Illinois General Assembly - Full Text of Public Act 102-0232
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Public Act 102-0232


Public Act 0232 102ND GENERAL ASSEMBLY



Public Act 102-0232
HB3940 EnrolledLRB102 17040 JLS 22467 b

    AN ACT concerning business.
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
    Section 5. The Motor Vehicle Franchise Act is amended by
changing Sections 1.1 and 6 as follows:
    (815 ILCS 710/1.1)  (from Ch. 121 1/2, par. 751.1)
    Sec. 1.1. Declaration of purpose. The Legislature finds
and declares that the distribution and sale of vehicles within
this State vitally affects the general economy of the State
and the public interest, welfare, and safety and that in order
to promote the public interest, welfare, and safety, and in
the exercise of its police power, it is necessary to regulate
motor vehicle manufacturers, distributors, wholesalers and
factory or distributor branches or representatives, and to
regulate dealers of motor vehicles doing business in this
State in order to prevent frauds, impositions, discrimination,
and other abuses upon its citizens, to protect and preserve
the investments and properties of the citizens of this State,
to foster healthy competition, and to provide adequate and
sufficient service to consumers generally. The licensing and
supervision of motor vehicle dealers is necessary for the
protection of consumers and the sale of motor vehicles by
unlicensed dealers shall should be prohibited prevented.
    The Legislature further finds that the regulation of motor
vehicle manufacturers, distributors, wholesalers, factory
branches, distributor branches and representatives, and
dealers promotes the distribution of motor vehicles to the
public and provides a system for servicing vehicles and for
complying with manufacturer warranties so that consumers can
keep their motor vehicles properly functioning and safe. The
sale and distribution of motor vehicles constitutes a
continuing obligation of manufacturers, distributors,
wholesalers, factory branches, distributor branches and
representatives, and dealers to consumers, and the public has
an interest in promoting the availability of post-sale
mechanical and operational services.
(Source: P.A. 100-308, eff. 8-24-17.)
    (815 ILCS 710/6)  (from Ch. 121 1/2, par. 756)
    Sec. 6. Warranty agreements; claims; approval; payment;
written disapproval.
    (a) Every manufacturer, distributor, wholesaler,
distributor branch or division, factory branch or division, or
wholesale branch or division shall properly fulfill any
warranty agreement and adequately and fairly compensate each
of its motor vehicle dealers for labor and parts.
    (b) Adequate and fair compensation requires the
manufacturer to pay each dealer no less than the amount the
retail customer pays for the same services with regard to rate
and time.
    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.
    In no event shall such compensation fail to include full
reasonable compensation for diagnostic work, as well as repair
service, labor, and parts. Time allowances for the diagnosis
and performance of warranty work and service shall be no less
than charged to retail customers reasonable and adequate for
the same work to be performed.
    No warranty or factory compensated repairs shall be
excluded from this requirement, including recalls or other
voluntary stop-sell repairs required by the manufacturer. If a
manufacturer is required to issue a recall, the dealer will be
compensated for labor time as above stated.
    Furthermore, manufacturers shall pay the dealer the same
effective labor rate (using the 100 sequential repair orders
chosen and submitted by the dealer less simple maintenance
repair orders) that the dealer receives for customer-pay
repairs. This requirement includes vehicle diagnostic times
for all warranty repairs. Additionally, if a technician is
required to communicate with a Technical Assistance
Center/Engineering/or some external manufacturer source in
order to provide a warranty repair, the manufacturer shall pay
for the time from start of communications (including hold
time) until the communication is complete.
    The dealer may submit a request to the manufacturer for
warranty labor rate increases a maximum of once per calendar
    A claim made by a franchised motor vehicle dealer for
compensation under this Section shall be either approved or
disapproved within 30 days after the claim is submitted to the
manufacturer in the manner and on the forms the manufacturer
reasonably prescribes. An approved claim shall be paid within
30 days after its approval. If a claim is not specifically
disapproved in writing or by electronic transmission within 30
days after the date on which the manufacturer receives it, the
claim shall be considered to be approved and payment shall
follow within 30 days.
    In the determination of what constitutes reasonable
compensation under this Section, the principal factor to be
given consideration shall be the prevailing wage rates being
paid by the dealer in the relevant market area in which the
motor vehicle dealer is doing business, and in no event shall
such compensation to of a motor vehicle dealer for labor times
and labor rates warranty service be less than the rates
charged by such dealer for like service to retail customers
for nonwarranty service and repairs. Additionally, the
manufacturer The franchiser shall reimburse the dealer
franchisee for any parts provided in satisfaction of a
warranty at the prevailing retail price charged by that dealer
for the same parts when sold to a retail customer not provided
in satisfaction of a warranty; provided that such motor
vehicle franchisee's prevailing retail price is not
unreasonable when compared with that of the holders of motor
vehicle franchises from the same motor vehicle franchiser for
identical merchandise in the geographic area in which the
motor vehicle franchisee is engaged in business.
    There shall be no reduction in payments due to
preestablished market norms or market averages. Manufacturers
are prohibited from establishing restrictions or limitations
of customer repair frequency due to failure rate indexes or
national failure averages.
