Petition for Approval of Alternate Odometer Disclosure Requirements, 643-650 [E9-43]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 74, Number 4 (Wednesday, January 7, 2009)]
[Rules and Regulations]
[Pages 643-650]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-43]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket No. NHTSA-2008-0116; Notice 2]


Petition for Approval of Alternate Odometer Disclosure 
Requirements

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

ACTION: Notice of final determination.

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SUMMARY: The Commonwealth of Virginia has petitioned for approval of 
alternate requirements governing certain aspects of Federal odometer 
law. NHTSA is issuing a final determination granting Virginia's 
petition.

DATES: Effective Date: February 6, 2009. Request for reconsideration 
due no later than February 23, 2009.

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

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

SUPPLEMENTARY INFORMATION: 

I. Introduction

    The Commonwealth of Virginia petitioned NHTSA to approve the 
Commonwealth's requirements on the disclosure of motor vehicle mileage 
when motor vehicles are transferred, which would apply in lieu of 
certain federal requirements, under 49 U.S.C. 32701, 32705(d). As 
described in detail in Section III below, Virginia's program will 
provide for the transfer of a vehicle's title with odometer disclosure 
information electronically, instead of through the execution of a paper 
title that is then submitted to the state for the issuance of a title 
to the new owner, for an in-state transaction where there is no 
security interest in the vehicle. NHTSA

[[Page 644]]

issued an initial determination proposing to grant Virginia's petition. 
See Petition for Approval of Alternate Odometer Disclosure 
Requirements, Proposed rule; notice of initial determination, 73 FR 
35617 (June 24, 2008). In its initial determination, NHTSA reviewed the 
statutory background and set out the agency's tentative view on 
applicable factors governing whether to grant a state's petition. NHTSA 
came to the tentative conclusion that Virginia's proposed alternate 
requirements met the statutory requirements for approval and invited 
public comment. After careful consideration of comments, NHTSA's final 
determination analysis is set forth below in section VI.

II. Statutory Background

A. The Cost Savings Act

    In 1972, Congress enacted the Motor Vehicle Information and Cost 
Savings Act (Cost Savings Act), among other things, to protect 
purchasers of motor vehicles from odometer fraud. See Public Law 92-
513, 86 Stat. 947, 961-63 (1972).
    To assist purchasers to know 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 in connection 
with the transfer of ownership of the vehicle. See Public Law 92-513, 
Sec.  408, 86 Stat. 947 (1972). Section 408 required the Secretary to 
issue rules requiring the transferor to give 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 that 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 actually traveled. 
The rules were to prescribe the manner in which information shall be 
disclosed under this section and in which such information shall be 
retained. Id. Section 408 further stated that it shall be a violation 
for any transferor to violate any rules under this section or to 
knowingly give a false statement to a transferee in making any 
disclosure required by such rules. 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.\1\
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    \1\ In 1976, Congress amended the odometer disclosure provisions 
in the Cost Savings Act to provide further protections to purchasers 
from unscrupulous car dealers. See Public Law 94-364, 90 Stat. 981, 
983 (1976). It amended section 408(b) and added new subsection 
408(c) requiring that no transferor shall violate any rule 
prescribed under this section or give a false statement to a 
transferee in making any disclosure required by such rule and no 
transferee who, for purposes of resale, acquires ownership of a 
motor vehicle shall accept any written disclosure required by any 
rule under this section if such disclosure is incomplete.
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    There were shortcomings in the odometer provisions of the Cost 
Savings Act. Among others, in some states, the odometer disclosure 
statement was not on the title; it was a separate document that could 
easily be altered or discarded and did not travel with the title. 
Consequently, it did not effectively provide information to purchasers 
about the vehicle's mileage. In some states, the title was not on 
tamper-proof paper. The problems were compounded by title washing 
through states 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.

