Starting Jan. 1, Illinois motor vehicle dealers have been able to claim “Fair and Adequate Compensation” for warranty and recall repairs. Pursuant to the changes made to Section 6 of the Motor Vehicle Franchise Act (815 ILCS 710/6) by Public Act 102-232 (https://bit.ly/3LBHSZt), manufacturers must reimburse their dealers for parts and labor in warranty and recall repairs at the same rate as those dealers charge when making repairs that are not covered by warranty. Importantly, P.A. 102-232 now prohibits manufacturers from imposing cost recovery surcharges on dealers who claim their “retail rate” for warranty and recall repairs. The parts and labor increases are similar to the reimbursement authorized under several other state statutes but represent a significant increase for Illinois dealers.

Time Allowances Increased

Public Act 102-232 creates new time allowances for warranty and recall repairs that are the first in the nation. While setting a new bar for warranty time allowances is indisputably good news for Illinois dealers, it creates a bit of uncertainty as dealers and manufacturers implement the new time allowances. Until Jan. 1, 2022, the warranty time allowance merely had to be “reasonable and adequate” and was often based on the manufacturer’s time guide. Under the new warranty reimbursement statute, dealers can request reimbursement based on an extended warranty agreement agreed to by the manufacturer and dealer or based on the manufacturer’s time guide multiplied 1.5. More specifically, Section 6(b) provides in part as follows:

Any time guide previously agreed to by the manufacturer and the dealer for extended warranty repairs may be used in lieu of actual time expended. In the event that a time guide has not been agreed to for warranty repairs, or said time guide does not define time for an applicable warranty repair, the manufacturer’s time guide shall be used, multiplied by 1.5.

From what IADA has learned from dealers, it seems that the majority of manufacturers have elected to use their own warranty time guide multiplied by 1.5. However, at least one manufacturer interprets Section 6(b) as mandatory rather than permissive and insists on reimbursing dealers based on the time allowances used under their extended warranty guide. IADA believes that this is a misinterpretation of Section 6(b) and that an extended warranty time guide is to be used only when both the manufacturer and dealer agree to it. Under our interpretation, if either party refuses an extended warranty time guide, then warranty reimbursement time allowances are based on the manufacturer’s times allowance multiplied by 1.5. Because the warranty time allowance guidelines are brand new, our analysis is based on our interpretation of P.A. 102-232 rather than settled case law. Depending on how hard manufacturers dig in, a possible dispute could require resolution through a Motor Vehicle Review Board protest.

Regardless of which time allowance you select, IADA recommends that you contact your factory representative right away and request your increase. Some manufacturers are not adjusting their warranty time allowances until dealers submit a request. Your request can be as simple as the following:

Pursuant to Section 6 of the Illinois Motor Vehicle Franchise Act, as amended by Public Act 102-232, (dealership name) requests to adopt (the manufacturer time guide multiplied by 1.5/name of extended warranty time guide) for warranty time allowances, effective immediately. Please contact me if you require additional information to implement the revised time allowance.

While the new time allowances apply to warranty repairs, recall repairs, and stop-sale repairs, they are not likely to extend to extended warranty or goodwill repairs.

Claim Submission

At press time, there is still a wide variance between manufacturers when it comes to the ease of submitting warranty claims for the increased time allowances. Some manufacturers are up to speed on having a seamless way for Illinois dealers to claim the higher time allowances, while others waited until mid-January to start the programming process or are manually reviewing each warranty submission. With luck, the manufacturers who are slow to the table will decide that it is more efficient to program a computer to multiply by 1.5 than to hand review thousands of warranty submissions.

No More “Gotcha!” Chargebacks

The new warranty law added a provision that prohibits manufacturers from charging back on a dealer’s warranty claim, except when the manufacturer can show fraud or illegal actions by the dealer. This provision prevents a manufacturer from invalidating a dealer’s warranty submission based on a technical defect in the dealer’s submission. This chargeback provision will prevent manufacturers from dinging your account based on a technicality.

Odds and Ends

Following is a list of many of the more minor changes to the Illinois warranty law that dealers should be aware of, even though IADA has not heard about any disputes yet.

• Manufacturers must compensate dealers for interest and storage costs for new vehicles subject to recall or stop-sale order that prevents the sale of a vehicle until the vehicle is repaired and ready for sale.
  
  
• Manufacturers cannot reduce any warranty reimbursement payment based on pre-established market norms or market averages.
  
  
• Manufacturers cannot place restrictions on repair frequency based on failure rate indexes or national failure averages.
  
  
• A manufacturer cannot invalidate a timely submitted warranty claim solely because the unavailability of parts caused additional use and mileage on a vehicle.
  
  
• Once a dealer submits a claim for warranty reimbursement, the manufacturer must approve or disapprove the claim within 30 days. If the manufacturer does not disapprove of a claim within 30 days, the claim is approved. Approved claims must be paid within 30 days after the approval date.

As you can see, the new warranty laws represent a sea change for Illinois dealers. IADA extends its thanks to the many dealers who contacted their legislators to urge support for the warranty law and the Chicago Automobile Trade Association legislative team. We are STRONGER TOGETHER!