motor vehicle dealers and
distributors and by auction companies should be held to the same
standard as records maintained by state vehicle administrators. As did
California, Florida, and Texas, AAMVA stated the proposed requirements
were unnecessary as states systems would provide the required security
protocols and data. NADA noted the proposed language changes to Sec.
508.8(a) should similarly be made to paragraphs (b) and (c). In NADA's
view, NHTSA should clarify that where electronic records are kept in a
centralized state system, the dealer record retention requirements are
satisfied to the extent those records are reasonably accessible from
their primary place of business. Allstate's comments stated record
retention requirements are needed to support the detection and
prosecution of odometer fraud but did not elaborate further.
9. Power of Attorney
Prior to this final rule, part 580 contained secure paper power of
attorney provisions in Sec. Sec. 508.13, 508.14, and 580.15
facilitating transactions in cases where the title was lost or
physically held by the lienholder. These power of attorney provisions
provide an exception to the rule that a single person cannot execute an
odometer disclosure as both transferor and
[[Page 52681]]
transferee by allowing appointment of that individual to execute
odometer disclosures on behalf of the transferor when acquiring the
vehicle under Sec. 508.13, and, if transferring the vehicle, on behalf
of the new transferee under Sec. 508.14.
The NPRM proposed amending Sec. 580.13(a) and (b), to allow an
individual with a vehicle titled in an electronic title state to use a
power of attorney to sell a vehicle in a paper title state. Further,
because the agency believed a power of attorney or reassignment
documents would not be needed in electronic title jurisdictions, the
NPRM proposed adding the word ``physical'' to certain phrases in Sec.
580.13(f), Sec. 580.14(a), (e), and (f), and in Sec. 580.15(a). Along
with proposing use of a power of attorney for interstate transfers from
electronic to paper jurisdictions, NHTSA specifically requested
comments on whether this power of attorney would be necessary in an
electronic odometer system for intra-state transfers. The NPRM also
sought comment on the feasibility of an electronic power or attorney as
well as the implications of variations among states in implementing the
power of attorney.
The comments submitted in response to this section in the NPRM
identified several issues related to the proposed amendments. Several
commenters observed the NPRM's view that a power of attorney would be
useful in interstate transactions from an electronic title state to a
paper state was flawed. Commenters also offered varying degrees of
support for the continued use of the power of attorney in electronic
title jurisdictions while others advocated both electronic and paper
versions of the power of attorney in jurisdictions with electronic
title and odometer systems. Other comments addressed the restriction
that the power of attorney could be used only when a title is lost or
physically held by a lienholder in the context of contemporary
electronic title and lien schemes. Similarly, the status of an
electronic title made unavailable because of technical failures led
others to advocate expansion of the power of attorney provision in such
an instance. Others advocated expanding the power of attorney
provisions to facilitate vehicle financing.
States generally argued against restricting power of attorney use
to jurisdictions without electronic title systems, advocated electronic
and paper power of attorney use and observed that a power of attorney,
without more, would not allow completion of an interstate vehicle
transfer from an electronic title jurisdiction to a paper title
jurisdiction. California agreed electronic disclosure would generally
eliminate the need for the power of attorney but urged that the rule
should not restrict its use only to a physical document. In
California's view, a power of attorney, by itself, is not sufficient to
sell a vehicle or otherwise convey ownership and that completing an
interstate sale from an electronic to paper jurisdiction would also
require a secure title printed on secure paper, with an application for
a duplicate title on which the disposition of the original paper title
is attested. Florida also agreed the secure power of attorney should
not be needed in an electronic title environment but that paper titles
will continue to be in use for some time, and the secure power of
attorney should remain available to states with e-title systems.
According to Florida, electronic powers of attorney would also be
needed, even if not used frequently. Oregon noted there is still an
issue with state-to-state transactions and will continue to be until
all states implement an electronic process and asked if the proposal
eliminated the use of the power of attorney with electronic titles.
Virginia's comments voiced the same concerns and observations raised by
California and Florida while also noting the NPRM does not address how
states deny accepting documents from other states.
Texas strongly advocated allowing use of the power of attorney with
any electronic title, whether within the same jurisdiction or not.
Further, Texas observed electronic lien systems and electronic titles
raise the question of whether the power of attorney can be used under
the existing restriction that the power of attorney can be used only
when a title is lost or physically held by the lienholder. As the title
is neither lost or held by the lienholder but resides within state
electronic title systems, a transferor must either pay off the loan to
release the title prior to the transfer or must use the power of
attorney to allow the transferee to complete the odometer disclosure.
Texas also urged the power of attorney be permitted in jurisdictions
with electronic titles and that electronic powers of attorney be
allowed as well and requested there be no limitation to whom a
jurisdiction can provide a secure power of attorney. Texas strongly
encouraged NHTSA to amend Sec. 580.13(f), which specifies a power of
attorney is void if the odometer reading on the power of attorney is
lower than on the title. According to Texas, this rule does not address
situations where the power of attorney contains a statement from the
transferor that the odometer reading is known to be in excess of
mechanical limits or is not actual. The preceding circumstances, where
the odometer reading on the power of attorney may be lower than that on
the title should not, in the view of Texas, void the power of attorney.
Texas also asked that this section allow for electronic submission of
an original power of attorney by scanning or imaging. As the power of
attorney is useful only for a single transfer, Texas requested this
change not be accompanied by a requirement that the jurisdiction
confirm destruction or invalidation of the document. Finally, Texas
requested Sec. 580.16 be amended to specify that a copy of a power of
attorney be made available upon request rather than returned and that
NHTSA replace the term ``purchaser'' with ``transferee'' for
consistency.
California, Texas, and AAMVA observed the current language in Sec.
580.13(f) states ``. . . [i]f the mileage disclosed on the power of
attorney form is lower than the mileage appearing on the title, the
power of attorney is void and the dealer shall not complete the mileage
disclosure on the title.'' (emphasis added). These three commenters all
observed that because the dealer does not complete the disclosure, the
reference to ``dealer'' in Sec. 580.13(f) should be changed to
``transferee'' for consistency.
AAMVA also noted the power of attorney process described in the
NPRM would not allow completion of a transfer of a vehicle from an
electronic title state to a paper title state without the corresponding
title. In AAMVA's view, a power of attorney is or would be the
appropriate document to transfer ownership. These transactions should
be performed on a secure physical title like they are today. AAMVA also
urged a secure power of attorney, whether physical or electronic, is
needed when the title is electronic because a power of attorney may
still be necessary in intrastate transactions within an electronic
titling state in instances where the buyer or seller does not have the
ability to complete the transaction electronically. As did Texas, AAMVA
observed the power of attorney regulations did not provide relief when
an electronic title cannot be physically held, and there is no title
available for the seller to sign.
Comments provided by the dealer and auctioneer communities
supported the continued use of the power of attorney in electronic
title and odometer disclosure jurisdictions as well as the availability
of both electronic and
[[Page 52682]]
secure paper versions of these documents. Additionally, support was
also expressed for expanded application of the power of attorney beyond
situations where the title is lost or physically held be a lienholder.
NADA noted the power of attorney should be unnecessary for
electronic transfers but stated that there will be situations where a
power of attorney will continue to be necessary. Therefore, NADA fully
supported the use of a power of attorney in situations involving
electronic state to physical state transactions when it is impractical
for sellers to obtain physical copies of their electronic titles. In
addition, NADA stated NHTSA should recognize that physical state to
electronic state transfers may also involve lost paper titles or paper
titles held by lienholders, and electronic disclosure states should
have to provide for a power of attorney. The organization gave the
example of a paper state trade-in customer transferring to an
electronic state dealership needing to use the power of attorney if the
title is lost or held by a lienholder. NADA urged amending Sec. Sec.
580.13 and 580.14 to accommodate both physical and electronic powers of
attorney or, at the least, NHTSA allow ``electronic states'' to issue
physical powers of attorney.
NIADA offered similar comments and supported continued availability
of the power of attorney as well as electronic versions of the
document. Dealertrack asked the agency to recognize paper and
electronic titles and odometer disclosures will both be used for many
years and the availability of the power of attorney is essential for
commerce. The company also advocated allowing an electronic power of
attorney. Copart stated powers of attorney will continue to be
necessary for intra-state transfers, particularly if the electronic
system is not available during a catastrophic event. IAA asked if NHTSA
intended for power of attorney forms only to be submitted to paper
title states if their use was not allowed in electronic title and
odometer disclosure states. NAAA requested NHTSA consider expanding the
availability of the power of attorney to situations where technical
problems in an e-title state made electronic titles unavailable. In
NAAA's view, a power of attorney should be available to allow transfers
to occur during the interval when the e-title is inaccessible.
Lenders and their affiliates also supported broad availability of
the power of attorney. NTSF supported the continued use of the power of
attorney, including electronic systems allowing for electronic power of
attorney forms. CUCTX requested Sec. 580.13 be amended to permit the
use of an electronic power of attorney, even when the title is still a
physical document. According to CUCTX, if parties to a transaction
execute a power of attorney electronically refinancing a vehicle would
be expedited. Similarly, CUCTX encouraged NHTSA to amend Sec. 580.13
to expressly provide that financial institutions may be appointed as an
agent of either the transferee or transferor to execute documents in
these transactions. HCUA also urged the agency to allow that a
lienholder may serve as agent of both transferor and transferee and
execute the statements on their behalf. In HCUA's view, this is
necessary for credit unions involved in the financing of private sales
of automobiles. NAFCU also noted the agency should look for areas
within part 580, especially Sec. 580.13, to identify how the
regulation can be amended to enable the efficient performance of a
financial institution's essential duties when facilitating a vehicle
sale.
Therefore, NAFCU recommended the regulation be amended to clearly
specify that a financial institution can serve as an ``agent'' for the
parties in the transaction.
ESRA's comments acknowledged that an electronic odometer disclosure
system would allow most e-titling transactions to occur without a power
of attorney. ESRA further stated an odometer disclosure by power of
attorney can be made electronically. According to ESRA, if a state
requires notarization of such a power of attorney, electronic
notarization could be applied, and the form signed electronically, as
allowed by ESIGN or the Uniform Electronic Transactions Act (``UETA'').
10. Exemptions
Section 580.17(3) exempts any vehicle which is more than 10 years
old from the odometer disclosure requirements. Because the average age
of the United States vehicle fleet has been trending upward, the NPRM
proposed raising this exemption to 25 years. NHTSA also requested
comments on whether this exemption should be eliminated.
The comments responding to this proposal were mixed, with most
states supporting the proposal or remaining neutral with some concerns
about increased costs. Lenders, insurers, and dealer-related
organizations generally opposed the proposal while other groups aligned
with consumer protection strongly supported it. Many of the commenters
also exhibited concerns about the practicalities of how disclosures
would be made and mileage reported when the exemption is changed given
the large numbers of vehicles whose titles may already have had their
odometer disclosures marked as ``exempt'' instead of having their
mileage reported as set forth in Sec. 580.5(e).
Among the states providing comments to this proposal, California
supported raising the exemption to 25 years but not eliminating it.
California suggested implementing the change incrementally at one year
intervals until the 25-year threshold it attained. Florida noted the
NPRM did not discuss why 25 years was proposed and questioned how this
could be implemented. Oregon stated changing the exemption from 10
years to 25 years would require computer system reprogramming and
result in a higher rejection rate of transactions, which would increase
costs. Texas strongly supported proposed change to 25 years or
eliminating the exemption. According to Texas, eliminating the
exemption would simplify processing and technological requirements.
Texas observed NHTSA would have to address the issues raised by
currently ``exempt'' vehicles having no mileage recorded.
According to Texas, a solution to the problems raised by
implementation would be to make the change effective when the
regulation becomes effective and then phase in the applicability year-
by-year over the next 15 years. Alternatively, Texas suggested vehicles
exempt at the time of promulgation be grandfathered unless other
evidence of false mileage exists. Virginia simply stated it does not
oppose raising the exemption to 25 years or eliminating the exemption.
AAMVA supported the extension of the exemption beyond 10 years, noting
25 years is consistent an antique vehicle classification in many
jurisdictions. AAMVA also noted some states discontinue the issuance of
titles at a certain age, such as 15 years. This, AAMVA noted, would
leave no title available to carry the odometer disclosure. AAMVA
expressed concern on how the change in the exemption would be
implemented. At the least, AAMVA recommended any vehicle that does not
reflect ``actual'' mileage in the title record be precluded from
obtaining an ``actual'' mileage brand on the title even if this mileage
is disclosed later. Beyond that, AAMVA recommended the rule change
phase-in the 25-year exemption, by first applying the requirement to
vehicles under 25 years old that are currently subject to odometer
reporting.
NADA opposed the proposed change as it would greatly increase
disclosure and recordkeeping burdens for transferors, transferees, and
states, with no demonstration by NHTSA that vehicles 11 to 25 years-old
have become
[[Page 52683]]
a ``hot bed'' for odometer fraud. The organization argued NHTSA could
revisit the issue in the future after electronic titling and odometer
disclosures provide data on older vehicle odometer fraud but should not
act until NHTSA can show changing the exemption will significantly
reduce odometer fraud. In NADA's view, this proposal runs contrary to
NHTSA's time-honored and well-deserved reputation for being a data
driven agency. Moreover, NADA noted the proposal fails to provide for
any transition period to account for currently exempt vehicles. In
contrast to NADA, dealer association NIADA supported the increase of
the exemption to 25 years but urged NHTSA to ``grandfather'' currently
exempt vehicles.
Copart opposed the proposal as an unreasonably high threshold given
the average vehicle age is 11 years. Copart also questioned the benefit
to be realized in relation to costs imposed by the change on state
title systems. Auctioneer IAA argued that mileage as an indicator of
condition and value do not apply to older cars or factor into the
decisions of those who buy them. According to IAA, the proposed change
is not warranted, and the costs of the expansion far outweigh any
benefit.
Insurer representative AIA opposed the proposed change arguing the
vehicles subject to theft and/or cloning are most often late model
high-value vehicles. In AIA's view, the age of vehicles is simply not
reason enough to change the existing exemption without a thoughtful
discussion of the underlying need to do so. PCI argued against the
proposed change stating the value of older vehicles is driven primarily
by the appearance and condition of the vehicle, not its mileage.
Further, PCI noted the odometers on older vehicles may not be
functional, further complicating the process and providing little if
any benefit to a purchaser of an older vehicle. PCI suggested if NHTSA
believes that a change is necessary, the threshold for the exemption
should not be higher than 15 years.
Lender affiliated organization NTSF supported changing the exempt
vehicle age from 10 years to 25 years. The NSVRP, a non-profit consumer
organization, stated there is no justification to retaining the 10-year
recording limit. In NSVRP's view, the older the vehicle, the more
likely it is there will be risks to the public from non-disclosure of
odometer discrepancies. The organization noted it is likely that most
vehicles now on the road are exempt and therefore not covered because
of the 10 model years of age cut-off for required reporting. NOTFEA
urged NHTSA to adopt the proposal. NOTFEA observed the average vehicle
age is now 11.5 years and that operation of vehicles older than 12
years old is expected to increase 15% by 2020. Further, NOTFEA cited a
survey indicating drivers were keeping and driving their vehicles more
than 100,000 miles and planned on continuing to drive them until
200,000 miles and/or until they stopped running. Participants planned
on keeping their vehicles more than 12 years.
According to NOTFEA, a recent odometer fraud investigation revealed
a dealer rolled back the odometers on 547 vehicles, and only 134 were
not exempt. NOTFEA stated the exempt status of vehicles gave the dealer
an opportunity to reduce the mileage and that this dealer removed
approximately 26 million miles from the odometers of all the exempt
vehicles he sold. According to NOTFEA, this accounted for an
approximate fraud loss of $1.2 million and approximately 26 million
miles rolled back on 300 vehicles. NOTFEA also offered examples of
similar cases involving exempt vehicles. To address the mechanics of
implementing the change to the exemption threshold, NOTFEA suggested
when the change becomes effective, NHTSA should make it apply only to
vehicles less than 10 years old on the effective date.
11. Miscellaneous Amendments
The NPRM proposed various amendments updating the agency's address,
removing obsolete text, and conforming the petition for alternative
disclosure schemes requirements to the other proposed amendments. These
included inserting a new address in Sec. Sec. 580.10(b)(2) and
580.11(b)(2), deleting the text in Sec. 580.12, and amending Sec.
580.11(a). One commenter, NADA, indicated they supported these proposed
amendments.
12. Other Comments
Several commenters addressed issues unrelated to specific proposals
in the NPRM as well as other odometer disclosure concerns and issues.
Some of these comments related to terms used within part 580. Texas
suggested the term ``purchasers'' in Sec. 580.2 be changed to
``transferees'' because not all transfers of ownership requiring an
odometer disclosure are the result of a purchase and ``purchaser'' is
not defined in part 580. Texas also recommended changing the language
``at the time the lessors transfer the vehicle'' in Sec. 580.2 to ``at
the time the lessees return possession of the vehicle to the lessors''
to more accurately fix the time when a lessee must make disclosure.
AAMVA recommended NHTSA remove references to the term ``form'' as it
relates to electronic odometer disclosure and electronic titles because
such disclosures are not made on a paper-based ``form.''
