Odometer Disclosure Requirements

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket No. NHTSA-2019-0089]

RIN 2127-AL39

Odometer Disclosure Requirements

AGENCY:

National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).

ACTION:

Final rule.

SUMMARY:

This final rule is issued to fulfill a requirement in the Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21) that NHTSA establish regulations permitting states to adopt schemes that allow electronic odometer disclosure statements in conjunction with electronic titling systems associated with the transfer of interests in motor vehicles. Amendments in this final rule allow odometer disclosures in an electronic medium while maintaining and protecting the existing system(s) ensuring accurate odometer disclosures and aid law enforcement in prosecuting odometer fraud. To accomplish this goal, the final rule amends prior regulations governing transactions made on paper titles and similar documents allowing odometer disclosures to be made in a purely electronic environment or through using paper documents that are scanned and converted into electronic form and stored in a state data system. This final rule also adds new sections containing specific additional requirements only applying to electronic disclosures to ensure the secure creation and maintenance of electronic records. NHTSA is also amending the mileage disclosure exemption to vehicles that are 20 years old or older.

DATES:

Effective date:

This rule is effective December 31, 2019.

Petitions for reconsideration:

Petitions for reconsideration of this final rule must be received not later than November 18, 2019.

Incorporation by Reference:

The incorporation by reference of certain publications listed in the standard is approved by the Director of the Federal Register as of December 31, 2019.

ADDRESSES:

Petitions for reconsideration of this final rule must refer to the docket and notice number set forth above and be submitted to the Administrator, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

For policy and technical issues:

Mr. David Sparks, Director, Office of Odometer Fraud, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590. Telephone: (202) 366-5953. Email:

David.Sparks@dot.gov.

For legal issues:

Mr. Thomas Healy, Office of the Chief Counsel, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590. Telephone: (202) 366-7161.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary

A. Summary of Requirements of the Final Rule

B. Costs and Benefits

II. Background

A. MAP-21

B. FAST Act Amendments

C. The Cost Savings Act, the Truth in Mileage Act and Subsequent Amendments

1. The Cost Savings Act

2. The Truth in Mileage Act

3. Amendments Following the Truth in Mileage Act and the 1994 Recodification of the Cost Savings Act

D. Overview of NHTSA's Odometer Disclosure Regulations

E. Previous State Petitions for Approval of Electronic Odometer Disclosure Schemes

F. Notice of Proposed Rulemaking

G. Summary of Comments to the NPRM

1. Scope of the Final Rule

2. Definitions

3. Identity of Parties to a Motor Vehicle Transfer and Security of Signatures

4. Document or Record Security and System Security

5. Odometer Disclosures

6. Requirements for Electronic Transactions

7. Leased Vehicles

8. Document Retention

9. Power of Attorney

10. Exemptions

11. Miscellaneous Amendments

12. Other Comments

III. Final Rule and Response to Comments

A. Summary of the Final Rule

B. Supplemental Notice of Proposed Rulemaking

C. Scope of the Final Rule

D. Definitions

E. Identity of Parties to a Motor Vehicle Transfer and Security of Signatures

F. Document or Record Security and System Security

G. Odometer Disclosures

H. Requirements for Electronic Transactions

I. Leased Vehicles

J. Document Retention

K. Power of Attorney

L. Exemptions

M. Miscellaneous Amendments

N. Other Comments

O. New Technologies

IV. Effective Date

V. Costs and Benefits

VI. Regulatory Notices and Analyses

I. Executive Summary

A. Summary of Requirements of the Final Rule

On Friday, March 25, 2016, NHTSA published a notice of proposed rulemaking (NPRM) specifying potential amendments to part 580 allowing states and other jurisdictions to establish electronic odometer disclosure schemes allowing odometer disclosures required by the Motor Vehicle Information and Cost Savings Act (Cost Savings Act) to be made electronically (81 FR 16107). The odometer disclosure laws and regulations protect purchasers of motor vehicles from odometer fraud.

See

Public Law 92-513, 86 Stat. 947, 961-63 (1972).

The NPRM discussed the Moving Ahead for Progress in the 21st Century Act of 2012's (MAP-21, or Pub. L. 112-141) direction that NHTSA promulgate regulations permitting written odometer disclosures and statements to be made electronically. To provide background and context for the proposed rules, the NPRM examined the history and development of existing odometer statutes and regulations from their inception in the Cost Savings Act of 1972 (Pub. L. 92-513, 86 Stat. 947, 961-63 (1972)) through the Truth in Mileage Act (TIMA) and subsequent amendments.

1

The NPRM also noted that § 24111 of the Fixing America's Surface Transportation Act of 2015 (FAST Act, or Pub. L. 114-94), allows states to adopt electronic odometer disclosure systems without prior approval of the Secretary (“the Secretary”) of the Department of Transportation until the effective date of the final rule addressed by this notice.

Id.

1

Public Law 100-561 sec. 40, 102 Stat. 2805, 2817 (1988) added Section 408(d)(2)(C) allowing use of secure power of attorney. 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 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). The Cost Savings Act, as amended by TIMA, was repealed in 1994 and reenacted and recodified without substantive change. Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387 (1994).

The salient provisions of the odometer disclosure regulations, 49 CFR 580.5, 580.7 and 580.13, were described in the NPRM, including the requirement that odometer disclosures must be made on the title (Section 580.5(c)), the attestation made when executing the

disclosure (§ 580.5(e)), as well as security features incorporated into titles and other documents to guard against tampering and counterfeiting (Section 580.4). Recordkeeping requirements, which are critical for effective detection and prosecution of odometer fraud, were also addressed. As the NPRM proposed modifying exemptions from disclosure in § 580.17, the existing provisions of this section were also described.

Because of their instructive value, the NPRM examined the petition process by which states may seek approval of alternative odometer disclosure schemes (§ 580.11) and petitions from Virginia, Wisconsin, Florida, New York, and Texas seeking approval of electronic disclosure systems. The NPRM observed such systems must minimize or eliminate disclosures made on paper, provide adequate means for verifying identities, link or merge disclosures with the record title, and preclude duplicate electronic and paper titles. Additionally, the NPRM stated electronic odometer disclosure systems must meet special conditions involved in vehicle leasing, provide for adequate recordkeeping and record retrieval, and accommodate interstate transactions between electronic and paper title jurisdictions.

The NPRM observed the purpose of the odometer disclosure provisions of the Cost Savings Act, as amended, is to protect consumers by ensuring they receive valid representations of a vehicle's actual mileage at the time of transfer. The Agency noted an additional purpose of creating a system of records and a paper trail to facilitate detection and prosecution of odometer fraud. Proposals set forth in the NPRM sought to preserve these attributes while allowing jurisdictions maximum flexibility in developing and deploying electronic titling and odometer disclosure schemes. The NPRM proposed changing part 580 to recognize physical and electronic documents by amending § 580.1 to add the option of electronic disclosures; § 580.3 to add new definitions and amend existing definitions to accommodate physical and electronic filings; § 580.4 to clarify separate requirements for the security of physical disclosures and electronic disclosures; § 580.5 to clarify methods of disclosure for physical and electronic systems; § 580.7 to add provisions allowing for the option of electronic disclosures for leased motor vehicles; § 580.8 to include electronic copies among forms of disclosures that must be retained and general requirements for that retention; §§ 580.13 and 580.14 to allow use of a power of attorney to address interstate transfers and added a new § 580.6 (previously reserved), which would contain unique requirements for electronic odometer disclosures. Other amendments proposed in the NPRM sought to correct a typographical error, update NHTSA's address, strike obsolete text in § 580.12 and extend the disclosure exemption in § 580.17 from 10 years to 25 years.

After careful consideration of all available information, including public comments submitted in response to the NPRM, the agency decided to adopt amendments proposed by the NPRM for §§ 580.1, 580.10, 580.11 and 580.12 without substantive change. Remaining amendments in this final rule differ from proposals in the NPRM. Some of these changes are minor. For example, the final rule replaces the word “his” with “their” and makes other modifications for gender neutrality. Similarly, to enhance clarity, the final rule establishes as definition of “jurisdiction” that encompasses states and territories and replaces “state” wherever formerly used in part 580 with “jurisdiction.” This final rule also adopts additional amendments to enhance clarity and accuracy. Section 580.2 is amended to better describe the status of a vehicle upon termination of a lease, and the term “purchasers” has been replaced with the more accurate and less restrictive term “transferees.” Consistent with the former amendment, the term “dealer” in § 508.13(g) has been changed to “transferee” to reflect that those receiving ownership may include persons or entities who are not dealers.

This final rule also implements significant changes to proposals contained in the NPRM. Broad definitions of physical documents and electronic documents NHTSA proposed have been discarded. Commenters rightly observed these proposed definitions were not apt. The final rule therefore contains new definitions for “Access,” “Electronic Power of Attorney,” “Electronic Title,” “Jurisdiction,” and “Printed Name,” and revises “Original Power of Attorney,” “Sign or Signature,” and “Transferor.” These more precise definitions are applied throughout part 580 to facilitate transactions with physical and electronic titles and powers of attorney. In contrast to the NPRM, which did not provide for an electronic power of attorney but allowed electronic reassignments, this final rule authorizes both under certain circumstances. The definition of “Sign or Signature” has been modified from our earlier proposal in that requirements for an electronic signature require a National Institute of Standards (NIST) level 2 authentication system rather than NIST Level 3. The final rule's requirements for electronic titles and electronic powers of attorney also diverge from the NPRM in allowing authorized modifications to electronic records. In addition, the final rule more clearly recognizes electronic titles and odometer disclosures may take many forms, from scanned copies of paper documents to database entries. Recognizing technologies such as “pen pads” may be used in electronic titling and odometer disclosure systems and paper documents may, in some jurisdictions, be employed in an electronic odometer disclosure system, the final rule removes the NPRM's proposal to delete printed names from electronic transactions. The final rule also modifies requirements for scanning documents to allow document conversion in black and white at a resolution of 200 dot per inch (dpi). Recordkeeping requirements of §§ 580.8 and 580.9 are changed from our earlier proposal to allow more options for transferees and to streamline the proposed rules for auctions. NHTSA has now adopted provisions allowing electronic and paper powers of attorney when a title is unavailable to a transferor because the title is lost, physically held by a lienholder, electronically controlled by a lienholder, or when an electronic title is inaccessible. Our NPRM also proposed changing the exemption from mileage disclosure in § 580.17 for cars 10 years old or older to 25 years old or older. The final rule adopts an exemption for cars 20 years old or older and explicitly sets out how this modified exemption will be applied.

B. Costs and Benefits

As discussed in Section V of this notice, the agency only performed a detailed cost benefit analysis for the exemption amendments of this final rule. With the exception changing the exemption from mileage disclosure from 10 to 20 years this final rule imposes no mandatory requirements. Amendments to part 580 simply allow jurisdictions the option of adopting electronic title and odometer disclosure systems without seeking prior approval from NHTSA. To the extent provisions in this final rule may affect existing electronic title and odometer disclosure systems in the small number of jurisdictions with such schemes, the agency believes provisions of this final rule are sufficiently flexible requiring little or no change. Since the FAST Act's temporary suspension of the requirement that states must petition NHTSA for

approval of alternative electronic odometer disclosure schemes ends on the effective date of this final rule, states seeking to adopt such schemes after that date must either comply with the provisions of this final rule or petition the agency for approval of alternative procedures.

To the limited extent this final rule impacts states and other jurisdictions with electronic titles systems, the agency believes that there is the potential for significant cost savings to be realized through issuance of this final rule. These savings would first be manifested through avoidance of legal and administrative costs to prepare and submit petitions to NHTSA seeking approval of electronic title systems. Moreover, by establishing uniform rules for electronic title systems, this final rule facilitates adoption of electronic disclosures and titles and the use of these mechanisms in vehicle transactions. Currently, NHTSA estimates that there are at least 40 million odometer disclosures made every year in the United States. Since the agency believes that electronic disclosure will be less costly than paper disclosures, even a minor cost savings per disclosure could lead to large societal savings. However, the agency does not have any data on the extent to which this rule will incentivize their existing practices. Certainly, this rule will make it far easier to adopt electronic disclosures as states will no longer need to petition NHTSA if the requirements of this final rule are met. It is reasonable, then, to expect that more states will adopt this practice, but the agency does not now have sufficient data to determine how this general expectation will translate into quantifiable cost savings.

The final rule's modification of the vehicle age-based exemption from odometer disclosure will impose costs and produce benefits. The total cost of the change to the exemption in this final rule is estimated to be from the minimum of $0.7 million in 2020 to the maximum of $5.4 million in 2029 and later. If the rule can deter 5 percent of rollbacks from affected vehicles the rule would eliminate $1.5 million in annual consumer losses in 2020 and $7.5 million in such losses from 2029 forward.

II. Background and Summary of Final Rule

A. MAP-21

This document is being issued pursuant to the Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21, or Pub. L. 112-141), which amended Section 32705 of Title 49, United States Code. The amendments required the Secretary to prescribe regulations permitting any written disclosures or notices and related matters to be provided electronically not later than 18 months after the date of enactment of the Motor Vehicle and Highway Safety Improvement Act of 2012. Section 31205, 126 Stat. 761 (2012).

B. FAST Act Amendments

Section 24111 of the Fixing America's Surface Transportation Act of 2015 (FAST Act, or Pub. L. 114-94), signed into law December 4, 2015, allows states to adopt electronic odometer disclosure systems without prior approval of the Secretary. Any such system must comply with applicable state and federal laws regarding electronic signatures under 15 U.S.C. 7001

et seq.,

meet requirements of 49 U.S.C. 32705 and provide for “appropriate authentication and security measures,” Public Law 114-94 section 24111. States may only adopt electronic odometer systems without prior approval of the Secretary until the effective date of rules proposed in this notice.

Id.

In providing states with the opportunity to implement electronic odometer disclosure systems until the effective date of this final rule, FAST Act amendments do not alter existing statutory odometer disclosure requirements or their intent. Effective odometer disclosure systems are essential to protecting consumers from odometer fraud and must reduce or eliminate opportunities for such fraud to the greatest practicable extent. Federal and state governments have an interest in preventing such fraud.

This final rule and NHTSA's prior responses to state petitions for approval of alternative disclosure schemes (discussed below) contain guidance on potential strengths and weaknesses of electronic odometer disclosure schemes.

C. The Cost Savings Act, the Truth in Mileage Act and Subsequent Amendments

1. The Cost Savings Act

In 1972, Congress enacted the Motor Vehicle Information and Cost Savings Act (Cost Savings Act) to, among other things, protect purchasers of motor vehicles from odometer fraud.

See

Public Law 92-513, 86 Stat. 947, 961-63 (1972).