B. The Truth in Mileage Act

    In 1986, Congress enacted the Truth in Mileage Act (TIMA), which 
added provisions to the odometer provisions of the Cost Savings Act. 
See Public Law 99-579, 100 Stat. 3309 (1986). The TIMA amendments 
expanded and strengthened Section 408 of the Cost Savings Act.
    Among other requirements, TIMA precluded the licensing of vehicles, 
the ownership of which was transferred, for use in any State unless 
several requirements were met by the transferee and transferor. The 
transferee, in submitting an application for a title, is required to 
provide the transferor's (seller's) title, and if that title contains a 
space for the transferor to disclose the vehicle's mileage, that 
information must be included and the statement must be signed and dated 
by the transferor.
    TIMA also precluded the licensing of vehicles, the ownership of 
which was transferred, for use in any State unless several titling 
requirements were met. Titles must be printed by a secure printing 
process or other secure process. They must indicate the mileage and 
contain space for the transferee to disclose the mileage in a 
subsequent transfer. As to leased vehicles, the Secretary was required 
to publish rules requiring the lessor of vehicles with leases to advise 
its lessee 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. In addition, TIMA required that 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.\2\
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    \2\ Section 408 of the Cost Savings Act, with the TIMA 
amendments, provided in pertinent part (100 Stat. 3309-3310):
    (d)(1)(A) Any motor vehicle the ownership of which is 
transferred may not be licensed for use in any State unless the 
transferee, in submitting an application to a State for the title 
upon which such license will be issued, includes with such 
application the transferor's title and, if that title contains the 
space referred to in paragraph (2)(A)(iii), a statement, signed and 
dated by the transferor, of the mileage disclosure required under 
subsection (a).
    (B) This paragraph shall not apply to any transfer of ownership 
of a motor vehicle which has not been licensed before the transfer.
    (2)(A) Any motor vehicle the ownership of which is transferred 
may not be licensed for use in any State unless the title which is 
issued by the State to the transferee following such transfer--
    (i) is set forth by means of a secure printing process (or other 
secure process);
    (ii) indicates the mileage disclosure required to be made under 
subsection (a); and
    (iii) contains a space for the transferee to disclose (in the 
event of a future transfer) the mileage at the time of such future 
transfer and to sign and date such disclosure.
    (B) The requirements of subparagraph (A) shall not be construed 
to require a State to verify, or preclude the State from verifying, 
the mileage information contained in the title.
    (e)(1) In the case of any leased motor vehicle, the rules under 
subsection (a) shall require written disclosure regarding mileage to 
be made by the lessee to the lessor upon the lessor's transfer of 
ownership of the leased motor vehicle.
    (2) Under such rules, the lessor of a leased motor vehicle shall 
provide written notice to the lessee regarding--
    (A) such mileage disclosure requirements, and
    (B) the penalties for failure to comply with them.
    (3) The lessor shall retain the disclosure made by any lessee 
with respect to any motor vehicle under paragraph (1) for a period 
of at least 4 years following the date the lessor transfers that 
vehicle.
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    As amended by TIMA, section 408(f)(1) of the Cost Savings Act 
provided that 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 that 
``[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.''

[[Page 645]]

C. 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 Section 408(d)(2)(C). In 1990, 
Congress amended section 408(d)(2)(C) of the Cost Savings Act. The 
amendment addressed retention of powers of attorneys by states and 
provided that the rule adopted by the Secretary not require that a 
vehicle be titled in the State in which the power of attorney was 
issued. See Public Law 101-641 Sec.  7(a), 104 Stat. 4654, 4657 
(1990).\3\
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    \3\ NHTSA reviewed this legislative history in 1991 when 
adopting the current regulations governing powers of attorney. See 
Odometer Disclosure Requirements, Final Rule, 56 FR 47681 (Sept. 20, 
1991).
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    In 1994, in the course of the 1994 recodification of various laws 
pertaining to the Department of Transportation, the Cost Savings Act, 
as amended by TIMA, was repealed. It was 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). The provisions pertaining to approval of State 
alternate motor vehicle mileage disclosure requirements were recodified 
at 49 U.S.C. 32705(d).

