Document ID: NHTSA-2009-0174-0001
Agency: nhtsa
Document Type: Rule
Title: Petition for Approval of Alternate Odometer Disclosure Requirements
Posted Date: 2009-11-18T05:00Z

[Federal Register: November 18, 2009 (Volume 74, Number 221)]
[Proposed Rules]               
[Page 59503-59508]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no09-22]                         

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket No. NHTSA-2009-0174; Notice 1]

 
Petition for Approval of Alternate Odometer Disclosure 
Requirements

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

ACTION: Notice of initial determination.

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SUMMARY: The State of Texas has petitioned for approval of alternate 
requirements to certain requirements under Federal odometer law. NHTSA 
has initially determined that Texas's alternate requirements satisfy 
Federal odometer law, with limited exceptions. Accordingly, NHTSA has 
preliminarily decided to grant Texas's petition, on the condition that 
before NHTSA makes a final determination, Texas amends its program to 
meet all the requirements of Federal odometer law or demonstrates that 
it meets the requirements of Federal law. This notice is not a final 
agency action.

DATES: Comments are due no later than December 18, 2009.

ADDRESSES: You may submit comments [identified by DOT Docket ID Number 
NHTSA-2008-0116] by any of the following methods:
     Federal eRulemaking Portal: Go to http://
www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility: U.S. Department of 
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room 
W12-140, 1200 New Jersey Avenue SE., between 9 a.m. and 5 p.m. ET, 
Monday through Friday, except Federal holidays.
     Fax: 202-493-2251.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Public 
Participation heading of the Supplementary Information section of this 
document. Note that all comments received will be posted without change 
to http://www.regulations.gov, including any personal information 
provided. Please see the Privacy Act heading below.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if

[[Page 59504]]

submitted on behalf of an association, business, labor union, etc.). 
You may review DOT's complete Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477-78) or you may visit 
http://DocketInfo.dot.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov or the street 
address listed above. Follow the online instructions for accessing the 
dockets.

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

SUPPLEMENTARY INFORMATION:

I. Introduction

    Federal odometer law, which is largely based on the Motor Vehicle 
Information and Cost Savings Act (Cost Savings Act) \1\ and Truth in 
Mileage Act of 1986 (TIMA),\2\ contains a number of provisions to limit 
odometer fraud and assure that the purchaser of a motor vehicle knows 
the true mileage of the vehicle. Under regulations promulgated pursuant 
to provisions in the Cost Savings Act, the transferor (seller) of a 
motor vehicle must provide a written statement of the vehicle's 
mileage, signed and dated by the transferor, to the transferee (buyer) 
at the time of sale. This written statement is generally referred to as 
the odometer disclosure statement. Further, under TIMA, vehicle titles 
themselves must have a space for the odometer disclosure statement and 
States are prohibited from licensing vehicles if the odometer 
disclosure statement on the title is not signed and dated by the 
transferor. In addition, titles must be printed by a secure printing 
process or other secure process. TIMA also contains specific disclosure 
provisions on transfers of leased vehicles. Federal law also contains 
document retention requirements.
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    \1\ Public Law 92-513, 86 Stat. 947, 961 (1972).
    \2\ Public Law 99-579, 100 Stat. 3309 (1986).
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    TIMA's requirements respecting the disclosure of motor vehicle 
mileage when vehicles are transferred or leased apply in a State unless 
the State has in effect alternative requirements approved by NHTSA. A 
State may petition NHTSA for the approval of alternate odometer 
disclosure requirements that apply in lieu of the Federal odometer 
requirements.
    Seeking to implement an electronic vehicle title transfer system, 
the State of Texas has petitioned for approval of alternate odometer 
disclosure requirements under TIMA. The Texas Department of 
Transportation proposes a paperless electronic title transfer scheme. 
Texas' program is similar to the Commonwealth of Virginia's alternate 
odometer disclosure program, which, after notice and comment, NHTSA 
approved on January 2, 2009. 74 FR 643, 650 (January 7, 2009). Similar 
to Virginia's, Texas's proposal does not implicate the provisions of 
federal odometer law related to leased vehicles, disclosures by power 
of attorney where the title is held by a lien holder, or transactions 
involving at least one out-of-State party.
    As discussed below, NHTSA's initial assessment is that the Texas 
program satisfies the requirements for approval under Federal odometer 
law, if Texas amends its program to or shows that its program provides 
for a transferee to obtain a paper title that complies with the 
requirements of TIMA,\3\ incorporates the ``brand'' requirement in its 
electronic titling process (the brand states whether the odometer 
reflects the actual mileage, reflects the mileage in excess of the 
designated odometer limit or differs from the actual mileage and should 
not be relied upon) \4\ and requires dealers to satisfy their 
obligation under Federal law to retain copies of odometer disclosure 
statements that they issue or receive.\5\ This notice proposes that 
NHTSA conditionally grant the Texas petition, subject to its resolution 
of these three concerns to NHTSA's satisfaction.
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    \3\ See Section 408(d)(2)(A)(i) of the Cost Savings Act, as 
added by TIMA, recodified at 49 U.S.C. 32705(b)(3)(A)(i) and 49 CFR 
580.4.
    \4\ See Section 408 of the Cost Savings Act, recodified at 49 
U.S.C. 32705, and 49 CFR 580.5(e).
    \5\ See Section 408 of the Cost Savings Act, recodified at 49 
U.S.C. 32705, and 49 CFR 580.8.
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II. Statutory Background

