Interpretation ID: nht89-2.66

TYPE: INTERPRETATION-NHTSA

DATE: August 9, 1989

FROM: Kathleen DeMeter -- Assistant Chief Counsel for General Law, NHTSA

TO: Madeline Flanagan -- Assistant Counsel, First Pennsylvania Bank N.A.

TITLE: NONE

ATTACHMT: ATTACHED TO 11/28/95 LETTER FROM Samuel J. Dubbin to Paul Danner (Part 580); Also attached to 8/31/95 letter from Paul Danner to John Womack

TEXT: Dear Mr. Flanagan:

This is in response to your letter of June 22, 1989, regarding the application of the Federal odometer disclosure requirements to various scenarios.

In the first scenario you describe, a leasee reports a theft of the leased vehicle to the lessor, who then sells the vehicle to an insurance company in accordance with a theft policy. Your first question under this scenario involves how the lessee shoul d complete the odometer disclosure statement required before the lessor sells the vehicle to the insurer. The lessee should certify to what the lessee knows; that is, the lessee should give the odometer reading as of that date (rather than the day the l essee completes the statement). Ideally, the lessee should complete the statement as soon after the vehicle has been stolen as is practical.

Your second questions concerned the lessor's disclosure requirements. Specifically, you asked for guidelines in completing the statement. The completion of an odometer disclosure statement involves the exercise of judgment on the part of the person maki ng the disclosure. The lessor may rely on the lessee's mileage statement in completing its disclosure statement, unless the lessor has good reason to doubt the lessee's statement. Whether or not to rely on the lessee's statement, and what to fill in, i f the lessee's information is not relied upon is a matter for the lessor, in the exercise of the lessor's best judgment, to determine. More specific guidance, in our opinion, is neither possible, nor appropriate.

Your second scenario envisions a leasing company that wants to transfer a vehicle that it repossessed. In this case, the leasing company should report the odometer reading as of the date of the transfer, regardless of the date on which the vehicle is lo cated. Thus, for example, if a

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vehicle is slated for repossession on August 1, 1989, located on April 1, 1990, and sold on April 6, 1990, the disclosure statement should be filled out in connection with the transfer and should be dated whenever in that period that the vehicle is inspe cted. If the leasing company looks at the odometer on April 1, the reading could be taken then, and the statement filled out accordingly. Alternatively, the leasing company could read the odometer when the vehicle is delivered to the purchaser (i.e., Ap ril 6), and complete the disclosure as of that date. Where the date of discovery of the vehicle is considerably earlier than the date of the sale, the odometer reading should accompany the sale and should be taken around the time of sale. For example, if the vehicle was located on February 1, 1990, but not sold until May 1, 1990, the leasing company should take an odometer reading around the time of sale. To the extent that the leasing company is unaware of whether the odometer reading reflects the a ctual mileage of the vehicle, the company should in this situation, as elsewhere, use its best judgment in filling out the certification and should not routinely certify that the odometer reading does not reflect the actual mileage.

Your third scenario involves the use of powers of attorney in situations in which the lessee purchases the leased vehicles at the termination of the lease period. Specifically, you asked whether Lease it may continue to use a power of attorney to proces s title work to a vehicle where the lessee completes the separate odometer disclosure statement. The short answer is "yes," however some greater detail will be useful. Where a lessee purchases a vehicle from a lessor, two separate disclosures must be m ade, first, the lessee must complete a lessee's disclosure statement to the lessor, and second, the lessor must complete a transferor's disclosure statement to the lessee (transferee). The lessee's statement will always be on a separate form because the lessee is not part of the chain of ownership of the vehicle. The transferor's (leasing company) disclosure statement will either be separate, if the vehicle's title is "non-conforming," or on the title. In either case, use of powers of attorney for pu rposes other than mileage disclosure is not affected by the odometer disclosure requirements. Thus, the leasing company could use the lessee's power of attorney to complete other transfership paperwork. Conversely, whether or not the title conforms, th e leasing company cannot use a power of attorney to acknowledge its mileage disclosure for the lessee. If the title does not conform, no power of attorney is necessary, as there is no reason why each party cannot sign the separate statement on his or he r own behalf. Even where the title conforms, the leasing company cannot use a power of attorney to sign the disclosure statement for the buyer. The State-issued secure power of attorney is to be used in situations in which the transferor does not have his or her title because it is being held by a lienholder and the buyer, usually a dealer, is going to pay off the lien for the seller, usually a consumer. In this situation, the power of attorney obviates the need for the consumer to make a return trip to the dealership to make the disclosure on the title when the title arrives from the bank. This does not apply in the leasing company-as-transferor situation, and, thus, the power of attorney should not be used for purposes of mileage disclosure.

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Finally, you asked several questions relating to verification of the information on the odometer disclosure statement. First, you wanted to know what happens when a dealership which is selling a leased car to a bank makes a false certification regarding the mileage. In such a case, the dealership would be in violation of the Federal law, independent of the fact that the bank had acknowledged receipt of the statement and the dealer would be subject to fines and/or imprisonment, in addition to possible private civil liability. As for how the bank might discover the fraud, the bank could send someone to check the vehicle (or check with the lessee). If the disclosure is made directly on the title, the discrepancy could be apparent by comparing the disc losed mileage with the previously reported mileage. Lastly, when the lessee files a disclosure statement with the bank (at the end of the elapse, or before then if the bank is selling the vehicle and lease), the bank would become aware of any discrepanc y between the statement the dealer made and the statement the lessee has made.

You also inquired about the lessee should complete the lessee's disclosure form absent having received a copy of the dealer's disclosure. The lessee does not need the dealers disclosure; the lessee has possession of the vehicle. The lessee would report the odometer reading and would make the certification regarding the mileage relying on his or her best knowledge. If, as you posed, the odometer had been repaired or replaced and reset to zero prior to the sale of the vehicle to the bank, the lessee wo uld still be able to determine this independently because when an odometer has been repaired or replaced and reset to zero, a sticker indicating the date of repair or replacement, and the odometer reading as of that date must be placed in the front left door of the vehicle. Thus, the lessee would know to check the "not the Actual Mileage" box in completing the odometer statement.

Finally, you asked whether the lessee could sign the odometer statement for the bank. Presuming you mean the dealer's (transferor's statement, yes, if the bank agrees to appoin the lessee its agent for the purpose of acknowledging the mileage disclosure . If a bank gives a lessee a power of attorney to sign a disclosure from a dealer for the bank, the lessee should sign the form in such a way as to indicate this (i.e., Joan Smith for National Bank, pao). Further, any such appointment should, naturally , be in writing.

I hope you find this information helpful. If you have any further questions, please do not hesitate to contact Ms. Mattie Cohan of my staff at (202) 366-1834.

Sincerely,