III. Virginia's Petition

    As explained in NHTSA's initial determination, Virginia proposes to 
allow parties to transfer title through the Internet by electronic 
means and to maintain an electronic record of the title in the Virginia 
Department of Motor Vehicles (VADMV) system. The VADMV system would 
permit the transferee to request a hard copy of the title, printed by a 
secure printed process. The title will reside as an electronic record 
with the VADMV, but a hard copy of the title will be generated for the 
transferee, if requested.\4\
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    \4\ In the Initial Determination, NHTSA addressed the question 
of where the title would reside. Virginia did not comment on NHTSA's 
discussion.
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    The Virginia petition states that its proposal would permit ``the 
transferor to disclose the odometer mileage to the transferee and the 
transferee to view and acknowledge receipt of the transferor's 
disclosure in connection with the sale of a motor vehicle, as part of a 
secure on-line transaction with the VADMV.'' Under Virginia's proposal, 
to complete a sale of the motor vehicle, the owner of the vehicle 
(transferor), and the purchaser of the vehicle (transferee) would be 
required to perform several steps after they agree upon the sale. 
Included in this process is the creation and use of electronic 
signatures.\5\
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    \5\ The term ``electronic signature'' means an electronic sound, 
symbol, or process, attached to or logically associated with a 
contract or other record and executed or adopted by a person with 
the intent to sign the record. 15 U.S.C. 7006(5) (2004).
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    Under Virginia's petition, an electronic signature would be created 
during the process of transferring the title. According to VADMV, the 
customer number, unique personal identification number (PIN), and date 
of birth (DOB) of the customer will be used in combination to create 
the electronic signature for each transferor and transferee. Thus, as a 
threshold matter, the process for transferring title would require both 
the transferor and the transferee to obtain a PIN from the VADMV.\6\
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    \6\ According to Virginia, the process whereby a customer 
obtains a PIN is currently in place, as a PIN already provides a 
secure and confidential Internet access to VADMV services and is 
required in order to conduct a number of on-line transactions. In 
order to obtain a PIN, a customer must provide his or her unique 
customer number and date of birth and certify, under penalty of 
perjury, that the customer number and DOB submitted in the PIN 
request belong to the customer requesting the PIN. Within three (3) 
business days of the customer's request, the VADMV mails a randomly 
generated 4-digit PIN to the customer by first class mail, and the 
assigned PIN is encrypted on the customer's VADMV record. In order 
to conduct a transaction on VADMV's Internet Web site, the customer 
is prompted to enter the VADMV assigned PIN and the Web site will 
prompt the customer to personalize his/her PIN for added security.
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    The online transaction begins when the transferor logs on to the 
VADMV's Web site using his/her customer number, DOB, and PIN to verify 
the transferor's identity. These also would be used to create the 
electronic signature of the transferor. The transferor would then 
select the ``vehicle transfer of ownership'' transaction and either 
choose the vehicle from a displayed list of eligible vehicles or enter 
the vehicle's VIN. The transferor would then enter the vehicle sales 
price, the odometer reading, and brand regarding the mileage disclosure 
(Actual, Not Actual, or Exceeds). After entering this data, the VADMV 
system will provide the transferor with a unique transaction number. 
The transferor must provide the unique transaction number to the 
transferee to complete the transaction. The VADMV system will also 
prompt the transferor to mail the existing vehicle title to the VADMV 
for destruction. According to the Virginia petition, if the transferor 
fails to return the existing vehicle title to the VADMV, the title is 
invalidated in the VADMV system and would be unable to transfer title 
in Virginia.
    The transaction would remain in ``pending'' status with VADMV until 
the transferee logs on to complete the transfer of ownership 
transaction. Meanwhile, the VADMV system would automatically check the 
odometer reading entered by the transferor against the odometer reading 
on the VADMV system. If the odometer reading entered by the transferor 
is lower, the transaction will be immediately rejected and referred to 
the VADMV Law Enforcement Services Division for an investigation.
    The transferee would then log on to VADMV's Web site, using his/her 
customer number, DOB, and PIN (this would be the transferee's 
electronic signature). The transferee would select the pending vehicle 
transfer of ownership transaction, and he/she would enter the unique 
transaction number that was provided by the transferor in order to 
obtain access to the pending transaction. Once such access is obtained, 
the transferee would verify the sales price, odometer reading, and 
brand that were entered by the transferor. The transaction would be 
processed if all the data entered by the transferor is verified and 
acknowledged as correct by the transferee. Ownership of the vehicle 
would transfer to the transferee and an electronic title record would 
be established by VADMV. The VADMV would then maintain the electronic 
title and would issue a paper title upon the request of the transferee.
    If the transferee does not agree with the information entered by 
the transferor, then the VADMV system will reject the transaction. The 
transferor will have the opportunity to correct the sales price, 
odometer reading, and brand for the rejected transaction. The 
transferee would then re-verify the information to ensure the accuracy. 
A second discrepancy would result in cancellation of the electronic 
transaction.
    Virginia's petition asserts that its proposed alternate odometer 
disclosure is consistent with Federal odometer law, but it did not 
address the purposes of TIMA. As advanced by VADMV, Virginia's 
alternative ensures that a fraudulent odometer disclosure can readily 
be detected and reliably traced to a particular individual by providing 
a means for the VADMV to validate and authenticate the electronic 
signatures of

[[Page 646]]

both parties. This verification is done through the generation of the 
customer number and unique PIN that are provided to customers of the 
VADMV. Virginia states that this unique electronic signature can be 
quickly and reliably traced to a particular individual.
    Second, Virginia states that the electronic odometer disclosure 
provided by the transferor will be available to the transferee at the 
time ownership of the vehicle is transferred. During the transfer-of-
ownership transaction, the transferee would view the odometer reading 
and brand information that was supplied by the transferor, thereby 
ensuring that the transferee is aware of the vehicle's mileage as well 
as any problem with the odometer that was disclosed by the transferor.
    Third, VADVM asserts that its proposal provides a level of security 
equivalent to that of a disclosure on a secure title document. 
According to Virginia, the unique electronic signatures (customer 
number, PIN, and DOB) utilized by each party to the transaction in 
addition to the unique transaction number generated by the VADMV ensure 
secure access to the on-line transaction and a reliable means of 
verifying the identities and electronic signatures of each individual. 
In addition, Virginia notes added security in its proposal because the 
information from the transferor and transferee must match exactly. If a 
discrepancy exists that is not corrected, the transaction would 
automatically be rejected and transfer of ownership would not take 
place. Virginia states that the same process would be used in dealer 
transactions with additional safeguards.\7\ The additional safeguards 
will include a requirement that a dealership notify the VADMV of 
employees authorized to do titling activities for the dealership. This 
authorization will be stored by the VADMV on-line system. When the 
employee logs onto the VADMV on-line system, he or she will also be 
requested to enter the dealer number that is assigned by the VADMV and 
the employee's logon information. If the VADMV does not show an 
authorization by the dealership, the employee will not be eligible to 
continue with the transaction for that dealership.
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    \7\ Under the VADMV program, dealers will continue to be subject 
to the dealer retention requirements as set forth in 49 CFR 
580.8(a), which requires dealers and distributors to retain a copy 
of odometer disclosure statements that they issue and receive for 
five years. These requirements are not based upon the TIMA 
amendments that added Section 408(d) to the Cost Savings Act.
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    Virginia refers to an April 25, 2003 letter by former NHTSA Chief 
Counsel, Jacqueline Glassman, stating that an electronic signature in 
the lessee-to-lessor context satisfies the requirement for a written 
disclosure under 49 CFR 580.7(b).\8\ Virginia contends that the written 
disclosure requirements under 49 CFR 580.7(b) are no different than 
those under 49 CFR 580.5(c). It also maintains that the electronic 
record and signature aspects of its proposal comport with the 
Electronic Signatures in Global and National Commerce Act (E-Sign), 15 
U.S.C. 7001 et seq., and Virginia's Uniform Electronic Transactions Act 
(UETA), Va. Code 46.2-629. Last, Virginia notes that it does not have 
regulations in effect that address odometer mileage disclosure 
requirements. Current state law permits the creation of electronic 
certificates of title, but requires a paper certificate of title for 
all transfers of vehicle ownership. Va. Code 46.2-603. When approved, 
VADMV will seek legislation to amend Section 46.2-603 to implement the 
alternate odometer disclosure requirements.
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    \8\ 49 CFR 580.7, Disclosure of odometer information for leased 
motor vehicles, governs lessee-to-lessor disclosures.
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IV. Summary of Public Comments