    NHTSA recently reviewed the statutory background of Federal 
odometer law in its consideration and approval of Virginia's petition 
for alternate odometer disclosure requirements. See 73 FR 35617 (June 
24, 2008) and 74 FR 643 (January 7, 2009). The statutory background of 
the Cost Savings Act and TIMA, and the purposes behind TIMA, are 
discussed at length in NHTSA's Final Determination granting Virginia's 
petition. 74 FR 643, 647-48. A brief summary of the statutory 
background of Federal odometer law and the purposes of TIMA follows.
    In 1972, Congress enacted the Cost Savings Act, among other things, 
to prohibit tampering of odometers on motor vehicles and to establish 
certain safeguards for the protection of purchasers with respect to the 
sale of motor vehicles having altered or reset odometers. See Public 
Law 92-513, section 401, 86 Stat. 947, 961-63 (1972). The Cost Savings 
Act required that the transferor of a motor vehicle provide a written 
vehicle mileage disclosure to the transferee, included several 
provisions relating to tampering with odometers and provided for 
enforcement. See Public Law 92-513, section 408, 86 Stat. 947 
(1972).\6\ In general, the purpose for the disclosure was to assist 
purchasers to know the true mileage of a motor vehicle.
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    \6\ Section 408 stated:
    (a) Not later than 90 days after the date of enactment of this 
Act, the Secretary shall prescribe rules requiring any transferor to 
give the following written disclosure to the transferee in 
connection with the transfer of ownership of a motor vehicle:
    (1) Disclosure of the cumulative mileage registered on the 
odometer.
    (2) Disclosure that the actual mileage is unknown, if the 
odometer reading is known to the transferor to be different from the 
number of miles the vehicle has actually traveled.
    Such rules shall prescribe the manner in which information shall 
be disclosed under this section and in which such information shall 
be retained.
    (b) It shall be a violation of this section for any transferor 
to violate any rules under this section or to knowingly give a false 
statement to a transferee in making any disclosure required by such 
rules.
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    A major shortcoming of the odometer provisions of the Cost Savings 
Act was that they did not require that the odometer disclosure 
statement be on the title. In a number of States, they were on separate 
documents that could be altered easily or discarded and did not travel 
with the title. See 74 FR 644. Consequently, the disclosure statements 
did not deter odometer fraud employing altered documents, discarded 
titles, and title washing. Id.
    Congress enacted TIMA in 1986 to address the Cost Savings Act's 
shortcomings. It amended the Cost Savings Act to prohibit States from 
licensing vehicles after transfers of ownership unless the new owner 
(transferee) submitted a title from the seller (transferor) containing 
the seller's signed and dated statement of the vehicle's mileage, as 
previously required by the Cost Savings Act. See Public Law 99-579, 100 
Stat. 3309 (1986); 74 FR 644 (Jan. 7, 2009). TIMA also prohibits the 
licensing of vehicles, for use in any State, unless the title issued to 
the transferee is printed using a secure printing process or other 
secure process, indicates the vehicle mileage at the time of transfer 
and contains additional space for a subsequent mileage disclosure by 
the transferee when it is sold again. Id. Other provisions created 
similar safeguards for leased vehicles.