    No debit reduction or charge back of any item on a warranty
repair order may be made absent a finding of fraud or illegal
actions by the dealer.
    A warranty claim timely made shall not be deemed invalid
solely because unavailable parts cause additional use and
mileage on the vehicle.
    If a manufacturer imposes a recall or stop sale on any new
vehicle in a dealer's inventory that prevents the sale of the
vehicle, the manufacturer shall compensate the dealer for any
interest and storage until the vehicle is repaired and made
ready for sale.
    Manufacturers are not permitted to impose any form of cost
recovery fees or surcharges against a franchised auto
dealership for payments made in accordance with this Section.
    All claims, either original or resubmitted, made by motor
vehicle dealers hereunder and under Section 5 for such labor
and parts shall be either approved or disapproved within 30
days following their submission. All approved claims shall be
paid within 30 days following their approval. The motor
vehicle dealer who submits a claim which is disapproved shall
be notified in writing of the disapproval within the same
period, and each such notice shall state the specific grounds
upon which the disapproval is based. The motor vehicle dealer
shall be permitted to correct and resubmit such disapproved
claims within 30 days of receipt of disapproval. Any claims
not specifically disapproved in writing within 30 days from
their submission shall be deemed approved and payment shall
follow within 30 days. The manufacturer or franchiser shall
have the right to require reasonable documentation for claims
and to audit such claims within a one year period from the date
the claim was paid or credit issued by the manufacturer or
franchiser, and to charge back any false or unsubstantiated
claims. The audit and charge back provisions of this Section
also apply to all other incentive and reimbursement programs
for a period of one year after the date the claim was paid or
credit issued by the manufacturer or franchiser. However, the
manufacturer retains the right to charge back any fraudulent
claim if the manufacturer establishes in a court of competent
jurisdiction in this State that the claim is fraudulent.
    (c) The motor vehicle franchiser shall not, by agreement,
by restrictions upon reimbursement, or otherwise, restrict the
nature and extent of services to be rendered or parts to be
provided so that such restriction prevents the motor vehicle
franchisee from satisfying the warranty by rendering services
in a good and workmanlike manner and providing parts which are
required in accordance with generally accepted standards. Any
such restriction shall constitute a prohibited practice.
    (d) For the purposes of this Section, the "prevailing
retail price charged by that dealer for the same parts" means
the price paid by the motor vehicle franchisee for parts,
including all shipping and other charges, multiplied by the
sum of 1.0 and the franchisee's average percentage markup over
the price paid by the motor vehicle franchisee for parts
purchased by the motor vehicle franchisee from the motor
vehicle franchiser and sold at retail. The motor vehicle
franchisee may establish average percentage markup under this
Section by submitting to the motor vehicle franchiser 100
sequential customer paid service repair orders or 90 days of
customer paid service repair orders, whichever is less,
covering repairs made no more than 180 days before the
submission, and declaring what the average percentage markup
is. The average percentage markup so declared shall go into
effect 30 days following the declaration, subject to audit of
the submitted repair orders by the motor vehicle franchiser
and adjustment of the average percentage markup based on that
audit. Any audit must be conducted within 30 days following
the declaration. Only retail sales not involving warranty
repairs, parts covered by subsection (e) of this Section, or
parts supplied for routine vehicle maintenance, shall be
considered in calculating average percentage markup. No motor
vehicle franchiser shall require a motor vehicle franchisee to
establish average percentage markup by a methodology, or by
requiring information, that is unduly burdensome or time
consuming to provide, including, but not limited to, part by
part or transaction by transaction calculations. A motor
vehicle franchisee shall not request a change in the average
percentage markup more than twice in one calendar year.
    (e) If a motor vehicle franchiser supplies a part or parts
for use in a repair rendered under a warranty other than by
sale of that part or parts to the motor vehicle franchisee, the
motor vehicle franchisee shall be entitled to compensation
equivalent to the motor vehicle franchisee's average
percentage markup on the part or parts, as if the part or parts
had been sold to the motor vehicle franchisee by the motor
vehicle franchiser. The requirements of this subsection (e)
shall not apply to entire engine assemblies and entire
transmission assemblies. In the case of those assemblies, the
motor vehicle franchiser shall reimburse the motor vehicle
franchisee in the amount of 30% of what the motor vehicle
franchisee would have paid the motor vehicle franchiser for
the assembly if the assembly had not been supplied by the
franchiser other than by the sale of that assembly to the motor
vehicle franchisee.
    (f) The obligations imposed on motor vehicle franchisers
by this Section shall apply to any parent, subsidiary,
affiliate, or agent of the motor vehicle franchiser, any
person under common ownership or control, any employee of the
motor vehicle franchiser, and any person holding 1% or more of
the shares of any class of securities or other ownership
interest in the motor vehicle franchiser, if a warranty or
service or repair plan is issued by that person instead of or
in addition to one issued by the motor vehicle franchiser.