    NHTSA received thirteen comments from the following entities: (1) 
The Texas Department of Transportation; (2) the Iowa Department of 
Transportation--Motor Vehicle Division; (3) Oregon Driver and Motor 
Vehicle Services; (4) the Wisconsin Department of Transportation; (5) 
the Michigan Department of State; (6) the National Auto Auction 
Association (NAAA); (7) the American Financial Services Association 
(NTSF); (8) triVIN, Inc. (a company which provides automated title and 
registration transaction processing and business process outsourcing 
solutions); (9) the Alabama Department of Revenue; (10) the National 
Automobile Dealers Association (NADA); (11) the South Carolina 
Department of Motor Vehicles; (12) the Nevada Department of Motor 
Vehicles; and, (13) United Parcel Service (UPS). Below is a discussion 
of the comments NHTSA received.
    Of the thirteen comments received, nine commenters support 
Virginia's petition without reservation (the Texas Department of 
Transportation, the Iowa Department of Transportation--Motor Vehicle 
Division, Oregon Driver and Motor Vehicle Services, the Wisconsin 
Department of Transportation, NTSF, triVIN, Inc., the Alabama 
Department of Revenue, NADA, and UPS). For example, the Iowa Department 
of Transportation states that NHTSA's initial determination analysis 
was ``well reasoned'' and leads to the correct initial determination--
to preliminarily grant the Commonwealth's petition. Oregon Driver and 
Motor Vehicle Services notes that, in its view, the method offered by 
Virginia for capturing and retaining odometer disclosure information 
provides a more secure process than currently provided for in Federal 
law. UPS notes that it has worked with VADMV since 1999 on automating 
the registration and title of new commercial vehicles. UPS stated that 
it does not receive ``hard copy'' paper titles and allows titles to 
reside electronically with VADMV. In practice, when UPS does require a 
paper title, such as for the disposition of a vehicle, UPS can 
electronically request a copy from VADMV, which is then printed, sent, 
and received within a few days. UPS states that in its experience the 
automation of these types of routine but necessary transactions and the 
elimination of paper documents, unless needed, saves time, costs, and 
unnecessary trips to VADMV offices.
    Four of the nine commenters who support Virginia's petition go 
further, and request that NHTSA allow all states to enact similar 
disclosure systems without the need to file separate petitions (the 
Texas Department of Transportation, NTSF, NADA, and triVIN, Inc.).\9\
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    \9\ NTSF and the Texas Department of Transportation requested a 
final rule that defines electronic signatures using the ESIGN Act 
and allows any electronic signature for odometer disclosures where 
the process of obtaining the signature and disclosing the odometer 
mileage is consistent with TIMA purposes. NADA and triVIN encourage 
NHTSA to amend disclosure regulations to allow all states to take 
advantage of electronic titling by outlining alternate electronic 
odometer disclosure requirements.
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    In addition to the nine commenters that support Virginia's petition 
without reservation, three additional commenters indicate support for 
the Virginia petition, but raise certain concerns: the South Carolina 
Department of Motor Vehicles, the Michigan Department of State, and 
NAAA. The concerns are not in connection with why, in the view of the 
commenters, Virginia's proposed alternate requirements would not be 
consistent with the purpose of the disclosure required by subsection 
(d) or (e) of Section 408 of the Cost Savings Act, as is required under 
the standard set forth in Section 408(f)(2) of the Cost Savings Act. 
Instead, the concerns relate to how Virginia's proposal would operate 
in practice.

