— cep
HWQUSI REP ENT ARIVES
RECEINCD
SEVENTEENTH CONGRESS OF THE REPUBLIC ) ye 1 5 AUG 2018
OF THE PHILIPPINES ) DATE:

aide
First Regular Session ) swe, 610
HOUSE OF REPRESENTATIVES, BY:
HB. No. 2937

{ SIG FLAFIOALUNIT
LS AND ‘DEX SERVICE

+
Introduced by Representative H. Harry L. Roql

AN ACT

REQUIRING USED CAR DEALERS TO PROVIDE CONSUMERS WITH A WRITTEN
WARRANTY AGAINST DEFECTS AND REQUIRING PRIVATE SELLERS TO DISCLOSE
ANY KNOWN USE OR SAFETY DEFE(

EXPLANATORY NOTE
‘The Constitution, Article 16, Section 9 states that:

The State shall protect consumers from trade malpractices and from
substandard or hazardous products

‘The recently passed Philippine Lemon Law! declares as policy that:
It is hereby declared the policy of the State to promote full protection to the rights of
consumers in the sale of motor vehicles against business and trade practices which are
deceptive, unfair or otherwise inimical to consumers and the public interest.
‘The State recognizes that a motor vehicle is a major consumer purchase or

investment, Hence, the rights of consumers should be clearly defined, including the
means for redress for violations thereof,

In the Philippines, the purchase of a new car usually carries a manufacturer’s warranty
On the other hand, vendors of used cars do not usually issue any express warranty. While the
new Philippine Lemon Law protects buyers of brand new cars, it’s far more common for used-
car buyers to get stuck with used-cars with defects. A “used car”, also known as a pre-owned
vehicle and second hand car, is a vehicle that previously had one or more owners. Used cars are

usually sold through car dealers, leasing companies, auctions and private party sales

' Republic Act No. 10642, Section 2.


Since brand new cars are still considered prohibitive for the middle class, many resort to
purchasing used cars. Unfortunately, without mechanical expertise, buyers cannot easily
distinguish which used cars have defects. Vendors are not required to disclose the history of the
cars they sell. Thus, many used cars though seemingly in good running condition, could have
been improperly maintained or poorly repaired, been unprofessionally rebuilt after a collision or
tampered with in some manner to conceal high mileage, mechanical defects, corrosion or other
damage. Some of these used lemons are even sold fraudulently, preying on the most vulnerable,
low-income car purchasers of the population.

‘This bill seeks to protect consumers who buy used vehicles from a dealer or private party
It requires dealers to provide consumers with a written warranty against defects that impair the
vehicle’s use or safety, and requires private parties to disclose any known use or safety defects.

Dealer warranties cannot be waived under any circumstances. The dealer must give a
signed, dated, correct copy of the limited used vehicle warranty at the time you purchase the
vehicle. The warranty requires the dealer to repair any defect that impairs the vehicle’s use or

safety. The coverage depends on the mileage of the vehicle at the time of purchase as outlined

below:
Mileage Warranty Period
Less than 64,500 km, 190 days or 6,035 km., whichever comes first
164,500 to 128,746 km. 160 days or 4,023 km., whichever comes first
128,747 to 201,167 km 30 days or 2,012 km., whichever comes first
201,168 km. or over No express warranty



If the true mileage of the vehicle is unknown at the time of the sale, the warranty period

is calculated according to the age of the vehicle as outlined below:

Age of Vehicle Warranty Period

3 years old or less 190 days or 6,035 km., whichever comes first

|More than 3 and less than 6 years old |60 days or 4,023 km., whichever comes first

[More than 6 years old 30 days or 2,012 km., whichever comes first

Though our country allows private enterprises and individuals to enter into contracts
freely, the state should come in when necessary to protect the interests of the consumer, promote

his general welfare and establish standards of conduct for business and industry.?

EW)

H. HARRY L, ROQUE JR.

° This bill was originally filed during the Fifteenth Congress, First Regular Session, and subsequently.
refiled by Miriam Defensor-Santiago during the Sixteenth Congress, Third Regular Session

3


SEVENTEENTH CONGRESS OF THEREPUBLIC _)
OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
HB. No, 29.

Introduced by H. Harry L, Roque Jr.