[[Page 59505]]

    TIMA added a provision to the Cost Savings Act, allowing States to 
have alternate requirements to those required under TIMA respecting the 
disclosure of mileage, with the approval of the Secretary of 
Transportation. It amended Section 408 of the Cost Savings Act as 
follows:

    (f)(1) The requirements of subsections (d) and (e)(1) respecting 
the disclosure of motor vehicle mileage when motor vehicles are 
transferred or leased shall apply in a State unless the State has in 
effect alternate motor vehicle mileage disclosure requirements 
approved by the Secretary. The Secretary may promulgate regulations 
establishing procedures for the consideration and approval of such 
alternate requirements.
    (2) The 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.

    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 section 40, 102 
Stat. 2805, 2817 (1988), which added Section 408(d)(2)(C). In 1990, 
Congress amended section 408(d)(2)(C) of the Cost Savings Act. The 
amendment addressed retention of powers of attorneys by States and 
provided that the rule adopted by the Secretary not require that a 
vehicle be titled in the State in which the power of attorney was 
issued. See Public Law 101-641 section 7(a), 104 Stat. 4654, 4657 
(1990).
    In 1994, in the course of the recodification of various laws 
pertaining to the Department of Transportation, the Cost Savings Act, 
as amended, was repealed, reenacted and recodified without substantive 
change. See Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387 
(1994). The odometer statute is now codified at 49 U.S.C. 32701 et seq. 
In particular, Section 408(a) of the Cost Savings Act was recodified at 
49 U.S.C. 32705(a). Sections 408(d) and (e), which were added by TIMA 
(and later amended), were recodified at 49 U.S.C. 32705(b) and (c). The 
provisions pertaining to approval of State alternate motor vehicle 
mileage disclosure requirements were recodified at 49 U.S.C. 32705(d).

III. Statutory Purposes

    As discussed above, the Cost Savings Act, as amended by TIMA in 
1986, contains a specific provision on approval of State alternate 
odometer disclosure programs. Subsection 408(f)(2) of the Cost Savings 
Act (recodified in 1994 to 49 U.S.C. 32705(d)) provides that NHTSA 
``shall approve alternate motor vehicle mileage disclosure requirements 
submitted by a State unless [NHTSA] determines that such requirements 
are not consistent with the purpose of the disclosure required by 
subsection (d) or (e) as the case may be.'' (Subsections 408(d), (e) of 
the Cost Savings Act were recodified to 49 U.S.C. 32705(b) and (c)). In 
light of this provision, we now turn to our interpretation of the 
purposes of these subsections, as germane to Texas's petition.\7\
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    \7\ Texas's petition does not address disclosures in leases or 
disclosures by power of attorney. In view of the scope of Texas's 
petition, Texas will continue to be subject to current federal 
requirements as to leases and disclosures by power of attorney, and 
we do not address the purposes of the related provisions.
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    Our Final Determination granting Virginia's petition for alternate 
odometer disclosure requirements, after notice and comment, identified 
the purposes of TIMA germane to petitions for approval of certain 
alternate odometer disclosure requirements.\8\ 74 FR 643, 647-48 
(January 7, 2009). These purposes are summarized below.
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    \8\ Since Virginia's program did not cover disclosures in leases 
or disclosures by power of attorney, the purposes of Sections 
408(d)(2)(C) and 408(e) of the Cost Savings Act, as amended, were 
not germane and were not addressed in the notice approving the 
Virginia program. See 74 FR 647 n. 12.
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    One purpose of TIMA was to assure that the form of the odometer 
disclosure precluded odometer fraud. 74 FR 647. To prevent odometer 
fraud facilitated by disclosure statements that were separate from 
titles, TIMA required mileage disclosures to be on a secure vehicle 
title instead of a separate document. These titles also had to contain 
space for the seller's attested mileage disclosure and a new disclosure 
by the purchaser when the vehicle was sold again. This discouraged 
mileage alterations on titles and limited opportunities for obtaining 
new titles with lower mileage than the actual mileage. Id.
    A second purpose of TIMA was to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title, and a requirement for 
the title issued by the State. 74 FR 647. This provision was intended 
to eliminate or significantly reduce abuses associated with lack of 
control of the titling process. Id.
    Third, TIMA sought to prevent alterations of disclosures on titles 
and to preclude counterfeit titles through secure processes. 74 FR 648. 
In furtherance of these purposes, in the context of paper titles, under 
TIMA, the title must be set forth by means of a secure printing process 
or protected by ``other secure process.'' \9\ Id.
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    \9\ Congress intended to encourage new technologies by including 
the language ``other secure process.'' The House Report accompanying 
TIMA noted that ```other secure process' is intended to describe 
means other than printing which could securely provide for the 
storage and transmittal of title and mileage information.'' H.R. 
Rep. No. 99-833, at 33 (1986). ``In adopting this language, the 
Committee intends to encourage new technologies which will provide 
increased levels of security for titles.'' Id. See also Cost Savings 
Act, as amended by TIMA, Sec.  408(d), recodified at 49 U.S.C. 
32705(b).
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    Another purpose was to create a record of the mileage on vehicles 
and a paper trail. 74 FR 648. The underlying purposes of this record 
and paper trail were to enable consumers to be better informed and 
provide a mechanism through which odometer tampering can be traced and 
violators prosecuted. TIMA's requirement that new applications for 
titles include the prior owner's signed mileage disclosure statement on 
his or her title creates a permanent record that is easily checked by 
subsequent owners or law enforcement officials. This record provides 
critical snapshots of the vehicle's mileage at every transfer, which 
are the fundamental links of this paper trail.
    Finally, the general purpose of TIMA was to protect consumers by 
assuring that they received valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer disclosures. 
Id.