[[Page 647]]

    For example, the South Carolina Department of Motor Vehicles 
questions how Virginia would approach liens and powers of attorney, 
questions which, as NHTSA explained in its initial determination, are 
outside of the scope of Virginia's petition.\10\ The Michigan 
Department of State, at the outset, states that Virginia's petition is 
consistent with Federal odometer standards. However, it notes that many 
states, including Michigan, require dealers to possess assigned 
certificates of title prior to transfer to the buyer, typically 
accomplished by holding a paper title. It notes that Virginia's 
petition would require Virginia owners to obtain a paper title for out-
of-state transfers, thereby adding complication to out-of-state 
transactions.\11\ NAAA states that it generally supports Virginia's 
proposal. However, it contends that Virginia's approach may be an 
impediment to interstate transfers due to the three day wait period for 
a PIN. NAAA contends that this wait period creates an impediment to 
out-of-state wholesale purchasers and sellers; per NAAA, without the 
ability to make a same-day transaction, potential purchasers may steer 
clear of auto auctions potentially involving Virginia titles. NAAA, 
therefore, proposes that Virginia's petition serve as an optional 
method for Virginians to transfer title while keeping paper transfers 
as a valid procedure, even for vehicles issued electronic titles. 
However, to the extent Virginia's proposal does not continue to support 
traditional paper transfers as an option, NAAA does not support the 
petition.
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    \10\ Additionally, the bulk of the South Carolina Department of 
Motor Vehicles' comments raise matters that NHTSA could only address 
in a rulemaking of general application to the states for electronic 
titling. For example, the South Carolina Department of Motor 
Vehicles contends other states' technological and legal restrictions 
may prevent a state from enacting the type of electronic disclosure 
proposed by Virginia. It contends that NHTSA should provide each 
state enough flexibility to create a system that satisfies TIMA's 
purposes while staying within specific state restrictions. NHTSA 
appreciate these suggestions. However, as noted above, this approach 
is not authorized by Section 408(f)(2) of the Cost Savings Act, and 
is neither within the scope of Virginia's petition nor NHTSA's 
initial determination.
    \11\ The Michigan Department of State also questions how data 
fields would be presented by VADMV to potential transferors to 
fulfill TIMA's purposes of title disclosures--for instance, how a 
transferor would be alerted to a salvaged title. The Michigan 
Department of State thus requested clarification on what information 
or data fields would be made available for parties to a transaction. 
The Michigan Department of State also questions how Virginia's 
approach would handle multiple sellers or purchasers, or how liens 
would be discharged and perfected, but conceded that those matters 
were beyond the scope of Virginia's petition. The Michigan 
Department of State also requested clarification on what appeals are 
available to a customer who accepted a transaction and later 
realizes he/she made an error in accepting the transaction.
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    Only one of thirteen commenters does not support Virginia's 
petition: The Nevada Department of Motor Vehicles. It contends that an 
electronic titling process would be more time consuming and expensive 
than existing paper systems and raises questions as to how the system 
would operate in practice, particularly in connection with how 
Virginia's electronic system would recognize mileage differences 
entered by the buyer and seller. The Nevada Department of Motor 
Vehicles also raises concerns in connection with the purposes of TIMA. 
It contends that, under Virginia's petition, unless requested by the 
buyer, vehicles could be transferred multiple times without a paper 
title. By eliminating paper titles, the Nevada Department of Motor 
Vehicles recognizes that the likelihood of attempted alterations would 
decrease. However, it contends that it may be easier to pass branded 
titles because not all states use the National Motor Vehicle Title 
Information System (NVMTIS). The Nevada Department of Motor Vehicles 
further contends that for a vehicle coming from such a state into 
Virginia, VADMV would not have the odometer reading in its system, save 
for what the transferor enters, thus creating the potential to launder 
out-of-state titles through Virginia.

V. Statutory Purposes of TIMA

    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 that NHTSA shall approve alternate 
motor vehicle mileage disclosure requirements submitted by a State 
unless NHTSA determines that such requirements are not consistent with 
the purpose of the disclosure required by subsection (d) or (e) as the 
case may be. (Subsections 408(d), (e) of the Costs Savings Act were 
recodified to 49 U.S.C. 32705(b) and (c)). In light of this provision, 
an important question is what are the purpose(s) of the disclosure 
required by section 408(d), (e) of the Cost Savings Act as amended by 
TIMA. We now turn to our interpretation of the purposes of these 
subsections, as germane to Virginia's petition.\12\
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    \12\ Virginia's petition does not address, among others, 
disclosures involving leased vehicles. In view of the scope of 
Virginia's petition, Virginia will continue to be subject to current 
Federal requirements as to leased vehicles and in this notice we do 
not address the purposes of the related provisions.
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    In the initial determination, NHTSA set forth its tentative view of 
the purpose(s) of the disclosure required by section 408(d) of the Cost 
Savings Act as amended by TIMA. NHTSA also provided a full opportunity 
for comment, including on the statutory purposes that govern the 
resolution of a state's petition. As noted above, most commenters 
agreed with NHTSA's initial determination. While some expressed concern 
about how Virginia's program would operate in practice, none disagreed 
with NHTSA's delineation of the purposes of the disclosure under TIMA. 
Indeed, no commenter directly addressed the purposes of TIMA set forth 
in our initial determination. In these circumstances, and upon careful 
consideration, the agency adopts the statement of the purposes in the 
initial determination, which are set out below.
    One purpose of TIMA was to assure that the form of the odometer 
disclosure precluded odometer fraud. To prevent odometer fraud, which 
was facilitated in some States by disclosure statements that were 
separate from titles, under TIMA the disclosure must be contained on 
the title provided to the transferee and not on a separate document. 
Related to this, the title was required to contain space for the 
disclosures. The Senate Report associated with TIMA noted that Federal 
law had not specified the form in which the odometer reading disclosure 
must be made. See S. Rep. No. 99-47, at 3 (1985), reprinted in 1986 
U.S.C.C.A.N. 5620. In some States, where the disclosure statement was 
on a separate piece of paper from the vehicle's title, the transferor 
could easily alter it or provide a new statement with a different 
mileage. The vehicle could be titled with a lower mileage than in the 
transferor's disclosure in a State that does not require an odometer 
reading on the title. Id. In this regard, in some States there was no 
place for recording the odometer reading on the title when the vehicle 
was sold. Id. at 2. A consequence of these practices was that the new 
title contained no odometer reading and the purchaser/wholesaler could 
then disclose whatever odometer reading it chose. Id.
    Another purpose of TIMA was to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title, and a requirement for 
the title issued by the State. Prior to TIMA, odometer fraud was 
facilitated by the ability of transferees to apply for titles without 
presenting the transferor's title with the disclosure. To eliminate or 
significantly