    (g) (Blank). (1) Any motor vehicle franchiser and at least
a majority of its Illinois franchisees of the same line make
may agree in an express written contract citing this Section
upon a uniform warranty reimbursement policy used by
contracting franchisees to perform warranty repairs. The
policy shall only involve either reimbursement for parts used
in warranty repairs or the use of a Uniform Time Standards
Manual, or both. Reimbursement for parts under the agreement
shall be used instead of the franchisees' "prevailing retail
price charged by that dealer for the same parts" as defined in
this Section to calculate compensation due from the franchiser
for parts used in warranty repairs. This Section does not
authorize a franchiser and its Illinois franchisees to
establish a uniform hourly labor reimbursement.
    Each franchiser shall only have one such agreement with
each line make. Any such agreement shall:
        (A) Establish a uniform parts reimbursement rate. The
    uniform parts reimbursement rate shall be greater than the
    franchiser's nationally established parts reimbursement
    rate in effect at the time the first such agreement
    becomes effective; however, any subsequent agreement shall
    result in a uniform reimbursement rate that is greater or
    equal to the rate set forth in the immediately prior
        (B) Apply to all warranty repair orders written during
    the period that the agreement is effective.
        (C) Be available, during the period it is effective,
    to any motor vehicle franchisee of the same line make at
    any time and on the same terms.
        (D) Be for a term not to exceed 3 years so long as any
    party to the agreement may terminate the agreement upon
    the annual anniversary of the agreement and with 30 days'
    prior written notice; however, the agreement shall remain
    in effect for the term of the agreement regardless of the
    number of dealers of the same line make that may terminate
    the agreement.
    (2) A franchiser that enters into an agreement with its
franchisees pursuant to paragraph (1) of this subsection (g)
may seek to recover its costs from only those franchisees that
are receiving their "prevailing retail price charged by that
dealer" under subsections (a) through (f) of this Section,
subject to the following requirements:
        (A) "costs" means the difference between the uniform
    reimbursement rate set forth in an agreement entered into
    pursuant to paragraph (1) of this subsection (g) and the
    "prevailing retail price charged by that dealer" received
    by those franchisees of the same line make. "Costs" do not
    include the following: legal fees or expenses;
    administrative expenses; a profit mark-up; or any other
        (B) the costs shall be recovered only by increasing
    the invoice price on new vehicles received by those
    franchisees; and
        (C) price increases imposed for the purpose of
    recovering costs imposed by this Section may vary from
    time to time and from model to model, but shall apply
    uniformly to all franchisees of the same line make in the
    State of Illinois that have requested reimbursement for
    warranty repairs at their "prevailing retail price charged
    by that dealer", except that a franchiser may make an
    exception for vehicles that are titled in the name of a
    consumer in another state.
    (3) If a franchiser contracts with its Illinois dealers
pursuant to paragraph (1) of this subsection (g), the
franchiser shall certify under oath to the Motor Vehicle
Review Board that a majority of the franchisees of that line
make did agree to such an agreement and file a sample copy of
the agreement. On an annual basis, each franchiser shall
certify under oath to the Motor Vehicle Review Board that the
reimbursement costs it recovers under paragraph (2) of this
subsection (g) do not exceed the amounts authorized by
paragraph (2) of this subsection (g). The franchiser shall
maintain for a period of 3 years a file that contains the
information upon which its certification is based.
    (3.1) A franchiser subject to subdivision (g)(2) of this
Section, upon request of a dealer subject to that subdivision,
shall disclose to the dealer, in writing or in person if
requested by the dealer, the method by which the franchiser
calculated the amount of the costs to be reimbursed by the
dealer. The franchiser shall also provide aggregate data
showing (i) the total costs the franchiser incurred and (ii)
the total number of new vehicles invoiced to each dealer that
received the "prevailing retail price charged by that dealer"
during the relevant period of time. In responding to a
dealer's request under this subdivision (g)(3.1), a franchiser
may not disclose any confidential or competitive information
regarding any other dealer. Any dealer who receives
information from a franchiser under this subdivision (g)(3.1)
may not disclose that information to any third party unless
the disclosure occurs in the course of a lawful proceeding
before, or upon the order of, the Motor Vehicle Review Board or
a court of competent jurisdiction.
    (4) If a franchiser and its franchisees do not enter into
an agreement pursuant to paragraph (1) of this subsection (g),
and for any matter that is not the subject of an agreement,
this subsection (g) shall have no effect whatsoever.
    (5) For purposes of this subsection (g), a Uniform Time
Standard Manual is a document created by a franchiser that
establishes the time allowances for the diagnosis and
performance of warranty work and service. The allowances shall
be reasonable and adequate for the work and service to be
performed. Each franchiser shall have a reasonable and fair
process that allows a franchisee to request a modification or
adjustment of a standard or standards included in such a
    (6) A franchiser may not take any adverse action against a
franchisee for not having executed an agreement contemplated
by this subsection (g) or for receiving the "prevailing retail
price charged by that dealer". Nothing in this subsection
shall be construed to prevent a franchiser from making a
determination of a franchisee's "prevailing retail price
charged by that dealer", as provided by this Section.
(Source: P.A. 96-11, eff. 5-22-09.)

Effective Date: 1/1/2022