IV. The Texas Petition

    Because it seeks to implement an electronic title transfer system, 
Texas petitions for approval of alternate odometer disclosure 
requirements. The scope of its petition is limited; Texas does not 
request alternate disclosure requirements for leased vehicles, 
disclosures of odometer statements by power of attorney, such as for 
vehicles subject to a lien, or transactions involving at least one out-
of-State party.
    Texas proposes maintaining electronic records of titles in the 
Texas Department of Transportation (TxDOT), Division of Vehicle Title 
and Registration (VTR) computer system. According to Texas's petition, 
the ``title'' will reside as an electronic record with the TxDOT, but 
that ``hard'' copies of the title can be generated if needed.
    The petition also states that the proposed system would require 
sellers to accurately disclose vehicle mileage and allow buyers to 
record, view and acknowledge receipt of the disclosure through a secure 
on-line transaction

[[Page 59506]]

with TxDOT using the TexasOnline Authentication Service (TOAS). TOAS is 
described as a secure identity verification service that establishes 
electronic signatures by authenticating individuals against a database. 
TOAS allows TexasOnline to collect user data, which it matches four 
personal data elements and two forms of identification submitted by the 
user against the TexasOnline Authentication Database (TOAD) \10\ to 
authenticate and verify the identity of the user. TOAD data elements 
include: A Texas driver license or identification card number; current 
driver license or identification card audit number; date of birth; and 
the last four digits of the individual's social security number.
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    \10\ Currently, TexasOnline permits users to perform several 
services online, such as renewal of driver licenses, voter 
registration address changes, and ordering driving records. The term 
``electronic signature'' means an electronic sound, symbol or 
process, attached to or logically associated with a contract or 
other record and executed or adopted by a person with the intent to 
sign the record. 15 U.S.C. 7006(5) (2004).
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    A purchaser or seller cannot access the proposed electronic title 
system unless the purchaser's or seller's identity, and status as a 
Texas resident, holding a valid Texas driver's license or 
identification card, is authenticated by TOAS. Therefore, the Texas 
petition asserts that out-of-state parties would be unable to initiate 
an electronic title transfer in an on-line transaction with TxDOT.
    Under Texas's proposal, completing a motor vehicle sale would 
require that the seller (transferor) and the purchaser (transferee) 
perform several steps. First, the seller's identity must be 
authenticated using TOAS. Once authenticated, the seller can access the 
TxDOT VTR Registration and Titles System (VTR system). The seller then 
selects a ``transfer of ownership'' transaction and enters the Vehicle 
Identification Number (VIN). The vehicle's information is automatically 
populated on the screen. The transferor is prompted to enter the 
vehicle sales price and odometer reading.\11\ After entering this data, 
the VTR system will provide the transferor with a unique transaction 
number. The transferor must provide the unique transaction number to 
the transferee to complete the transaction.
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    \11\ Texas does not address the brand requirement. Under the 
Cost Savings Act, a person transferring ownership must provide 
written disclosure that the actual mileage is unknown, if the 
transferor knows that the odometer reading is different from the 
number of miles the vehicle has actually traveled. See 49 CFR 
590.5(e).
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    The transaction would remain in ``pending'' status until the 
transferee logs on to complete the transfer of ownership transaction. 
Meanwhile, the VTR system would automatically check the odometer 
reading entered by the transferor against VTR odometer records. If the 
odometer reading entered by the transferor is lower than in the State's 
records, the transaction will be immediately rejected.
    Once transferees log on to TexasOnline and are authenticated, TOAS 
will transfer them to the TxDOT VTR system where they can select 
``vehicle transfer of ownership'' and enter the unique transaction 
number obtained from the transferor. The transferee must enter the 
correct transaction number to continue. Once access is obtained, the 