To assist purchasers in knowing 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 at the time of the transfer of ownership of the vehicle.

See

Public Law 92-513, 408, 86 Stat. 947 (1972). Section 408 required the Secretary to issue rules requiring the transferor to provide 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 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 traveled. The rules were to prescribe the way information is disclosed under this section and in which such information is retained.

Id.

Section 408 further stated if any transferor violated any rules under this section or knowingly gave a false statement to a transferee in making any disclosure required by such rules is a violation.

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.

Despite these protections, there were shortcomings in odometer provisions of the Cost Savings Act. In some states, the odometer disclosure statement was not on the title; instead, it was a separate document that could easily be altered or discarded and did not travel with the title. Titles were not on tamper-proof paper, and mileage disclosures could be easily altered. Problems were compounded by title washing through jurisdictions 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.

2. The Truth in Mileage Act

In 1986, Congress enacted the Truth in Mileage Act (TIMA), which added provisions to odometer provisions of the Cost Savings Act.

See

Public Law 99-579, 100 Stat. 3309 (1986). TIMA amendments expanded and strengthened Section 408 of the Cost Savings Act.

Among other requirements, TIMA precluded the licensing of vehicles unless several requirements were met by the transferee and transferor. Titles must be printed by a secure printing process or other secure process and must indicate the mileage and contain space for the transferee to disclose the mileage in a subsequent transfer. The transferee, when applying 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.

As to lease vehicles, TIMA stated NHTSA must publish rules requiring the lessor of vehicles to advise its lessee(s) 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. Additionally, TIMA required 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.

As amended by TIMA, section 408(f) (1) of the Cost Savings Act provided 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 “[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.”

3. 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 § 40, 102 Stat. 2805, 2817 (1988), which added § 408(d)(2)(C). In 1990, Congress amended § 408(d)(2)(C) of the Cost Savings Act. The amendment addressed retention of powers of attorneys by states and provided the rule adopted by the Secretary not require a vehicle be titled in the state in which the power of attorney was issued.

See

Public Law 101-641 § 7(a), 104 Stat. 4654, 4657 (1990).

Because of the 1994 recodification of various laws pertaining to the DOT, the Cost Savings Act, as amended by TIMA, was repealed, 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). Provisions pertaining to approval of state alternate motor vehicle mileage disclosure requirements were recodified at 49 U.S.C. 32705(d).

D. Overview of NHTSA's Odometer Disclosure Regulations

The implementing regulations for the odometer provisions of the Cost Savings Act, as amended, are found in part 580 of title 49 of the Code of Federal Regulations (CFR). These regulations establish minimum requirements for odometer disclosure, the form of certain documents employed in disclosures, and the security of title documents and power of attorney forms. The regulations also set rules for transactions involving leased vehicles, set recordkeeping requirements including those for auctions, and authorize the use of powers of attorney in limited circumstances. Additionally, part 580 contains provisions exempting certain classes of vehicles from disclosure regulations and provides a petition process by which a state may obtain approval of alternate disclosure requirements. The following paragraphs summarize important aspects of the regulations.

Odometer disclosures must be made on a secure title, reassignment document, or power of attorney when a vehicle is transferred to a new owner. Section 580.5(c) requires a transferor to sign, and to print his/her name on an odometer disclosure statement with the following information: (1) The odometer reading at the time of transfer (not to include tenths of miles); (2) the date of transfer; (3) the transferor's name and current address; (4) the transferee's name and current address; and (5) the identity of the vehicle, including its make, model, year, body type, and VIN. The transferor must also, under § 580.5(e), certify whether the odometer reading reflects the vehicle's actual mileage, disclose whether the odometer reading reflects mileage in excess of the odometer's mechanical limit or, if the odometer does not reflect the actual mileage, must state the odometer reading should not be relied on. The transferee must acknowledge the reading by signing the statement. Each title, at the time it is issued to the transferee, must contain the mileage disclosed by the transferor.

To ensure vehicles subject to leases of four months or more have accurate odometer readings executed on titles at the time of transfer, § 580.7(a) requires lessors to provide written notice to the lessee of the lessee's obligation to disclose the mileage of the leased vehicle and penalties for failure to disclose the information. Before a change in ownership of a leased vehicle, lessees are required by § 580.7(b) to provide disclosures comparable to those required by § 580.5(c) and (e), noted above, to the lessor along with the date the lessor notified the lessee of disclosure requirements. Additionally, the lessor must state the date the lessor received the lessee's completed disclosure statement and must sign it. Under § 580.7(d) a lessor transferring ownership of a vehicle (without obtaining possession) may indicate the mileage disclosed by the lessee on the vehicle's title unless the lessor has reason to believe the lessee's disclosure is inaccurate.

When a title is physically held by a lienholder or has been lost, § 580.13(a) allows a transferor to give the transferee a power of attorney to execute the mileage disclosure on the title once it is obtained by the transferee. Section 580.13(b) and (d) provide that the transferor must disclose information identical to that required by § 580.5(c) and (e) on part A of the secure power of attorney form. The transferee is required to sign the power of attorney form part A and print his/her name.

Id.

In turn, § 580.13(f) requires the transferee, upon receipt of the transferor's title, to make on the title exactly the mileage disclosure as disclosed by the transferor on the power of attorney.

After part A of the power of attorney form has been used, part B may be executed when a vehicle addressed on part A is resold. Part B of the secure power of attorney form allows a subsequent transferee to give a power of attorney to his transferor to review the title and any reassignment documents for mileage discrepancies, and if no discrepancies are found, to acknowledge disclosure on the title, while maintaining the integrity of the first seller's disclosure. The disclosure required to be made by the transferor to the transferee for this transaction on part B of the power of attorney form tracks information required to be made by the transferor to the transferee on the title when ownership of a vehicle is transferred on a title under 49 CFR 580.5. Among other things, the power of attorney must contain a space for the transferor to disclose the mileage to the transferee and sign and date the form, and a space for the transferee to sign and date the form.

To ensure disclosures made through a power of attorney are accurate, § 580.15 requires the person exercising the power of attorney to certify, on part C of the form, that disclosures made on a title or

reassignment document on behalf of the original seller are identical to those found on part A of the power of attorney. This section also requires a certification, when part B is used, that the mileage disclosed and acknowledged under part B is greater than the mileage disclosed in part A.

Titles, reassignment documents, and the power of attorney form must be protected against counterfeiting and tampering by a secure printing process or other secure process (§ 580.4). These titles, reassignment documents, and powers of attorney must contain a statement referring to federal odometer law and a warning that failure to complete the form or providing false information may result in fines or imprisonment.

See

§ 580.5(d). For a leased vehicle, the lessor is obligated to provide the lessee with written notice of the obligation to make a mileage disclosure, and that notice must contain the same warnings (§ 580.7(a)). Except in the limited context of the proper use of the power of attorney forms, no person shall sign an odometer disclosure statement as the transferor and transferee in the same transaction (§ 580.5(h)).

Part 580 establishes minimum requirements for record retention, ensuring a paper trail sufficient to support detection and prosecution of odometer fraud. Section 580.8(a) requires motor vehicle dealers and distributors, who are required to issue an odometer disclosure, to retain copies of each odometer statement they issue and receive for five years. Lessors of leased vehicles must retain the odometer statement they receive from their lessee for five years from the date they transfer ownership of the leased vehicle (§ 580.8(b)). If a power of attorney authorized by §§ 580.13 and/or 580.14 has been used, dealers must retain copies of the document for five years (§ 580.8(c)). Section 580.9 requires auction companies to retain the name of the most recent owner on the date the auction took possession of the motor vehicle, the name of the buyer, the vehicle identification number, and the odometer reading on the date the auction company took possession of the motor vehicle for five years from the date of sale. States are required, under § 580.13(f) to retain the original copy of the power of attorney authorized by § 580.13(a) or (b) and the title for a period of three years or a time period equal to the state's titling record retention period, whichever is shorter.

Other sections of part 580 establish a petition process by which states may seek assistance in revising their odometer laws (§ 580.10), may seek approval of alternative odometer disclosure schemes (§ 580.11), and establish exemptions from the disclosure requirements of §§ 580.5 and 580.7 (§ 580.17). Exemptions in 580.17 apply to transfers or leases for: (1) Vehicles with a Gross Vehicle Weight Rating (GVWR) over 16,000 pounds; (2) vehicles that are not self-propelled; (3) vehicles manufactured in a model year beginning 10 years before January 1 of the calendar year in which the transfer occurs; (4) certain vehicles sold by the manufacturer to any agency of the United States; and (5) a new vehicle prior to its first transfer for purposes other than resale.

E. Previous State Petitions for Approval of Electronic Odometer Disclosure Schemes

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 NHTSA shall approve alternate motor vehicle mileage disclosure requirements submitted by a state unless NHTSA determines 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).)

Virginia, Wisconsin, Florida, New York, Texas, and Arizona filed petitions with NHTSA seeking approval of electronic alternative odometer programs under 49 U.S.C. 32705(d)). NHTSA has approved, in whole or in part, five of these six petitions and not taken final action on the Arizona petition, which was made moot by the passage of section 24111 of the FAST Act and Arizona's adoption of a disclosure system under that provision. Review of the systems proposed in these petitions and the terms of NHTSA's actions in response to them, illustrates the variations in schemes between jurisdictions and the concerns raised by electronic odometer disclosure.

Petitions filed by three states, Virginia, Texas, and Wisconsin, shared certain characteristics. In each case, the proposed alternative odometer disclosure schemes applied only to intrastate transactions. Each of the three proposals also relied on multi-factor authentication to ensure the identity of persons executing the odometer disclosures. All three proposals relied on substituting electronic versions of the paper odometer disclosure form by maintaining the electronic form on state-controlled systems. These systems also held data elements comprising the electronic title.

Virginia petitioned NHTSA in December 2006 seeking approval of electronic odometer disclosure for intrastate transfers of vehicles not subject to liens. Virginia proposed using a paperless system where users would enter the information and attestations found on paper odometer disclosures into a state electronic system. The petition stated unique personal identification numbers (PIN) and unique customer numbers sent by conventional U.S. mail would be used with the customer's date of birth (DOB) to create a verified account and signature. Dealer users would provide lists of employees authorized to make disclosures, and these individuals would get PINs by conventional mail to verify their identity. In dealer sales, the employee PIN and a dealer number would be used. Disclosures would be made in the same way a paper disclosure would be made. The seller or transferor would fill out an electronic form identical to the paper form and sign it electronically. The buyer or transferee would examine the disclosure and either accept it or reject it. Once accepted, the disclosure would be linked to the electronic title, and the transferor would be instructed to mail any paper title to the state.

A June 2008 petition by Texas sought approval of alternative odometer disclosure requirements for intrastate transactions between residents transferring vehicles not subject to liens. Texas proposed to eliminate paper titles (except as requested), create electronic titles and require in-state vehicle transfers to be made electronically. Users, who would have to be Texas residents holding a valid state identification credential, would be verified by matching four personal data elements and two forms of identification against a state database. Odometer mileage disclosures would be made by requiring both parties to separately log into a secure website, make required disclosures and verification of the mileage, and accept or reject the transaction. The seller or transferor would then mail the paper title to the state for destruction. The title and odometer disclosure would remain as an electronic record, and the transferee could receive a secure paper title on request.

Wisconsin filed a petition in September 2009 proposing an electronic odometer disclosure scheme limited to intrastate transactions where at least one party would be a motor vehicle dealer. Identity verification would be based on customers entering a minimum of three personal identifiers—name, address,

date of birth, product number, Driver License/ID number, and a Federal Employer Identification Number or partial Social Security Number—in the state system. Once verified, the user could begin the title transaction. As with the Virginia and Texas petitions, Wisconsin's proposal linked electronic odometer disclosures to the title record in the state's database. Similarly, a title could not be transferred unless the electronic odometer disclosure had been properly completed. Again, if a paper title was needed, the Wisconsin DMV would print it on secure paper with the odometer disclosure statement in the proper location and format under existing rules.

Finding that the Virginia scheme would properly verify user identities, provide security equivalent to the paper system, and create an adequate system of records, NHTSA granted Virginia's request on January 7, 2009 (74 FR 643). NHTSA granted the Texas petition on April 22, 2010 (75 FR 20925) after that state clarified the Texas system allowed transferees to obtain a paper copy of the title meeting TIMA, required dealers to retain copies of odometer disclosures, and required disclosure of the brand (the brand states whether the odometer reflects the actual mileage, reflects mileage in excess of the designated odometer limit or differs from the actual mileage and is not reliable.)

Id.

at 20928. NHTSA also noted since Texas would require persons with an electronic title to submit any paper titles to Texas for destruction, the proposal would prevent potential mischief caused by duplicate titles.

Id.

at 20929. In a final determination published on January 10, 2011, 76 FR 1367, the agency approved the Wisconsin proposal based on its user verification scheme, the linkage of a properly executed odometer disclosure to the electronic title, and the existence of safeguards preventing the simultaneous existence of an electronic and paper title.

Petitions filed by two other states, Florida and New York, differed from other petitions as systems proposed relied, to differing degrees, on the use of paper forms for executing the odometer disclosures. These paper forms, which were not titles, reassignment documents or a power of attorney specified under part 580, were employed to transmit information either before entry into an electronic system or to facilitate interstate transactions. Because paper documents are employed in conjunction with an electronic system, these odometer disclosure schemes can be referred to as “hybrid” systems because of their reliance on paper and electronic information storage.

In December 2009, Florida proposed a hybrid electronic disclosure system in December 2009 wherein the actual data entry into the state system would be made by authorized tag agents using data terminals. For private sales, authorized tag agents required transferors and transferees to fill out odometer disclosures on paper forms. These paper forms would be executed by both parties at the tag agent's facility after each had verified their identity to the tag agent. The tag agent would enter the data into Florida's system and create an electronic title for the transferee, or upon request, provide the transferee with a paper title. For dealer transactions, Florida proposed transferors with e-title would complete a secure reassignment form with odometer disclosure. When the dealer transferred that vehicle to another transferee, both parties would complete another secure reassignment form with an odometer disclosure. The dealer would take both secure reassignment forms to a tag agency. The tag agent would enter the disclosures, and the data needed to create an electronic title or provide the transferor with the option of obtaining a paper title. Similarly, a lessee of a leased vehicle with an e-title would bring the vehicle to a dealership and make the odometer disclosure on a secure physical document. The lessor would then sign a secure physical power of attorney to the dealer authorizing the dealer to execute the odometer disclosure on its behalf. The dealer would then sign a physical secure reassignment form agreeing with the odometer disclosure. When the dealer sold the vehicle to another buyer, the dealer would take the various physical documents (bill of sale, reassignment document, and power of attorney) to the tag agency, where the tag agent would enter the required data and either create an electronic title in Florida's system or have a paper title provided for the buyer.