AAMVA also asked for clarification on when a power of attorney may
be used in conjunction with odometer disclosure. Specifically, AAMVA
wanted to know if use by third parties such as lienholders, title
services, and auctions signing a non-secure power of attorney
permissible. ESRA noted none of the proposed rulemaking provisions
address ``end of life'' of vehicle title processing. In ESRA's view,
NHTSA should consider if an odometer disclosure is needed once a
vehicle is declared a total loss, and, if so, create an electronic
disclosure process for such vehicles.
The NSVRP urged NHTSA to make whatever changes were needed to
ensure odometer readings were reported to the correct jurisdiction at
every transfer, including dealer-to-dealer transfers. According to
NSVRP, gaps in reported mileage occurring when reassignment documents
or a power of attorney are used create opportunities for title skipping
and false odometer disclosure statement.
Auctioneer representative NAAA argued the proposed rule does not
adequately address U.S. and international export rules. According to
NAAA, U.S. Customs and Border Protection regulations require vehicles
titled domestically be exported with the original certificate of title
or a certified copy and destination countries may require original
titles for importation. Because the proposed rule requires destruction
of paper titles when those titles are converted to electronic titles,
NAAA is concerned domestic and foreign customs officials may not be
prepared to work with electronic titles and disclosures and that delays
in processing requests to create official paper titles may harm vehicle
exporters.
Two commenters, Texas and AAMVA, addressed the petition process for
establishing alternative odometer disclosure schemes. AAMVA asked that
the final rule ensure the petition process remains available while
Texas requested Sec. 580.12, which the NPRM proposed to remove and
reserve, be used to provide the parameters for rescinding a grant of
approval.
Finally, two lender organizations, NTSF and HCUA, recommended
electronic odometer systems provide the means for lienholders to
electronically
[[Page 52684]]
receive the mileage reading for vehicles they intend to finance.
III. Final Rule and Response to Comments
A. Summary of the Final Rule
This final rule adopts the amendments proposed by the NPRM for
Sec. Sec. 580.1, 580.10, 580.11, and 580.12 without substantive
change. Minor changes from NPRM proposals include replacing ``his''
with ``their'' to achieve gender neutrality throughout part 580 and
establishing a definition of ``jurisdiction'' that encompasses states
and territories to replace the term ``state'' wherever formerly used in
part 580. Also for clarity and accuracy, Sec. 580.2 is amended to
better describe the status of a vehicle upon termination of a lease,
and the term ``purchasers'' has been replaced with the more accurate
and less restrictive term ``transferees.'' Consistent with the former
amendment, the term ``dealer'' in Sec. 508.13(g) has been changed to
``transferee'' to reflect that those receiving ownership are not just
dealers.
The NPRM proposed facilitating adoption of electronic title and
odometer disclosure systems by adapting the existing physical document
requirements of part 580 to a broadly defined class of electronic
documents. In response to comments criticizing this approach, the final
rule contains new definitions for ``Access,'' ``Electronic Power of
Attorney,'' ``Electronic Title,'' ``Jurisdiction,'' and ``Printed
Name,'' and revises the definitions of ``Original Power of Attorney,''
``Sign or Signature,'' and ``Transferor.'' These more precise
definitions are applied throughout part 580 to allow odometer
disclosures with both physical and electronic titles and powers of
attorney. This final rule also authorizes use of an electronic power of
attorney and, provides for electronic reassignments when a transferee
is given a paper title by the transferor but does not take title to the
vehicle. The definition of ``Sign or Signature'' includes an electronic
signature employing NIST level 2 authentication system or its
equivalent, instead of NIST Level 3. The regulations now also more
clearly allow authorized modifications to electronic records and
recognize that electronic titles and odometer disclosures may be held
in a variety of formats. The final rule retains our proposal that an
individual signing a disclosure on behalf of a business must identify
himself and the business. Also, because technologies such as ``pen
pads'' may be used in electronic titling and odometer disclosure
systems and that paper documents may, in some jurisdictions, be
employed in an electronic odometer disclosure system, the final rule
abandons the NPRM's proposal to delete printed names from electronic
transactions. This final rule also substantially relaxes the proposed
requirements for scanning documents to allow document conversion in
black and white at a resolution of 200 dot per inch (dpi) and
recordkeeping requirements in Sec. Sec. 580.8 and 580.9 provide more
options for dealers and relax the rules for auctions. NHTSA now
promulgates provisions allowing both electronic and paper powers of
attorney if a title is unavailable to a transferor because the title is
lost, physically held by a lienholder, electronically controlled by a
lienholder or when an electronic title is inaccessible. The exemption
rules in Sec. 580.17 are now set so vehicles that are 20 years old or
older are exempt from mileage reporting. The final rule also now
explicitly establishes how this exemption will be applied to different
model years.
B. Supplemental Notice of Proposed Rulemaking (SNPRM)
As noted above, NADA and NAAA, suggested NHTSA issue an SNPRM prior
to issuing a final rule while NAMIC and Texas stated NHTSA might
consider delaying this final rule. NADA felt that an SNPRM would help
to provide more comments and information about interstate transfers.
NAAA asked for an SNPRM to explore the effect of any delays inherent in
producing paper titles on exporting vehicles. Texas urged delay in
issuance so the agency could craft clearer language. NAMIC thought
delay would give a greater opportunity for NHTSA and state officials to
forge a national electronic titling and odometer disclosure system.
Given the amount of time that has passed since the issuance of the
NPRM and the extensive changes made to the agency's original proposal
as detailed elsewhere in this notice, NHTSA does not believe that an
SNPRM is needed or would provide any added value in addressing the
concerns voiced by these commenters. NHTSA shares NADA's concerns about
the challenges posed by interstate transactions and has drafted the
final rule to provide solutions. Additionally, the agency's approach is
to provide as much flexibility as possible while protecting the
integrity of mileage disclosures. This approach will allow states to
adopt and develop means for addressing different transactions in what
will certainly be an evolutionary process. Similarly, the agency
believes NAAA's concerns would not be addressed by issuing an SNPRM.
States have an interest in meeting the needs of citizens and resident
businesses and will likely develop methods for providing paper titles
efficiently. The commenters urging delay, Texas and NAMIC, raised
entirely different issues. Texas urged delay so better language could
be developed. The extensive revisions made to our original proposal
signal NHTSA's strenuous effort to do just that. NAMIC's loftier goal,
to delay issuance until a national titling system could be developed,
would require significant and unacceptable delay in issuing this final
rule.
C. Scope of the Final Rule
In considering the breadth of the proposals in the NPRM and the
amendments promulgated in this final rule, NHTSA remained mindful of
the direction given by Congress in directing that the agency
``prescribe regulations permitting any written disclosures or notices
and related matters to be provided electronically.'' (Section 31205,
126 Stat. 761, Pub. L. 112-141 (2012)). NHTSA notes this direction was
unaccompanied by any suggestion that a national electronic title system
be created, however laudable that goal may be. Moreover, in enacting
section 24111 of the FAST Act authorizing states to create electronic
odometer disclosure systems without NHTSA's approval until the
effective date of this final rule, Congress also did not offer any
indication it supported the creation of a national title system by
expansion of NMVTIS or other means. (Section 24111, Pub. L. 114-94
(2015)). However desirable a national electronic title or odometer
disclosure infrastructure might be, the agency concluded it has not
been tasked with creating such a system. Accordingly, this final rule
does not answer to the sentiments expressed by AIA, NAMIC, and Texas
that this rulemaking action create such a system.
A secondary scope issue exists to the extent the NPRM contemplated
that NHTSA take two approaches to regulating electronic odometer
disclosures. As reflected in the NPRM's request for comments, one
approach would be to draft a set of detailed and comprehensive
regulations creating rules governing technical aspects of system
security, identity authentication, interstate communications, and the
mechanics of executing transfers. Alternatively, the NPRM posited the
agency take a less prescriptive approach aimed at preserving the
essential characteristics of odometer disclosure and providing states
with the latitude needed to develop electronic systems consistent with
their environment. On
[[Page 52685]]
the whole, commenters strongly favored NHTSA adopt this less
prescriptive approach, noting that rapidly changing technologies and
traditional rulemaking are incompatible, that overly restrictive rules
would preclude development of electronic systems, and that states have
a deeply rooted fundamental interest in erecting and maintaining
electronic titling and odometer disclosure systems that are secure,
functional, and efficient. The agency concurs in these assessments and
believes this less restrictive approach is consistent with the brevity
exhibited by Congress in directing the promulgation of this final rule.
D. Definitions
The definitions in this final rule differ significantly from those
proposed in the NPRM and remedy some significant shortcomings in our
earlier proposal. Commenters identified many issues created by the
proposed definitions. In posing the terms ``Electronic Document'' and
``Physical Document'' our proposal apparently created an impression
that NHTSA's vision of permissible electronic odometer disclosure
schemes was limited to instances where the electronic record was
nothing more than a scanned or imaged conversion of a paper document.
Although it was not NHTSA's intent to erect such a limitation, many
commenters noted these terms were inconsistent with many existing
systems where electronic titles and odometer disclosures are entries in
a database. Commenters also correctly observed the types of documents
encompassed by the respective definitions suffered from real or
apparent conflicts with other sections of the proposed rules. Some
comments addressed the proposed definition of ``Sign or Signature'' and
noted it did not appear to encompass signatures made on ``pen pads'' or
similar devices on which an individual's physical signature is captured
electronically. Two commenters, NADA and Texas, also suggested NHTSA
modify the definitions section to ensure no doubt exists that the
proposed rules apply to any jurisdiction that issues titles, including
territories.
As noted, Texas included a ``redline'' version of the regulatory
text proposed in the NPRM along with its substantive comments. Noting
first that Texas has already implemented an electronic title and
odometer disclosure system known as webDEALER consistent with NHTSA's
approval of its petition to implement alternative electronic disclosure
requirements and thereby gained valuable experience in a new field,
NHTSA examined the changes to the regulatory language proposed by that
state. After consideration of the proffered language and the comments
addressing concerns about our proposals in this, and other, sections,
the agency is incorporating many of the changes suggested by Texas into
this Final Rule.
To distinguish between the ability to view an electronic title,
power of attorney, and the electronic odometer disclosures incorporated
into those records and the ability to modify those records, the final
rule adds the definition of ``Access'' to Sec. 580.3. This definition
states ``Access'' is the authorized display and entry of information
into an electronic title or power of attorney in a manner allowing
modification of previously stored data. The definition further
differentiates ``Access'' from the mere ability to view information
without being able to modify it and distinguishes ``Access'' from the
modification of a record resulting in creation of a new title. Adding
this definition, in our view, also assists in alleviating concerns
voiced by commenters that different rules proposed in the NPRM failed
to adequately provide opportunities for legitimate error correction in
secure records by authorized persons.
This final rule also disposes of the definition of ``Electronic
Document'' by replacing the latter with new definitions of ``Electronic
Power of Attorney'' and ``Electronic Title.'' The definition of
``Physical Document'' has been retained in modified form to establish
the meaning of the term ``Physical'' as it applies to documents. The
term is inserted where appropriate throughout part 580 to identify
paper documents. Although the NPRM did not provide for an electronic
power of attorney or propose to define one on the basis that such a
document should not be necessary where electronic titles exist, NHTSA
has reconsidered this position in response to the observations of some
commenters that this tool will be needed as the transition from paper
titles to electronic titles moves forward. The final rule definition
simply states an electronic power of attorney is simply a power of
attorney created and maintained in an electronic format that meets all
the requirements of part 580. Our definition of ``Original Power of
Attorney'' is amended in the final rule by adding the word ``physical''
for clarity. Similarly, the final rule definition for the electronic
version excludes a scanned copy of a paper power of attorney. The final
rule adopts a similar definition of ``Electronic Title,'' by specifying
this record as created and maintained in an electronic format and
incorporating and odometer disclosure and reassignment process. For
clarity, a scanned copy of a paper title is specifically excluded from
the definition. Responding to other comments that the applicability of
proposed rules should be clarified, the final rule also includes a
definition of ``Jurisdiction'' as a state, territory, or possession of
the United States. To ensure all governmental entities with the power
to title vehicles are clearly encompassed by part 580, the final rule
replaces the term ``state'' with ``jurisdiction'' wherever it appears.
The agency also notes that the definition of ``Jurisdiction'' is
singular and signals NHTSA's decision not to establish security
standards or similar regulations governing the exchange of electronic
title information between jurisdictions. While it is most certainly the
agency's intent to ensure that odometer disclosures be properly
executed in interstate and intrastate transfers, the manner in which
jurisdictions may share electronic title information is beyond the
purview of this final rule.
For electronic documents, the NPRM proposed eliminating the
requirement found Sec. 580.5(f) for a person completing an odometer
disclosure to provide their printed name when transferring a vehicle.
The agency viewed this requirement as superfluous when identity
authentication requirements should ensure the information would be
available. While NHTSA still believes this to be the case where a party
would have to log on to a state website to conduct a transaction,
electronic title and odometer disclosure schemes may involve other
procedures. For example, our approval of Florida's petition for
alternative odometer disclosure requirements involved a system where
individuals presented secure documents to a tag agent who entered the
information into a state system. A variant of such a system might
involve parties employing a pen pad to sign documents and enter
information at a state or state-authorized facility after presenting
identification. In such an instance, providing a printed name would be
necessary to ensure identification in the future. Accordingly, the
final rule is adding a definition of ``Printed Name'' to Sec. 580.3
specifying what constitutes a printed name in both an electronic record
and a physical document.
NHTSA's proposed changes to the definition of ``Sign or Signature''
generated many comments. These comments were directed at the NIST
authentication level proposed in the definition as well as more prosaic
concerns about the definition not
[[Page 52686]]
adequately encompassing the full range of potential means for making an
electronic signature. NHTSA's response to the NIST authentication
issues is discussed below, and the agency now addresses the remaining
issues.
The final rule leaves the language pertaining to physical
signatures unchanged and adopts a two-part definition of electronic
signature. In the first part of this definition, the language remains
essentially the same as that in the NPRM aside from the NIST level
requirement. The second part of the definition, which states that an
electronic signature may include an electronic sign or process made
before an employee or statutory employee of the jurisdiction,
encompasses situations where an electronic title and odometer
disclosure system may involve entering information and executing
signatures at a state office or a state-authorized facility. NHTSA
added this language to accommodate electronic title systems that may
rely on physical signatures as part of the titling and odometer
disclosure process
E. Identity of Parties to a Motor Vehicle Transfer and Security of
Signatures
As NHTSA observed in the NPRM, a physical signature is a unique
mark linked to the person who made it. That unique mark may be tied to
its maker even in the event a false name is used when the signature is
given. In contrast, an electronic signature is anonymous. Confirming
the identity of a person making an electronic signature is therefore
dependent on factors other than the signature and requires a degree of
corroboration. Because of concerns that the use of electronic
signatures may impede the ability to identify persons making an
odometer disclosure, NHTSA proposed the definition of ``Sign or
Signature'' require that an electronic signature identify a specific
individual. The NPRM also proposed this requirement be included in
580.6(a)(2), that proposed requirements for electronic transfers. This
proposal was supported by those commenters choosing to address it, and
NHTSA is adopting this requirement in this final rule.
The NPRM simultaneously proposed that in the context of an
electronic odometer disclosure, the identity of the individual making
or acknowledging the disclosure be verified using an identity
authentication scheme meeting, or equivalent to, Level 3 as described
in the NIST Special Publication 800-63-2, Electronic Authentication
Guideline. This NIST guideline specified four different levels of
identity assurance which are assigned according to the level of risk
posed by the potential failure to authenticate the identity of an
individual using an electronic system for a transaction. These four
levels of assurance (LOA)--with Level 1 being the lowest and Level 4
being the highest set out different authentication requirements. At
Level 1 a user name and a password is sufficient verification and there
is no identity proofing. The only assurance is the fact that the user
can authenticate to the identity provider that some relationship exists
between the two because the user provides a previously issued
credential (username and password or cryptographic key). At Level 2,
proof of identity requirements are introduced, requiring presentation
of identifying materials or information. Both in-person and remote
registration are permitted. For in-person registration the applicant
must be in possession of a primary government photo ID (such as a
driver's license or passport). For remote registration, the applicant
submits the references of and attests to current possession of at least
one primary government photo ID and a second form of identification.
The applicant must provide to the registration authority at a minimum
their name, date of birth, and current address or personal telephone
number. At Level 3 proof of identity requires verification of
identifying materials and information. Both in-person and remote
registration are permitted. Level 3 requires the same evidence for
issuing credentials as Level 2; however, at this level verification of
the documents or references through record checks is required. The most
stringent requirements, at Level 4, do not permit remote registration.
Potential users must appear before a registration officer and provide
two independent ID documents or accounts which must be verified. One of
these must be a current primary government photo ID that contains
applicant's picture, and either address of record or nationality (e.g.
driver's license or passport).
Most of the commenters submitted views on this proposal, and all
the commenters protested imposition of a NIST Level 3 requirement. As
noted above, the comments in opposition stated the Level 3 standard was
inapposite, costly, and overly restrictive. In specifying the NIST
Level 3 standard, NHTSA intended to ensure the identities of those
giving electronic signatures would be established to the extent
necessary to ensure imposters did not execute or acknowledge mileage
disclosures.
However, the agency has also re-examined the applicability of the
Level 3 standard. The comments submitted in response to the NPRM,
directed toward this proposal and other proposed and potential security
requirements, underscored the degree to which states are invested in
providing secure electronic systems and, to a lesser but still
sufficient degree, in verifying the identities of persons using those
systems for vehicle transfers. The final rule, therefore, specifies the
required level of authentication for confirming the identity of persons
participating in electronic odometer disclosures shall meet the NIST
Level 2 requirements or an alternative scheme providing an equivalent
level of security.