AN ACT
REQUIRING USED CAR DEALERS TO PROVIDE CONSUMERS WITH A WRITTEN
WARRANTY AGAINST DEFECTS AND REQUIRING PRIVATE SELLERS TO DISCLOSE
ANY KNOWN USE OR SAFETY DEFECTS.

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the “Used Car Lemon Act.”

SECTION. 2. Declaration of Policy. — It is hereby declared the policy of the State to
promote full protection to the rights of consumers in the sale of motor vehicles against sales and
trade practices which are deceptive, unfair or otherwise inimical to the consumers and the public
interest,

The State recognizes that a motor vehicle, including a second-hand one, is a major
consumer purchase or investment. ‘The consumer rights should thus be clearly defined including

the means for redress for violations thereof.

SECTION 3, Definitions. — For the purposes of this Act, the terms:
A. “Consumer” refers to a buyer, other than for purposes of resale, of a motor

vehicle, any person to whom such motor vehicle is transferred during the period of any express


or statutory warranty under this Act applicable to such motor vehicle, and any other person
entitled by the terms of such warranty to enforce its obligations;

B. “Dealer” refers to any person engaged in the business of selling, offering for sale,
or negotiating the retail sale of used motor vehicles or selling motor vehicles as broker or agent
for another, including the officers, agents and employees of such person and any combination or
association of dealers, but not including a bank or other financial institution, or the
commonwealth, its agencies, bureaus, boards, commissions, authorities, nor any of its political
subdivisions. A person shall be deemed to be engaged in the business of selling used motor
vehicles if such person has sold more than three used motor vehicles in the preceding twelve
months;

c. “DTT” refers to the Department of Trade and Industry;

D. “Motor vehicle” refers to any self-propelled four (4)-wheeled road vehicle
designed to carry passengers including, but not limited to, sedans, coupes, station wagons,
convertibles, pickups, vans, sport utility vehicles (SUVs) and Asian utility vehicles (AUVs) but
excepting motorcycles, delivery trucks, dump trucks, buses, road rollers, trolley cars, street
sweepers, sprinklers, lawn mowers and heavy equipment, such as, but not limited to, bulldozers,
payloaders, graders, forklifts, amphibian trucks, cranes and vehicles which run only on rails or
tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural
purposes. Trailers having any number of wheels, when propelled or intended by attachment to a
motor vehicle, shall be classified as separate motor vehicle with no power rating;

E “Private seller” refers to any person who is not a dealer and who offers to sell or

sells a used motor vehicle to a consumer;


wv

F, “Purchase price” refers to the invoice price or the amount of money which the
dealer or retailer actually received for the used motor vehicle, in consideration of the sale of such
brand new motor vehicle;

G. “Repurchase price”, the purchase price, as defined above, less any cash award that
was made by the dealer in an attempt to resolve the dispute and was accepted by the consumer,
and less any refunds or rebates to which the consumer is entitled, plus any incidental damages
not previously reimbursed, including but not limited to the reasonable costs of towing from point
of breakdown to obtain required repairs or to return the vehicle under this section, and the
reasonable costs of obtaining alternative transportation during the applicable warranty period
after the second day following each such breakdown not to exceed five hundred pesos (P'S00.00)

vehicle rental charges for each day in which the cost of such alternative transportation is

reimbursable;
H Secretary” refers to the Secretary of the Department of Trade and Industry;
1. “Used motor vehicle” or “used vehicle”, any motor vehicle as defined above,

previously owned by anyone other than the consumer, which has been driven more than the

limited use necessary in moving or road testing a new vehicle prior to delivery to a consumer

ION 4, Sales accompanied by written warranty
A. No used motor vehicle shall be sold by a dealer to a consumer unless

accompanied by an expres:

written warranty covering the full cost of both parts and labor
necessary to repair a defect existing at the point of sale that impairs the said used motor vehicle’s
safety or use;

B. Dealer warranties cannot be waived under any circumstances



10

12

13

14

15

16

17

18

19

20

22

6. Defects that affect only appearance shall not be deemed to impair safety or use for
the purposes of this section. For the purposes of this section, defect shall include defect,
malfunction or any combination or defects or malfunctions,