New York filed a petition with NHTSA in November 2010, seeking conversion of the existing paper process for dealer transactions to an electronic one. A transferor's odometer disclosure would be made on the title and then recorded in New York's system by a specific dealer employee whose identity had been verified. If that dealer sold a vehicle to another licensed New York dealer, the selling dealer would enter the current odometer reading, vehicle and seller and purchaser information. The purchasing dealer would subsequently sign on, review the selling dealer's odometer disclosure, and other data and accept or reject the transaction. Subsequent New York dealer transfers would be recorded in the same manner.

New York proposed that when a vehicle owned by a New York dealer is sold to a retail purchaser, salvage dealer, out-of-state buyer, or other non-New York dealer purchaser, the selling dealer would access its system, enter odometer and other information, including the seller and purchaser. A two-part sales receipt/odometer statement would be created, and if correct, would be accepted by the buyer. The dealer would then print a two-part sales receipt with a disclosure statement on each part. The dealer would retain one part, and the purchaser would be given the other, along with the original title acquired by the dealer upon vehicle purchase.

NHTSA granted the Florida petition in part and denied it in part, approving provisions for private party transactions but denying proposed terms for dealer and leased vehicle transactions. 77 FR 36935 (June 20, 2012). Among other things, NHTSA observed dealer transactions relied on odometer disclosures being made on documents other than the title itself. This, in the agency's view, is inconsistent with TIMA's command that disclosures be made on the title and not on a separate document. Further, the Florida dealer transaction scheme allowed issuance of new registrations after submission of a disclosure statement on a physical reassignment document rather than on the title itself, thereby violating the statutory requirement that a title with an odometer statement must be submitted prior to registering the vehicle. Florida's proposed requirements for leased vehicles were denied on similar grounds because of the numerous times disclosures had to be made on documents other than the title that did not meet security and content thresholds. Finally, the use of a power of attorney, where the lessor had access to the title, was inconsistent with TIMA.

NHTSA's initial determination denied New York's petition because it used a non-secure receipt for odometer disclosure in transfers between New York dealers and out-of-state buyers and was, therefore, inconsistent with federal odometer law. 76 FR 65487, 65491 (Oct. 21, 2011). New York subsequently amended its proposal by replacing the non-secure document with a secure state-issued paper, New York State MV-50 (Retail Certificate of Sale) form. The result of this change was a consumer purchasing a vehicle from a dealer would then receive the original title and odometer statement executed by the owner, who sold the vehicle to the dealer, and the secure MV-50 form with

an odometer disclosure. Additionally, the mileage disclosed at the time of the sale to the dealer and the mileage disclosed at the time the dealer sold the vehicle to the subsequent retail purchaser would be recorded in New York's system and available for viewing through a web portal. The agency's final determination, 77 FR 50381 (Aug. 12, 2012), granted the New York petition as amended. NHTSA found the employment of the secure state-issued and numbered MV-50 form, in conjunction with the odometer disclosure on the original seller's title and the recording of these disclosures in New York's electronic system, met the purposes of TIMA.

Processing foregoing petitions illuminated concerns relevant to this final rule. Any electronic odometer disclosure system must follow TIMA's command that odometer disclosures must be made on the title itself, the electronic equivalent of that title, or a selectively narrow set of tightly controlled secure documents. While jurisdictions should be accorded a degree of flexibility in designing and executing electronic titling and odometer disclosure schemes, an electronic odometer disclosure system should minimize or eliminate odometer disclosures on documents other than the title. Other concerns include methods of transmitting secure paper documents, the means for verifying the identity of transferors and transferees, the potential for the simultaneous existence of paper and electronic titles and the problems posed by interstate transactions between states with traditional and electric systems.

NHTSA's experience with petitions filed by Virginia, Texas, Florida, New York, and others demonstrates states choose to create a paperless system where all parties to a transaction make direct entries into the system or may employ a “hybrid” scheme where paper forms are employed as part of the process. As discussed below, some commenters responding to the NPRM believed amendments proposed by NHTSA did not adequately address the characteristics of such hybrid systems. An additional concern raised by commenters, particularly states that had previously had alternative odometer disclosure systems approved through the petition process, was the applicability of provisions in the final rule to those systems. The agency believes provisions of this final rule are sufficiently flexible to minimize potential conflicts with terms of our prior approvals of alternative odometer disclosure schemes.

F. Notice of Proposed Rulemaking

The NPRM was published in the

Federal Register

on March 25, 2016 (81 FR 16107). This notice explained the Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21, or Pub. L. 112-141) directed NHTSA to prescribe regulations permitting any written odometer disclosures or notices to be provided electronically.

See

section 31205, 126 Stat. 761 (2012). The proposed amendments sought to allow odometer disclosures in an electronic medium while maintaining accurate odometer disclosures and aiding law enforcement in prosecuting odometer fraud. To accomplish this end, the proposal addressed electronic signatures and identity verification, security concerns, record retention, leased vehicle transfers, and interstate transactions between jurisdictions with electronic and paper titles. The NPRM proposed modifying odometer disclosure exemptions for transfers of ten year old vehicles to transactions involving 25 year old vehicles. Other proposed amendments addressed restructuring of part 580, corrections to typographical errors and updating NHTSA's address.

Although Congress had directed that NHTSA promulgate regulations allowing electronic odometer disclosures and, through the FAST Act amendment discussed above, facilitated state adoption of electronic odometer disclosure systems until the effective date of this final rule, few jurisdictions have implemented schemes for electronic titles and electronic odometer disclosure, either in whole or in part. Given the nascent state of electronic titling and odometer disclosures, as well as variations in existing title systems in states and territories, the NPRM asked for comments on how prescriptive NHTSA's approach should be. While more prescriptive requirements might better protect vehicle buyers and force a degree of uniformity in future electronic systems, such an approach by NHTSA could limit or hinder adoption of electronic titling and odometer disclosure system. Additionally, a highly prescriptive approach could be interpreted to be inconsistent with the direction in MAP-21 to promulgate regulations that simply permit electronic disclosures. The foregoing concerns prompted NHTSA to specifically request comments in the NPRM on whether it should adopt a minimalist approach or a more prescriptive set of rules.

NHTSA chose to propose modifications to the existing structure of part 580 to accommodate electronic odometer disclosure schemes. Accordingly, the NPRM sought to add new definitions in part 580.3 for the terms “Electronic Document,” “Physical Document,” and “Sign or Signature.” As proposed, “Electronic Document” would mean “a title, reassignment document or power of attorney that is maintained in electronic form by a state, territory or possession that meets all the requirements of this part.” The NPRM proposed defining a “Physical Document” as “a title, reassignment document or power of attorney printed on paper that meets all the requirements of this part.” The proposed definition of “Sign or Signature” encompassed both hand written and electronic signatures and, for the electronic signature, also specified that a valid electronic signature must incorporate an identity authentication scheme equivalent to or greater than a NIST Level 3 system. This definition also specified a valid electronic signature must be made by the specific individual whose identity had been verified, regardless of whether the person was signing as in individual or as a representative of a business. The NPRM specifically requested comments on the propriety and appropriateness of these proposed definitions. In addition, the NPRM asked for comments on implementation of identity verification for transferors and transferees in electronic transactions, including what level of NIST verification should be appropriate, whether car dealers should provide secure computing services, and what security measures should be mandatory for such services.

In contrast to a written signature, which through handwriting analysis can be used to identify an individual even in the event of forgery, an electronic signature is, without sufficient verification and other safeguards, anonymous. Because of this, NHTSA proposed that a valid electronic signature must be made by an individual. The NPRM also asked for comments on whether any other requirements are necessary to ensure investigators can back trace an electronic “signature” to identify the individual and/or computer used in the electronic equivalent of a paper trail or whether the proposed requirements could be used to identify individuals making unauthorized alterations to disclosure statements.

Consistent with its approach of modifying existing provisions of part 580 to allow electronic odometer disclosures, NHTSA also proposed amending § 580.4, which governed security features of printed forms, by creating a new paragraph (a) for paper documents and new paragraph (b) for

electronic records. The requirements for paper documents remained unchanged while the proposed paragraph (b) requirements set forth that electronic titles, power of attorney forms, and reassignment documents must be maintained in a secure environment and protected from unauthorized modification, alteration, or disclosure. Paragraph (b) also proposed that the system storing title and odometer disclosure information must record dates and times when documents are created, when odometer disclosures contained are signed, when documents are accessed, and when any attempt is made to alter or modify documents. The NPRM asked for comment on these proposals, including the degree to which the security and authenticity requirements for electronic documents appropriately matched those for paper documents.

The NPRM also addressed a bedrock concern of any electronic system creating and maintaining records having financial import—system security. Rather than attempt to specify security requirements, the NPRM explained the agency made a tentative determination that such an effort would be inappropriate given the comparatively slow pace of rulemaking in comparison to the rapidly evolving and changing landscape of cyber security. Just as software and hardware are constantly evolving and improving, cyber-attacks and efforts to undermine the security of electronic data systems are also changing rapidly and frequently. Moreover, the NPRM noted potential risks to property interests and commerce presented by insecure vehicle titling and odometer disclosure systems would be addressed by the jurisdictions creating these systems. The jurisdictions doing so would be better positioned to assess security risks and craft appropriate responses. The NPRM nonetheless requested comments on whether NHTSA should establish minimum security requirements, including hardware and natural disaster specifications, and if such security requirements should be modeled on the Federal Information Security Management Act (FISMA) framework.

Section 580.5 of part 580 dictates the content and manner of odometer disclosure. The NPRM proposed adding the phrase “whether a physical or electronic document” in § 580.5(a) so the disclosure requirements specified in § 580.5 would apply to paper and electronic transactions. Similarly, the NPRM also proposed amending § 580.5(c), governing the specific disclosures that must be made when transferring title, by adding the phrase “physical document” in instances of paper title transfers and “electronic form incorporated into the electronic title.” to § 580.5(c) for instances of electronic title transfers. The agency also added a requirement that disclosures in the case of electronic titles must be on an electronic form incorporated into that title, that the electronic disclosure must be incorporated into the electronic title, and, in jurisdictions with electronic titles, reassignment documents could not be used in lieu of making the odometer disclosure electronically. The agency also asked for comments on the proposal that disclosures be made on an electronic form incorporated into the electronic title.

Under § 580.5(d), paper forms used to make odometer disclosures must contain certain legal notices and warnings intended to ensure those executing the forms are aware of their responsibilities and potential liability when doing so. The NPRM proposed extending these requirements to electronic disclosures transfers by amending § 580.5(d), specifying that in instances of electronic transfer, the required information must be displayed on the screen, and acknowledged as understood by that party, before any signature can be applied to the transaction. NHTSA also proposed amending § 580.5(f), requiring transferees to print their name on the disclosure and return a copy to the transferor, to restrict its application to paper transactions only. Because § 580.5(f) also requires transferees to provide transferors with a copy of the executed disclosure statement, the agency also proposed electronic disclosure systems provide a means for parties involved with the transaction to access copies of the disclosure. Although this proposal expanded the paper requirement from making a copy available to one party to both parties, NHTSA believed the burden of making an electronic copy of the disclosure statement to both parties rather than one would be minimally burdensome. The NPRM sought specific comments on these proposed amendments.

Section 580.5(g) of part 580 addresses the situation in which a vehicle has not been titled or where the existing paper title does not have sufficient space for making an odometer disclosure. As explained in the NPRM, NHTSA tentatively believed this provision should only apply in jurisdictions where paper titles and odometer disclosures are used. The agency thought any electronic titling system would have the capability to accept disclosures for multiple transactions and could be configured to accept an odometer disclosure immediately prior to creation of the first electronic title. Accordingly, the NPRM proposed limiting application of § 580.5(g) to transactions employing paper documents in jurisdictions without electronic title systems. The NPRM asked for comments specifically addressing this proposal.

The NPRM also proposed adding a new § 580.6 to part 580 to create requirements resolving unique concerns posed by electronic odometer disclosures. To ensure systems creating and maintaining records provided a minimum level of security and certainty, the NPRM sought to add § 580.6(a)(1) requiring electronic records to be retained in a format that cannot be altered and, further, that indicates any attempts to alter it. As it is critical that parties to a transaction are who they claim to be for ownership and law enforcement purposes, the NPRM proposed in § 580.6(a)(2), a requirement that any electronic signature identify an individual. The section also proposed if an individual is acting in a business capacity or otherwise on behalf of any other individual or entity, that the business or entity also be identified as part of that unique electronic signature. Because the requirement to maintain or provide copies of paper documents exists in various places within part 580, the NPRM proposed accommodating these requirements in electronic disclosure systems by establishing, in § 580.6(a)(3), that any requirement in part 580 to disclose, issue, execute, return, notify, or otherwise provide information to another person is satisfied when a copy of the electronic disclosure or statement is electronically transmitted or otherwise electronically accessible to the party required to receive the disclosure. Although the NPRM noted NHTSA discouraged the continued use of paper documents in electronic disclosure jurisdictions, the agency proposed accommodating “hybrid” systems such as those seen in the Florida and New York petitions by creating § 580.6(a)(7) requiring that any physical documents used to make electronic disclosures comply with the security and other requirements applicable to paper documents in part 580.

The advent of electronic titles would not eliminate the demand for paper titles, particularly because paper titles are likely to be essential to completing interstate transactions between electronic and paper jurisdictions. Moreover, paper titles will need to be accounted for when electronic title systems are created. Since the

simultaneous existence of an electronic and a paper title would provide fertile ground for odometer fraud, the NPRM proposed, in § 580.6(a)(4) that any physical title replaced by an electronic title must be destroyed after creation of the electronic title. The proposed text of this section further provided that an electronic copy of the physical title be recorded and maintained for five years and that the electronic copy be retained in a format that cannot be altered and that indicates any attempts to alter it. If a paper title needed to be created from an electronic record, the NPRM proposed, in § 580.6(a)(6), that only states or their authorized surrogates could produce a secure paper title from an electronic record and that this paper title must meet the security requirements applicable to paper titles. Additionally, the proposed § 580.6(a)(6) stated that issuance of a paper title in an electronic title state must be memorialized by a record stating the electronic title has been superseded by a paper document that is the official title. As suggested by the Texas petition seeking approval of alternative odometer regulations, NHTSA also believed electronic title systems might have a means of making a paper document available to vehicle owners who would attest to the existence of an electronic title maintained by their jurisdiction. The NPRM proposed adding a provision in § 580.6(a)(5) permitting jurisdictions to issue such a document if they chose to do so. Because NHTSA anticipated electronic title and odometer disclosure systems would rely on scanned documents at various times and under various conditions, including interstate transactions from paper jurisdictions to electronic jurisdictions, the NPRM proposed adding § 580.6(a)(7) specifying that any conversion of physical documents to electronic documents must preserve the security features of the physical document and be scanned at a resolution of not less than 600 dots per inch (dpi). Again, the NPRM sought specific comments on the foregoing proposals.