Furthermore, since the June 2017 issuance of NIST Special
Publication 800-63-3, Digital Identity Guidelines (including sub-parts
800-63-3A, 800-63-3B and 800-63-3C) superseded Special Publication 800-
63-2, Electronic Authentication Guideline, the final rule has updated
the reference to the new NIST guidance. While making this change, NHTSA
is mindful the NIST guidelines, or similar guidance, will continue to
evolve as technology advances. As discussed in the NPRM, advances in
technology are likely to proceed at a faster pace than NHTSA's ability
to revise and issue new rules. It is for this reason that the NPRM, as
well as this final rule, specified that states need adopt a system
meeting the specified NIST guideline or its equivalent. Moreover, in
specifying that the NIST Level 2 standard or its equivalent must be
met, NHTSA does not intend that states must update their systems to
meet each new NIST guideline when it is issued. Instead, our
expectation is that states will recognize the need to properly
authenticate participants in odometer disclosure transactions and
maintain a level of authentication security comparable to what the 2017
NIST Level 2 guideline establishes now. NIST guidelines can be met with
currently available products on the market.
The final rule's definition of an electronic signature--``an
electronic sound, symbol, or process''--is intended to encompass the
full range of methods and technologies that may be employed to
electronically sign a disclosure. Accordingly, a signature executed by
writing on a pen pad or using a biometric such as a fingerprint, falls
within an ``electronic process'' as described in the definition. While
a biometric such as a fingerprint or retina scan might serve as a
signature under the definition, NHTSA notes that employment of a
biometric does not relieve a state or jurisdiction from having to meet
the authentication
[[Page 52687]]
requirements in subsection (b)(i) of the definition.
F. Document or Record Security and System Security
The NPRM proposed amending Sec. 580.4 to require electronic
titles, powers of attorney, and reassignment documents to be maintained
in a secure environment preventing unauthorized modification and
recording when records are created, accessed, altered or unauthorized
attempts to modify them are made as well as the date and time any
attempt is made to alter the documents and any alterations are actually
made in the records. The NPRM explained NHTSA might consider specifying
security standards for these systems and requested comment on doing so.
Commenters supported the proposed changes on the condition the final
rule take adequate steps to ensure the final rule allowed authorized
changes to electronic records to correct errors. One commenter,
Virginia, objected to the requirement that unauthorized attempts to
alter or modify records be tracked as the proper response in that event
is to deny access and not create a record. Commenters overwhelmingly
supported NHTSA's tentative decision to not issue security standards
for overall system security.
The final rule adopts the language proposed in the NPRM with a
small number of modifications. The heading for Sec. 580.4 is changed
to make it clear that it applies to physical documents, electronic
titles, and electronic powers of attorney. As electronic reassignments
are addressed in the definition of Electronic Title the final rule also
removes the reference to an electronic reassignment document in Sec.
580.4(b). In transactions where paper titles are used, separate
reassignment documents become necessary when the title is reassigned
multiple times and the existing title can no longer physically
accommodate the required odometer disclosures. In the case of an
electronic title, no such physical limitation exists, and, for all
practical purposes, all the necessary reassignment disclosures will be
incorporated into the electronic title. However, as there may be
instances where a transferee is provided with a paper title by the
transferor in a state with electronic titles, and the transferee may
not wish to take title to the vehicle, an electronic reassignment
option should be made available in those circumstances where a paper
reassignment form would otherwise be used. Accordingly, Sec. 580.5(g)
of the final rule provides that an electronic reassignment shall be
made before issuance of an electronic title where the transferee
receives a paper title and no room exists on that title for the desired
reassignment. Other changes made in this section for the sake of
clarity and consistency include deletion of the word ``forms'' when
referring to electronic records, substitution of ``jurisdiction'' for
``state,'' and expansion of the term ``secure process'' in Sec.
580.4(a) to ``secure printing process or other secure process.''
G. Odometer Disclosures
NHTSA proposed changing Sec. 580.5, Disclosure of odometer
information, to accommodate electronic odometer disclosures by adding
references to electronic systems, directing information required on a
paper title be entered in an electronic form incorporated into the
electronic title, requiring warnings be provided electronically for
electronic transactions, and executed electronic disclosures be made
available to the parties. Where paper transactions required
participants to provide a printed name, the NPRM proposed the printed
name was not needed in electronic transactions and sought to delete
that requirement. NHTSA also proposed an existing requirement that
transferees provide a copy of a completed paper disclosure form to
transferors be expanded to electronic transactions by requiring that
the completed electronic disclosure be made available to the parties.
To address situations where a vehicle has not yet been titled, NHTSA
proposed amendments for the use of disclosures separate from the title
in both paper and electronic systems.
Commenters supported the proposed changes while offering
modifications aimed at improving clarity and flexibility. The final
rule addresses many of the concerns found in the comments. Because this
final rule adopts a definition of an ``electronic title'' instead of
the proposed ``electronic document,'' changes consistent with that
definition are now incorporated into Sec. 580.5. Section 580.5(a)
states the mileage and other information required for odometer
disclosures must be incorporated into a physical title or an electronic
title presented to a transferee. Because an electronic title has
unlimited space available for disclosures, Sec. 580.5(b) of the final
rule provides physical titles must have space available for the
required elements of the disclosure. Where NHTSA proposed in Sec.
580.5(c) that an odometer disclosure be made an ``electronic form
incorporated into the electronic title,'' the final rule now provides
disclosures be made on an electronic title to clarify that electronic
title systems are not, as many commenters noted, limited to systems
where ``forms'' are scanned into an electronic format. The final rule
also differs from our proposal by requiring that parties provide a
printed name on both physical and electronic titles. As noted above,
using ``pen pads'' or similar handwriting conversion technologies could
result in an inability to identify individuals in ``hybrid'' electronic
title and odometer disclosure systems. Section Sec. 580.5(d) of this
final rule specifies the warnings and notices present on paper odometer
disclosures also be presented to parties executing an electronic
disclosure. The NPRM proposed an additional requirement be added to
this section in electronic transactions in the form of a check box or
similar mechanism to ensure the notices were read and understood before
the transaction can move forward. In response to comments that this
requirement is superfluous, since the electronic or physical signature
already constitutes acknowledgement of these warnings, the final rule
does not require a separate acknowledgement or ``check box'' in
electronic disclosures.
NHTSA is also adopting the language proposed in the NPRM for Sec.
580.5(f), with some modifications. Because of comments that the
proposal did not sufficiently specify the sequence in which odometer
disclosure statements are signed, this final rule states a transferee
must execute the disclosure statement ``upon receipt'' of the
transferor's signed disclosure. While the concept of ``receipt'' is
arguably more ephemeral in an electronic transaction when no physical
document is present, the agency believes that ``receipt'' in that
context occurs when a system provides a display confirming the
transferor's signature and all the required elements of the disclosure
itself. For electronic systems, this final rule also adapts the
requirement in Sec. 580.5(f) that a transferor provide a paper copy of
the executed disclosure statement to the transferee by requiring that
such systems must make the completed statement available to the
parties. Although one commenter objected to states being required to
provide this copy, the requirement is satisfied if the electronic
system allows the parties to print or download a record of the odometer
disclosure and the required elements of that disclosure.
The requirement that odometer disclosures be made on the title and
not on a separate document is critical for preventing odometer fraud.
Since the title is nearly indispensable when establishing ownership,
making
[[Page 52688]]
disclosures on the title ensures that opportunities for counterfeiting
odometer statements are kept to a minimum. Consistent with this theme,
part 580 allows odometer disclosures to be made on a document other
than the title only in very prescribed circumstances. One of these is
when the title is lost or held by a lienholder and the power of
attorney authorized by this part may be used. Another exists when a
paper title, which is required to have space for an odometer disclosure
and subsequent reassignments, no longer has space available for
additional reassignments. A reassignment document may also be used when
the vehicle at issue has never been titled. While preserving the
foregoing provisions for physical documents in paper title states, our
NPRM proposed amendments stating electronic title and odometer
disclosure systems shall provide a means for making the disclosure
electronically and incorporating it into the electronic title when the
title is created. Commenters supported this proposal but requested
states have the option of employing either a paper or an electronic
system for these transactions, even where the jurisdiction provided an
electronic title and odometer disclosure system. NHTSA agrees that
states, whether they have an electronic or paper-based title and
odometer disclosure system, must have the option of using either paper
or electronic disclosure statements in instances when a vehicle has not
yet been titled. The final rule now provides that option.
The final rule also allows the use of electronic or physical
reassignments under specific conditions after a vehicle has been
titled. These conditions stem from the nature of physical titles and
the fact that transfers occurring in electronic title jurisdictions
will inevitably involve transactions where a transferor has a paper
title. Because physical titles can only accommodate a certain number of
reassignments, separate secure reassignment documents can be employed
to facilitate transfers between parties that do not take title to the
vehicle. Where a transaction involves a vehicle with an electronic
title, the electronic title system should accommodate any number of
reassignments. Therefore, reassignment documents, either electronic or
physical, would not be needed in electronic title jurisdictions. There
will, however, be situations where an electronic title system must
allow electronic reassignment before an electronic title has been
created. The first will be instances where the vehicle has never been
titled and neither an electronic or a physical title is available for
recording reassignments. Another circumstance requiring an electronic
reassignment would arise when a transferor holding a paper title for a
vehicle wishes to transfer that vehicle in a jurisdiction with an
electronic title system. In that circumstance, a mechanism needs to
exist to allow further reassignments prior to issuance of the
electronic title. If the transferor holding the physical title makes
the disclosure on that title, the final rule requires subsequent
electronic reassignments in such an instance, even though the vehicle
has a physical title.
Consistent with other provisions of this final rule, Sec. 580.5(g)
disposes of the use of separate physical odometer disclosure statements
in states with electronic title and odometer disclosure systems. To
make this limitation on the use of separate physical odometer
disclosure statements after a title has been issued, the final rule now
states a separate physical disclosure statement may only be used after
the holder of a physical title has made a proper odometer disclosure,
assigned the title to their transferee, the title no longer has space
for a reassignment and the transaction's locale does not have an
electronic title and odometer disclosure system. Finally, while states
with electronic title and odometer disclosure systems may choose to
employ separate physical disclosure statements in instances where a
title has not been issued, the final rule establishes these states must
provide a means for electronic odometer disclosures both before and
after a title has been issued.
H. Requirements for Electronic Transactions
NHTSA proposed employing Section 580.6, previously reserved, to
address issues specific to electronic transactions. These proposals
included electronic storage in Sec. 580.6(a)(1), electronic signatures
in Sec. 580.6(a)(2), availability of electronic records in Sec.
580.6(a)(3), accounting for the potential for co-existing paper and
electronic records in Sec. Sec. 580.6(a)(4) and 580.6(a)(6), allowing
a non-negotiable paper ownership record option in Sec. 580.6(a)(5),
NHTSA also proposed, requiring secure physical documents be used in
electronic odometer disclosure systems in Sec. 580.6(a)(7), and
setting standards for converting secure paper documents to electronic
formats in Sec. 580.6(a)(8).
As set out in the NPRM, Sec. 580.6(a)(1) stated electronic records
shall be retained in a format which cannot be altered, and which
indicates any attempts to alter it. Commenters supported this proposal
if the final rule allowed authorized alterations to the records to make
corrections and other permissible changes. In response to these
comments, the final rule makes several changes to this section. First,
NHTSA has narrowed the applicability of this section from electronic
``records'' to electronic titles to remedy the overbreadth of our
proposed language and for consistency with the remainder of the final
rule. The final rule similarly changes the heading for Sec. 580.6 to
``Additional Requirements for Electronic Odometer Disclosures'' to add
clarity and precision. Proposed Sec. 580.6(a)(1) is now redesignated
as Sec. 580.6(a) and, also for clarity, Sec. 580.6(a)(2) through (8)
are re-designated as Sec. 580.6(b) through (h).
Section 580.6(a) of the final rule states electronic titles and
power of attorney shall be retained in a format which cannot be altered
unless such alterations are authorized and which indicates any
unauthorized attempts to alter it (Sec. 580.6(a)(1)). This language
allows authorized modifications in response to comments requesting this
authority. To assist in detecting odometer fraud, these records must be
stored in an order that permits systematic retrieval (Sec.
580.6(a)(2)) for a minimum of five years following conversion to a
physical title, issuance of a subsequent title, or permanent
destruction of the vehicle. Absent those events, the record shall be
retained indefinitely. Final rule Sec. 580.6(a)(2) and (3) mirror
provisions for electronic record retrieval and storage that were found
in Sec. 580.6(a)(4) of the NPRM's regulatory text. These have been
relocated as the focus of Sec. 580.6, which has been narrowed to
electronic odometer disclosures embedded in electronic titles and
powers of attorney. The agency observes that two commenters, Texas and
California, indicated the five-year retention period was unnecessarily
burdensome and suggested three and four years respectively. Although
NHTSA acknowledges that a shorter retention period would be less
burdensome, the agency believes effective detection and prosecution of
odometer fraud requires that states retain records, as dealers must,
for not less than five years.
The agency also proposed requirements for signatures in electronic
transactions. Section 580.6(a)(2), as set forth in the NPRM, stated any
electronic signature identify an individual, and, further specified a
business or entity be identified if the individual is acting on behalf
of that business or entity. Comments submitted in response to this
proposal were generally split--states,
[[Page 52689]]
AAMVA, and consumer or law enforcement-oriented groups supported it
while dealers, auction firms, and their associations opposed it. Dealer
groups believed the requirement to be unnecessary and inflexible as
dealerships are entities regulated and licensed by their home states.
Auction interests argued the requirement would impose a crippling
burden on their ability to do business as they process hundreds or
thousands of vehicles at a time. The final rule amends the language
proposed in the NPRM to alleviate some of these concerns. Redesignated
as Sec. 580.6(b), this section is now restricted in application to
electronic signatures made on odometer disclosures embedded in
electronic titles or power of attorney. In contrast to our proposal,
which was capable of being read as applying to all electronic
transactions, the final rule requirement applies specifically to
odometer disclosures.
In addition, the final rule also explains the requirement to
identify both an individual and the entity that individual represents
is, for auctions and dealers, limited to identifying the individual and
the dealer or auction firm. NHTSA believes these modifications should
relieve auctions from identifying multitudes of consignees that bring
cars to them for sale, particularly since auctions typically do not
take title or execute odometer disclosures. The agency does not,
however, believe the requirement to identify both an individual and an
entity when the individual represents an entity, should be eliminated.
Identity verification schemes may rely heavily on personal information,
not business information. Considering this, maintenance of what may be
a rapidly changing list of ``authorized'' employees for a business
would impose burdens on states and promote misidentification.
Executing odometer disclosures requires notices, warnings, and
instructions to be read, information to be supplied by the transferor,
acknowledgement and acceptance of the disclosure by the transferee,
and, in paper transactions, a copy of the signed disclosure statement
must be given to the transferor by the transferee. Transitioning from
paper to electronic odometer disclosure requires parties have this
information available. Then NPRM proposed any requirement in part 580
to disclose, issue, execute, return, notify, or otherwise provide
information to another person is satisfied when the required
information is electronically transmitted or otherwise electronically
accessible to the party required to receive the disclosure. One
association and one state opposed this proposal as imposing a
requirement on states that more properly lies with the parties.
Objection was also made to this requirement as ``process based'' and
not transaction based because of the proposed Sec. 580.6 applying to
electronic transactions.
The final rule adopts the language proposed in Sec. 580.6(a)(3) in
the redesignated Sec. 580.6(c) with modifications responsive to
commenter concerns. NHTSA observes first that Sec. 580.6 has been
recast to focus on electronic odometer disclosures instead of
transactions to correct the impression it applies to processes. In
addition, the final rule strikes the word ``execute'' from the proposed
regulatory text and directs a requirement to disclose, issue, return,
notify, or otherwise provide information to another person in the
course of an electronic odometer disclosure is satisfied when the
required information is electronically transmitted or otherwise
electronically available to the party required to review or receive it.
Therefore, the final rule clarifies the information at issue is that
which is necessary for an odometer disclosure, and the duty to provide
it is satisfied when it is made available to a party. As any electronic
odometer disclosure must, at a minimum, provide an opportunity for
parties to the transfer to view information, this requirement does not,
for all practical purposes, impose an unnecessary burden.
Paper and electronic title and disclosure systems are likely to
coexist for the foreseeable future. The NPRM proposed adding two
sections to 580.6 to address the issues posed by the co-existence of
paper and electronic systems. Section 580.6(a)(4) proposed requiring
prior paper titles be copied electronically and then destroyed when a
new electronic title is created. To preserve the paper title as a
record, NHTSA also proposed the electronic copy of the paper title be
retained for five years. Section 580.6(a)(6) proposed electronic title
states must have an ability to issue secure paper titles and upon
issuing such a title must invalidate any electronic title. Commenters
supported these proposals but offered some concerns. One of these is
that requiring destruction of physical titles by states is cumbersome,
and the same purpose can be met by invalidating the paper title.
Commenters also noted the requirement that only states can print paper
titles might be too restrictive as technological advances might make it
possible for secure paper titles to be produced by other entities.
Indeed, one individual commenter suggested individuals could print
their own titles.