[[Page 648]]

reduce abuses associated with this lack of controls, TIMA required that 
a vehicle, the ownership of which is transferred, may not be licensed 
unless the application for the title is accompanied by the title of 
such vehicle. Thus, ``in the case of an application for a new motor 
vehicle certificate of title, if the prior owner's title certificate 
contains a space for the disclosure of the mileage, when the title 
certificate is submitted to the State * * *, it shall contain a 
statement, signed and dated by the prior owner, of the mileage required 
to be disclosed by the prior owner.'' See S. Rep. No. 99-47, at 2-3 
(1985), reprinted in 1986 U.S.C.C.A.N. 5620, 5625-26, see also Cost 
Savings Act, as amended by TIMA, Sec.  408(d), 49 U.S.C. 32705(b).
    TIMA also sought to prevent alterations of disclosures on titles 
and to preclude counterfeit titles through secure processes. In 
furtherance of these purposes, in the context of paper titles, under 
TIMA the title must be set forth by means of a secure printing process. 
It could also be set forth by other secure process that might evolve in 
the future. As noted in the legislative history, because the title 
could be printed through a non-secure process, persons could alter it 
or launder it. See S. Rep. No. 99-47, at 3 (1985), reprinted in 1986 
U.S.C.C.A.N. 5620. The House Report noted that ```[o]ther secure 
process' is intended to describe means other than printing which could 
securely provide for the storage and transmittal of title and mileage 
information.'' H.R. Rep. No. 99-833, at 33 (1986). ``In adopting this 
language, the Committee intends to encourage new technologies which 
will provide increased levels of security for titles.'' Id. See also 
Cost Savings Act, as amended by TIMA, Sec.  408(d), 49 U.S.C. 32705(b).
    Another purpose was to create a record of the mileage on vehicles 
and a paper trail. The underlying purposes of this record and trail was 
to enable consumers to be better informed and provide a mechanism 
through which odometer tampering can be traced and violators 
prosecuted. The creation of a paper trail would improve the enforcement 
process by providing evidence of fraudulent transfers, including by 
consumers and the individuals engaged in such practices. More 
specifically, the paper trail would document transfers and create 
evidence showing the incidence of odometer rollbacks. Under TIMA, as 
part of the paper trail, the title must include a space for the mileage 
of the vehicle. New applications for titles must include a mileage 
disclosure statement signed by the prior owner of the vehicle. There 
would be a permanent record on the vehicle's title at the place where 
the vehicle is titled, usually the State motor vehicle administration. 
This record could be checked by subsequent owners or law enforcement 
officials, who would have a critical snapshot of the vehicle's mileage 
at every transfer, which is the fundamental link in the paper trail for 
enforcement. These provisions were aimed at providing purchasers and 
law enforcement with the much-needed tools to combat odometer fraud. 
The House Report associated with TIMA focused on the lack of evidence 
or ``paper trail'' showing the incidence of rollbacks as one of the 
major barriers to decreasing odometer fraud. H.R. Rep. No. 99-833, at 
18 (1986). The House Report noted that a purpose of section 408(d), 
which required the seller to disclose the mileage on the title and 
titles to include the mileage disclosure and a space for recording 
mileage on the next transfer, is to create a permanent record or paper 
trail for car owners and law enforcement and other State officials to 
track odometer fraud. Id. A permanent record on the vehicle's title 
would be maintained at the place where it is titled. Id. Thus, the 
underlying purpose of this record and trail was to enable consumers to 
be better informed and provide a mechanism through which odometer 
tampering can be traced and violators prosecuted. See Cost Savings Act, 
as amended by TIMA, Sec.  408(d), 49 U.S.C. 32705(b).
    Moreover, the general purpose of TIMA was to protect consumers by 
assuring that they received valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer disclosures. 
The TIMA amendments were directed at resolving shortcomings in the Cost 
Savings Act.