The agency also proposed several amendments to § 580.7, which governs odometer disclosures for leased vehicles. Leased vehicles present challenges to the ordinary scheme for odometer disclosures because lessors usually hold the title to the vehicle but seldom have physical control over it. When a vehicle lease is terminated, the lessee typically surrenders the vehicle to a dealer while the lessor is responsible for making the required odometer disclosures on the title. To facilitate transactions associated with terminating the lease, § 580.7(a) required lessors to provide lessee with a written notice explaining that the lessee must provide the lessor with an odometer disclosure statement and that failure to do so, or to do so in conformance with federal law, exposes them to criminal liability. Section 580.7(b) and (c) state lessees must execute an odometer disclosure statement with any transfer of ownership and provide this disclosure statement to the lessor. In turn, the lessor is required by § 580.7(d) to execute the disclosure statement on the vehicle title in conformance with the lessee's disclosure unless the lessor has reason to believe the lessee's disclosure is inaccurate. The NPRM proposed amending § 580.7(a) to allow lessors to provide notices to lessee electronically, proposed deletion of a printed name requirement for electronic odometer disclosures by lessees in § 580.7(b) and proposed adding a new § 580.7(e) stating an electronic system maintained by a lessor must meet the proposed security requirements in § 580.4(b). The NPRM also requested comments on whether leased vehicle electronic disclosures should be a required part of the electronic system established by a jurisdiction or are best developed by individual leasing companies.

Sections 580.8 and 580.9 include requirements for odometer disclosure record retention by motor vehicle dealers and distributors and by auction companies, respectively. Section 580.8(a) specifies dealers and distributors must retain a “Photostat, carbon copy or other facsimile copy of each odometer mileage statement which they issue and receive.” Under both sections, records must be stored for five years in a manner and method so they are accessible to NHTSA investigators and other law enforcement personnel. The records must also be stored so they are difficult or impossible to modify. The NPRM proposed adding requirements in a new § 580.8(d) and § 580.9 that electronic odometer disclosure records kept by motor vehicle dealers, distributors, and auction companies must be stored in a format that cannot be altered and that indicates any attempts to alter the document, consistent with the standards set forth in proposed § 580.4(b). NHTSA requested comment on whether this requirement would be sufficient to allow law enforcement to detect altered documents.

The agency also proposed modifications to the power of attorney provisions in § 580.13(a) and (b), to allow an individual with a vehicle titled in an electronic title state to use a power of attorney to sell a vehicle in a paper title state. This proposed expansion of the use of a power of attorney, in conjunction with the agency's view that the power of attorney provisions applicable to lost titles or titles held by lienholders would no longer be needed in electronic title jurisdictions, led the agency to propose adding the word “physical” in multiple places in §§ 580.13(f), 580.14(a), (e), and (f), and in 580.15(a) to restrict application of various provisions to paper title jurisdictions. The NPRM asked commenters to specifically address the need for the proposed power of attorney and if an electronic power of attorney would also be needed or feasible.

Because § 580.17(a)(3) exempts any vehicle, which is more than 10 years old from the odometer disclosure requirements and the average age of the United States vehicle fleet has been trending upward to 11.5 years, the NPRM proposed raising the exemption to 25 years. The NPRM also requested comments on whether the exemption should be eliminated.

Another group of amendments in the NPRM were proposed to correct address changes and typographical errors as well as removing obsolete provisions and providing redesignations needed to complete the final rule.

G. Summary of Comments to the NPRM

NHTSA received 28 comments in response to the NPRM. Six comments were filed by state motor vehicle departments: The Motor Vehicle Division of the Arizona Department of Transportation (Arizona), the California Department of Motor Vehicles (California), the Florida Department of Highway Safety and Motor Vehicles (Florida), the Oregon Driver and Motor Vehicle Services (Oregon), the Texas Department of Motor Vehicles (Texas), and the Virginia Department of Transportation (Virginia). State concerns were also addressed in comments from the American Association of Motor Vehicle Administrators (AAMVA). Dealer and auctioneer concerns were voiced by comments from the National Automobile Dealers Association (NADA), the National Independent Automobile Dealers Association (NIADA), the National Auto Auction Association (NAAA), the Ohio Automobile Dealers Association (OADA), Copart Inc. (Copart), Dealertrack Inc. (Dealertrack), and Insurance Auto Auctions Inc. (IAA). Several trade associations acting on behalf of lenders also submitted comments, including the National

Association of Federal Credit Unions (NAFCU), National Title Solutions Forum of the American Financial Services Association (NTSF), the Credit Union National Association (CUNA), the Credit Union Coalition of Texas (CUCTX), and the Heartland Credit Union Association (HCUA).

Comments were also filed by insurance companies and insurance trade associations: Allstate Corporation (Allstate), the Property Casualty Insurers Association of America (PCIA), the American Insurance Association (AIA), Liberty Mutual (Liberty), and the National Association of Mutual Insurance Companies (NAMI). Other organizations, such as the Electronic Signature and Records Association (ESRA), the National Odometer and Title Fraud Enforcement Association (NOTFEA), and the National Salvage Vehicle Reporting Program (NSVRP) also filed comments. An individual, Thaddeus Lopatka, filed comments as well.

The commenters all favored regulatory changes that would allow states to implement electronic odometer disclosures as part of an electronic title system. The comments, however, differed in how this goal should be achieved. While some comments did not address the specifics of NHTSA's proposed amendments, others provided detailed analyses of the regulatory text contained in the NPRM. The comments also diverged on the extent to which NHTSA should exercise its regulatory authority. While some commenters urged NHTSA to leave as much as possible to the discretion of individual states, others felt the agency should compel creation of a national electronic title and odometer disclosure system by a specified date and impose penalties for non-compliance. The agency's proposed modification of the ten-year exemption was supported by most commenters and vociferously opposed by others. For commenters who specifically addressed the agency's proposed requirement that individual identities be established by NIST level 3 authentication, opposition was universal. Some commenters also voiced reservations about the structure of the proposed amendments, which, in their view, appeared to adopt an unduly narrow vision of how electronic odometer disclosure and electronic titling systems would function. For these commenters, NHTSA's proposal did not adequately address the potential adoption of hybrid systems employing a mixture of paper documents and electronic processes.

Two commenters, NADA and NAAA, suggested NHTSA issue an SNPRM prior to issuing a final rule while two, NAMIC and Texas, suggested NHTSA delay issuance of a final rule. NADA stated an SNPRM might be needed because of the complex array of potential motor vehicle transfers and potential variations between state systems that NHTSA needs to explore. NAAA stated an SNPRM might be required to explore the effect of any delays inherent in producing paper titles on exporting vehicles. Texas stated the proposals put forward in the NPRM indicated an apparent misunderstanding of current title processes and urged the agency to work with stakeholders to draft clearer, more meaningful language. NAMIC suggested delay so NHTSA could convene an assembly of state officials with the goal of forging a national electronic titling and odometer disclosure system.

1. Scope of the Final Rule

NHTSA's March 25, 2016, NPRM stated the agency's view that the directive in MAP-21 to promulgate rules allowing electronic odometer disclosure was intended only to facilitate this change without imposing additional requirements on stakeholders (81 FR 16114). Nonetheless, the NPRM requested comments on whether the proposals therein should be extended to prevent, or limit, variation among the various state systems.

Comments submitted in response to this solicitation were generally split into two opposing positions. Several commenters urged creation of a uniform national electronic title and disclosure system while others urged the agency take a minimalist approach. Insurers favored the former approach while most states embraced the latter. The AIA contended allowing both paper and electronic disclosures complicated an already cumbersome process. AIA urged NHTSA to require electronic titling and odometer disclosure and warned the co-existence of electronic and paper title and disclosure systems will inevitably lead to fraud, title washing, errors, the inability to find the owner for recalls, and a lack of consumer understanding of the process.

The organization further urged NHTSA to establish a date certain by which all states must move to an electronic title and disclosure system and establish penalties for jurisdictions not meeting this deadline. NAMIC offered similar concerns about the potential complexity of co-existing paper and electronic systems as well as potential issues caused by incompatible state databases. As noted, NAMIC urged NHTSA to convene meetings with states and other stakeholders to formulate a plan for a more uniform electronic system. Although Texas adopted a position that NHTSA's rulemaking should not be prescriptive and should grant states as much leeway as possible in developing electronic title and odometer disclosure systems and encouraged NHTSA to explore the use of the U.S. Department of Justice's National Motor Vehicle Title Information System (NMVTIS) as a national system to facilitate the transfer of electronic titles. According to Texas, leveraging this existing system would assist with mitigating any costs associated with implementing a national electronic title transfer system and aid the rate of adoption while easing the implementation process.

Among state commenters, Virginia stood alone in supporting an expanded scope for the final rule. Virginia's concerns included the possibility of broad variations among state systems that would hinder interoperability and preclude the consistency required to allow consumers to conduct interstate transactions. While Virginia advocated rules to enforce consistency in security standards, its comments also decried the proposed NIST authentication and minimum dot per inch standards as well as the inability of traditional rulemaking to keep pace with rapidly changing technologies. Texas, California, and Florida offered comments stating the scope of the NPRM proposals should not be expanded. Texas stated each jurisdiction should be able to facilitate the electronic process for signatures as it determines appropriate. California contended that initially, each state must be able to implement an electronic odometer scheme within its own environment. Florida echoed this sentiment while opining that flexibility is needed as states first implement intrastate systems. AAMVA stated few states had developed electronic title systems, and even fewer could support fully electronic transactions or odometer disclosures. In AAMVA's view, imposing restrictive requirements before all states have had the opportunity to evaluate their existing systems and determine what such a transition could look like would be premature. ESRA's comments also endorsed a less restrictive regulatory approach stating the NPRM proposals were sufficiently broad to enhance the adoption of e-odometer and e-titling systems, and some level of variation would be acceptable if state systems are technologically neutral and promote interoperability.

2. Definitions

NHTSA proposed several changes to definitions found within § 580.3 to accommodate electronic odometer disclosures within the existing framework of part 580. The NPRM proposed new definitions for the terms “Electronic Document,” “Physical Document,” and “Sign or Signature,” where an electronic document is a title, reassignment document, or power of attorney maintained in an electronic form; a physical document is a paper document as used prior to the advent of electronic disclosures, and sign or signature may either be a hand written signature or an electronic sound, symbol, or process using an authentication system to verify the signer's identity. As noted, the NPRM sought comments on the appropriateness of the proposed definitions.

One insurer, Liberty Mutual, four associations, AAMVA, NADA, CUCTX, and HCUA, and three states, California, Virginia, and Texas, offered comments in response to the definitions contained in the NPRM. California voiced concerns the definition of electronic document inappropriately inferred that electronic titles exist only as an electronic image of a paper document when an electronic title may only be a set of data elements maintained in a state database and not necessarily a form. AAMVA also stated “Electronic Record” would be more appropriate than “Electronic Document” and opined the proposed definition of “Electronic Document,” and “Physical Document,” should both refer to lease disclosures required by § 580.7. HCUA stated the proposed definition should clarify that a database record could serve as the title, disclosure, and audit trail. California further noted the proposed definition included “reassignment document” and “power of attorney,” which appears to conflict with proposed language for § 580.15, limiting powers of attorney to paper transactions, which California also opposed. California suggested Electronic Document should include or be restated as “titling record” and “paperless or electronic title.”

Virginia believed the definition of “sign or signature” is insufficient to address handwritten signatures on paper, handwritten signatures captioned electronically on a pen pad, electronic signatures for individuals, and electronic signatures for organizations verified through authentication measures. NADA offered similar comment, stating many of its dealer members used “pen pads” to capture signatures electronically. CUCTX noted the proposed definition of “Sign or Signature” applied only to electronic disclosure statements and should be expanded to include other electronic documents to capture powers of attorney as well.

Texas, which provided a “redline” version of part 580 along with its written comments, suggested the definitions proposed in the NPRM be expanded by adding a definition of “Access” encompassing the means of entering, displaying and modifying previously stored data, “Agent” as person appointed by a power of attorney or authorized to act for an entity, “Electronic title” for electronic titles incorporating an electronic reassignment format or process, “Jurisdiction” meaning a state, territory, or possession of the United States of America, “Mileage” meaning the actual distance a vehicle has traveled, “Printed Name” meaning either the clear and legible name on a physical document or an equivalent electronic record and “Sign or Signature” meaning either a traditional hand-written signature on a paper disclosure or an electronic sound symbol or process either incorporating an authentication process or performed before an authorized employee or agent of the jurisdiction. Liberty Mutual suggested adding a definition for an electronically signed document used specifically for title transfers for total loss vehicles.

NADA offered a similar comment to that provided by Texas and urged NHTSA to add a clarifying definition of the term “State” to read “any jurisdiction of the United States that issues motor vehicle titles, and the authorized agent(s) for any such jurisdiction.”

3. Identity of Parties to a Motor Vehicle Transfer and Security of Signatures

The definition of “Sign or Signature” proposed in the NPRM specified a valid electronic signature must identify a specific individual. This requirement stems from NHTSA's concern the comparative anonymity of an electronic signature to a written signature could frustrate identification of perpetrators of odometer fraud. This proposed requirement also appeared in § 580.6(a)(2) of the proposed amendments. The agency received many comments in response to this proposed requirement, and these comments are discussed below.

As proposed in the NPRM, the definition of “sign or signature” for an electronic document included an electronic sound, symbol, or process using an authentication system equivalent to or greater than Level 3 as described in NIST Special Publication 800-63-2,

Electronic Authentication Guideline,

which identifies a specific individual. NHTSA proposed incorporating the NIST Level 3 requirement into the definition of an electronic signature because of agency concerns that electronic odometer disclosures could easily be made by someone other than the actual transferor or transferee involved in the transaction. The NPRM requested comments on the appropriate NIST level as well as other forms of verification and security, including whether dealers should be required to provide secure computing services to transferors and transferees.