Dd, Defects or malfunctions which involve parts or components that are covered or
are warranted under an express warranty issued by the dealer of the used motor vehicle shall be

excluded from this Section if the following conditions have been met:

i. the manufacturer’s warranty has been duly assigned or transferred to the buyer;

ii the manufacturer’s warranty is enforceable according to its terms;

iii, the manufacturer’s warranty is not inconsistent with this section; and,

iv. the seller has assured that the repair authorized by such manufacturer’s express
warranty was made;

E. ‘The terms of the seller’s warranty shall be tolled for any period of time the used

motor vehicle is out of service by reason of repair under the manufacturer’s warranty.

SECTION 5. Duration of warranty. ~ The express warranties required by this section
shall be of the following durations:

A. For a.used motor vehicle which, at the time of sale, has been operated less than
64,500 kilometers, the warranty shall be for ninety days or 6,035 kilometers, whichever occurs
first;

B, For a used motor vehicle which, at the time of sale, has been operated sixty-four
thousand five hundred kilometers (64,500 km) or more, but less than one hundred twenty-eight
thousand and seven hundred forty-seven kilometers (128,747 km.), the warranty shall be for

sixty days or, four thousand and twenty-three kilometers (4,023 km.), whichever occurs first,


10

i

17

18

19

20

C. For a used motor vehicle which, at the time of sale, has been operated one
hundred twenty-eight thousand and seven hundred forty-seven kilometers (128,747 km), or
more, but less than two hundred one thousand and one hundred sixty-eight kilometers (201,168
km.), thirty days or two thousand and twelve kilometers (2,012 km. ), whichever occurs first;

D. If the used motor vehicle’s true mileage is not known, such warranty period shall
be determined by the age of said used motor vehicle in the following manner: a used motor
vehicle three years old or less shall have a warranty as provided in paragraph (A); a used motor
vehicle more than three, but less than six years old, shall have a warranty as provided in
paragraph (B); and a used motor vehicle six years old or more shall have a warranty as provided
in paragraph (C). A used motor vehicle’s age shall be determined by subtracting its model year
from the year in which the warranty holder purchased said used vehicle;

E, The warranty periods established by this section shall be tolled during any period
in which the used motor vehicle is out of service as a result of any repair attempt pursuant to any
warranty created by this section. The applicable warranty period shall be extended thirty days
from the date of completion of any repair required by this section as to the defect repaired if the

warranty would otherwise have expired during such period

SECTION 6. Repair of defect. ~

A. A dealer may repair, within the meaning of this section, either by performing the
repair himself or by arranging and making payment for prompt repair by another,

B. A consumer shall return a vehicle for repair under this section by presenting it to
the dealer no later than five business days after the expiration of the applicable warranty period
and informing him of the defect. Said return period shall be tolled during any time period in

which the consumer has notified the dealer of the defect but cannot reasonably present the


vehicle to the dealer; including, but not limited to, the reason that a used motor vehicle is
inoperable and the dealer refuses to pay the charge to tow said vehicle. The dealer shall
immediately accept return of a vehicle when it is so presented. Said used motor vehicle shall be
deemed out of service commencing the day it is so presented, notwithstanding any dealer’s
failure to accept its return on said day. During the applicable warranty period and the aforesaid
return period, the dealer shall pay the reasonable costs of towing from point of breakdown up to
forty-eight kilometers (48 km.) to obtain required repairs or to return the vehicle to the dealer;

C. Upon return of the used motor vehicle to the consumer after repair, the dealer
shall provide the consumer with a warranty repair receipt describing:

(1) the defect complained of:

(2) the work performed in an attempt to correct such defect and the identity of the

repairer if it is not the dealer; and

(3) the parts replaced in performing such work.