VI. NHTSA's Final Determination

    In this part, NHTSA considers the Virginia program in light of the 
purposes of the disclosure required by subsection (d) of section 
408.\13\
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    \13\ Since Virginia's program does not cover leased vehicles, 
the purposes of Section 408(e) of the Cost Savings Act as amended by 
TIMA are not germane.
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    As an initial matter, under section 408(f)(2) of the Cost Savings 
Act, the standard is that NHTSA ``shall'' approve alternate motor 
vehicle mileage disclosure requirements submitted by a State unless 
NHTSA determines that such requirements are not consistent with the 
purpose of the disclosure required by subsection (d) or (e) of section 
408, as the case may be. The purposes of the odometer disclosure are 
discussed above, as is the Virginia program.
    The majority of the commenters agreed with the initial 
determination. Of those commenters that did not fully support the 
initial determination, the concerns raised by the South Carolina 
Department of Motor Vehicles, the Michigan Department of State, and 
NAAA do not implicate whether or not Virginia's proposed alternate 
requirements satisfy the purposes of section 408(d) of the Cost Savings 
Act. In particular, how powers of attorney are handled, how liens are 
perfected and discharged, how dealers are affected, how the system will 
handle auto auctions, and the potential costs and time associated with 
implementing Virginia's system, all fall outside the scope of 
Virginia's petition \14\ and do not implicate whether or not Virginia's 
proposed alternate requirements are consistent with TIMA.
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    \14\ NHTSA's final determination does not address odometer 
requirements that are not based on Section 408(d) of the Cost 
Savings Act, as codified at 49 U.S.C. 32705(b). Virginia will 
continue to be subject to all Federal requirements that are not 
based on Section 408(d).
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    As to commenters' suggestion that NHTSA allow all states to pursue 
an approach like Virginia's proposal, such an approach is not within 
the scope of Virginia's petition nor NHTSA's initial determination. 
NHTSA, therefore, is unable to address such a request within the scope 
of NHTSA's final determination here. Also, section 408(f)(2) of the 
Cost Savings Act contemplates a submission of alternate requirements by 
a State.
    As explained in NHTSA's initial determination, a purpose of TIMA is 
to assure that the form of the odometer disclosure precludes odometer 
fraud. NHTSA has determined that Virginia's alternate disclosure 
requirements satisfy this purpose. Under Virginia's program, the title 
will reside as an electronic record with the VADMV; however, a hard 
copy of the title will be generated for the transferee, if requested. 
Virginia's proposed system will, therefore, continue to have the 
odometer disclosure on the virtual ``title'' itself, as required by 
TIMA, and not as a separate document. As to TIMA's requirement that the 
title contain a space for the transferor to disclose the vehicle's 
mileage, NHTSA does not believe the electronic transaction Virginia as 
outlined implicates the space requirement. NHTSA, however, assumes that 
if a hard copy of the title is requested, Virginia will continue to 
provide a separate space on the hard copy title, in keeping with TIMA 
and current practice.
    Another purpose of TIMA was to prevent odometer fraud by processes

[[Page 649]]

