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Dealer Alert: Catalytic Converter Marking Requirement – Answers to Common Questions

Dear Member,

As we’ve noted in prior alerts and bulletin articles, starting January 1, 2024, SB 55 requires California dealers to mark catalytic converters in vehicle sales transactions unless the dealer offers the marking as an optional product and the customer opts-out.

SB 55 applies to finance and cash sales of new and used vehicles, but the bill does not apply to leases. Unless the customer declines the dealer’s offer to mark the catalytic converter, the bill requires the marking of the vehicle identification number (VIN) on the catalytic converter using a ‘permanent’ method such as engraving, etching, welding, metal stamp, or acid mark. 

Copied below are answers to common questions that we’ve received from dealers about SB 55. Dealers interested in learning more about this requirement and other new laws are encouraged to register for our upcoming New Laws Seminars here. Members can also access our 2023 Legislative Summary on CNCDA Comply here.

What options do I have to comply with SB 55?

At the highest level, dealers have two options to comply with SB 55:

Option 1: The dealer marks the VIN on the catalytic converter prior to the sale and advertises the price of the vehicle inclusive of any cost for the marking. In this option, catalytic converter marking would be treated in the same manner as any other additional pre-sale dealer-installed equipment (such as a tow hitch).

If the vehicle is new, the dealer should use the supplemental/ addendum price sticker to notate any adjustment of the price of the vehicle above MSRP. (For an in-depth discussion of the use of Supplemental Stickers, see Chapter 50 of CNCDA’s F&I Compliance Manual.)

Option 2: The dealer offers catalytic converter VIN marking as an optional product to the customer. The marking would be disclosed as a “theft deterrent device” in the Precontract Disclosure Statement and the customer would sign the statement if they elect to purchase the option. (See Chapter 22 of CNCDA’s F&I Compliance Manual for a discussion of the Precontract Disclosure Statement.)

In either a cash or finance sale, a dealer should obtain the customer’s signed acknowledgment in the event the customer declines the catalytic converter marking. CNCDA is working with Reynolds on developing a model form for the customer to decline the catalytic converter marking. The form will be available in early December 2023. CNCDA’s 2023 Legislative Summary discusses this requirement in greater detail. 

Can I mark a unique identification number instead of the VIN?

No. The law requires dealers to mark the VIN. VIN marking was important for supporters of SB 55, as the VIN can be accessed more directly by law enforcement.

I’m offering catalytic converter marking as an optional product. Can I bundle the catalytic converter marking with a warranty product that covers the theft of the catalytic converter?

CNCDA recommends against bundling any warranty products with the marking of catalytic converters unless you consult competent counsel before doing so. There are several reasons for this. First, it’s unclear if a dealer would be excused from its obligation to mark a catalytic converter if the customer declines the marking of a product that is bundled with a warranty.

Second, the sale of a warranty on a catalytic converter may constitute the sale of insurance under California law, which triggers licensure requirements and regulation by the California Department of Insurance. As such, dealers are strongly encouraged to contact competent counsel before offering warranties on catalytic converters.

Some of my vehicles have more than one catalytic converter. Do they all need to be marked?

Yes. CNCDA recommends that all catalytic converters be marked unless the marking is offered as an optional product and the customer opts out.

Some of my vehicles require substantial disassembly to mark the catalytic converter(s). Do I still need to mark the vehicle?

Yes (unless you are offering the marking as an optional product and the customer declines the marking). That said, the law does not limit your ability to adjust the price of the product based on the complexity of the operation. In other words, if it is time consuming or expensive for you to mark a hard-to-access converter, nothing prevents a dealer from passing along that higher cost to the customer.

Note that this alert is intended for educational purposes only and is not legal advice. If you require legal advice, contact competent counsel. If you have more questions, please call CNCDA’s Legal Hotline at (916) 441-2599.

Memo on Credit Card Surcharges

Over the past couple of years, we’ve received an increasing number of inquiries from dealers about whether they can impose credit card surcharges at their stores. To aid your dealership in developing an appropriate policy, CNCDA is providing our members a detailed legal memorandum on credit card surcharges, which is available on CNCDA Comply. 