Commenters addressing the issue uniformly opposed the proposed requirement that identity verification for electronic odometer disclosures must meet NIST Level 3. California noted NIST Level 3 authentication went beyond what is required for current paper transactions. In California's view, prescribing a NIST Level 3 identity authentication, which, among other things, could entail verification of a government ID, such as a driver license, and a financial or utility account, is unnecessary. California argued a Level 3 process would be burdensome and impractical, if not impossible, to implement. California contended the manner of identity verification be left to states at a level strong enough to reasonably identify the signing party and should not be set above NIST Level 2. Florida contended the cost and complexity of implementing a Level 3 system may prohibit many states from being able to provide electronic titles and odometer disclosures. Further, Florida argued a Level 2 solution would still provide greater security than the existing paper process. Virginia asked if use of pen pad for electronic transactions done in person before a state employee or agent—essentially replicating the present paper process—met NIST Level 2 requirements.

Texas, like California, argued against any NIST level requirement because jurisdictions should be responsible for the secure electronic process just as they are for the existing security provisions for paper documents. According to Texas, states have an interest in the security of vehicle and odometer transactions equal to that of the federal government and are more familiar with their jurisdiction's business needs and those of its customers. Should NHTSA specify a NIST level, Texas urged that it not be set above NIST Level 2. AAMVA noted the NPRM proposal did not distinguish between electronic signatures being made in the presence of a state employee or agent and remote

transactions. The association also urged the agency to not require NIST Level 3 authentication and observed attaining this level of security would be very difficult because of the requirement that all elements of the system meet NIST Level 3. Further, AAMVA argued an attempt to force all potential participating parties to comply with a standard set at NIST Level 3 would ultimately lead to a common inability to do so. Compared to the existing paper signature process, AAMVA stated NIST Level 2 would be achievable and provide suitable assurance of identity.

Other stakeholders also argued against NIST Level 3 authentication. Dealer groups OADA, NAAA, NIADA, and NADA stated obtaining and maintaining a NIST Level 3 system would require significant investment by states and dealers. This burden is not, in the view of these commenters, necessary when compared to the benefits achievable with a Level 2 system. These organizations also believe costs of Level 3 authentication would prevent states from attempting to employ electronic title and odometer disclosure systems. Lender associations and other entities also opposed the proposal to require Level 3 authentication. HCUA stated Level 2 authentication should be sufficient while the NTSF argued Level 3 authentication was not required. In NTSF's view, as supported by the ANSI X9. l 17-2012 “

Secure Remote Access Mutual Authentication”

authentication framework, vehicle transfers are relatively low risk transactions that do not require the security provided by NIST Level 3. Further, NTSF observed the NIST Standards are applicable to federal government computer systems and should not be applied in this context. Finally, given the costs of Level 3 for states and others, NTSF recommended the final rule replace Level 3 with Level 2. ESRA observed the threat of financial loss presented by fraudulent odometer disclosures is commensurate with Level 2 authentication and this level is adequate for odometer disclosures.

The NPRM also requested specific comments on whether dealers should be required to provide secure computing services to transferors and transferees. NIADA and IAA responded, noting NHTSA should be mindful vehicle transfers are processed by many entities with different resources and are not limited to dealers. In the view of these commenters, imposing the foregoing requirement on a wide range of potential parties to a transfer would be unduly burdensome.

NHTSA also asked for comments on whether any requirements beyond those proposed in the NPRM would be needed or desired given the need for an odometer disclosure system to provide an adequate paper trail to identify the signer of an electronic odometer disclosure. Florida stated electronic odometer disclosure systems provide more security than the paper process. According to Florida, paper transactions do not involve verifying signatures and titles or other reassignment documents are often given to the transferee without being filled out so the incomplete forms are filled out by the transferee. Because electronic systems would require completeness and allow more frequent and accurate mileage reporting, Florida argued NHTSA should not adopt more stringent requirements in the Final Rule.

4. Document or Record Security and System Security

Prior to the issuance of this final rule, § 580.4 set forth the requirements for security features incorporated into paper documents employed to perform odometer disclosures. These security features are intended to prevent modification of existing disclosures and deter the use of counterfeit documents. The NPRM proposed amending this section through addition of new requirements for electronic documents or titles intended to provide the same level of security for electronic records as exists in secure paper documents. The proposed language would require electronic titles, powers of attorney, and reassignment documents to be maintained in a secure environment protecting the record for unauthorized modification. This environment would be part of a system that records when the document or record is created, when the odometer disclosures within are signed, when documents are accessed, and the date and time any attempt is made to alter the documents as well as any alterations made in the document.

The NPRM first sought comment on whether the proposal appropriately matched the security and authenticity requirement for electronic documents to the existing requirements, which apply to paper documents. While the NPRM contained a discussion outlining why the agency was not proposing specific security standards for these storage systems, NHTSA also asked for comment on whether the final rule should incorporate more specific security requirements for systems used to create and maintain electronic titles and odometer disclosures.

With the caveat that many commenters noted that the proposed language referred to an electronic “document” when reference to an electronic “record” would be more appropriate, this portion of the proposed rule enjoyed general support with many commenters strongly endorsing the agency's decision not to impose specific security standards for electronic title and odometer disclosure systems. NAAA and IAA noted the proposal required protection against unauthorized changes but did not address how entry errors are to be corrected. NTSF stated the requirement to track when records are accessed seemed to be unduly burdensome given the nature of the records involved. ESRA recommended NHTSA take an “agnostic” approach to electronic records storage by allowing states to store electronic data and documents in their secure data systems and to employ reasonable efforts to prevent such records from being altered.

Some commenters believed the proposal was too prescriptive. California noted paper documents should not be compared to an electronic process and that it would be unnecessary to prescribe anything more than maintaining electronic titling and odometer disclosure information in a secure system or environment. Texas stated the proposed requirements are more cumbersome than those for physical documents, and jurisdictions should be given the same latitude for electronic and physical documents. Virginia objected to the requirement that attempts to alter or modify records be tracked. Virginia noted the proposal did not distinguish between authorized and unauthorized modification and that any unauthorized attempt at access should result in denial of access and not creation of a record. AAMVA stated most systems track dates and times on who accessed certain records and asked NHTSA to exercise caution so requirements do not interrupt titling agency business.

Comments supporting NHTSA's decision to not adopt specific system security requirements were submitted by insurers, dealer associations, lender groups, states, and others. Allstate stated that states should have the flexibility to assess systems requirements that ensure information security. Dealer groups NADA, OADA, and NIADA agreed with NHTSA's approach, as did Dealertrack, stating that technology moved too rapidly for effective regulation by rules. NADA and NTSF opined that specific system security requirements would be counterproductive for the same reason. ESRA recommended only general security standards and safeguards be adopted to prevent obsolescence and to empower states adopt systems they determine are most appropriate. CUCTX

also noted states have been, and should be, responsible for maintaining secure electronic title records. Arizona stated specific security standards would be too inflexible. Virginia urged any security requirements be technology neutral to keep pace with changing threats. Texas questioned the need for any security requirements given the strong interest any jurisdiction would have in maintaining the security and integrity of public records. AAMVA also questioned the need for systems security requirements based on the history of states securely maintaining data for many years. In AAMVA's view, specific system security requirements would hinder states in their ability to protect this data rather than enhance it.

5. Odometer Disclosures

NHTSA proposed several changes to § 580.5,

Disclosure of odometer information,

to accommodate electronic odometer disclosures. The proposed amendments sought to ensure the content required in the paper-based disclosure system would be carried forward into an electronic environment. Therefore, where information was required to be entered on the title under the paper system, the NPRM proposed, in 580.5(c), that the same information be entered in “an electronic form incorporated into the electronic title.” Similarly, where notices of potential liability for failing to meet certain requirements are required on paper documents, 580.5(d) of the NPRM proposed the same warnings be provided electronically for electronic transactions. At the same time, differences between an electronic and a paper-based transaction led the agency to propose differing requirements for the two regimes. A requirement that a printed name be affixed to the disclosure on a paper title in § 580.5(f) was not carried forward into the agency proposal for electronic transactions as sufficient means independent of a hand-written signature should be available to identify individuals executing electronic disclosures. Where the paper based system requires the transferee to sign the executed disclosure statement and return a copy to the transferor, § 580.5(f) of the NPRM proposed an electronic system make copies of the executed documents available to the parties.

Comments addressing this portion of the agency's proposal supported the proposed changes. These commenters nonetheless offered observations and corrections, which they believed would better reflect the characteristics of electronic odometer disclosure and electronic title systems and clarify the proposals made in the NPRM. The proposal's directive in 580.5(c) that an odometer disclosure be made on an “electronic form incorporated into the electronic title” led some commenters to observe this nomenclature was inconsistent with any form of electronic disclosure and electronic title system save those that relied on scanning images of documents and storing these documents electronically.

AAMVA observed NHTSA's approach seemed to transform a paper-based disclosure process into an electronic disclosure by simply scanning current documentation—the title, the reassignment, or the power of attorney. The organization stated any reliance on a physical document, whether scanned or not, does not constitute an electronic disclosure system and should not provide the basis for an electronic disclosure system. Instead, AAMVA noted, an electronic disclosure and title record would be data fields making up an electronic record. HCUA offered similar views, urging NHTSA to clarify that database records can be substituted for scanned images of paper titles by state DMVs. NTSF also stated it is important to note states maintain electronic title records as database records and not scanned images of paper titles. The organization contended the proposed rules wrongly indicated title and disclosure documents must exist as embedded replicas of the corresponding paper documents when the actual electronic record would be an actual secure electronic database record of the transaction, including the metadata supporting the authentication of the individual executing the signature, as well as a full audit trail of transactional data. ESRA offered similar comments about the nature of electronic titles and recommended replacing the term “form” with the term “statement” when referring to electronic disclosure documents, and using the term “record” instead of “form” when referring to electronic titles. Texas argued it is paramount that NHTSA recognizes what an electronic process is and allow latitude in their development.

Other comments focused more narrowly. California stated electronic and paper titles will only resemble each other to the extent they contain the same information. Florida and Virginia simply stated they supported the agency proposal to incorporate the odometer disclosure into the electronic title. Texas strongly supported requiring odometer disclosures to be made “on” the electronic title while noting it did not support allowing a separate “electronic” or physical reassignment apart from the electronic title. Because there would be unlimited “space” for mileage disclosure entries in an electronic title system, Texas contended a reassignment process that is not specifically attached to an electronic title should be prohibited. Arizona stated requirements in §§ 580.5(c) and 580.6(a)(7) regarding the use of physical documents for a transfer being conducted electronically appear to conflict and suggested the provisions in § 580.6(a)(7) take precedence with § 580.5(c) being reworded to eliminate the conflict.

The NPRM proposed amending § 580.5(d) to provide the same warnings and notices present on paper odometer disclosure forms also be presented to parties executing an electronic disclosure. As presented in the NPRM, the amendment stated, “the information specified in this paragraph shall be displayed, and acknowledged as understood by the party, prior to the execution of any electronic signatures.” Texas supported including the proposed statements and warnings but contended the electronic signature should be sufficient acknowledgement that statements were read and understood. Therefore, Texas argued against any additional acknowledgement such as a checkbox. IAA observed this language did not provide adequate guidance on the sequence in which the odometer disclosures would be executed and that if neither transferor nor transferee may sign until the acknowledgement by both, it would be difficult to envision the proper sequence of execution.

NHTSA also proposed amending § 580.5(f), which specified transferees receiving a paper odometer disclosure from a transferor must sign the disclosure statement, print their name, and return the signed copy to the transferor. The proposed amendment eliminated the requirement for a printed name in electronic transactions and stated electronic disclosure systems must provide a copy to the parties. With one exception, all commenters responding to this proposal supported elimination of the printed name requirement. California, Florida, Virginia, NADA, NTSF, and AAMVA all supported eliminating the printed name requirement in electronic disclosures, with most also stating identity authentication employed in these systems would make the printed name requirement superfluous. Texas, however, strongly opposed elimination of the printed name requirement, explaining a printed name would still be needed in electronic disclosures when an individual employee of a business executed the disclosure on behalf of their employer. California

opposed the proposal that electronic disclosure systems provide a copy of the executed disclosure statement to the parties. In California's view, states should have the option of choosing whether to make copies available. NADA supported the proposal that systems make copies available as did Texas. Texas also recommended more generic language to require the jurisdiction to make it available.

An additional modification proposed in the NPRM sought to expand the provisions of § 580.5(g) to electronic systems. Section 580.5(g) addresses issues that may arise in sales when a brand-new vehicle has not yet been titled or when an existing title for a used vehicle does not have sufficient space to accommodate multiple disclosures. In such an instance, the section provided that a separate document could be used for the disclosure. To extend this section to electronic disclosures, the NPRM proposed that in jurisdictions with electronic title and odometer disclosure, the system shall provide a means for making the disclosure electronically and incorporating it into the electronic title when the title is created.

Commenters supported this proposal but noted potential difficulties in implementing it. Some commenters suggested states have the option of employing either a paper or an electronic system for these transactions, even where the jurisdiction provided an electronic title and odometer disclosure system. California and Virginia stated they agreed with the proposal. Florida generally supported the concept but observed the ability to use only an electronic means depended on whether the Manufacturer's Certificate of Origin (MCO) is available electronically or only on paper. According to Florida, if a jurisdiction maintains electronic title and odometer disclosure systems but the manufacturer has a paper MCO, the jurisdiction must have a way to capture signatures from this paper document into the electronic system. NADA voiced similar concerns and noted the uncertainty of electronic versions of required documents being available until electronic systems became universal. Texas did not support the requirement for a secure electronic process for these transactions since the paper system does not require use of a secure document, manufacturers control the form of the MCO, and NHTSA did not propose imposing requirements on manufacturers for the MCO.

Texas also suggested clarification to paragraph (g). Texas noted the words “or if the physical title does not contain a space for the information required” are no longer relevant because part 580 requires all issued titles to contain space for the required information. Additionally, Texas recommended the text specify when use of a separate reassignment document is permitted. However, Texas would support allowing (but not requiring) jurisdictions to employ an electronic process.

6. Requirements for Electronic Transactions

Section 580.6, previously reserved for future use, was employed by the NPRM as the vehicle for proposed new regulations establishing requirements for electronic odometer disclosures. These proposals sought to establish fundamental requirements for electronic odometer disclosure systems that would protect against odometer fraud while facilitating smooth and efficient transactions. The proposed regulations address recordkeeping requirements, access to electronic documents, identification of participants, conversion of paper records to electronic records, the potential for simultaneous electronic and paper titles, and the character of any paper documents employed as part of an electronic title system.