The agency is adopting the proposed sections with several
modifications. Section 580.6(d), Sec. 580.6(a)(4) in the NPRM, of the
final rule requires states issuing electronic titles to obtain the
prior physical title or proof that it was lost or invalidated before
issuing a new title. These states must retain a physical or electronic
copy of the physical title for five years, a period NHTSA believes is
required for effective enforcement. As noted, the storage requirements
for these records have been incorporated into the general requirements
for storing electronic odometer disclosures in Sec. 580.6(a) of this
final rule. The final rule further adopts the language proposed in
Sec. 580.6(a)(6) of the NPRM without substantive change as Sec.
580.6(f). NHTSA does not presently believe entities other than states
should have the capability to issue titles.
NHTSA's NPRM proposed, in Sec. 580.6(a)(5), that states with
electronic title systems have the option of providing vehicle owners
with a paper record of ownership, including odometer disclosure
information, if that document clearly indicates it is not an official
title or odometer disclosure for that vehicle. The comments received in
response to this proposal were very supportive, with some commenters
expressing reservations such a document could be used fraudulently if
not clearly marked. The final rule adopts the proposal in Sec.
580.6(e), allowing issuance of such a document if it clearly indicates
it is not an official title for the vehicle and may not be used to
transfer ownership.
States may implement electronic title and odometer disclosure
schemes by employing physical documents at some stage of the process.
NHTSA's approval of alternative odometer disclosure schemes presented
by the Florida and New York petitions, was conditioned on the use of
secure documents for portions of the odometer disclosure process.
Section 580.6(a)(7) of the NPRM proposed any physical documents used
make odometer disclosures for entry into an electronic title and
odometer disclosure system to comply with the existing requirements of
part 580. Comments directed toward this portion of the NPRM supported
it, but two commenters, Arizona and Texas, respectively noted the
proposed language conflicted or may conflict with other portions of the
proposed rule.
The final rule adopts the regulatory text of Sec. 580.6(a)(7) of
the NPRM as Sec. 580.6(g) and modifies the requirement that such a
document meet the existing requirements of part 580. For clarity and
[[Page 52690]]
to eliminate conflicts with other provisions, the final rule paragraph
states any document used to make odometer disclosures into an
electronic system must be set forth by means of a secure printing
process or other secure process. In addition, the final rule specifies
the foregoing requirement does not apply to a lessee's odometer
disclosure made in conformance with Sec. 580.7.
The simultaneous existence of both paper and electronic title and
odometer disclosure systems requires paper documents be converted into
electronic records. As NHTSA remained concerned document conversion
presented opportunities for fraud, Sec. 580.6(a)(8) of the NPRM
proposed processes for converting titles and other secure documents to
electronic copies maintain security features and that scanning be made
in color at a resolution of 600 dpi. Commenters reacted strongly to
this proposal and argued strenuously that it was ill founded, costly,
and impractical. After consideration of these comments, the agency
agrees a 600-dpi requirement is impractical and that a 200-dpi standard
should provide the required level of security. Accordingly, the final
rule redesignates the proposal's paragraph Sec. 580.6(a)(8) as Sec.
580.6(h), eliminates the requirement that scanning or imaging be
performed in color and reduces the required resolution to not less than
200 dpi.
Texas submitted comments suggesting an additional two subsections
be added to Sec. 580.6. The first of these would make an explicit
provision for using a power of attorney in an electronic title
jurisdiction where the transferor holds a lost physical title. Rather
than have the transferor execute a power of attorney and then have the
transferee obtain a physical title and then convert it to electronic
form, the provision would allow use of a single power of attorney to
complete the transaction and convert the title. NHTSA concurs with
adding this provision, which is adopted by this final rule as Sec.
580.6(i). Texas also offered an amendment providing that reassignment
documents may not be used for making odometer disclosures with an
electronic title because there is no physical limit on the number of
reassignments that can be incorporated into such a title. The agency
agrees this provision is desirable and has added Sec. 580.6(j) to
implement it in the final rule.
I. Leased Vehicles
Leased vehicles present challenges in making odometer disclosures
because they are held by a lessee while the lessor holds the title and,
without the title accompanying the vehicle, frequently transferred by
the lessee to a transferor. Section 580.7 establishes special
procedures to ensure accurate mileage information is provided by the
lessee to the lessor so the lessor can execute the odometer disclosure
on the title. The NPRM proposed amendments to Sec. 580.7 allowing the
required documents be in the form of ``electronic documents.''
Commenters generally supported the proposed amendments provided NHTSA
did not extend the proposal to require states to play a role in
facilitating lease vehicle disclosures. Many commenters noted the use
of the terms ``physical document'' and ``electronic document'' as
employed in the proposed regulatory text were incompatible with the
definitions and security requirements of these documents proposed
elsewhere in the NPRM. Consistent with the revisions this final rule
makes to the definitions in Sec. 580.3, this final rule revises Sec.
580.7 by eliminating references to ``physical document'' and
``electronic document'' and stating required communications may be made
electronically and in writing. Because the existing paper process does
not contain such a requirement, the final rule also eliminates a
proposal stating a lessee completing an electronic odometer statement
must separately acknowledge understanding federal and applicable state
law requirements prior to signing the disclosure.
J. Document Retention
Part 580's document retention requirements provide for the
maintenance of records essential to establishing the paper trail used
to detect and prove cases of odometer fraud. Section 580.8, applicable
to dealers and distributors, and Sec. 580.9, which applies to auction
companies were both the subject of amendments proposed to include
electronic copies or electronic documents as an acceptable form of
record. The NPRM further proposed Sec. 580.8 specify dealer electronic
records be retained in a format which cannot be altered, and which
indicates any attempts to alter it. Commenters questioned whether
extending paper record requirements would be necessary in electronic
title and odometer disclosure states given those states would store the
same data. Comments also questioned the use of the term ``electronic
document'' and ``physical document'' in the proposal given the
definition proposed in Sec. 580.3. Other comments questioned the
proposal's amending the requirements for odometer disclosure statements
for dealers and distributors while not applying similar requirements to
leased vehicle documents and powers of attorney. The final rule makes
several changes to the amendments proposed in the NPRM in response to
these comments
This final rule amends Sec. 580.8(a) to provide dealers and
distributors must retain paper or electronic copies of each odometer
mileage statement they issue and receive for five years. The final rule
further states electronic data shall be retained so it cannot be
altered and which indicates any attempts to alter it. Similarly, the
final rule amends Sec. 580.8(c) to require dealers and distributors to
retain paper or electronic copies of each power of attorney, executed
pursuant to Sec. Sec. 580.13 and 580.14, that they receive for five
years and imposes the same storage requirements for electronic
documents as found in Sec. 580.8(a). Section 580.8(b) is also amended
to require lessors to retain both written and electronic odometer
disclosure statements they receive from lessees for five years and, if
the disclosure is electronic, the data shall be retained so it cannot
be altered and which indicates any attempt to alter it. The final rule
also adds a new paragraph, Sec. 580.8(d), specifying that in the case
of odometer disclosure statements made on electronic titles or
electronic powers of attorney, dealers and distributors need not retain
the data if the jurisdiction retains this information for five years
and makes it available to these dealers and distributors at their
principal place of business. To ensure these records are available to
enforcement officials, the paragraph further states such data must be
available at the dealer or distributors place of business upon demand.
As proposed in the NPRM, Sec. 580.9, establishing document
retention requirements for auction companies, employed the terms
``electronic document'' and ``physical document'' to describe the
materials they must retain. Consistent with other changes made in this
final rule, this section dispenses with those terms as used in the NPRM
and states that the information may be physical or electronic. Also,
the final rule replaces the term buyer in Sec. 580.9(b) with
``transferee'' as that term is employed throughout part 580.
K. Power of Attorney
As required by the Truth in Mileage Act of 1986 (TIMA), NHTSA
issued a final rule in August 1988 (53 FR 29464), stating odometer
disclosures may only be made on the vehicle title unless the vehicle
has never been titled or the title did not contain sufficient space for
the
[[Page 52691]]
disclosure. Id. at 29471. The command that odometer disclosures can
only be made on the title could cause serious difficulties in instances
where the title was held by a lienholder because the title, and the
means for making an odometer disclosure, would not be available to the
owner of the vehicle subject to the lien if that owner wished to sell
the vehicle or trade it in when buying a new car. Congress responded to
the foregoing final rule by inserting a provision in the Pipeline
Safety Reauthorization Act of 1988 (Pub. L. 100-561) amending TIMA's
requirement that odometer disclosures be made only on the title. This
amendment allowed use of a special power of attorney for executing
odometer disclosures when a title is physically held by a lienholder.
NHTSA implemented changes to part 580 authorizing use of this power of
attorney by an interim final rule published in the Federal Register on
March 8, 1989. (54 FR 9609). NHTSA later expanded the applicability of
the power of attorney provisions to instances where the title was held
by a lienholder or the title was lost. (54 FR 35879).
The advent of electronic title and odometer disclosure systems
presents challenges stemming from the requirement that odometer
disclosures must be made on the title, a reassignment document if no
space for disclosure is available on the title, or through the special
power of attorney when a title is physically held by a lienholder or
has been lost. If an electronic title is subject to an electronic lien,
it is not available to the vehicle owner to allow odometer disclosure
until the lien is released. Further, as explained in the NPRM, a person
holding an electronic title issued in one state may wish to sell their
vehicle in a state that does not have an electronic title and odometer
disclosure capability. Again, this vehicle owner would not have a title
on which to make an odometer disclosure unless they obtained a printed
title from their state beforehand.
NHTSA proposed amending Sec. 580.13(a) and (b), to allow an
individual with a vehicle titled in an electronic title state to use a
power of attorney to sell a vehicle in a paper title state. Based on
the belief that a power of attorney should not be needed when
electronic titles and disclosures were available, the agency limited
their use to the paper format. Commenters observed the NPRM's view a
power of attorney would be useful in interstate transactions from an
electronic title state to a paper state was flawed as the transferor
would still need a paper title to register the vehicle. Most commenters
advocated having both electronic and paper versions of the power of
attorney in jurisdictions with electronic title and odometer systems.
Three commenters noted language in Sec. 580.13(f) stating ``. . . if
the mileage disclosed on the power of attorney form is lower than the
mileage appearing on the title, the power of attorney is void and the
dealer shall not complete the mileage disclosure on the title''
(emphasis added) is erroneous. These commenters noted the dealer does
not complete the disclosure and should be changed to ``transferee.''
Another commenter encouraged amending Sec. 580.13(f), which specifies
that a power of attorney is void if the odometer reading on the power
of attorney is lower than on the title, to accommodate instances where
the disclosure properly reports the odometer reading is known to be in
excess of mechanical limits or is ``not actual.'' This commenter
further asked that this section allow for electronic submission of an
original power of attorney by scanning or imaging and that Sec. 580.16
be amended to specify that a copy of a power of attorney be made
available upon request rather than returned. Other comments noted an
electronic title could be unavailable when subject to an electronic
lien or in the event technical issues in an electronic system made
titles temporarily unavailable. Commenters aligned with lenders asked
the power of attorney be expanded so lenders could perform disclosures
for their clients.
The agency is adopting several changes to this portion of the final
rule in response to the comments. For clarity, these amendments
required bifurcating the former Sec. 580.13(a) into two paragraphs,
Sec. 580.13(a) and (b), and redesignating the former Sec. 580.13(b)
through (f) as Sec. 580.13(c) through (g). This final rule adds a new
paragraph, Sec. 580.13(h), as explained below.
Section 580.13(a) now specifies a power of attorney may be either a
paper document, defined as an ``Original power of attorney'' in Sec.
580.3, or may exist in electronic form consistent with the final rule's
definition of ``Electronic power of attorney.'' The restriction on the
use of the power of attorney when the title is lost or is physically
held by a lienholder remains in place for physical or paper titles.
However, either an electronic power of attorney or an original power of
attorney may be used when a paper title is lost or held by a
lienholder. Given the likelihood that electronic title and odometer
disclosure systems will not be implemented across the nation in the
foreseeable future, the final rule provides a power of attorney may be
used if the title in question is electronic. For an electronic title,
the final rule allows use of a power of attorney under two
circumstances. The first is when the electronic title is held or
controlled by a lienholder. In NHTSA's view, this situation is
analogous to that where a paper title is physically held by a
lienholder as the title is not available to the transferor because the
title will only be released when the lien is satisfied. The final rule
also provides a power of attorney may be used when an electronic title
cannot be accessed. The term ``accessed'' is employed here as defined
in Sec. 580.3 and therefore means the power of attorney may be used
only in circumstances where either a transferee or a transferor does
not have the ability to make authorized changes to the electronic
title. In incorporating this provision into the final rule, NHTSA
believes it offers the flexibility required to allow transferors with
electronic titles to sell or trade in vehicles in states without
electronic titles or odometer disclosure systems when the transferor
did not obtain a paper title prior to the transfer.
NHTSA believes the foregoing changes to Sec. 580.13(a) address the
pre-eminent concerns expressed by most commenters. The final rule
allows both physical and electronic powers of attorney to afford the
flexibility required to facilitate vehicle transfers as states
transition from paper to electronic titling and odometer disclosure.
The agency acknowledges a power of attorney will not, in transactions
where vehicle with an electronic title is transferred in a jurisdiction
without electronic titles, allow the transferee to register and title
the vehicle without obtaining a paper title from the transferor's
state. Nonetheless, that same obstacle exists today in interstate
transactions involving a lost physical title or one that is physically
held by a lienholder.
This final rule also amends former Sec. 580.13(a) through (e), now
redesignated as Sec. 580.13(b) through (f) to make these sections
consistent with changes implemented elsewhere. Where it appeared, the
term ``state'' is now replaced with ``jurisdiction'' to conform to the
definition added in Sec. 580.3. References to the power of attorney
are also modified by use of the terms ``original'' and ``electronic,''
and the term ``title'' is similarly modified by the terms
``electronic'' or ``physical.'' Because of concerns raised by the
potential for illegible signatures or address information in instances
where a ``pen pad'' or similar device for recording hand written
information electronically may be used, these
[[Page 52692]]
sections have also been changed to require a printed name and a printed
address.
NHTSA has also made amendments responding to comments addressing
the former Sec. 580.13(f), now redesignated at Sec. 580.13(g), and
added a new paragraph Sec. 580.13(h). Along with adding the necessary
terms to accommodate electronic and original powers of attorney and
physical and electronic titles to the former Sec. 508.13(f), the final
rule now provides two exceptions to the requirement that mileage shown
to be lower than that disclosed on the title voids the power of
attorney. The two exceptions added reflect two instances where the
mileage on the power of attorney may properly be lower than that shown
on the prior title--when the transferor states that the mileage shown
reflects mileage in excess of the designed mechanical odometer limit or
that the mileage shown does not reflect the actual mileage. This final
rule also removes the word ``dealer'' in this paragraph and replaces it
with the word ``transferee'' for consistency. This final rule also adds
Sec. 508.13(h), allowing states to receive copies of an original power
of attorney in an electronic format after scanning or imaging.
This final rule also amends Sec. Sec. 580.14 through 580.16 to
allow for the use of both electronic and original powers of attorney,
electronic and physical titles and to replace ``state'' with
``jurisdiction'' consistent with the definitions in Sec. 580.3. As
Sec. 580.14 sets out the requirements of Part B of the power of
attorney and is a counterpart to Part A addressed by Sec. 580.13, the
final rule also adds the requirement transferees provide a printed name
and a printed address in Sec. 580.14(b)(3) and (4). Consistent with
Sec. 580.13(g) of this final rule, Sec. 580.15--establishing the
certification requirements for a person exercising the power of
attorney--is modified to account for situations where a transferor has
indicated mileage exceeds mechanical limits of the odometer or has
stated the odometer does not reflect the actual mileage. Therefore,
Sec. 580.15(a) is revised to relieve the person making the
certification from attesting that the mileage they disclosed (as
authorized by the power of attorney) is greater than that previously
shown in the title or a reassignment document if they disclosed that
the mileage exceeds mechanical limits or the odometer reading does not
reflect the actual mileage. The foregoing change to Sec. 580.15(a)
requires restructuring the remainder of this section for clarity.
Accordingly, Sec. 580.15(b) is redesignated in the final rule as Sec.
580.15(c) and the final sentence of the former Sec. 580.15(a) is now
Sec. 580.15(b). In addition to the redesignation, Sec. 580.15(c) is
also modified to provide an exception to voiding the power of attorney
for mileage inconsistency where the disclosure states the mileage is in
excess of mechanical limits or does not reflect the actual mileage. The
final rule makes another revision for consistency by replacing the term
``purchaser'' with ``transferee'' in Sec. 580.16(b).
L. Exemptions
NHTSA's NPRM proposed amending Sec. 580.17(a)(3), exempting any
vehicle more than 10 years old from the odometer disclosure
requirements, to raise this exemption to 25 years. Comments submitted
in response to the proposal were consistent in raising concerns about
how such a change would be implemented because many vehicles exempt
under the former rule would no longer qualify, but may have already
been claimed as exempt. Far less consensus existed in consideration of
the wisdom of changing the exemption. Some commenters strongly
supported the proposal, citing the increased age of the vehicle fleet
and providing anecdotal evidence of significant odometer fraud
prosecutions involving older vehicles. One commenter noted some states
do not issue titles for older vehicles, presenting the paradox of
requiring disclosure on a title when no title exists. Out of states
submitting comments, only one indicated any degree of opposition,
citing possible increased data entry costs. Dealers, insurers, and
auctioneers opposing the proposed change to the exemption argued it
would increase disclosure and recordkeeping burdens for transferors,
transferees, and states, without providing any known benefit. Others
also decried the notion this change would provide any benefit,
contending buyers of older cars do not consider mileage as an important
indicator of value, while one commenter noted theft and cloning are
largely restricted to newer and higher value cars.