The memo, which was written by attorneys at Arent Fox Schiff, makes the following findings:

  • Fixed ops (service/parts sales) – credit card surcharges may be imposed, provided that they are clearly and conspicuously disclosed to the consumer on the receipt/invoice and by signage displayed at the cash register.
  • Installment sales/lease contracts – credit card surcharges occupy a legal grey area, and dealers should closely review the memo’s findings with their counsel to implement an appropriate policy.
  • Cash sales – credit card surcharges may be imposed, provided that such surcharges are clearly and conspicuously disclosed.

The memo is available on CNCDA Comply by clicking on the link above.

2022 Economic Impact Report

Click on the image below to view the full report.

Federal EV Tax Credit Forms

The new clean vehicle tax credit applies to clean vehicles placed in service after January 1, 2023, and acquired by a taxpayer for original use. To qualify for the credit, the vehicle and the consumer must meet certain requirements. To view those requirements and a list of qualifying vehicles, click here. The site will be updated as more vehicles are added to the list. Importantly, the seller of a new clean vehicle must provide a report containing taxpayer and vehicle information to the taxpayer and to the IRS for the consumer to receive the credit. These reports will need to be compiled and filed with the IRS by January 15, 2024. Click here for more details about the form. NADA has created a model sellers report form for this purpose, linked below.

In addition to the new clean vehicle tax credit, there is a previously owned clean vehicle tax credit available. Click here to view eligibility details. Dealers must also provide a report to taxpayers/purchasers upon sale of a previously owned vehicle potentially eligible for the Section 25E Previously Owned Clean Vehicle Tax Credit. NADA has created a model sellers report form for the 2023 IRC Section 25E previously owned clean vehicle tax credit, linked below.

On December 30, the U.S. Department of Treasury, in conjunction with the IRS, released preliminary guidance indicating consumer leases qualify for the commercial clean vehicle credit under 26 USCS § 45W. Effectively, this guidance removes much of the vehicle sourcing and income requirements from consumer lease transactions. However, these vehicles will still be subject to the commercial clean vehicle credit requirements, and it is important to note that retail vehicle sales are still subject to the § 30D requirements. Click here to view the guidance fact sheet. 

While Treasury and the IRS often allow taxpayers to rely on proposed guidance in the interim between notice and issuance of regulations, it is important to note that this guidance is not regulatory action, and dealers should stay tuned as CNCDA and NADA follow this developing body of law. We also encourage dealers to access and review the materials prepared by NADA, available here.

Voluntary Protection Products Policy – Template for California Dealerships

The Voluntary Protection Products Policy is designed for use at California dealerships to implement a California-compliant policy on the sale of voluntary protection products. Dealers that are interested in implementing such a policy should also refer to NADA’s Driven Guide called “Voluntary Protection Products: A Model Dealership Policy.”

2023 Pay Scale Tool

Sample Employment Arbitration Agreement

This sample employment arbitration agreement (available in English and Spanish language) has been developed by Fine, Boggs, & Perkins for CNCDA members. It is current as of May 9, 2022. Consult competent counsel prior to implementing any changes to your dealership’s employment policies or practices.

Electronic Contracting White Paper

CNCDA commissioned a legal white paper by preeminent experts at the Munger, Tolles & Olson LLP law firm on the use of e-signatures for vehicle sales and lease contracts in California. The chief author of the memo – Donald Verrilli – is one of the nation’s premier Supreme Court and appellate advocates. He served as Solicitor General of the United States from June 2011 to June 2016 for the Obama Administration. 

The white paper unambiguously concludes that “the use of electronic signatures and records in connection with the sale and leasing of automobiles is lawful in California.” You can download it by clicking on “Download PDF” above.

The white paper’s conclusion is supported by recent statements by the California DMV Director on the use of electronic signatures for vehicle purchases. Following the DMV’s approval of electronic submission of odometer statements, Director Gordan proclaimed: “Buyers can now complete their purchase from anywhere – no ink or paper required.” Click here to read more.

CNCDA understands that some dealers are hesitant to adopt the use of electronic signatures for vehicle sales and lease transactions, as such transactions are not expressly authorized by the California Uniform Electronic Transactions Act (CalUETA). CNCDA sought to provide clarity on this issue by introducing legislation to amend CalUETA in 2021. However, our bill was blocked by trial attorneys and other special interest groups, who sought to use our bill as leverage to impose additional onerous restrictions on dealers. 

If you have hesitated to adopt the use of electronic signatures at your dealership, please review the attached white paper with your counsel, as we believe it provides a strong basis to move forward with a fully electronicprocess at your dealership. 

2021 Economic Impact Report

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