The NPRM proposed adding § 580.6(a)(1) requiring any electronic record be retained in a format that cannot be altered and, further, that indicates any attempts to alter it. Commenters addressing this proposal supported it, providing the ban on alterations was limited to unauthorized alterations. AAMVA supported NHTSA's intent to provide a mechanism to track

unauthorized

access and alteration but warned against language that would limit titling agency authority or impede titling agency business. NAAA similarly urged the agency to ensure any final rule include language allowing jurisdictions to employ an error correction mechanism. ESRA again urged the agency to take an “agnostic” approach and allow states to employ reasonable efforts to protect records. NADA similarly cautioned requirements protecting record integrity be practical and appropriate for states, their agents, and all other parties involved. California agreed protections were needed to prevent unauthorized attempts to access and alter information but urged caution against imposing disruptive requirements. Florida requested NHTSA distinguish between authorized and unauthorized alterations while Texas stated jurisdictions be allowed the latitude to maintain electronic records in the fashion they feel is the most secure. Virginia noted the proposal did not separate legitimate corrections from unauthorized alterations but supported security measures, record retention requirements, and audit and review.

Subsection 580.6(a)(2) of the agency's proposal creates a requirement that any electronic signature identify an individual and, further, that if the individual is acting in a business capacity or otherwise on behalf of any other individual or entity, that the business or entity also be identified as part of that unique electronic signature. As explained in the NPRM, the agency believed this requirement is needed both to facilitate identity authentication and to create a record of the individual executing an electronic signature. Commenters voiced opposing views on this proposal. While states and some associations supported it, dealers and vehicle auction organizations were strongly against it. Lender groups, NTSF and HCUA, supported the proposal. AAMVA also supported the proposal, and ESRA stated the requirement represented a best practice. California and Florida offered support without elaboration while Virginia stated it supports signatures applying to an individual and not to an organization. Texas supported the requirement with the proviso that there be no specific requirements on how this is to be accomplished.

NADA stated it had concerns about the proposal for several reasons. The association noted transfers for odometer disclosure purposes do not involve transferees taking title to the vehicle when that transferee is a dealership, wholesaler, insurance company, auction, or a lessee. Therefore, NADA argues the rules must accommodate a process by which odometer disclosures are made on electronic documents without title transferring (reassignments). NADA also questioned why agents acting on behalf of licensed entities should have to sign as individuals if they use the unique identifiers issued to their licensed employer. NADA urged NHTSA to consider adopting two sets of electronic transaction requirements, one for licensed entities such as dealers, distributors, auctions, lessors, lenders, and their agents, and one for private individuals. IAA, a vehicle auction company, stated the proposed rule would, in its case, result in a single employee signing on behalf of a host of vehicle owners bringing their vehicles for sale.

According to IAA, adoption of this requirement would necessitate many thousands of unique electronic signatures, posing a huge burden on the auction company and states processing the signatures. As NADA did, IAA

observed auction houses were state-licensed and subject to state regulation. As such, IAA argued states and licensees should be given the latitude to fashion workable methods for identification. Copart, another auction provider, offered the same observations about the effect of this proposal on businesses that provide a venue for selling large volumes of vehicles for many different owners. The company urged NHTSA to seek a solution allowing various industry stakeholders to develop reasonable methods for signing odometer disclosures. NAAA, a group representing auctioneers, stated the proposal was not workable for bulk processors like their members. In NAAA's view, creating thousands of unique signature credentials for each auction would be both a logistical nightmare and an opportunity for increased fraud. To address these problems, NAAA suggested NHTSA issue a second notice of proposed rulemaking incorporating comments from both industry stakeholders and states before proceeding to a final rule.

The process of executing an odometer disclosure requires notices, warnings, and instructions to be read, information to be supplied by the transferor, acknowledgement and acceptance of the disclosure by the transferee, and, in paper transactions, a copy of the signed disclosure statement must be given to the transferor by the transferee. To enable the needed access to text and other information in electronic disclosure schemes, NHTSA proposed adding § 580.6(a)(3), stating any requirement in the regulations to disclose, issue, execute, return, notify, or otherwise provide information to another person is satisfied when a copy of the electronic disclosure or statement is electronically transmitted or otherwise electronically accessible to the party required to receive the disclosure. Two associations, AAMVA and ESRA, and two states, California and Virginia, commented on this specific proposal. AAMVA opposed the proposal, arguing the responsibility to provide odometer disclosure information resides with the transferee and transferor and should remain there. AAMVA also contended any notification requirements should be transaction-based rather than the process-based individual account method proposed by NHTSA. In AAMVA's view, the NHTSA proposal would impose additional technology requirements on states.

ESRA noted the federal Electronic Signatures in Global National Commerce Act (“ESIGN”) establishes how a consumer may request a paper copy of an electronic record. Arguably, therefore, precedence has been set for permitting vehicle owners to obtain paper copies of e-titling documents, including odometer disclosures, in any state e-titling system. California argued states should not be required to provide the access described, and Virginia stated it had no objections.

NHTSA explained in the NPRM that it expected implementation of electronic titling and odometer disclosure systems would occur slowly, and, for the foreseeable future, both paper and electronic title and disclosure systems would coexist. As evidenced by the petitions for approval filed with the agency, individual states are not likely to shift their entire titling and odometer disclosure systems from paper to electronic systems at one time, and it is inevitable that interstate vehicle sales will involve vehicles moving from one type of jurisdiction to another. The NRPM proposed adding two sections to 580.6 to address the issues posed by the co-existence of paper and electronic systems. Section 580.6(a)(4) proposed requiring that a prior paper title and odometer disclosure be copied electronically for retention by the electronic system state and that the paper document(s) be destroyed at the time they are converted to electronic documents. Further, the electronic copy of the paper title would be retained in a system allowing its retrieval for five years. Section 580.6(a)(6) proposed that states maintaining an electronic title and odometer disclosure system shall retain the capacity to issue physical titles meeting all the requirements of this part. Once a physical title is created by a state with an electronic title and odometer disclosure statement system, the electronic record must indicate a physical title has been issued and the electronic title and disclosure statement have been superseded by the physical title as the official title.

The proposal further provided that electronic title and odometer disclosure systems shall record the date on which the physical title was issued and record the identity of the recipient of the physical title as well as the owner(s) named on the physical title. Two commenters, PCI and ESRA, supported these proposals without substantive comment. AAMVA noted that use of physical documents should be strongly discouraged in an electronic disclosure jurisdiction, but exchanging electronic and paper title records will be necessary. According to AAMVA, an active electronic title record and an active paper title cannot coexist. However, AAMVA noted jurisdictions cannot reliably ensure the destruction of existing physical documents. These paper titles can be invalidated and the record superseded (as is current practice), but the new jurisdiction of record has no control over whether a transferor or transferee destroys the document. AAMVA also stated that because states are currently required to perform a title check prior to title transactions to determine if they have the most current title issued, states already have a process in place to validate that they are not dealing with an out-of-date or superseding title.

NADA concurred in the need for a process to convert “official” e-odometer records to “official” paper records and that only state or their authorized agents should be allowed to do so. In NADA's view, records of such conversions should be retained. Florida stated the proposed rules mirror its current practices as it scans and stores paper titles electronically and converts e-titles to paper for various reasons. According to Florida, it presently stores the history of title conversions from one form to another and invalidates the inactive title while paper titles are printed by Florida or an authorized entity. Florida, nonetheless, requested NHTSA not dictate that only states can print titles in the event future developments allow for other means of producing these secure documents. Florida also noted it would be difficult for states to ensure paper titles are destroyed after conversion to electronic titles and suggested that the rule provide that a prior physical title be destroyed or otherwise rendered void. California noted its procedure for converting paper titles to electronic calls for the paper title to be scanned and stored, and the original is destroyed. However, California felt the five-year storage requirement proposed in § 580.6(a)(4) is burdensome and suggested a four-year requirement. Virginia supported the proposals without substantive comment while Texas also stated the proposals mirrored its current practice. However, Texas also noted jurisdictions cannot control the submission of physical documents and would have to prevent issuance of title until such time the documents were surrendered to comply with the proposals.

An individual providing comments, Lopatka, stated NHTSA should alternatively consider adopting a system by which individual titleholders may create official physical copies of their own records from the electronic system. Mr. Lopatka conceded that allowing individuals to print their own records from the electronic system might reduce the level of security associated with the transaction to some degree but that

allowing them to do so would lessen burdens on states implementing electronic title and disclosure systems.

Based in part on its experience in processing petitions for approval of alternative disclosure schemes, NHTSA also proposed a new § 580.6(a)(5) giving jurisdictions with electronic title and odometer disclosure systems the option of providing vehicle owners with a paper record of ownership, including odometer disclosure information, so long as the document clearly indicates it is not an official title or odometer disclosure for that vehicle. Almost all commenters supported this proposal provided the document issued could not be employed as a counterfeit title. ESRA noted providing a non-negotiable copy of a paper title is a standard practice in some states supporting electronic titling programs today. NADA concurred with the proposal, recognizing that some dealership customers may wish to be provided with paper printouts. NTSF supported the proposal as this practice is currently used in some states with electronic lien and title programs but stated it should not be required. California and Florida also agreed with the proposal if it remains permissive. Virginia opposed using the language “paper record of ownership” because of potential fraud and suggested the term “title receipt.” Texas also supported states having this option provided issuing such a document was discretionary. Lopatka argued against allowing states to provide an unofficial ownership document, stating that merely requiring clear disclosure that the physical copy is an unofficial record may be insufficient to prevent this fraud and abuse.

The agency's NPRM observed electronic title and odometer disclosure systems have the potential to reduce opportunities for odometer fraud by eliminating or reducing the use of paper documents in vehicle transfers. Nonetheless, the agency's experience in processing petitions seeking approval of alternative odometer disclosure schemes demonstrated states may choose to implement electronic title and odometer disclosure systems in ways that will still require the limited use of paper documents. To ensure the security of transactions employing such documents, the NPRM proposed a new section, § 580.6(a)(7), requiring any physical documents used to make odometer disclosures for entry into and electronic title and odometer disclosure system to comply with the existing requirements of part 580. AAMVA agreed to the extent that continued use of physical documents is necessary in an electronic system, any physical documents used must comply with regulatory requirements. NADA did not object to the proposal while California supported it without substantive comment. Arizona observed the requirements in the proposed §§ 580.5(c) and 580.6(a)(7) appeared to conflict and suggested that § 580.6(a)(7) take precedence and § 580.5(c) be reworded to eliminate the conflict. Texas stated that it fully supported this proposal, particularly as it would apply to powers of attorney but encouraged NHTSA to review other sections of its proposed rules because the agency believes other sections may imply such a scenario is not permissible.

Another issue addressed in the NPRM is the need to ensure odometer disclosure records converted from paper to an electronic form do not lose their value in that process. The NPRM therefore proposed such a conversion must maintain and preserve the security features in the document so alterations or modifications can be detected in the electronic version. The proposal, found in § 580.6(a)(8), also required that scanning be made in color at a resolution of 600 dpi.

Comments received in response to this proposal were unanimously opposed to the requirement that scanning be conducted at 600 dpi, and some commenters noted that scanning or imaging need not be in color. Dealertrack stated that a 600 dpi and color scanning requirement are well beyond current industry standards and should be reconsidered. NADA opposed the proposal as unduly burdensome on states and their agents. In NADA's view, NHTSA should adopt a standard that requires no more than a black and white scan of 300 dpi PDF, TIFF, or equivalent. OADA recommended NHSTA not impose any minimum technological standards and instead leave that to the discretion of the individual state motor vehicle administrators. AAMVA contended a 600-dpi scan is excessive, and the NPRM provides no clear evidence or case study to support a high-resolution standard. According to AAMVA, a 600-dpi resolution unnecessarily increases the file size to the point that storage and transmission of title histories sent via email become overly expensive and burdensome. This burden, AAMVA's view, provides no meaningful benefit as documents are but one part of establishing an odometer fraud case.

ESRA stated NHTSA should take a technology and standard-neutral position and allow states to choose reasonable standards. NTSF recommended NHTSA abandon scanning and resolution requirements because of variations in document and font sizes among states. In NTSF's view, states already have appropriate scanning resolution requirements, and NHTSA should leave this issue to state regulation. Arizona stated scanning documents at the NHTSA proposed resolution would adversely affect system performance and impose data storage costs and recommended states retain the ability to balance between system performance and scanned image quality. In Arizona's view, any requirement should be limited to requiring detail sufficient to preserve the features of the original document. California also strongly disagreed with the proposal, contending the standard be left to states and not set above 200 dpi in black and white. Florida echoed the comments of Arizona and California, citing greatly increased storage, transmission, and scanning costs.

According to Florida, color scans are not optimal, and NHTSA should allow states to set their own scanning standards. Texas observed jurisdictions have a strong interest in the accuracy of title records and bear the responsibility for assuring their validity. According to Texas, scanning at the proposed resolution in color produced a loss of visibility to security features, such as the “VOID” watermarks, which are apparent at lower dpi black and white scans. Texas also noted NHTSA did not impose a dpi requirement when approving its petition for alternative disclosure, and Texas had been employing a minimum 200 dpi standard with good results. Texas urged striking any dpi requirement and allowing jurisdictions to ensure the security of their process, particularly as the cost of scanning at the NHTSA-proposed resolution would be prohibitive. Virginia also opposed requiring 600 dpi color scans for cost and feasibility reasons. In Virginia's view, the regulation should not set a dpi standard but noted 300 dpi is reasonable. Lopatka urged the agency to more fully consider if states must scan physical titles with sufficient resolution to preserve security features or if preserving details such as the clarity of the titleholder's signature is sufficient.

The comments submitted by Texas also suggested adding two more subsections to 580.8. One of the subsections would provide an electronic means for completing a transaction where the transferor holds a physical title that has been lost. According to Texas, adding this paragraph, which would authorize the transferor to execute an electronic or physical power of attorney, would save costs and reduce fraud because it would eliminate the

need for the transferee to obtain a physical title, only to transfer it electronically and make disclosure electronically. The second addition put forward by Texas would explicitly state that separate reassignment documents may not be used with an electronic title. Texas explained that because electronic titles have no physical limitation on the number of reassignments that can be incorporated into an electronic title, a separate reassignment document is not needed and should not be allowed. Texas also argued allowing physical reassignment documents with electronic titles could result in increased odometer fraud.

7. Leased Vehicles

Section 580.7 of part 580,

Disclosure of odometer information for leased motor vehicles,

establishes requirements for odometer disclosure for vehicles which, because of their leased status, are physically controlled by a lessee while the lessor holds the title. Because these vehicles are frequently transferred by the lessee to a transferor, this section establishes special procedures to ensure mileage information is provided by the lessee to the lessor. The lessor then executes the odometer disclosure on the title using the information provided by the lessee unless the lessor believes the lessee's mileage information is inaccurate. As NHTSA explained in the NPRM, NHTSA is not aware of any reason why electronic disclosures could not be made for leased vehicles, and the NPRM proposed revisions which would allow lease disclosures to be made on paper documents or electronically. Although the proposal did not require any action on the part of states or other jurisdictions to accommodate electronic disclosures for leased vehicles, the NPRM asked for comments on whether such a requirement should be implemented.