After review of the comments and consideration of the available
data, NHTSA is modifying the 25-year exemption proposed in the NPRM to
a period of 20 years. NHTSA notes that it amended the previous 25-year
exemption to a 10-year exemption rule in 1988. (53 FR 29464, August 5,
1988). In the preamble to the 1988 final rule, the agency observed it
was abandoning the 25-year exemption because of evidence derived from
studies conducted in Wisconsin and Iowa that odometer tampering was
disproportionately small as compared to the number of vehicles in that
age group. The agency also observed at the time that many commenters
indicated that the prices for vehicles over ten years old was not
typically based on the odometer reading. Given the low incidence of
odometer tampering and substantial evidence that buyers in 1988 were
not relying on mileage as the primary indicator of condition in
vehicles 10 year old and older than 10 years, NHTSA adopted an
exemption that applied to vehicles 10 years old and older. Id. at
29472. When that final rule was issued in 1988, the average age of
automobiles in use was 7.6 years.\2\ In 2017, almost three decades
later, the average age of light vehicles in use had risen to 11.7
years.\3\
---------------------------------------------------------------------------
\2\ Average Age of Automobiles and Trucks, Fed. Highway Admin.,
available at https://www.fhwa.dot.gov/ohim/onh00/line3.htm (last
visited Sept. 13, 2019).
\3\ America's Cars and Trucks Are Getting Older, Business
Insider (Aug. 22, 2018), available at https://www.businessinsider.com/americas-cars-and-trucks-are-getting-older-2018-8 (last visited Sept. 13, 2019).
---------------------------------------------------------------------------
The 2017 National Household Travel Survey also validate this trend
of increased vehicles longevity. The survey shows that the average age
of household vehicles increase to 10.1 years for cars and 10.4 for
light trucks/vans (LTVS) from 7.6 and 8.0 years, respectively, in 1990.
In other words, 10 years and older vehicles also have increasingly
comprised a greater proportion of household vehicles. In 2017, about 47
percent of the household cars and 50 percent of the household LTVs were
10 years and older--a significant increase from the respective 30
percent and 32 percent in 1990.\4\ Furthermore, based on the NHTSA
established scrapped rate schedule, the average age of vehicles when
they are scrapped (i.e., age at 50 percent scrappage rate) is about 16
years old for cars and 15 years old for LTVs.
---------------------------------------------------------------------------
\4\ Table 21 of Summary of Travel Trends, 2017 National
Household Travel Survey, Fed. Highway Admin., July 2018, available
at https://nhts.ornl.gov/assets/2017_nhts_summary_travel_trends.pdf
(last visited Sept. 13, 2019).
---------------------------------------------------------------------------
In 2008, noting the increasing age of light vehicles in use, the
U.S. Department of Justice (DOJ) requested NHTSA consider review of the
10-year exemption. Among other things, DOJ observed the increasing
numbers of ``exempt'' titles increased opportunities for odometer fraud
while the advent of mileage records in Carfax and similar venues made
such titles more valuable for those engaging in odometer fraud.
Consistent with increases in vehicle age since 1988, the age of
vehicles that have their mileage altered has also increased. An April
2002 NHTSA study, which
[[Page 52693]]
examined 11 model years of data, found the rate of odometer fraud began
to rise in the fourth and fifth year of service and then remained
consistently high through years 7 through 10. A 2013 study performed by
a private company, CARFAX, found vehicles 14 to 15 years old were most
susceptible to having had their odometers rolled back.\5\ The increased
longevity of vehicles in years has been matched by change in the number
of miles travelled before a vehicle has reached the end of its useful
life. In the years before NHTSA's 1988 amendment decreasing the
exemption from 25 to 10 years, vehicles that had travelled over 100,000
miles were generally considered to be at or near the end of their
useful lives. Improvements in vehicle quality and advancements in
technology have greatly extended this figure and worked corresponding
changes in the used vehicle market. According to the data Edmonds
provided to NHTSA, the 100,000 miles travelled approximated to that for
an average 8/9 years old vehicles that were sold in 2017. These 8 to 9
years, on an average, would still maintain 87 to 89 percent of its
useful life. Furthermore, not only have vehicles lasted longer, they
also retain a greater proportion of their original manufacturer
suggested retailed price (MSRP). Edmunds data indicated that a 10-year-
old vehicle retained 21 percent of its original MSRP in 2012. In 2017,
the percentage increase to 26 percent.\6\
---------------------------------------------------------------------------
\5\ Carfax: Odometer Fraud Hits Nearly 200,000 Cars Annually,
available at https://www.carfax.com/press/carfax-odometer-fraud-hits-nearly-200-000-cars-annually (last visited Sept. 13, 2019).
\6\ Used Vehicle Market Report, Edmunds, Feb. 2017, available at
https://dealers.edmunds.com/static/assets/articles/2017_Feb_Used_Market_Report.pdf (last visited Sept. 13, 2019).
---------------------------------------------------------------------------
Additional considerations supporting changing the exemption include
the relative ease with which modern odometers may be rolled back and
the significant increases in market value that may be gained through
such fraud. Mechanical odometers have vanished from the market and have
been controlled by microprocessor driven digital displays. As the
microprocessors controlling the odometer display are also employed in
service of anti-theft devices and other functions, they may be accessed
by specialized software through the vehicle's diagnostic port. This
specialized software, which may be used to reset, repair or correct
information in the module controlling the odometer and other systems in
the instrument cluster can also be employed to remove mileage from the
odometer display in minutes. Given the improved corrosion resistance
and improved quality of exterior finishes on contemporary vehicles,
resetting an odometer display to remove 100,000 miles from the mileage
shown can significantly alter the market value of a car, often by many
thousands of dollars. For those inclined to commit odometer fraud, the
profit that can be gained from a single transaction can far exceed the
investment in software and time needed to change the odometer display.
Therefore, NHTSA's view is that the increased age of vehicles, the
changes in the used car market prompted by vehicle longevity, the
relative ease with which modern odometers may be rolled back and the
known trends in odometer fraud support extending the exemption to 20
years.
Implementation of any change in the exemption caused many
commenters to voice concern as the NPRM proposal did not account for
vehicles subject to the prior exemption in the regulatory text. The
final rule addresses this issue by stating the 20-year exemption
applies only to vehicles manufactured after the 2010 model year,
ensuring previously exempt vehicles are not captured by the new rule.
The agency believes the costs associated with changing the
exemption will be negligible and more than offset by the benefits
gained from protecting consumers from odometer fraud. Although one
state and several commenters associated with dealers and auctioneers
cited additional data entry and recordkeeping costs associated with
modifying the extension, the exact nature and source of these costs was
not described in the comments.
Approximately 40 million used car sales occurred in the United
States in 2018. Vehicles over 10 years old accounted for approximately
3 to 4 percent of retail sales by franchised new car dealers \7\ and 12
percent of sales by independent dealers.\8\ Many older vehicles are
sold through private sales or at wholesale auctions.\9\ Private used
car sales accounted for approximately 28 percent of 2017 used car sales
or slightly less than 11 million sales.\10\ Franchised dealers were
responsible for approximately 37 percent of the used car sales while
independent dealers accounted for approximately 34 percent of these
sales.\11\ Wholesale auctions, which are an important source of used
cars inventory for dealers, sold approximately 10 million cars in
2018.\12\ Given that approximately 4 and 12 percent of used car sales
respectively involving franchised and independent dealers involve
vehicles over 10 years old, the change in the exemption will impose
some additional costs on these dealers which can be quantified with a
degree of certainty. These additional costs will stem from having to
complete odometer disclosure forms for vehicles which, because of their
age, had the mileage blank on the title marked with the word ``exempt''
while leaving the remainder of the form blank. In instances where the
vehicle's paper title is not available because it is lost or held by
lienholders, a transferor will have to employ the power of attorney
form dictated by part 580 and the transferee will have to either
complete the odometer disclosure on the title when it is obtained or
execute Part B of the power of attorney in a subsequent transaction.
This is most likely to arise when a consumer transfers a vehicle to a
dealer either as a trade-in or in an outright sale. NHTSA believes that
it is unlikely that the change in the exemption will involve execution
of a both a power of attorney and the odometer disclosure statement in
transactions involving private sales and wholesale auctions. In both
private sales and auction sales, odometer disclosures are almost always
made on the vehicle's title and do not involve the use of a power of
attorney. Private sales are more likely to involve vehicles that are
not subject to a lien and where the seller has the title in their
possession. Buyers in private sales are also more likely to insist on
having the title itself available at the time the transfer is
completed. Similarly, auction sales also rarely involve vehicles for
which the title is not available. As these are wholesale transactions
where the auctioneer is acting as the agent on behalf of a seller that
is a business entity, the vehicle title is available at the time of
sale.
---------------------------------------------------------------------------
\7\ Used Vehicle Outlook 2019, Edmunds, available at https://static.ed.edmunds-media.com/unversioned/img/industry-center/insights/2019-used-vehicle-outlook-report-final.pdf (last visited
Sept. 13, 2019).
\8\ NIADA 2018 Used Car Industry Report, National Independent
Auto Dealers Association, available at https://www.niada.com/uploads/dynamic_areas/ei5l4ZznCkTc8GyrBKd6/34/UCIR_2018_Web.pdf?
(last visited Sept. 13, 2019).
\9\ Used Vehicle Market Report, Edmunds, Feb. 2017, available at
https://dealers.edmunds.com/static/assets/articles/2017_Feb_Used_Market_Report.pdf (last visited Sept. 13, 2019).
\10\ Charles Chesbrough, The Used Vehicle Market: Bumps On The
Road Ahead, available at https://www.chicagofed.org/~/media/others/
events/2017/automotive-outlook-symposium/chesbrough-06022017-pdf.pdf
(lasted visited Sept. 13, 2019).
\11\ Id.
\12\ Auction Industry Survey For the Year Ended Dec. 31, 2018,
available at https://www.naaa.com/pdfs/AuctionIndustrySurveySummary_2018.pdf (last visited Sept. 13, 2019).
---------------------------------------------------------------------------
The change in the exemption period made by this final rule will
also impose some additional recordkeeping costs.
[[Page 52694]]
Dealers are required to retain copies of executed odometer disclosure
statements for a period of five years. As noted above, this may either
involve retaining a copy of the executed odometer disclosure on the
back of a title or a copy of both the power of attorney form and the
odometer disclosure on the back of the title made under the authority
given by the power of attorney.
M. Miscellaneous Amendments
The NPRM proposed various amendments updating the agency's address,
removing obsolete text, and conforming the petition for alternative
disclosure schemes requirements to the other proposed amendments. These
included inserting a new address in Sec. Sec. 580.10(b)(2) and
580.11(b)(2), deleting the text in Sec. 580.12 and amending Sec.
580.11(a). A single commenter supported these proposed amendments. This
final rule adopts these amendments as proposed in the final rule.
N. Other Comments
Several commenters proposed amendments not offered in the NPRM. One
commenter suggested the term ``his'' used in various sections of part
580 be changed to be gender neutral and that ``purchasers'' in Sec.
580.2 be changed to ``transferees'' because not all transfers of
ownership requiring an odometer disclosure are the result of a purchase
and ``purchaser'' is not defined in part 580. This commenter also
proposed changing ``at the time the lessors transfer the vehicle'' in
Sec. 580.2 to ``at the time the lessees return possession of the
vehicle to the lessors'' to more accurately fix the time when a lessee
must make disclosure. The final rule adopts these changes.
Commenters also asked for clarification on when a power of attorney
may be used in conjunction with odometer disclosure by third parties
such as lienholders, title services, and auctions. NHTSA observes the
definition of both ``transferor'' and ``transferee'' in Sec. 580.3
includes not just the owner and the buyer but also an agent acting on
their behalf. Such an agent may include an individual or entity
appointed by a general or limited power of attorney. If, however, that
agent is representing an owner in a situation where the special power
of attorney set forth in Sec. 580.13 may be used, that agent must make
the odometer disclosure on the secure special power of attorney
specified in that section.
Several commenters requested NHTSA implement provisions providing
lenders with the ability to make odometer disclosures through the
special power of attorney in Sec. 580.13 as well as requiring the
mileage on disclosures be transmitted electronically to lenders. NHTSA
does not believe expanding the scope of permissible users of the
special power of attorney to be desirable because limiting the use of
these documents reduces the opportunity for fraud. The agency also
declines to require mileage disclosures to be transmitted
electronically to lenders as such a requirement is inconsistent with
the purposes of part 580.
Comments were also submitted supporting provisions to address ``end
of life'' of vehicle title processing. These commenters suggested
special electronic processes be implemented to facilitate transfers of
vehicles that are scrapped or have been declared to be a total loss.
NHTSA acknowledges the desirability of streamlining the process of
transferring vehicles to recyclers as well as transfers for vehicles
that have been declared to be a total loss. The agency does not,
however, believe it should take further action other than fostering the
development of electronic title and odometer disclosures through
issuing this final rule.
The NSVRP urged NHTSA to make whatever changes were needed to
ensure odometer readings were reported to the correct jurisdiction at
every transfer, including dealer-to-dealer transfers. NHTSA concurs in
the goal of having odometer mileage accurately reported at every
opportunity and believes the implementation of electronic title and
odometer disclosure systems will do much to achieve that goal. As this
final rule eliminates reassignment documents in states with electronic
odometer disclosure systems, mileage will be reported more frequently
when these systems are implemented. The agency is not requiring such
reporting where paper documents are used absent further analysis of the
burdens that would be imposed and the benefits what would accrue.
Auctioneer representative NAAA stated U.S. Customs and Border
Protection (CBP) regulations require vehicles to be exported with the
original or certified copy of the title. This commenter fears CBP may
not be prepared to work with electronic titles, and delays in issuing
paper titles may harm vehicle exporters. NHTSA believes this final rule
will not result in titles becoming more difficult to obtain.
Two commenters addressed the petition process for approval of
odometer disclosure schemes, expressing concern about the effect the
NPRM would have on the continued existence of the petition process. One
commenter requested NHTSA establish rules for rescinding prior grants
and that this final rule declare that it did not invalidate any
previously granted petition. NHTSA did not propose eliminating the
petition process in the NPRM, and this final rule does not make any
changes to that process. The agency also does not agree there is a need
to craft rules of general applicability for rescinding prior grants of
any petitions for approval of alternative disclosure requirements.
Historically, NHTSA has received few of these petitions and has, thus
far, not encountered any situation calling for a rescinding a prior
grant. To the extent any conflict exists between the requirements of
this final rule and a previously granted petition, NHTSA expects the
final rule to be controlling authority that must be followed. In making
this statement, however, it is the agency's belief the provisions of
this final rule are not inconsistent with any of its prior
determinations approving alternative odometer disclosure schemes.
O. New Technologies
NHTSA intends for this final rule to accommodate emerging
technologies such as blockchain that states may wish to use for
recording electronic titles, making odometer disclosures, and
authenticating electronic signatures. As was discussed previously, we
cannot foresee all future security and authentication applications that
states may wish to use to facilitate electronic odometer disclosures
and title transactions. We intend for this final rule to be technology
neutral. States can use any application for electronic odometer
disclosure or title transactions so long as the application provides
for NIST Level 2 assurance or equivalent and otherwise complies with
the requirements of part 580.
IV. Effective Date
The NPRM did not propose a date on which the amendments offered by
NHTSA would become effective. NHTSA has determined the amendments
provided below shall become effective on December 31, 2019. The agency
is issuing this final rule in response to a Congressional directive
that NHTSA issue regulations allowing states to implement electronic
odometer disclosure systems without having to petition NHTSA for
approval. After thorough review of the comments and consideration of
existing electronic odometer disclosure systems, the agency believes
almost all of the states with
[[Page 52695]]
such systems currently will meet the new requirements. However, NHTSA
notes that states whose systems may need to be modified to meet the new
requirements will need to time to make any changes needed to comply
with this rule, NHTSA has established an effective date that allows
sufficient time to for states to ensure compliance.
V. Costs and Benefits
The estimated annual costs of the final rule considers the total
labor cost for filling the mileage in odometer disclosures when
ownership is transferred for 11 to 19 years old used vehicles, the cost
for computer storage for these disclosure records, and the processing
time for filing these records. The estimated benefits of the final rule
primarily are measured by the annual consumer loss from the odometer
fraud that can be eliminated by the exemption requirement of the final
rule. Allowing e-odometer filing is expected to be more efficient for a
paper form of odometer system and thus has the benefits of paper
reduction and the decrease of record processing and management time.
The agency presently is unable to quantify the efficacy impact of E-
odometer, therefore, its benefit is not included. The estimated costs
and benefits are expressed in 2018 dollars. Please see the accompanying
cost and benefit analysis for a detailed discussion.