and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title and a requirement for 
the title issued by the State. During the proposed on-line process for 
retitling, the disclosure of odometer information occurs during the 
transfer of ownership and a title is required by Virginia's proposal to 
complete the transaction. During the on-line transaction, the 
transferor is instructed to mail the existing title to the VADMV for 
destruction.\15\ If the transaction is successful, the VADMV will 
retain an electronic title, which includes a record of the transaction 
and the odometer disclosure information.
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    \15\ If the transferor does not return the existing title to 
VADMV, the existing title will be invalid once the vehicle transfers 
to the transferee.
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    Another purpose of TIMA is to prevent alterations to disclosures on 
titles and to preclude counterfeit titles, through secure processes. In 
this regard, NHTSA has determined that Virginia's proposed process 
satisfies this purpose. By eliminating paper titles, the Nevada 
Department of Motor Vehicles concedes that the likelihood of attempted 
alterations would decrease. The Nevada Department of Motor Vehicles did 
express the concern that, under Virginia's petition, unless requested 
by the buyer, vehicles could be transferred multiple times without a 
paper title which may ``serve as a way to pass along branded 
vehicles.'' Nevada did not explain how this problem would arise. In any 
event, NHTSA respectfully does not agree. In our view, Virginia's 
alternate disclosure requirements provide at least equivalent security 
protections against altering, tampering, or counterfeiting titles to a 
paper title printed through a secure process. Electronic recordation of 
the odometer reading decreases the likelihood of any subsequent 
odometer disclosure being altered by erasures or other methods. Under 
Virginia's system, once the transaction is completed, VADMV stores an 
electronic version of the title and may upon request send a paper copy 
of the title to the transferee. The transferee may never request a 
paper title, even if there is a subsequent transfer. However, 
subsequent transferees will view an electronic odometer disclosure at 
the time of transfer as they verify the transferor's mileage 
disclosure. Under this system, all subsequent transfers may be 
performed through the on-line process. Each time an on-line transfer 
occurs, the VADMV stores the electronic version of the title, and VADMV 
issues a paper title only upon request. As an electronic title, the 
likelihood of an individual altering, tampering, or counterfeiting the 
title is decreased significantly. Moreover, the electronic recordation 
can detect an attempted alteration or fraudulent disclosure almost 
immediately. If a transferee requests a paper title, the VADMV will 
issue a paper title, printed through a secure process, with the 
requisite odometer information on the title.
    Another purpose of TIMA is to create a record of the mileage on 
vehicles and a paper trail. NHTSA has determined in this matter that 
Virginia's alternate disclosure requirements provide for a system that 
creates an equivalent to a ``paper trail'' that assists law enforcement 
in identifying and prosecuting odometer fraud. NHTSA has analyzed the 
concern of the Nevada Department of Motor Vehicles that, under 
Virginia's proposal, it may be easier to pass branded titles because 
not all states use the National Motor Vehicle Title Information System 
(NVMTIS). NHTSA does not agree. Here, the paper trail under Virginia's 
proposal starts with the establishment of the electronic signatures of 
the parties. The electronic signatures of the transferor and transferee 
are readily detectable and can be reliably traced to the particular 
individual due to the system's means for validating and authenticating 
the electronic signature of each individual. VADMV can validate and 
authenticate an individual electronic signature because the electronic 
signature consists of the individual's unique customer number, DOB, and 
PIN. In order to obtain a unique customer number, VADMV must have an 
individual's address on file. In order to obtain a PIN, the individual 
must also certify, under penalty of perjury, that the customer number 
and DOB submitted in the PIN request belong to the customer requesting 
the PIN. The customer number and PIN are required to log on to the 
VADMV system. Based upon the information provided by each individual to 
the transaction, the VADMV can trace the PIN to the assigned 
individual. The ability to identify the individuals to the transaction 
through the electronic signature \16\ maintains the purposes behind the 
creation of a paper trail since the VADMV will have a history of each 
transfer of the vehicle and can discover incidences of rollbacks. After 
the transaction is completed, the title is electronically recorded and 
stored by the VADMV. It includes the mileage of the vehicle at the 
transfer. These electronic records will create the electronic 
equivalent to a paper based system and are accessible to law 
enforcement officials.
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    \16\ Electronic signatures are generally valid under applicable 
law. Congress recognized the growing importance of electronic 
signatures in interstate commerce when it enacted the Electronic 
Signatures in Global and National Commerce Act (E-Sign). See Public 
Law 106-229, 114 Stat. 464 (2000). E-Sign established a general rule 
of validity for electronic records and electronic signatures. 15 
U.S.C. 7001. It also encourages the use of electronic signatures in 
commerce, both in private transactions and transactions involving 
the Federal government. 15 U.S.C. 7031(a).
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    Moreover, the overall purpose of TIMA is to protect consumers by 
assuring that they receive valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer disclosures. 
In connection with this TIMA purpose, NHTSA has analyzed the concern of 
the Nevada Department of Motor Vehicles that, under Virginia's 
proposal, for a vehicle coming into Virginia from another state, VADMV 
would not have the odometer reading in its system, save for what the 
transferor enters, thus creating the potential to launder out-of-state 
titles through Virginia. Again, NHTSA does not agree. Transactions 
involving out-of-state titles are outside the scope of Virginia's 
electronic disclosure proposal. Here, Virginia's alternate disclosure 
requirements include several prerequisites, including a vehicle titled 
in Virginia, that make it unlikely that the representations of a 
vehicle's actual mileage by the transferor to the transferee would be 
of lesser validity than representations made through a vehicle transfer 
by paper title and potentially deter odometer fraud better than a paper 
title. These prerequisites include the verification of the individuals 
to the transfer transaction through the issuance of a PIN number from 
VADMV. Virginia's alternate disclosure requirements also include 
procedures to assure that a transferee verifies the odometer disclosure 
made by the transferor. In addition, the verification of the odometer 
reading provides indication of potential fraud to the transferee should 
the transferor attempt to enter a different mileage into the system 
than the mileage the transferee observed on the vehicle when the 
agreement to purchase was made.\17\
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    \17\ Further protection is provided by the VADMV system itself. 
The system automatically cross references the odometer reading 
entered by the transferor against the odometer reading on the VADMV 
system. If the odometer reading entered by the transferor is lower 
than the mileage recorded in the VADMV system, the VADMV system will 
immediately reject the transaction and refer the individual to the 
VADMV Law Enforcement Services Division for investigation.
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    For the foregoing reasons, and upon review of the entire record, 
NHTSA hereby issues a final determination granting Virginia's petition 
for requirements that apply in lieu of the

[[Page 650]]

federal requirements adopted under section 408(d) of the Cost Savings 
Act. Other requirements of the Cost Savings Act continue to apply in 
Virginia. NHTSA reserves the right to rescind this grant in the event 
that information acquired after this grant indicates that, in 
operation, Virginia's alternate requirements do not satisfy one or more 
---------------------------------------------------------------------------
applicable requirements.

    Authority: 49 U.S.C. 32705; delegation of authority at 49 CFR 
1.50 and 501.8.

    Issued on: January 2, 2009.
David Kelly,
Acting Administrator.
 [FR Doc. E9-43 Filed 1-6-09; 8:45 am]
BILLING CODE 4910-59-P