For the dealer to toll the ten business day period as provided in paragraph (D) of this

section said dealer shall attach to each such warranty repair receipt copies of such order

forms, invoices, receipts or other evidence of a parts order and its receipt to evidence his
compliance with this paragraph;

D. If the dealer fails to repair the same defect within three attempts, or if the used
motor vehicle is out of service for more than a cumulative total of ten business days after the
consumer has returned it to the dealer for repair of the same, then the dealer shall accept return of
the vehicle from the consumer and refund the full repurchase price, less a reasonable allowance
for use. A reasonable allowance for use shall ten pesos (P10.00) per kilometer the motor vehicle

has been operated between its sale and the dealer’s repurchase;


E. A consumer shall have the option of retaining the use of any vehicle returned
under the provisions of this section until such time as said consumer has been tendered a full
refund. The use of any vehicle retained by a consumer afier its return to a manufacturer under the
provisions of this section, shall, in instances in which a refund is tendered, be reflected in the
above-mentioned reasonable allowance for use;

F. _ A.used motor vehicle shall not be considered out of service for purposes of the ten
business-day period described hereinabove for any day in which a part necessary to repair a
defect complained of is not in the dealer's possession; provided, however, that the dealer has
ordered the part by reasonable means on the same day on which he knew or should have known
that the part was necessary, except that in no event shall a part’s unavailability operate to toll the
ten business-day period for more than twenty-one days. The applicable warranty period shall be

extended by the number of days a part is unavailable;

SECTION 7. Option of vendor to repurchase vehicle, ~

At any time within the applicable warranty period and after a consumer has complained
of a defect, notwithstanding any objection from the consumer, the dealer shall have the option of
repurchasing a used vehicle and refunding the full repurchase price, less a reasonable allowance
for use. A reasonable allowance for use shall be fifteen cents for each mile the used motor
vehicle had been operated between its sale and the dealer's repurchase.

If the dealer is required to or elects to repurchase a vehicle under the terms of this section,
the consumer and dealer shall cooperate with each other to execute all necessary documents in

order to clear the title of any encumbrances on the repurchased vehicle.


SECTION 8. Private sellers. — A private seller shall clearly disclose to any prospective
buyer, before the sale is completed, all defects the seller knows of which impair the used motor
vehicle’s safety or substantially impair its use. Failure to so disclose known defects shall entitle
the buyer, within thirty days after the sale, to rescind the sale and be entitled to return of all
monies paid to the seller less a reasonable amount for use as defined in clause (iv) of paragraph
(A) subsection (3). A reasonable allowance for use shall be ten pesos per kilometer the motor
vehicle had been operated between its sale and the seller's repurchase.

In any subsequent action by a buyer under this section, it shall be an affirmative defense
in any such action that an alleged defect does not impair the vehicle's safety, or substantially
impair its use, or that it is the result of the buyer’s negligence, abuse, damage caused by accident,

vandalism or attempt to modify the vehicle.

SECTION 9. Implementing Agency and its duties. — The DTI Secretary shall, within
sixty (60) days from the effectivity of this Act, promulgate rules and regulations, including those
of disciplinary nature, to carry out and enforce the provisions of this Act. Further, the DTI shall

be the lead agency in carrying out the provisions of this Act.

SECTION 10. Assistance by other agencies. ~ The DOTC and other agencies, political
subdivisions and local government units, including government-owned and controlled
corporations, shall render such assistance as required by the DTI in order to effectively

implement the provisions of this Act.

SECTION. 11. Penalties. - The dealer adjudged to have violated the provisions in this

act shall be liable to pay a minimum amount of One hundred thousand pesos (P 100,000.00) as



damages to the aggrieved party without prejudice to any civil or criminal liability they and/or the
responsible officer may incur under existing laws.

Any private seller adjudged to have violated the provisions in section 7 shall be liable to
pay a minimum amount of Fifty thousand pesos (P50,000.00) as damages to the aggrieved party
without prejudice to any civil or criminal liability they and/or the responsible officer may incur

under existing laws,

SECTION 12. Other Remedies. — No provision of this Act shall be construed to limit the

remedies available to the dealer or buyer under any other provision of law.

SECTION 13. Separability Clause. ~ If any provision or part hereof is held invalid or
unconstitutional, the same shall not affect the validity and effectivity of the other provisions

hereof.

SECTION 14. Repealing Clause, — All laws, decrees, orders, and issuances, or portions
thereof, which are inconsistent with the provisions of this Act, are hereby repealed, amended or

modified accordingly

SECTION 15. Effectivity Clause, — This Act shall take effect fifteen (15) days after its

publication in the Official Gazette o in two (2) newspapers of general circulation.

Approved,