This final rule, except for the amendment modifying the exemption
for vehicles of a certain age from the odometer disclosure
requirements, establishes rules intended to accommodate electronic
odometer disclosures in the event states or other jurisdictions seek to
adopt such systems. The agency has carefully reviewed previous
petitions for approval of such systems, the requirements of federal
odometer disclosure law, past rulemaking actions, and the comments
provided in response to the NPRM with a goal toward crafting
regulations that will continue to protect against odometer fraud while
providing sufficient latitude for jurisdictions to either retain or
develop electronic title and odometer disclosure schemes. The agency
believes the final rule will not require the small number of
jurisdictions with electronic odometer systems to make significant
changes to comply with the new rules, and NHTSA will work with those
jurisdictions to facilitate compliance. Specifically, the final rule
requires the security of the electronic systems that are comparable to
the practice of the current state security requirements and to that
recommended by the task force sponsored by the American Association of
Motor Vehicle Administrators.\13\ Therefore, the agency believes the
final rule would not impose costs to states for the implementation of
security requirement of the e-odometer systems.
---------------------------------------------------------------------------
\13\ Roadmap to Electronic Odometer Disclosure Guidance Document
from the E-Odometer Task Force, March 2018, American Association of
Motor Vehicle Administrators.
---------------------------------------------------------------------------
This final rule also alters the previous exemption from odometer
disclosure for vehicles that are 10 years old to make it applicable to
vehicles 20 years old. This new exemption will apply to vehicles
manufactured in the 2010 model year and later and, unlike the remainder
of the provisions of this final rule, will be applicable to all vehicle
transfers and odometer disclosures regardless of whether the
disclosures are made on paper or electronically.
The increased quality and longevity of vehicles dictates half of
vehicles now in use are more than 11 years old, and, with the average
age at scrapping of 15 years, these vehicles are prime targets for
odometer fraud. It is the agency's belief the aggregate cost of
odometer fraud to purchasers of vehicles in the 10 to 20-year age range
is substantial. Balanced against that cost, the burdens imposed by
raising the exemption age are minimal. An odometer disclosure is one of
many steps involved in transferring ownership of a vehicle. When a
vehicle is old enough to be exempt from the disclosure requirements,
the seller may choose to simply place the word ``exempt'' in the space
where the odometer mileage would be entered. In such a case, the buyer
and seller do not need to fill in the remainder of the disclosure form
or sign it. However, whether made on the title or on a separate
document when it is permissible to do so, the claim that the vehicle is
exempt or the odometer mileage is recorded and processed by a state
when the vehicle is registered. The odometer disclosure is also just
one part of the larger process of transferring ownership in which the
various participants are executing or processing documents and
retaining copies as records. States will be maintaining these records
regardless of whether the vehicle is exempt from odometer disclosure.
Car dealerships also generally preserve all transaction records for at
least five years, for tax and audit purposes. As such, the agency
believes that the final rule would not have additional costs on
computer and physical storage for states and car dealerships. The final
rule also is not expected to increase the record processing burden to
states and car dealerships. Therefore, the only cost from the final
rule would be the labor cost for the time that is needed for recording
the mileage from ``exempt'' to the actual mileage, for inspection to
ensure accuracy, time to sign the statement and to provide the name and
address information.
Based on the NIADA Used Car Industry Report (NIADA report),\14\
there were 41.4 million used cars sold in 2017. Examining the data in
the NIADA report, the data provided by Edmonds, and Polk vehicle
registrations, the agency estimated that 10.4 million vehicles sold
annually were between 10 and 19 years old. This represents the whole 10
model years (MY) of vehicles that would be affected by the extended
exemption requirement of this final rule in the 10th (2019) and later
years. During the first effective year of the final rule, i.e., 2020,
only one MY of vehicles, 2010 MY (i.e., age 10) will be affected. One
more additional MY vehicles will be added each year between the 2nd to
the 9th effective years of the final rule. Afterwards, i.e., the 10th
effective year and later, a whole 10 MYs of vehicles will be affected
each year.
---------------------------------------------------------------------------
\14\ NIADA 2018 Used Car Industry Report, National Independent
Auto Dealers Association, available at https://www.niada.com/uploads/dynamic_areas/ei5l4ZznCkTc8GyrBKd6/34/UCIR_2018_Web.pdf?
(last visited Sept. 13, 2019).
---------------------------------------------------------------------------
The number of odometer disclosures for the affected vehicles would
depend on the retained sources. Private party transactions (i.e.,
individual to individual) will require one odometer disclosure assuming
that the disclosure conforms to the current individual state
regulations for vehicles 0 to 9 years old. By contrast, vehicles sold
through dealers will involve at least two disclosures due to the
wholesale level when vehicles are passed among dealers. With the lack
of the statistics on how many times a used vehicle would be wholesaled
before its retail purchase, the agency assumes a total of 5 disclosure
transactions per retailed vehicle.
Using several data sources (Polk registration data, NIADA report,
and Edmonds), the agency estimated that the total number of affected
vehicles is about 1.4 million in 2020 when only one MY of vehicles
would be affected. With one additional MY of vehicles affected each
progressing year, the volume as expected will be gradually increased
until reaching the maximum of 10.5 million units in 2029 and later
years (2028+) when 10 MYs of vehicles (i.e., 10 to 19 years old) were
included. Derived from the same data source, the agency estimated that
40.3 percent were from private party sales and 59.7
[[Page 52696]]
percent from car dealerships (franchised and independent). Therefore,
there will be 4.9 million disclosures (=1.4 million * 0.403 * 1 + 1.4
million * 0.597 * 5) for 2020 and 35.4 million annual disclosures (=
10.5 million * 0.403 * 1 + 1.4 million * 0.597 * 5) for 2029+ years.
The agency estimated that it will take 15 seconds to fill the actual
mileage per disclosure and the average hourly labor cost in 2018 is
$36.39.\15\ Multiplying time in hours by the total disclosures and
hourly labor cost derived the total cost of the final rule. The total
cost of the change to the age-based exemption in the final rule is
estimated to be from the minimum of $0.7 million in 2020 to the maximum
of $5.4 million for 2029+ years.
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\15\ Average of first three Quarters of 2018. Series Id:
CMU1010000000000D (C); Series Title: All Civilian Total compensation
for All occupations; Cost per hour worked as of March 18, 2019,
Bureau of Labor Statistics, https://data.bls.gov/cgi-bin/dsrv.
---------------------------------------------------------------------------
Table 1 summarizes the affected MYs, the number of affected
vehicles, the total number of mileage disclosures, and the total costs
from 2020. Note that the first part of the table shows the affected MYs
and their corresponding age for each effective calendar year. The last
column ``2029+'' indicates that 2029 and later, 10 MYs of vehicles will
be affected by this final rule but with rolling one MY forwards each
year. In other words, affected vehicles are MYs 2010-2019 for 2029, MYs
2011-2020 for 2030, and so on so forth.
Table 1--Estimated Cost of the Final Rule
[Affected vehicles]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Calendar year
Model year -----------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010.......................................................... 10 11 12 13 14 15 16 17 18 19
2011.......................................................... ....... 10 11 12 13 14 15 16 17 18
2012.......................................................... ....... ....... 10 11 12 13 14 15 16 17
2013.......................................................... ....... ....... ....... 10 11 12 13 14 15 16
2014.......................................................... ....... ....... ....... ....... 10 11 12 13 14 15
2015.......................................................... ....... ....... ....... ....... ....... 10 11 12 13 14
2016.......................................................... ....... ....... ....... ....... ....... ....... 10 11 12 13
2017.......................................................... ....... ....... ....... ....... ....... ....... ....... 10 11 12
2018.......................................................... ....... ....... ....... ....... ....... ....... ....... ....... 10 11
2019.......................................................... ....... ....... ....... ....... ....... ....... ....... ....... ....... 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost Estimates
[In 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029-
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units Sold (in Million)....................................... 1.4 2.8 4.2 5.5 6.6 7.7 8.6 9.3 9.9 10.5
Number of Transac-tions (in Million).......................... 4.9 9.6 14.2 18.5 22. 26.0 29.0 31.5 33.7 35.4
Labor Hours (in 1000)......................................... 20.2 40.1 59.1 77.1 93.6 108.1 120.8 131.3 140.3 147.5
Labor Costs (in Million)...................................... $0.7 $1.5 $2.2 $2.7 $3.4 $3.9 $4.4 $4.8 $5.1 $5.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
The benefit of the final rule as stated earlier is measured by the
consumer cost from odometer fraud that can be eliminated due to the
final rule. Based on the 2013 Carfax study,\16\ there are about 190,000
cases of odometer fraud (or rollbacks) with an annual loss of $761
million indicating an average of $4,000 loss per case. The study also
stated that 60 percent of rollbacks occurred in vehicles 11 to 19 years
old and the average rollback is about 50,000 miles.
---------------------------------------------------------------------------
\16\ Odometer Fraud 2013, Carfax, available at https://cfx-wp-images.s3.amazonaws.com/2017/11/odometer_fraud_infographic.jpg (last
visited Sept. 13, 2019).
---------------------------------------------------------------------------
These are the available rollback statistics and fraud monetary loss
that the agency used as starting points for benefit estimates.
Specifically, the fraud loss was adjusted from 2013 economics to 2018
economics. Therefore, the fraud loss is estimated to be $820 million in
2018 dollars. The 60 percent rollback rate is used as the rate for all
affected vehicles (i.e., 10-19 years old) because of the lack of annual
rollback information by individual age. This implies that during the
full effective calendar year where 10 MYs of vehicles will be affected,
rollbacks for these 10 MYs of vehicles account for 60 percent of all
rollbacks of that calendar year. The agency believes that the impact on
fraud loss will be reduced disproportionally with increased age given
the same rollback miles. To reflect this, the agency used the overall
annual fraud loss of $820 million as the base and estimated the
proportion each age of vehicles' contributing to this loss. To achieve
this, the agency first developed a regression model describing the
relationship between retail price and vehicle mileage using data
provided by Edmonds. The 50,000 miles was treated as the average
rollback miles and was used in the regression model to project the
retail price when mileage is increased by 50,000 miles for all age of
vehicles. The average price difference is the retail price difference
between a vehicle with a specific mileage level and with that mileage
increased by 50,000 miles. The Edmonds data used in the regression
model only reflects dealership transactions which tend to involve
younger used vehicles. The model projected price difference thus might
not account for the relative occurrence of each age of vehicles in the
annual used car market. To address these issues, the projected price
difference for individual vehicle age was indexed relative to that of
age 0 (i.e., ratio of price difference of individual age to that of
Year 0). The relative indexes were then weighted by the vehicle age
factors to account for the occurrence of each vehicle age. The age
factors were developed using 2013 to 2018 Polk vehicle registration
data. Thus, in 2020, there are about 15,700 rollbacks in vehicles 10-19
years old, representing a minimum annual impact.
[[Page 52697]]
These rollbacks would account for 3.6 percent of the overall annual
fraud loss which equates to $29.4 million (= $820 million * 0.036).
Representing a maximum annual impact, from 2028 onwards when a whole of
10 MYs would be affected each year, there would be 114,300 annual
rollbacks. These rollback account for 18.3 percent of the overall
annual fraud loss resulting in a $150.1 million (= $820 million *
0.183) loss to consumers. Table 2 summarizes the estimated annual
rollbacks for affected vehicles, its share in overall annual fraud
loss, annual consumer economic loss, and a 5-percent rollback scenario.
As shown, if the rule can deter 5 percent of rollbacks from affected
vehicles, i.e., the 5% of loss, the rule would reduce $1.5 million
annual consumer loss in 2020 and $7.5 million from 2029 forwards. In
addition, Table 2 also presents the breakeven point of the rule. The
breakeven point is defined as the projected effectiveness of the final
rule where the benefit is equal to the cost. The rule is expected to
break even if the rule can eliminate 3.6 percent of the annual fraud
loss (or rollbacks). If the rule can deter more than 3.6 percent of
rollbacks in affected vehicles, the rule would accrue monetary
benefits.
Table 2--Benefits Estimates
[In 2018 dollar]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Calendar year
-----------------------------------------------------------------------------------------
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units w/Rollback (in 1000).................................... 15.7 31.1 45.8 59.8 72.5 83.8 93.6 101.8 108.7 114.3
Percent of Overall Annual Loss *.............................. 3.6% 6.8% 9.7% 12.3% 14.5% 16.4% 17.4% 18.0% 18.3% 18.4%
Annual Loss (in Million)...................................... $29.5 $55.8 $79.6 $100.9 $110.0 $134.5 $142.7 $147.7 $150.1 $150.9
5% of Loss (in Million)....................................... $1.5 $2.8 $4.0 $5.0 $5.9 $6.7 $7.1 $7.4 $7.5 $7.5
Breakeven Point **............................................ 2.5% 2.6% 2.7% 2.8% 2.9% 2.9% 3.1% 3.2% 3.4% 3.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Overall annual loss from all vehicle ages is estimated to be $820 million.
** The projected effectiveness where the benefit is equal to the cost.
Note: rounding might affect the final outcomes.
VI. Regulatory Notices and Analyses
A. Executive Orders 12866 and 13563 and DOT Regulatory Policies and
Procedures
Executive Order 12866, Executive Order 13563, and the Department of
Transportation's regulatory policies require this agency to make
determinations as to whether a regulatory action is ``significant'' and
therefore subject to OMB review and the requirements of the Executive
Orders. Executive Order 12866 defines a ``significant regulatory
action'' as one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or Tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
NHTSA has considered the potential impact of this final rule under
Executive Order 12866, Executive Order 13563, and the Department of
Transportation's regulatory policies and procedures, and have
determined that it is not significant. This proposal amends existing
requirements to allow States a new alternative means of complying with
those requirements and changes the terms of an existing exemption from
mileage disclosure. This change in the exemption will require slight
additional data entry and otherwise does not impose any new regulatory
burdens. For those States with existing electronic title and odometer
disclosure systems, the agency believes that changes required to meet
the new rule will not be burdensome. Therefore, this document was not
reviewed by the Office of Management and Budget under E.O. 12866 and
E.O. 13563.
B. E.O. 13771 (Reducing Regulation and Controlling Regulatory Costs)
E.O. 13771 (82 FR 9339, February 3, 2017), Reducing Regulation and
Controlling Regulatory Costs, requires that for ``every one new [E.O.
13771 regulatory action] issued, at least two prior regulations be
identified for elimination, and that the cost of planned regulations be
prudently managed and controlled through a budgeting process.''
An E.O. 13771 deregulatory action is defined as ``an action that
has been finalized and has total costs less than zero.'' As discussed
earlier, this final rule does not impose new requirements but rather
creates opportunities for states to implement an electronic odometer
disclosure system without petitioning NHTSA for approval. As such, it
is considered a deregulatory action.
C. National Environmental Policy Act
NHTSA has reviewed this rule for the purposes of the National
Environmental Policy Act and determined it would not have a significant
effect on the quality of the human environment.
D. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of proposed rulemaking or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
The Small Business Administration's regulations at 13 CFR part 121
define a small business, in part, as a business entity ``which operates
primarily within the United States.'' 13 CFR 121.105(a). No regulatory
flexibility analysis is required if the head of an agency certifies the
proposal would not have a significant economic impact on a substantial
number of small entities. SBREFA amended the Regulatory Flexibility Act
to require federal agencies to provide a statement of the factual basis
for certifying that a proposal would not have a significant economic
impact on a substantial number of small entities.
In compliance with the Regulatory Flexibility Act, NHTSA has
evaluated the effects of this final rule on small
[[Page 52698]]
entities. The head of the agency has certified that this final rule
would not have a significant economic impact on a substantial number of
small entities. The changes promulgated by this final rule, except for
modification of the ten-year old vehicle exemption to 20 years, allow
states the option of an alternative means of complying with previously
existing requirements. Adoption of electronic title and odometer
schemes by states choosing to do so, will likely confer benefits on
small businesses. This final rule's modification of the previous 10-
year exemption from mileage disclosure to 20-year old vehicles will
require minimal changes in data entry for small businesses and not
result in any significant effect.
E. Executive Order 13132 (Federalism)
NHTSA has examined today's final rule pursuant to Executive Order
13132 (64 FR 43255, August 10, 1999). Executive Order 13132 requires
agencies to determine the federalism implications of a final rule. The
agency has determined this final rule does not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment. The final rule adds another option to the way states may
process existing odometer disclosure requirements and alters existing
statutory or regulatory requirements only by changing the terms of an
exemption for owners from disclosing vehicle mileage when transferring
the vehicle.
F. Executive Order 12988 (Civil Justice Reform)
When promulgating a regulation, Executive Order 12988 specifically
requires the agency must make every reasonable effort to ensure that
the regulation, as appropriate: (1) Specifies in clear language the
preemptive effect; (2) specifies in clear language the effect on
existing federal law or regulation, including all provisions repealed,
circumscribed, displaced, impaired, or modified; (3) provides a clear
legal standard for affected conduct rather than a general standard,
while promoting simplification and burden reduction; (4) specifies in
clear language the retroactive effect; (5) specifies whether
administrative proceedings are to be required before parties may file
suit in court; (6) explicitly or implicitly defines key terms; and (7)
addresses other important issues affecting clarity and general
draftsmanship of regulations.
Pursuant to this Order, NHTSA notes as follows. The preemptive
effect of this proposal is discussed above in connection with Executive
Order 13132. NHTSA has also considered whether this rulemaking would
have any retroactive effect. This proposed rule does not have any
retroactive effect. NHTSA notes further there is no requirement that
individuals submit a petition for reconsideration or pursue other
administrative proceeding before they may file suit in court.