Commenters submitting responses to this portion of the NPRM rejected any suggestion that states or other jurisdictions be required to make any accommodation for leased vehicle disclosures. NTSF recommended this requirement be left up to states implementing electronic odometer system. According to NTSF, specific regulations to be implemented by states may be needed for electronic processing of the practice by which a lessor can obtain an odometer disclosure from the lessee. NIADA also stated electronic disclosures for leased vehicles should be left to states to develop in conjunction with the leasing companies operating in their jurisdiction. NADA did not address the role of states but supported the NHTSA proposal to enable electronic lessor-lessee notices and electronic lessee-lessor disclosures. NADA also stated minimum requirements for these end-of-lease situations should be established because leasing companies have been a significant source of odometer fraud. AAMVA opposed involving states in transactions made between the lessee and the lessor and that a state's only involvement should be to accept completed documents. AAMVA also noted the term “physical document” used in the proposed amendments could create confusion as the proposed definition of this term included a title, reassignment document, or power of attorney. California also indicated leased vehicle transactions should only involve lessors and lessees. Florida noted states were not involved in the leased vehicle disclosure process and should not be compelled to participate now.

As observed by AAMVA, Florida also questioned the use of term “physical document” in the proposed amendments. Texas found the proposal to be particularly concerning. Texas rejected any role for states in this process but observed the use of term “physical document” and language stating leased vehicle disclosure be made within an “electronic document” implicated states (and other title issuing jurisdictions) because of the specific definitions NHTSA proposed for these terms in the proposal. In addition, Texas recommended allowing the lessors to comply with this section without imposing the security requirements proposed by NHTSA as doing so would provide a disincentive to adopting an electronic process. Virginia, unlike any other commenter, supported including electronic disclosures of leased vehicles as part of the electronic system established by a jurisdiction but did not elaborate further.

8. Document Retention

Sections 580.8 and 580.9 include requirements for odometer disclosure record retention by motor vehicle dealers and distributors and by auction companies, respectively. The NPRM proposed to amend these requirements to include electronic copies or electronic documents as an acceptable form of record. The proposal also added a requirement in 580.8 that dealer electronic records must be retained in a format which cannot be altered and which indicates any attempts to alter it.

The comments addressing this proposal questioned whether extending the paper record requirements for dealers and auction houses would be necessary in jurisdictions with electronic title and odometer disclosure systems because these jurisdictions would be required to securely store electronic title and odometer disclosure data. Some commenters also questioned the accuracy of some of the terms proposed in the amendments. California stated the proposals are not needed because it maintains the titling record of a vehicle, to which only authorized access is permitted. Florida supported the proposed amendments but asked NHTSA to reconsider the storage or retention of paper records altogether given state recordkeeping. Texas argued that where jurisdictions facilitated the electronic odometer disclosures needed to create a new title, it would be burdensome for dealers to retain this information. According to Texas, dealers would have to extract the information or require the jurisdiction to provide it, and Texas perceived no benefit from this burden. Texas also contended the requirements for auctioneers proposed by NHTSA were overbroad, particularly in requiring secure storage as auctions only need to log transactions and not store odometer disclosures. Texas also observed that use of the term “physical document” in the proposal was inappropriate as that term is defined by the NPRM. In contrast to other states, Virginia stated records kept by motor vehicle dealers and distributors and by auction companies should be held to the same standard as records maintained by state vehicle administrators. As did California, Florida, and Texas, AAMVA stated the proposed requirements were unnecessary as states systems would provide the required security protocols and data. NADA noted the proposed language changes to § 508.8(a) should similarly be made to paragraphs (b) and (c). In NADA's view, NHTSA should clarify that where electronic records are kept in a centralized state system, the dealer record retention requirements are satisfied to the extent those records are reasonably accessible from their primary place of business. Allstate's comments stated record retention requirements are needed to support the detection and prosecution of odometer fraud but did not elaborate further.

9. Power of Attorney

Prior to this final rule, part 580 contained secure paper power of attorney provisions in §§ 508.13, 508.14, and 580.15 facilitating transactions in cases where the title was lost or physically held by the lienholder. These power of attorney provisions provide an exception to the rule that a single person cannot execute an odometer disclosure as both transferor and

transferee by allowing appointment of that individual to execute odometer disclosures on behalf of the transferor when acquiring the vehicle under § 508.13, and, if transferring the vehicle, on behalf of the new transferee under § 508.14.

The NPRM proposed amending § 580.13(a) and (b), to allow an individual with a vehicle titled in an electronic title state to use a power of attorney to sell a vehicle in a paper title state. Further, because the agency believed a power of attorney or reassignment documents would not be needed in electronic title jurisdictions, the NPRM proposed adding the word “physical” to certain phrases in § 580.13(f), § 580.14(a), (e), and (f), and in § 580.15(a). Along with proposing use of a power of attorney for interstate transfers from electronic to paper jurisdictions, NHTSA specifically requested comments on whether this power of attorney would be necessary in an electronic odometer system for intra-state transfers. The NPRM also sought comment on the feasibility of an electronic power or attorney as well as the implications of variations among states in implementing the power of attorney.

The comments submitted in response to this section in the NPRM identified several issues related to the proposed amendments. Several commenters observed the NPRM's view that a power of attorney would be useful in interstate transactions from an electronic title state to a paper state was flawed. Commenters also offered varying degrees of support for the continued use of the power of attorney in electronic title jurisdictions while others advocated both electronic and paper versions of the power of attorney in jurisdictions with electronic title and odometer systems. Other comments addressed the restriction that the power of attorney could be used only when a title is lost or physically held by a lienholder in the context of contemporary electronic title and lien schemes. Similarly, the status of an electronic title made unavailable because of technical failures led others to advocate expansion of the power of attorney provision in such an instance. Others advocated expanding the power of attorney provisions to facilitate vehicle financing.

States generally argued against restricting power of attorney use to jurisdictions without electronic title systems, advocated electronic and paper power of attorney use and observed that a power of attorney, without more, would not allow completion of an interstate vehicle transfer from an electronic title jurisdiction to a paper title jurisdiction. California agreed electronic disclosure would generally eliminate the need for the power of attorney but urged that the rule should not restrict its use only to a physical document. In California's view, a power of attorney, by itself, is not sufficient to sell a vehicle or otherwise convey ownership and that completing an interstate sale from an electronic to paper jurisdiction would also require a secure title printed on secure paper, with an application for a duplicate title on which the disposition of the original paper title is attested. Florida also agreed the secure power of attorney should not be needed in an electronic title environment but that paper titles will continue to be in use for some time, and the secure power of attorney should remain available to states with e-title systems. According to Florida, electronic powers of attorney would also be needed, even if not used frequently. Oregon noted there is still an issue with state-to-state transactions and will continue to be until all states implement an electronic process and asked if the proposal eliminated the use of the power of attorney with electronic titles. Virginia's comments voiced the same concerns and observations raised by California and Florida while also noting the NPRM does not address how states deny accepting documents from other states.

Texas strongly advocated allowing use of the power of attorney with any electronic title, whether within the same jurisdiction or not. Further, Texas observed electronic lien systems and electronic titles raise the question of whether the power of attorney can be used under the existing restriction that the power of attorney can be used only when a title is lost or physically held by the lienholder. As the title is neither lost or held by the lienholder but resides within state electronic title systems, a transferor must either pay off the loan to release the title prior to the transfer or must use the power of attorney to allow the transferee to complete the odometer disclosure. Texas also urged the power of attorney be permitted in jurisdictions with electronic titles and that electronic powers of attorney be allowed as well and requested there be no limitation to whom a jurisdiction can provide a secure power of attorney. Texas strongly encouraged NHTSA to amend § 580.13(f), which specifies a power of attorney is void if the odometer reading on the power of attorney is lower than on the title. According to Texas, this rule does not address situations where the power of attorney contains a statement from the transferor that the odometer reading is known to be in excess of mechanical limits or is not actual. The preceding circumstances, where the odometer reading on the power of attorney may be lower than that on the title should not, in the view of Texas, void the power of attorney. Texas also asked that this section allow for electronic submission of an original power of attorney by scanning or imaging. As the power of attorney is useful only for a single transfer, Texas requested this change not be accompanied by a requirement that the jurisdiction confirm destruction or invalidation of the document. Finally, Texas requested § 580.16 be amended to specify that a copy of a power of attorney be made available upon request rather than returned and that NHTSA replace the term “purchaser” with “transferee” for consistency.

California, Texas, and AAMVA observed the current language in § 580.13(f) states “. . . [i]f the mileage disclosed on the power of attorney form is lower than the mileage appearing on the title, the power of attorney is void and the

dealer

shall not complete the mileage disclosure on the title.” (emphasis added). These three commenters all observed that because the dealer does not complete the disclosure, the reference to “dealer” in § 580.13(f) should be changed to “transferee” for consistency.

AAMVA also noted the power of attorney process described in the NPRM would not allow completion of a transfer of a vehicle from an electronic title state to a paper title state without the corresponding title. In AAMVA's view, a power of attorney is or would be the appropriate document to transfer ownership. These transactions should be performed on a secure physical title like they are today. AAMVA also urged a secure power of attorney, whether physical or electronic, is needed when the title is electronic because a power of attorney may still be necessary in intrastate transactions within an electronic titling state in instances where the buyer or seller does not have the ability to complete the transaction electronically. As did Texas, AAMVA observed the power of attorney regulations did not provide relief when an electronic title cannot be physically held, and there is no title available for the seller to sign.

Comments provided by the dealer and auctioneer communities supported the continued use of the power of attorney in electronic title and odometer disclosure jurisdictions as well as the availability of both electronic and

secure paper versions of these documents. Additionally, support was also expressed for expanded application of the power of attorney beyond situations where the title is lost or physically held be a lienholder.

NADA noted the power of attorney should be unnecessary for electronic transfers but stated that there will be situations where a power of attorney will continue to be necessary. Therefore, NADA fully supported the use of a power of attorney in situations involving electronic state to physical state transactions when it is impractical for sellers to obtain physical copies of their electronic titles. In addition, NADA stated NHTSA should recognize that physical state to electronic state transfers may also involve lost paper titles or paper titles held by lienholders, and electronic disclosure states should have to provide for a power of attorney. The organization gave the example of a paper state trade-in customer transferring to an electronic state dealership needing to use the power of attorney if the title is lost or held by a lienholder. NADA urged amending §§ 580.13 and 580.14 to accommodate both physical and electronic powers of attorney or, at the least, NHTSA allow “electronic states” to issue physical powers of attorney.

NIADA offered similar comments and supported continued availability of the power of attorney as well as electronic versions of the document. Dealertrack asked the agency to recognize paper and electronic titles and odometer disclosures will both be used for many years and the availability of the power of attorney is essential for commerce. The company also advocated allowing an electronic power of attorney. Copart stated powers of attorney will continue to be necessary for intra-state transfers, particularly if the electronic system is not available during a catastrophic event. IAA asked if NHTSA intended for power of attorney forms only to be submitted to paper title states if their use was not allowed in electronic title and odometer disclosure states. NAAA requested NHTSA consider expanding the availability of the power of attorney to situations where technical problems in an e-title state made electronic titles unavailable. In NAAA's view, a power of attorney should be available to allow transfers to occur during the interval when the e-title is inaccessible.

Lenders and their affiliates also supported broad availability of the power of attorney. NTSF supported the continued use of the power of attorney, including electronic systems allowing for electronic power of attorney forms. CUCTX requested § 580.13 be amended to permit the use of an electronic power of attorney, even when the title is still a physical document. According to CUCTX, if parties to a transaction execute a power of attorney electronically refinancing a vehicle would be expedited. Similarly, CUCTX encouraged NHTSA to amend § 580.13 to expressly provide that financial institutions may be appointed as an agent of either the transferee or transferor to execute documents in these transactions. HCUA also urged the agency to allow that a lienholder may serve as agent of both transferor and transferee and execute the statements on their behalf. In HCUA's view, this is necessary for credit unions involved in the financing of private sales of automobiles. NAFCU also noted the agency should look for areas within part 580, especially § 580.13, to identify how the regulation can be amended to enable the efficient performance of a financial institution's essential duties when facilitating a vehicle sale.

Therefore, NAFCU recommended the regulation be amended to clearly specify that a financial institution can serve as an “agent” for the parties in the transaction.

ESRA's comments acknowledged that an electronic odometer disclosure system would allow most e-titling transactions to occur without a power of attorney. ESRA further stated an odometer disclosure by power of attorney can be made electronically. According to ESRA, if a state requires notarization of such a power of attorney, electronic notarization could be applied, and the form signed electronically, as allowed by ESIGN or the Uniform Electronic Transactions Act (“UETA”).

10. Exemptions

Section 580.17(3) exempts any vehicle which is more than 10 years old from the odometer disclosure requirements. Because the average age of the United States vehicle fleet has been trending upward, the NPRM proposed raising this exemption to 25 years. NHTSA also requested comments on whether this exemption should be eliminated.

The comments responding to this proposal were mixed, with most states supporting the proposal or remaining neutral with some concerns about increased costs. Lenders, insurers, and dealer-related organizations generally opposed the proposal while other groups aligned with consumer protection strongly supported it. Many of the commenters also exhibited concerns about the practicalities of how disclosures would be made and mileage reported when the exemption is changed given the large numbers of vehicles whose titles may already have had their odometer disclosures marked as “exempt” instead of having their mileage reported as set forth in § 580.5(e).

Among the states providing comments to this proposal, California supported raising the exemption to 25 years but not eliminating it. California suggested implementing the change incrementally at one year intervals until the 25-year threshold it attained. Florida noted the NPRM did not discuss why 25 years was proposed and questioned how this could be implemented. Oregon stated changing the exemption from 10 years to 25 years would require computer system reprogramming and result in a higher rejection rate of transactions, which would increase costs. Texas strongly supported proposed change to 25 years or eliminating the exemption. According to Texas, eliminating the exemption would simplify processing and technological requirements. Texas observed NHTSA would have to address the issues raised by currently “exempt” vehicles having no mileage recorded.

According to Texas, a solution to the problems raised by implementation would be to make the change effective when the regulation becomes effective and then phase in the applicability year-by-year over the next 15 years. Alternatively, Texas suggested vehicles exempt at the time of promulgation be grandfathered unless other evidence of false mileage exists. Virginia simply stated it does not oppose raising the exemption to 25 years or eliminating the exemption. AAMVA supported the extension of the exemption beyond 10 years, noting 25 years is consistent an antique vehicle classification in many jurisdictions. AAMVA also noted some states discontinue the issuance of titles at a certain age, such as 15 years. This, AAMVA noted, would leave no title available to carry the odometer disclosure. AAMVA expressed concern on how the change in the exemption would be implemented. At the least, AAMVA recommended any vehicle that does not reflect “actual” mileage in the title record be precluded from obtaining an “actual” mileage brand on the title even if this mileage is disclosed later. Beyond that, AAMVA recommended the rule change phase-in the 25-year exemption, by first applying the requirement to vehicles under 25 years old that are currently subject to odometer reporting.