transferee would verify the sales price and odometer reading entered by 
the transferor. If all the data entered by the transferor is verified 
and acknowledged as correct by the transferee, ownership of the vehicle 
would pass to the transferee and an electronic title record would be 
established by the VTR system. The VTR system would then contact the 
transferor and request that the transferor's original paper title be 
mailed to the VTR for destruction.\12\
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    \12\ According to the Texas petition, the previous title, 
regardless if it were electronic or paper, would be superseded by 
the ``new'' electronic title. The ``old'' title is invalidated in 
the VTR system and would be unable to transfer title in Texas.
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    If the transferee does not agree with the information entered by 
the transferor, then the VTR system will reject the transaction. The 
transferor will have the opportunity to correct the sales price and 
odometer reading for the rejected transaction. The transferee would 
then re-verify the information to ensure the accuracy. A second 
discrepancy would result in cancellation of the electronic transaction.
    Texas's petition states that the same process, along with 
additional safeguards, will be used in dealer assignments and 
reassignments of vehicle ownership. According to Texas, such safeguards 
include requiring the dealership to notify VTR of the employees 
authorized to do titling activities for the dealership.\13\ This 
authorization will be stored in the TxDOT VTR system. To complete a 
transaction, the authorized employee will be required to enter his or 
her authorization number and the dealer number.
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    \13\ Texas does not address the dealer retention requirements as 
set forth in 49 CFR 580.8(a), which requires dealers and 
distributors to retain a copy of odometer disclosure statements that 
they issue and receive for five years. It is unclear whether Texas's 
program includes a mechanism for the dealer or distributor to retain 
a copy of any odometer disclosure statement involved in a 
transaction.
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    Texas's petition asserts that its proposed alternate odometer 
disclosure is consistent with Federal odometer law. As advanced by 
TxDOT, Texas's alternative ensures that a fraudulent odometer 
disclosure can readily be detected and reliably traced to a particular 
individual by providing a means for TxDOT to validate and authenticate 
the individuals through the electronic signatures of both parties. As 
described above, the parties' electronic signatures are established and 
their identities authenticated through the four TOAD data elements, 
Texas driver's license, driver's license audit number, date of birth 
and last four digits of social security number. TOAS then verifies the 
identity of the transferor and transferee through the submission of the 
required information. To conduct any transaction, both the transferor 
and transferee will have to authenticate their identity by submitting 
the correct data elements.
    Texas also asserts that its proposal provides a level of security 
equivalent to that of a disclosure on a secure title document and 
provides an on-line authentication for identity management solution in 
lieu of an actual signature on the title. Furthermore, Texas states 
that the electronic odometer disclosure provided by the transferor will 
be available to the transferee at the time ownership of the vehicle is 
transferred.
    The Texas petition maintains that the electronic record and 
signature components of the proposal comport with the Electronic 
Signatures in Global and National Commerce Act (E-Sign), 15 U.S.C. 7001 
et seq. Current State law permits the creation of electronic 
certificates of title, but requires a paper certificate of title for 
all transfers of vehicle ownership. Tex. Transp. Code Ann. Sec.  
501.117. If its proposal were approved, Texas could pass pending 
legislation that would implement an electronic title system.

V. Analysis

    Under TIMA, NHTSA ``shall approve alternate motor vehicle mileage 
disclosure requirements submitted by a State unless [NHTSA] determines 
that such requirements are not consistent with the purpose of the 
disclosure required by subsection (d) or (e) as the case may be.'' The 
purposes are discussed above, as is the Texas alternative. We now 
provide our initial assessment whether Texas's proposal

[[Page 59507]]