G. Executive Order 13609: Promoting International Regulatory
Cooperation
The policy statement in section 1 of Executive Order 13609
provides, in part:
The regulatory approaches taken by foreign governments may
differ from those taken by U.S. regulatory agencies to address
similar issues. In some cases, the differences between the
regulatory approaches of U.S. agencies and those of their foreign
counterparts might not be necessary and might impair the ability of
American businesses to export and compete internationally. In
meeting shared challenges involving health, safety, labor, security,
environmental, and other issues, international regulatory
cooperation can identify approaches that are at least as protective
as those that are or would be adopted in the absence of such
cooperation. International regulatory cooperation can also reduce,
eliminate, or prevent unnecessary differences in regulatory
requirements.
NHTSA finds this final rule, which establishes requirements for
electronic odometer disclosure systems, does not implicate or encompass
the issues outlined in the foregoing policy statement.
H. National Technology Transfer and Advancement Act
Under the National Technology Transfer and Advancement Act of 1995
(NTTAA) (Pub. L. 104-113), all federal agencies and departments shall
use technical standards that are developed or adopted by voluntary
consensus standards bodies, using such technical standards as a means
to carry out policy objectives or activities determined by the agencies
and departments, except when use of such a voluntary consensus standard
would be inconsistent with the law or otherwise impractical. Voluntary
consensus standards are technical standards (e.g., materials
specifications, test methods, sampling procedures, and business
practices) developed or adopted by voluntary consensus standards
bodies, such as the SAE International. The NTTAA directs NHTSA to
provide Congress, through OMB, explanations when the agency decides not
to use available and applicable voluntary consensus standards. NHTSA is
referencing the standards provided in NIST Special Publication 800-63-
3, Digital Identity Guidelines (including sub-parts 800-63-3A, 800-63-
3B and 800-63-3C), to determine the appropriate level of security to
authenticate electronic signatures.
I. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 requires agencies to
prepare a written assessment of the costs, benefits, and other effects
of proposed or final rules that include a federal mandate likely to
result in the expenditure by state, local, or tribal governments, in
the aggregate, or by the private sector, of more than $100 million
annually (adjusted for inflation with base year of 1995). In 2011
dollars, this threshold is $139 million.
This final rule would not result in the expenditure by state,
local, or tribal governments, in the aggregate, or more than $139
million annually, and would not result in the expenditure of that
magnitude by the private sector.
J. Paperwork Reduction Act
Under the procedures established by the Paperwork Reduction Act of
1995 (PRA), a person is not required to respond to a collection of
information by a federal agency unless the collection displays a valid
OMB control number. Today's final rule does not propose any new federal
agency information collection requirements; it merely allows states to
provide an alternative means of collecting information they already
collect.
K. Incorporation by Reference
As discussed earlier in the relevant potions of this document,
NHTSA is incorporating a single standard issued by the NIST into the
Code of Federal Regulations in this rulemaking. The standard NHTSA is
incorporating is NIST Special Publication 800-63-3 Digital Identity
Guidelines (including sub-parts 800-63-3A, 800-63-3B and 800-63-3C).
Under 5 U.S.C. 552(a)(1)(E), Congress allows agencies to
incorporate by reference materials that are reasonably available to the
class of persons affected if the agency has approval from the Director
of the Federal Register. As a part of that approval process, the
Director of the Federal Register (in 1 CFR 51.5) directs agencies to
discuss (in the preamble) the ways that the materials NHTSA is
incorporating by reference are reasonably available to interested
parties.
NHTSA has worked to ensure that standards being considered for
incorporation by reference are reasonably available to the class of
persons affected. In this case, those directly affected by incorporated
[[Page 52699]]
provisions are states and vehicle lessors choosing to adopt electronic
systems for odometer disclosures. These entities have access to copies
of the aforementioned standard through NIST at no charge. Other
interested parties in the rulemaking process beyond the class affected
by the regulation include members of the public, vehicle dealers, law
enforcement agencies, consumer protection groups, etc. Such interested
parties can access the standard by obtaining a copy from NIST.
Interested parties may also access the standards through NHTSA. All
approved material is available for inspection at NHTSA's Office of
Technical Information Services, 1200 New Jersey Avenue SE, Washington,
DC 20590, phone number (202) 366-2588.
M. Executive Order 13211
Executive Order 13211 applies to any rule that: (1) Is determined
to be economically significant as defined under E.O. 12866, and is
likely to have a significant adverse effect on the supply,
distribution, or use of energy; or (2) that is designated by the
Administrator of the Office of Information and Regulatory Affairs as a
significant energy action. If the regulatory action meets either
criterion, the agency must evaluate the adverse energy effects of the
proposed rule and explain why the proposed regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by NHTSA.
This rule is not economically significant and is not likely to have
a detectable effect on the supply, distribution, or use of energy.
N. Executive Order 13045
Executive Order 13045 applies to any rule that: (1) Is determined
to be economically significant as defined under E.O. 12866, and (2)
concerns an environmental, health or safety risk that NHTSA has reason
to believe may have a disproportionate effect on children. If the
regulatory action meets both criteria, NHTSA must evaluate the
environmental health or safety effects of the proposed rule on
children, and explain why the proposed regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by us.
This rule is not economically significant will not pose such a risk
for children.
O. Privacy Act
Anyone can 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 organization,
business, labor union, etc.). You may review DOT's complete Privacy Act
statement in the Federal Register published on April 11, 2000 (Volume
65, Number 70; Pages 19477-78), or you may visit http://www.dot.gov/privacy.html.
P. Regulation Identifier Number (RIN)
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
List of Subjects in 49 CFR Part 580
Consumer protection, Incorporation by reference, Motor vehicles,
Reporting and recordkeeping requirements.
For the reasons discussed in the preamble, NHTSA amends 49 CFR part
580 as follows:
PART 580--ODOMETER DISCLOSURE REQUIREMENTS
0
1. Revise the authority citation for part 580 to read as follows:
Authority: 49 U.S.C. 32705; Pub. L. 112-141; delegation of
authority at 49 CFR 1.95.
0
2. Revise Sec. 580.1 to read as follows:
Sec. 580.1 Scope.
This part prescribes rules requiring transferors and lessees of
motor vehicles to make electronic or written disclosure to transferees
and lessors respectively, concerning the odometer mileage and its
accuracy as directed by sections 408(a) and (e) of the Motor Vehicle
Information and Cost Savings Act as amended, 49 U.S.C. 32705(a) and
(c). In addition, this part prescribes the rules requiring the
retention of odometer disclosure statements by motor vehicle dealers,
distributors and lessors and the retention of certain other information
by auction companies as directed by sections 408(g) and 414 of the
Motor Vehicle Information and Cost Savings Act as amended, 49 U.S.C.
32706(d) and 32705(e).
0
3. Revise Sec. 580.2 to read as follows:
Sec. 580.2 Purpose.
The purpose of this part is to provide transferees of motor
vehicles with odometer information to assist them in determining a
vehicle's condition and value by making the disclosure of a vehicle's
mileage a condition of title and by requiring lessees to disclose to
their lessors the vehicle's mileage at the time the lessee returns the
vehicle to the lessor. In addition, the purpose of this part is to
preserve records that are needed for the proper investigation of
possible violations of the Motor Vehicle Information and Cost Savings
Act and any subsequent prosecutorial, adjudicative or other action.
0
4. Amend Sec. 580.3 by:
0
a. Revising the introductory text;
0
b. Adding in alphabetical order definitions for ``Access'', Electronic
power of attorney'', ``Electronic title'', and ``Jurisdiction'';
0
c. Revising the definition of ``Physical power of attorney'';
0
d. Adding in alphabetical order definitions for ``Printed name'' and
``Sign or signature''; and
0
e. Revising the definition of ``Transferor''.
The revisions and additions read as follows:
Sec. 580.3 Definitions.
All terms defined in 49 U.S.C. 32702 are used in their statutory
meaning. Other terms used in this part are defined as follows:
Access means the authorized entry to, and display of, an electronic
title in a manner allowing modification of previously stored data, even
if the stored data is not modified at the time it is accessed. The term
does not include display of an electronic record for viewing purposes
where modification of stored data is not possible, or where
modification to the record is possible but results in a new, unique
electronic title.
Electronic power of attorney means a power of attorney maintained
in electronic form by a jurisdiction that meets all the requirements of
this part. For the purposes of this part, this term is limited to a
record that was created electronically and does not include a physical
power of attorney that was executed on paper and converted by scanning
or imaging for storage in an electronic medium.
Electronic title means a title created and maintained in an
electronic format by a jurisdiction that meets all the requirements of
this part. An electronic title incorporates an electronic reassignment
form or process containing the disclosures required by this part
facilitating transfers between transferors and transferees who do not
take title to the vehicle. As set forth in Sec. 580.5(g), an
electronic reassignment may precede issuance of an electronic title
when no electronic title exists. For the purposes of this part, this
term is limited to a record created electronically and does not include
a physical title
[[Page 52700]]
incorporating an odometer disclosure executed on that title and
converted by scanning and imaging for storage in an electronic medium.
Jurisdiction means a state, territory, or possession of the United
States of America.
* * * * *
Physical power of attorney means, for single copy forms, the paper
document set forth by secure process which is issued by the
jurisdiction, and, for multicopy forms, any and all copies set forth by
a secure printing process or other secure process which are issued by
the jurisdiction pursuant to Sec. 580.13 or Sec. 580.14.
Printed name means either:
(1) For a physical title or physical power of attorney, the clear
and legible name applied to the physical document of the signatory; or
(2) For an electronic title or electronic power of attorney, the
clear, legible, visible, audible, recognizable, or otherwise
understandable name of the electronic signatory recorded and stored
electronically.
Physical when referring to a document means a manufacturer's
certificate of origin, title, reassignment document, or power of
attorney printed on paper by a secure printing process or other secure
process that meets all the requirements of this part.
* * * * *
Sign or signature means either:
(1) For a physical document, a person's name, or a mark
representing it, as hand written personally.
(2) For an electronic odometer disclosure incorporated in an
electronic title or power of attorney, an electronic sound, symbol, or
process:
(i) Using a secure authentication system identifying a specific
individual with a degree of certainty equivalent to or greater than
Level 2 as described in NIST Special Publication 800-63-3, Revision 3,
Digital Identity Guidelines (including sub-parts 800-63-3A, 800-63-3B
and 800-63-3C), June 2017. NIST Special Publication 800-63-3, Revision
3, Digital Identity Guidelines (including sub-parts 800-63-3A, 800-63-
3B and 800-63-3C), June 2017 is incorporated by reference into this
section with the approval of the Director of the Federal Register under
5 U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than
that specified in this section, NHTSA must publish a document in the
Federal Register and the material must be available to the public. All
approved material is available for inspection at NHTSA Office of
Technical Information Services, 1200 New Jersey Avenue SE, phone number
(202) 366-2588, and is available from the National Institute of
Standards and Technology, U.S. Department of Commerce, 100 Bureau
Drive, Gaithersburg, Maryland 20899, https://pages.nist.gov/800-63-3/sp800-63-3.html. It is also available for inspection at the National
Archives and Records Administration (NARA). For information on the
availability of this material at NARA, email [email protected] or
go to www.archives.gov/federal-register/cfr/ibr-locations.html; or
(ii) Completed in person before a bona fide employee of the
jurisdiction or statutory agent under a surety bond with the
jurisdiction.
* * * * *
Transferor means any person who transfers their ownership of a
motor vehicle by sale, gift, or any means other than by the creation of
a security interest, and any person who, as agent, signs an odometer
disclosure statement for the transferor.
0
5. Revise Sec. 580.4 to read as follows:
Sec. 580.4 Security of physical documents, electronic titles and
electronic powers of attorney.
(a) Each physical title shall be set forth by means of a secure
printing process or other secure process. Additionally, a physical
power of attorney issued pursuant to Sec. Sec. 580.13 and 580.14 and
physical documents, which are used to reassign the title, shall be
issued by the jurisdiction and shall be set forth by a secure printing
process or other secure process.
(b) Each electronic title shall be maintained in a secure
environment so it is protected from unauthorized modification,
alteration or disclosure. In addition, an electronic power of attorney
maintained and made available pursuant to Sec. Sec. 580.13 and 580.14
and shall be maintained by the jurisdiction in a secure environment so
that it is protected from unauthorized modification, alteration and
disclosure. Any system employed to create, store or maintain the
foregoing electronic records shall record the dates and times when the
electronic document is created, the odometer disclosures contained
within are signed and when the documents are accessed, including the
date and time any unauthorized attempt is made to alter or modify the
electronic document and any unauthorized alterations or modifications
made.
0
6. Amend Sec. 580.5 by revising paragraphs (a) through (g) to read as
follows:
Sec. 580.5 Disclosure of odometer information.
(a) At the time a physical or electronic title is issued or made
available to the transferee, it must contain the mileage disclosed by
the transferor when ownership of the vehicle was transferred and
contain a space for the information required to be disclosed under
paragraphs (c) through (f) of this section at the time of future
transfer.
(b) Any physical documents which are used to reassign a title shall
contain a space for the information required to be disclosed under
paragraphs (c) through (f) of this section at the time of transfer of
ownership.
(c) In connection with the transfer of ownership of a motor
vehicle, the transferor shall disclose the mileage to the transferee on
the physical or electronic title or, except as noted below, on the
physical document being used to reassign the title. In the case of a
transferor in whose name the vehicle is titled, the transferor shall
disclose the mileage on the electronic title or the physical title, and
not on a reassignment document. This disclosure must be signed by the
transferor and must contain the transferor's printed name. In
connection with the transfer of ownership of a motor vehicle in which
more than one person is a transferor, only one transferor need sign the
disclosure. In addition to the signature of the transferor, the
disclosure must contain the following information:
(1) The odometer reading at the time of transfer (not to include
tenths of miles);
(2) The date of transfer;
(3) The transferor's printed name and current address;
(4) The transferee's printed name and current address; and
(5) The identity of the vehicle, including its make, model, year,
body type, and vehicle identification number.
(d) In addition to the information provided under paragraph (c) of
this section, the physical document shall provide a statement
referencing federal law and stating failure to complete the disclosure
or providing false information may result in fines and/or imprisonment.
Reference may also be made to applicable law of the jurisdiction. If
the transaction at issue is electronic, the information specified in
this paragraph shall be displayed, prior to the execution of any
electronic signatures.
(e) In addition to the information provided under paragraphs (c)
and (d) of this section:
(1) The transferor shall certify that to the best of their
knowledge the
[[Page 52701]]
odometer reading reflects the actual mileage, or;
(2) If the transferor knows that the odometer reading reflects the
amount of mileage in excess of the designed mechanical odometer limit,
they shall include a statement that the mileage exceeds mechanical
limits; or
(3) If the transferor knows that the odometer reading does not
reflect a valid mileage display or differs from the mileage and that
the difference is greater than that caused by odometer calibration
error, they shall include a statement that the odometer reading does
not reflect the actual mileage, and should not be relied upon. This
statement shall also include a warning notice to alert the transferee
that a discrepancy exists between the odometer reading and the actual
mileage.
(f) Upon receipt of the transferor's signed disclosure statement,
the transferee shall sign the disclosure statement, which shall include
their printed name, and make copy available to their transferor. If the
disclosure is on an electronic title, the jurisdiction shall provide a
means for making copies of the completed disclosure statement available
to the transferee and transferor.
(g) If the vehicle has not been titled the written disclosure shall
be executed on a separate physical document or by electronic means and
incorporated into the electronic title record. A separate physical
reassignment document may be used for a subsequent reassignment only
after a transferor holding title has made the mileage disclosure in
conformance with paragraphs (c), (e), and (f) of this section on the
title and assigned the physical title to their transferee. An
electronic title system shall provide a means for making mileage
disclosures upon assignment and reassignment electronically and
incorporating these disclosures into the electronic title. A physical
reassignment document shall not be used with an electronic title or
when an electronic reassignment has been made. In instances where a
paper title is held by the initial transferor, an available electronic
reassignment may be used for a subsequent reassignment after a
transferor holding title has made the mileage disclosure in conformance
with paragraphs (c), (e), and (f) of this section on the title and
assigned the physical title to their transferee
* * * * *
0
7. Add Sec. 580.6 to read as follows:
Sec. 580.6 Additional requirements for electronic odometer
disclosure.
(a) Any electronic title or power of attorney as defined in this
part shall be retained:
(1) In a format which cannot be altered unless such alterations are
made as authorized by the jurisdiction, and which indicates any
unauthorized attempts to alter it;
(2) In an order that permits systematic retrieval; and
(3) For a minimum of five years following conversion to a physical
title, issuance of a subsequent physical or electronic title by any
jurisdiction, or permanent destruction of the vehicle; otherwise, the
record shall be retained indefinitely.
(b) Any electronic signature made on an odometer disclosure shall
identify an individual, and not solely the organization the person
represents or employs them. If the individual executing the electronic
signature is acting in a business capacity or otherwise on behalf of
another individual or entity, the business or other individual or
entity shall also be identified when the signature is made. Electronic
signatures on odometer disclosures made in connection with transfers by
a licensed dealer or at an auction sale need only identify the
individual executing the signature and the dealer transferring the
vehicle or auction entity conducting the sale.