NADA opposed the proposed change as it would greatly increase disclosure and recordkeeping burdens for transferors, transferees, and states, with no demonstration by NHTSA that vehicles 11 to 25 years-old have become

a “hot bed” for odometer fraud. The organization argued NHTSA could revisit the issue in the future after electronic titling and odometer disclosures provide data on older vehicle odometer fraud but should not act until NHTSA can show changing the exemption will significantly reduce odometer fraud. In NADA's view, this proposal runs contrary to NHTSA's time-honored and well-deserved reputation for being a data driven agency. Moreover, NADA noted the proposal fails to provide for any transition period to account for currently exempt vehicles. In contrast to NADA, dealer association NIADA supported the increase of the exemption to 25 years but urged NHTSA to “grandfather” currently exempt vehicles.

Copart opposed the proposal as an unreasonably high threshold given the average vehicle age is 11 years. Copart also questioned the benefit to be realized in relation to costs imposed by the change on state title systems. Auctioneer IAA argued that mileage as an indicator of condition and value do not apply to older cars or factor into the decisions of those who buy them. According to IAA, the proposed change is not warranted, and the costs of the expansion far outweigh any benefit.

Insurer representative AIA opposed the proposed change arguing the vehicles subject to theft and/or cloning are most often late model high-value vehicles. In AIA's view, the age of vehicles is simply not reason enough to change the existing exemption without a thoughtful discussion of the underlying need to do so. PCI argued against the proposed change stating the value of older vehicles is driven primarily by the appearance and condition of the vehicle, not its mileage. Further, PCI noted the odometers on older vehicles may not be functional, further complicating the process and providing little if any benefit to a purchaser of an older vehicle. PCI suggested if NHTSA believes that a change is necessary, the threshold for the exemption should not be higher than 15 years.

Lender affiliated organization NTSF supported changing the exempt vehicle age from 10 years to 25 years. The NSVRP, a non-profit consumer organization, stated there is no justification to retaining the 10-year recording limit. In NSVRP's view, the older the vehicle, the more likely it is there will be risks to the public from non-disclosure of odometer discrepancies. The organization noted it is likely that most vehicles now on the road are exempt and therefore not covered because of the 10 model years of age cut-off for required reporting. NOTFEA urged NHTSA to adopt the proposal. NOTFEA observed the average vehicle age is now 11.5 years and that operation of vehicles older than 12 years old is expected to increase 15% by 2020. Further, NOTFEA cited a survey indicating drivers were keeping and driving their vehicles more than 100,000 miles and planned on continuing to drive them until 200,000 miles and/or until they stopped running. Participants planned on keeping their vehicles more than 12 years.

According to NOTFEA, a recent odometer fraud investigation revealed a dealer rolled back the odometers on 547 vehicles, and only 134 were not exempt. NOTFEA stated the exempt status of vehicles gave the dealer an opportunity to reduce the mileage and that this dealer removed approximately 26 million miles from the odometers of all the exempt vehicles he sold. According to NOTFEA, this accounted for an approximate fraud loss of $1.2 million and approximately 26 million miles rolled back on 300 vehicles. NOTFEA also offered examples of similar cases involving exempt vehicles. To address the mechanics of implementing the change to the exemption threshold, NOTFEA suggested when the change becomes effective, NHTSA should make it apply only to vehicles less than 10 years old on the effective date.

11. Miscellaneous Amendments

The NPRM proposed various amendments updating the agency's address, removing obsolete text, and conforming the petition for alternative disclosure schemes requirements to the other proposed amendments. These included inserting a new address in §§ 580.10(b)(2) and 580.11(b)(2), deleting the text in § 580.12, and amending § 580.11(a). One commenter, NADA, indicated they supported these proposed amendments.

12. Other Comments

Several commenters addressed issues unrelated to specific proposals in the NPRM as well as other odometer disclosure concerns and issues. Some of these comments related to terms used within part 580. Texas suggested the term “purchasers” in § 580.2 be changed to “transferees” because not all transfers of ownership requiring an odometer disclosure are the result of a purchase and “purchaser” is not defined in part 580. Texas also recommended changing the language “at the time the lessors transfer the vehicle” in § 580.2 to “at the time the lessees return possession of the vehicle to the lessors” to more accurately fix the time when a lessee must make disclosure. AAMVA recommended NHTSA remove references to the term “form” as it relates to electronic odometer disclosure and electronic titles because such disclosures are not made on a paper-based “form.”

AAMVA also asked for clarification on when a power of attorney may be used in conjunction with odometer disclosure. Specifically, AAMVA wanted to know if use by third parties such as lienholders, title services, and auctions signing a non-secure power of attorney permissible. ESRA noted none of the proposed rulemaking provisions address “end of life” of vehicle title processing. In ESRA's view, NHTSA should consider if an odometer disclosure is needed once a vehicle is declared a total loss, and, if so, create an electronic disclosure process for such vehicles.

The NSVRP urged NHTSA to make whatever changes were needed to ensure odometer readings were reported to the correct jurisdiction at every transfer, including dealer-to-dealer transfers. According to NSVRP, gaps in reported mileage occurring when reassignment documents or a power of attorney are used create opportunities for title skipping and false odometer disclosure statement.

Auctioneer representative NAAA argued the proposed rule does not adequately address U.S. and international export rules. According to NAAA, U.S. Customs and Border Protection regulations require vehicles titled domestically be exported with the original certificate of title or a certified copy and destination countries may require original titles for importation. Because the proposed rule requires destruction of paper titles when those titles are converted to electronic titles, NAAA is concerned domestic and foreign customs officials may not be prepared to work with electronic titles and disclosures and that delays in processing requests to create official paper titles may harm vehicle exporters.

Two commenters, Texas and AAMVA, addressed the petition process for establishing alternative odometer disclosure schemes. AAMVA asked that the final rule ensure the petition process remains available while Texas requested § 580.12, which the NPRM proposed to remove and reserve, be used to provide the parameters for rescinding a grant of approval.

Finally, two lender organizations, NTSF and HCUA, recommended electronic odometer systems provide the means for lienholders to electronically

receive the mileage reading for vehicles they intend to finance.

III. Final Rule and Response to Comments

A. Summary of the Final Rule

This final rule adopts the amendments proposed by the NPRM for §§ 580.1, 580.10, 580.11, and 580.12 without substantive change. Minor changes from NPRM proposals include replacing “his” with “their” to achieve gender neutrality throughout part 580 and establishing a definition of “jurisdiction” that encompasses states and territories to replace the term “state” wherever formerly used in part 580. Also for clarity and accuracy, § 580.2 is amended to better describe the status of a vehicle upon termination of a lease, and the term “purchasers” has been replaced with the more accurate and less restrictive term “transferees.” Consistent with the former amendment, the term “dealer” in § 508.13(g) has been changed to “transferee” to reflect that those receiving ownership are not just dealers.

The NPRM proposed facilitating adoption of electronic title and odometer disclosure systems by adapting the existing physical document requirements of part 580 to a broadly defined class of electronic documents. In response to comments criticizing this approach, the final rule contains new definitions for “Access,” “Electronic Power of Attorney,” “Electronic Title,” “Jurisdiction,” and “Printed Name,” and revises the definitions of “Original Power of Attorney,” “Sign or Signature,” and “Transferor.” These more precise definitions are applied throughout part 580 to allow odometer disclosures with both physical and electronic titles and powers of attorney. This final rule also authorizes use of an electronic power of attorney and, provides for electronic reassignments when a transferee is given a paper title by the transferor but does not take title to the vehicle. The definition of “Sign or Signature” includes an electronic signature employing NIST level 2 authentication system or its equivalent, instead of NIST Level 3. The regulations now also more clearly allow authorized modifications to electronic records and recognize that electronic titles and odometer disclosures may be held in a variety of formats. The final rule retains our proposal that an individual signing a disclosure on behalf of a business must identify himself and the business. Also, because technologies such as “pen pads” may be used in electronic titling and odometer disclosure systems and that paper documents may, in some jurisdictions, be employed in an electronic odometer disclosure system, the final rule abandons the NPRM's proposal to delete printed names from electronic transactions. This final rule also substantially relaxes the proposed requirements for scanning documents to allow document conversion in black and white at a resolution of 200 dot per inch (dpi) and recordkeeping requirements in §§ 580.8 and 580.9 provide more options for dealers and relax the rules for auctions. NHTSA now promulgates provisions allowing both electronic and paper powers of attorney if a title is unavailable to a transferor because the title is lost, physically held by a lienholder, electronically controlled by a lienholder or when an electronic title is inaccessible. The exemption rules in § 580.17 are now set so vehicles that are 20 years old or older are exempt from mileage reporting. The final rule also now explicitly establishes how this exemption will be applied to different model years.

B. Supplemental Notice of Proposed Rulemaking (SNPRM)

As noted above, NADA and NAAA, suggested NHTSA issue an SNPRM prior to issuing a final rule while NAMIC and Texas stated NHTSA might consider delaying this final rule. NADA felt that an SNPRM would help to provide more comments and information about interstate transfers. NAAA asked for an SNPRM to explore the effect of any delays inherent in producing paper titles on exporting vehicles. Texas urged delay in issuance so the agency could craft clearer language. NAMIC thought delay would give a greater opportunity for NHTSA and state officials to forge a national electronic titling and odometer disclosure system.

Given the amount of time that has passed since the issuance of the NPRM and the extensive changes made to the agency's original proposal as detailed elsewhere in this notice, NHTSA does not believe that an SNPRM is needed or would provide any added value in addressing the concerns voiced by these commenters. NHTSA shares NADA's concerns about the challenges posed by interstate transactions and has drafted the final rule to provide solutions. Additionally, the agency's approach is to provide as much flexibility as possible while protecting the integrity of mileage disclosures. This approach will allow states to adopt and develop means for addressing different transactions in what will certainly be an evolutionary process. Similarly, the agency believes NAAA's concerns would not be addressed by issuing an SNPRM. States have an interest in meeting the needs of citizens and resident businesses and will likely develop methods for providing paper titles efficiently. The commenters urging delay, Texas and NAMIC, raised entirely different issues. Texas urged delay so better language could be developed. The extensive revisions made to our original proposal signal NHTSA's strenuous effort to do just that. NAMIC's loftier goal, to delay issuance until a national titling system could be developed, would require significant and unacceptable delay in issuing this final rule.

C. Scope of the Final Rule

In considering the breadth of the proposals in the NPRM and the amendments promulgated in this final rule, NHTSA remained mindful of the direction given by Congress in directing that the agency “prescribe regulations permitting any written disclosures or notices and related matters to be provided electronically.” (Section 31205, 126 Stat. 761, Pub. L. 112-141 (2012)). NHTSA notes this direction was unaccompanied by any suggestion that a national electronic title system be created, however laudable that goal may be. Moreover, in enacting section 24111 of the FAST Act authorizing states to create electronic odometer disclosure systems without NHTSA's approval until the effective date of this final rule, Congress also did not offer any indication it supported the creation of a national title system by expansion of NMVTIS or other means. (Section 24111, Pub. L. 114-94 (2015)). However desirable a national electronic title or odometer disclosure infrastructure might be, the agency concluded it has not been tasked with creating such a system. Accordingly, this final rule does not answer to the sentiments expressed by AIA, NAMIC, and Texas that this rulemaking action create such a system.

A secondary scope issue exists to the extent the NPRM contemplated that NHTSA take two approaches to regulating electronic odometer disclosures. As reflected in the NPRM's request for comments, one approach would be to draft a set of detailed and comprehensive regulations creating rules governing technical aspects of system security, identity authentication, interstate communications, and the mechanics of executing transfers. Alternatively, the NPRM posited the agency take a less prescriptive approach aimed at preserving the essential characteristics of odometer disclosure and providing states with the latitude needed to develop electronic systems consistent with their environment. On

the whole, commenters strongly favored NHTSA adopt this less prescriptive approach, noting that rapidly changing technologies and traditional rulemaking are incompatible, that overly restrictive rules would preclude development of electronic systems, and that states have a deeply rooted fundamental interest in erecting and maintaining electronic titling and odometer disclosure systems that are secure, functional, and efficient. The agency concurs in these assessments and believes this less restrictive approach is consistent with the brevity exhibited by Congress in directing the promulgation of this final rule.

D. Definitions

The definitions in this final rule differ significantly from those proposed in the NPRM and remedy some significant shortcomings in our earlier proposal. Commenters identified many issues created by the proposed definitions. In posing the terms “Electronic Document” and “Physical Document” our proposal apparently created an impression that NHTSA's vision of permissible electronic odometer disclosure schemes was limited to instances where the electronic record was nothing more than a scanned or imaged conversion of a paper document. Although it was not NHTSA's intent to erect such a limitation, many commenters noted these terms were inconsistent with many existing systems where electronic titles and odometer disclosures are entries in a database. Commenters also correctly observed the types of documents encompassed by the respective definitions suffered from real or apparent conflicts with other sections of the proposed rules. Some comments addressed the proposed definition of “Sign or Signature” and noted it did not appear to encompass signatures made on “pen pads” or similar devices on which an individual's physical signature is captured electronically. Two commenters, NADA and Texas, also suggested NHTSA modify the definitions section to ensure no doubt exists that the proposed rules apply to any jurisdiction that issues titles, including territories.

As noted, Texas included a “redline” version of the regulatory text proposed in the NPRM along with its substantive comments. Noting first that Texas has already implemented an electronic title and odometer disclosure system known as webDEALER consistent with NHTSA's approval of its petition to implement alternative electronic disclosure requirements and thereby gained valuable experience in a new field, NHTSA examined the changes to the regulatory language proposed by that state. After consideration of the proffered language and the comments addressing concerns about our proposals in this, and other, sections, the agency is incorporating many of the changes suggested by Texas into this Final Rule.

To distinguish between the ability to view an electronic title, power of attorney, and the electronic odometer disclosures incorporated into those records and the ability to modify those records, the final rule adds the definition of “Access” to § 580.3. This definition states “Access” is the authorized display and entry of information into an electronic title or power of attorney in a manner allowing modification of previously stored data. The definition further differentiates “Access” from the mere ability to view information without being able to modify it and distinguishes “Access” from the modification of a record resulting in creation of a new title. Adding this definit

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