(c) Any requirement in these regulations to disclose, issue,
return, notify or otherwise provide information to another person in
the course of an electronic odometer disclosure is satisfied when the
required information is electronically transmitted or otherwise
electronically available to the party required to review or receive it.
(d) When an electronic title is created following transfer of
ownership a vehicle with a physical title or an existing physical title
is converted to an electronic title, the jurisdiction issuing the
electronic title shall obtain the physical title or proof that the
physical title has been invalidated or lost, and retain a physical or
electronic copy of the physical title or proof for a minimum of five
years.
(e) A jurisdiction issuing an electronic title may provide a paper
record of ownership, which includes the odometer disclosure
information, provided the paper record clearly indicates it is not an
official title for the vehicle and may not be used to transfer
ownership for the vehicle.
(f) A jurisdiction issuing an electronic title shall retain the
capacity to issue physical titles meeting all the requirements of this
part. If a physical title is created by a jurisdiction with an
electronic title and odometer disclosure statement system, any
electronic record of the title must indicate that a physical title has
been issued and the date on which the physical title was issued. The
jurisdiction shall retain a record of the identity of the recipient of
the physical title if the recipient is not an owner or a lienholder.
(g) Any physical documents employed by transferors and transferees
to make electronic odometer disclosures shall be set forth by means of
a secure printing process or other secure process. This requirement
does not apply to mileage disclosures made by lessees as required be
Sec. 580.7
(h) Physical documents employed to comply with any of the
requirements of this part that are converted to an electronic format by
scanning or imaging must maintain and preserve the security features
incorporated in the physical document so that any alterations or
modifications to the physical document can be detected in the physical
document's electronic format. Scanning of physical documents must be
made at a resolution of not less than 200 dpi.
(i) When a transferor's physical title is lost, a jurisdiction may
facilitate the transfer of a physical title through an electronic
process without issuing another physical title provided a physical or
electronic power of attorney pursuant to Sec. 580.13 is properly
executed by the transferor.
(j) Electronic reassignments shall be made on or in the electronic
title or, as set forth in Sec. 580.5(g), may be entered in the
electronic title system prior to the first issuance of an electronic
title. A physical reassignment document shall not be used with an
electronic title.
0
8. Amend Sec. 580.7 by revising paragraphs (a) and (b) and adding
paragraph (e) to read as follows:
Sec. 580.7 Disclosure of odometer information for leased motor
vehicles.
(a) Before executing any transfer of ownership document, each
lessor of a leased motor vehicle shall notify the lessee electronically
or in writing stating that the lessee is required to provide a written
or electronic disclosure to the lessor regarding the mileage. This
written or electronic notice shall contain a reference to the federal
law and shall state failure to complete the disclosure or providing
false information may result in fines and/or imprisonment. Reference
may also be made to applicable law of the jurisdiction. If the notice
is electronic, the information specified in this paragraph shall be
displayed prior to, or
[[Page 52702]]
at the time of, the execution of any electronic signatures.
(b) In connection with the transfer of ownership of the leased
motor vehicle, the lessee shall furnish to the lessor a written or
electronic statement regarding the mileage of the vehicle. This
statement must be signed by the lessee. This statement, in addition to
the lessee acknowledging receiving notification of federal law and any
applicable law of the jurisdiction as required by paragraph (a) of this
section, shall also contain the following information:
(1) The printed name of the person making the disclosure;
(2) The current odometer reading (not to include tenths of miles);
(3) The date of the statement;
(4) The lessee's printed name and current address;
(5) The lessor's printed name and current address;
(6) The identity of the vehicle, including its make, model, year,
and body type, and its vehicle identification number;
(7) The date that the lessor notified the lessee of disclosure
requirements;
(8) The date that the completed disclosure statement was received
by the lessor; and
(9) The signature of the lessor
* * * * *
(e) Any electronic system maintained by a lessor for the purpose of
complying with the requirements of this section shall meet the
requirements of Sec. 580.4(b) of this part.
0
9. Revise Sec. 580.8 to read as follows:
Sec. 580.8 Odometer disclosure statement retention.
(a) Dealers and distributors of motor vehicles who are required by
this part to execute an odometer disclosure statement shall retain,
except as noted in paragraph (d), for five years a photostat, carbon,
other facsimile copy, or electronic copy of each odometer mileage
statement, which they issue and receive. They shall retain all odometer
disclosure statements at their primary place of business in an order
appropriate to business requirements and that permits systematic
retrieval. Electronic copies shall be retained in a format which cannot
be altered and which indicates any attempts to alter it.
(b) Lessors shall retain, for five years following the date they
transfer ownership of the leased vehicle, each written or electronic
odometer disclosure statement which they receive from a lessee. They
shall retain all odometer disclosure statements at their primary place
of business in an order that is appropriate to business requirements
and that permits systematic retrieval. Electronic copies shall be
retained in a format which cannot be altered and which indicates any
attempts to alter it.
(c) Dealers and distributors of motor vehicles who are granted a
power of attorney, except as noted in paragraph (d) of this section, by
their transferor pursuant to Sec. 580.13, or by their transferee
pursuant to Sec. 580.14, shall retain for five years a photostat,
carbon, or other facsimile copy, or electronic copy of each power of
attorney they receive. They shall retain all powers of attorney at
their primary place of business in an order that is appropriate to
business requirements and that permits systematic retrieval. Electronic
copies shall be retained in a format which cannot be altered and which
indicates any unauthorized attempts to alter it.
(d) Any odometer disclosure statement made on an electronic title
or electronic power of attorney shall be retained by the jurisdiction
for a minimum of five years and made available upon request to dealers,
distributors, and lessors for retrieval at their principal place of
business and inspection on demand by law enforcement officials.
Dealers, distributors, and lessors are not required to, but may, retain
a copy of an odometer disclosure statement made on an electronic title
or electronic power of attorney.
0
10. Amend Sec. 580.9 by revising the introductory text and paragraph
(b) to read as follows:
Sec. 580.9 Odometer record retention for auction companies.
Each auction company shall establish and retain in physical or
electronic format at its primary place of business in an order
appropriate to business requirements and that permits systematic
retrieval, for five years following the date of sale of each motor
vehicle, the following records:
* * *
(b) The name of the transferee;
* * *
0
11. Amend Sec. 580.10 by revising paragraph (b)(2) to read as follows:
Sec. 580.10 Application for assistance.
* * * * *
(b) * * *
(2) Be submitted to the Office of Chief Counsel, National Highway
Traffic Safety Administration, 1200 New Jersey Avenue SE, W41-326,
Washington, DC 20590;
* * * * *
0
12. Amend Sec. 580.11 by revising paragraphs (a), (b)(2) through (4),
and (c) to read as follows:
Sec. 580.11 Petition for approval of alternate disclosure
requirements.
(a) A state may petition NHTSA for approval of disclosure
requirements which differ from the disclosure requirements of Sec.
580.5, Sec. 580.6, Sec. 580.7, or Sec. 580.13(f) of this part.
(b) * * *
(2) Be submitted to the Office of Chief Counsel, National Highway
Traffic Safety Administration, 1200 New Jersey Avenue SE, W41-326,
Washington, DC 20590;
(3) Set forth the motor vehicle disclosure requirements in effect
in the jurisdiction, including a copy of the applicable laws or
regulations of the jurisdiction; and
(4) Explain how the jurisdiction's motor vehicle disclosure
requirements are consistent with the purposes of the Motor Vehicle
Information and Cost Savings Act.
* * * * *
(c) Notice of the petition and an initial determination pending a
30-day comment period will be published in the Federal Register. Notice
of final grant or denial of a petition for approval of alternate motor
vehicle disclosure requirements will be published in the Federal
Register. The effect of the grant of a petition is to relieve a
jurisdiction from responsibility to conform the Jurisdiction disclosure
requirements with Sec. 580.5, Sec. 580.6, Sec. 580.7, or Sec.
580.13(f), as applicable, for as long as the approved alternate
disclosure requirements remain in effect in that jurisdiction. The
effect of a denial is to require a jurisdiction to conform to the
requirements of Sec. 580.5, Sec. 580.6, Sec. 580.7, or Sec.
580.13(f), as applicable, of this part until such time as NHTSA
approves any alternate motor vehicle disclosure requirements.
Sec. 580.12 [Removed and Reserved]
0
13. Remove and reserve Sec. 580.12.
0
14. Revise Sec. 580.13 to read as follows:
Sec. 580.13 Disclosure of odometer information by power of attorney.
(a) If otherwise permitted by the law of the jurisdiction, the
transferor may grant a power of attorney to their transferee for the
purpose of mileage disclosure under one of the following conditions:
(1) The transferor's physical title is held by a lienholder; or
(2) The transferor's physical title is lost; or
(3) The transferor's electronic title is held or controlled by a
lienholder; or
[[Page 52703]]
(4) The transferor's electronic title cannot be accessed.
(b) The physical or electronic power of attorney shall contain, in
part A, a space for the information required to be disclosed under
paragraphs (c) through (f) of this section. If a state permits the use
of a physical or electronic power of attorney in the situation
described in Sec. 580.14(a), the power of attorney must also contain,
in part B, a space for the information required to be disclosed under
Sec. 580.14, and, in part C, a space for the certification required to
be made under Sec. 580.15.
(c) In connection with the transfer of ownership of a motor vehicle
as described in paragraph (a) of this section, where the transferor
elects to give their transferee a physical or electronic power of
attorney for the purpose of mileage disclosure, the transferor must
appoint the transferee their attorney-in-fact for the purpose of
mileage disclosure and disclose the mileage on the physical or
electronic power of attorney form issued by the jurisdiction in which
the transfer occurs. This disclosure must be signed by the transferor,
including the printed name, and contain the following information:
(1) The odometer reading at the time of transfer (not to include
tenths of miles);
(2) The date of transfer;
(3) The transferor's printed name and current address;
(4) The transferee's printed name and current address; and
(5) The identity of the vehicle, including its make, model, year,
body type, and vehicle identification number.
(d) In addition to the information provided under paragraph (c) of
this section, the physical or electronic power of attorney form shall
refer to the federal odometer law and state that providing false
information or the failure of the person granted the power of attorney
to submit the form to the jurisdiction may result in fines and/or
imprisonment. Reference may also be made to applicable law of the
jurisdiction.
(e) In addition to the information provided under paragraphs (c)
and (d) of this section:
(1) The transferor shall certify that to the best of their
knowledge the odometer reading reflects the actual mileage; or
(2) If the transferor knows that the odometer reading reflects
mileage in excess of the designed mechanical odometer limit, they shall
include a statement to that the mileage exceeds mechanical limits; or
(3) If the transferor knows the odometer reading differs from the
mileage and the difference is greater than that caused by a calibration
error or does not reflect a valid mileage display, they shall include a
statement that the odometer reading does not reflect the actual mileage
and should not be relied upon. This statement shall also include a
warning notice to alert the transferee that a discrepancy exists
between the odometer reading and the actual mileage.
(f) The transferee shall sign the physical or electronic power of
attorney, which shall include their printed name, and make a copy of
the power of attorney form available to the transferor.
(g) Upon receipt of the transferor's physical or electronic title,
the transferee shall complete the space for mileage disclosure on the
title exactly as the mileage was disclosed by the transferor on the
physical or electronic power of attorney. The transferee shall submit
the physical or electronic power of attorney to the jurisdiction that
issued it with the actual physical or electronic title when the
transferee submits a new title application. The jurisdiction shall
retain the physical or electronic power of attorney form and physical
or electronic title for a minimum of three years or a period equal to
the state titling record retention period, whichever is shorter. If the
mileage disclosed on the physical or electronic power of attorney is
lower than the mileage appearing on the physical or electronic title,
the power of attorney is void and the transferee shall not complete the
mileage disclosure on the title unless:
(1) The transferor has included a statement that the mileage
exceeds mechanical limits; or
(2) The transferor has included a statement that the odometer
reading does not reflect the actual mileage.
(h) A jurisdiction may permit submission of a physical power of
attorney in an electronic format such as by scanning or imaging.
0
15. Revise Sec. 580.14 to read as follows
Sec. 580.14 Power of attorney to review title documents and
acknowledge disclosure.
(a) In circumstances where part A of a physical power of attorney
form has been used pursuant to Sec. 580.13 of this part, and if
otherwise permitted by the law of the jurisdiction, a transferee may
grant power of attorney to their transferor to review the physical or
electronic title and any physical reassignment documents, if
applicable, for mileage discrepancies, and if no discrepancies are
found, to acknowledge disclosure on the physical or electronic title.
The power of attorney shall be on part B of the physical or electronic
power of attorney referred to in Sec. 580.13(a), which shall contain a
space for the information required to be disclosed under paragraphs
(b), (c), and (d) of this section and, in part C, a space for the
certification required to be made under Sec. 580.15.
(b) Part B of the physical or electronic power of attorney must
include a mileage disclosure from the transferor to the transferee and
must be signed by the transferor, including the printed name, and
contain the following information:
(1) The odometer reading at the time of transfer (not to include
tenths of miles);
(2) The date of transfer;
(3) The transferor's printed name and current address;
(4) The transferee's printed name and current address; and
(5) The identity of the vehicle, including its make, model, year,
body type, and vehicle identification number.
(c) In addition to the information provided under paragraph (b) of
this section, the power of attorney form shall refer to the federal
odometer law and state that providing false information or the failure
of the person granted the power of attorney to submit the form to the
State may result in fines and/or imprisonment. Reference may also be
made to applicable law of the jurisdiction.
(d) In addition to the information provided under paragraphs (b)
and (c) of this section:
(1) The transferor shall certify that to the best of their
knowledge the odometer reading reflects the actual mileage; or
(2) If the transferor knows that the odometer reading reflects
mileage in excess of the designed mechanical odometer limit, they shall
include a statement to that the mileage exceeds mechanical limits; or
(3) If the transferor knows that the odometer reading differs from
the mileage and the difference is greater than that caused by a
calibration error or does not reflect a valid mileage display, they
shall include a statement that the odometer reading does not reflect
the actual mileage and should not be relied upon. This statement shall
also include a warning notice to alert the transferee that a
discrepancy exists between the odometer reading and the actual mileage.
(e) The transferee shall sign the physical or electronic power of
attorney form, which shall include their printed name.
(f) The transferor shall give a copy of the physical power of
attorney form to their transferee.
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16. Revise Sec. 580.15 to read as follows:
[[Page 52704]]
Sec. 580.15 Certification by person exercising powers of attorney.
(a) A person who exercises a power of attorney under both
Sec. Sec. 580.13 and 580.14 must complete a certification that they
disclosed the mileage on the physical or electronic title as it was
provided to them on the physical or electronic power of attorney form,
and that upon examination of the physical or electronic title and any
applicable physical reassignment documents, the mileage disclosure made
on the physical or electronic title pursuant to the physical or
electronic power of attorney is greater than that previously stated on
the physical or electronic title and applicable physical reassignment
documents unless:
(1) The transferor has included a statement that the mileage
exceeds mechanical limits; or
(2) The transferor has included a statement that the odometer
reading does not reflect the actual mileage.
(b) This certification shall be under part C of the same form as
the powers of attorney executed under Sec. Sec. 580.13 and 580.14 and
shall include:
(1) The signature and printed name of the person exercising the
power of attorney;
(2) The printed address of the person exercising the power of
attorney; and
(3) The date of the certification.
(c) If the mileage reflected by the transferor on the power of
attorney is less than that previously stated on the title and any
reassignment documents, the power of attorney shall be void unless:
(1) The transferor has included a statement that the mileage
exceeds mechanical limits; or
(2) The transferor has included a statement that the odometer
reading does not reflect the actual mileage.
0
17. Revise Sec. 580.16 to read as follows
Sec. 580.16 Availability of prior title and power of attorney
documents to transferee.
(a) In circumstances in which a power of attorney has been used
pursuant to Sec. 580.13, if a subsequent transferee elects to return
to their transferor to sign the disclosure on the physical or
electronic title and does not give their transferor a power of attorney
pursuant to Sec. 580.14, the transferor shall, upon the subsequent
transferee's request, show that transferee a copy of the physical or
electronic power of attorney that he they received from their
transferor.
(b) Upon request of a transferee, a transferor who was granted a
power of attorney by their transferor and who holds the title to the
vehicle in their own name, must show to the transferee the copy of the
previous owner's title and the physical or electronic power of attorney
form.
0
18. Amend Sec. 580.17 by revising paragraphs (a)(3) and (4) and adding
paragraph (a)(5) to read as follows
Sec. 580.17 Exemptions.
(a) * * *
(3)(i) A vehicle manufactured in or before the 2009 model year that
is transferred at least 10 years after January 1 of the calendar year
corresponding to its designated model year;
(ii) Example to paragraph (a)(3): For vehicle transfers occurring
during calendar year 2019, model year 2009 or older vehicles are
exempt.
(4)(i) A vehicle manufactured in or after the 2010 model year that
is transferred at least 20 years after January 1 of the calendar year
corresponding to its designated model year; or
(ii) Example to paragraph (a)(4): For vehicle transfers occurring
during calendar year 2030, model year 2010 or older vehicles are
exempt.
(5) A vehicle sold directly by the manufacturer to any agency of
the United States in conformity with contractual specifications.
* * * * *
Under authority delegated in 49 CFR 1.95, 501.5, and 501.7.
Jonathan Charles Morrison,
Chief Counsel.
[FR Doc. 2019-20360 Filed 10-1-19; 8:45 am]
BILLING CODE 4910-59-P