satisfies TIMA's purposes as relevant to its petition.\14\
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    \14\ Texas would continue to be subject to all federal 
requirements that are not based on Section 408(d) of the Cost 
Savings Act as amended, recodified at 49 U.S.C. 32705(b).
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    One purpose is to assure that the form of the odometer disclosure 
precludes odometer fraud. In this regard, NHTSA has initially 
determined that Texas's proposed alternate disclosure requirements 
satisfy this purpose. Under Texas's proposal, it appears that the 
``title'' will reside as an electronic record with the TxDOT, but a 
hard copy of the title will be generated upon request. Texas's proposed 
system will, therefore, continue to have the odometer disclosure on the 
virtual ``title'' itself, as required by TIMA, and not as a separate 
document. As to TIMA's requirement that the title contain a space for 
the transferor to disclose the vehicle's mileage, NHTSA does not 
believe the proposed Texas electronic title is inconsistent with the 
space requirement. The agency, however, expects that hard copies of 
these electronic titles will provide a separate space for owners to 
execute a proper odometer disclosure in keeping with TIMA and current 
practice.
    Another purpose of TIMA is to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title and a requirement for 
the title issued by the State. NHTSA has initially determined that 
Texas's proposed process satisfies this purpose. The proposed on-line 
title transfer process requires disclosure of odometer information 
before the transaction can be completed. If the transaction is 
successful, the VTR system will retain an electronic title, which 
includes a record of the transaction and the odometer disclosure 
information. Once the transaction is complete, transferors are 
instructed to mail the existing title to the VTR for destruction.\15\
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    \15\ If the transferor does not return the existing title to 
VTR, the existing title will be invalid once the vehicle transfers 
to the transferee.
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    Another purpose of TIMA is to prevent alterations of disclosures on 
titles and to preclude counterfeit titles through secure processes. The 
agency has initially determined that VTR's alternate disclosure 
requirements appear to be as secure as current paper titles. Electronic 
recording of odometer readings and disclosures decreases the likelihood 
of any subsequent odometer disclosure being altered by erasures or 
other methods. As we understand Texas's proposal, once the transaction 
is completed, the VTR system stores an electronic version of the title 
until the transferee requests it.
    Under the VTR system, all subsequent transfers may be performed 
through the on-line process. Each time an on-line transfer occurs, the 
VTR system stores the electronic version of the title, and issues a 
paper title only upon request. Since the title remains in electronic 
form under State care and custody, the likelihood of an individual 
altering, tampering or counterfeiting the title is significantly 
decreased. These electronic records are maintained in a secure 
environment and any attempted alteration would be detected by the 
system. Finally, if a transferee requests a paper title, the VTR will 
issue a paper title, but the Texas submission does not state that the 
paper title will comply with TIMA requirements, which it must.
    Another purpose of TIMA is to create a record of the mileage on 
vehicles and a paper trail. The underlying purposes of this record 
trail are to enable consumers to be better informed and provide a 
mechanism through which odometer tampering can be traced and violators 
prosecuted. In NHTSA's preliminary view, the proposed electronic title 
transfer system will create a scheme of records equivalent to the 
current ``paper trail'' now assisting law enforcement in identifying 
and prosecuting odometer fraud. Under the Texas proposal, creation of a 
paper trail starts with the establishment of the electronic signatures 
of the parties. Due to the system's procedures for validating and 
authenticating the electronic signature of each individual through TOAS 
and TOAD, the electronic signatures of the transferor and transferee 
are reliable, readily detectable and can easily be linked to particular 
individuals.\16\ Because the electronic signature consists of data 
elements such as the Texas driver license or identification card 
number, driver license or identification card audit number, date of 
birth and last four digits of the individual's social security number, 
the VTR system can validate and authenticate individual electronic 
signatures. This authentication process also allows the VTR system to 
trace the individuals involved in the transaction. This capacity 
maintains the purposes of creating a paper trail since the VTR system 
will have histories of odometer disclosures for each title transfer. 
These electronic records will create the electronic equivalent to a 
paper based system that will be readily available to law enforcement. 
The one exception is that the program does not require dealers to 
retain a copy of all odometer disclosures that they issue and receive.
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    \16\ Electronic signatures are generally valid under applicable 
law. Congress recognized the growing importance of electronic 
signatures in interstate commerce when it enacted the Electronic 
Signatures in Global and National Commerce Act (E-Sign). See Public 
Law 106-229, 114 Stat. 464 (2000). E-Sign established a general rule 
of validity for electronic records and electronic signatures. 15 
U.S.C. 7001. It also encourages the use of electronic signatures in 
commerce, both in private transactions and transactions involving 
the Federal government. 15 U.S.C. 7031(a).
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    Finally, TIMA's overall purpose is to protect consumers by assuring 
that they receive valid representations of the vehicle's actual mileage 
at the time of transfer based on odometer disclosures. Here, Texas's 
proposed alternate disclosure requirements include several 
characteristics that would assure that representations of a vehicle's 
actual mileage would be as valid as those found in current paper title 
transfers, with one exception. These characteristics include identity 
and residency authentication, an automatic system check of the reported 
mileage against previously reported mileage, and transferee 
verification of the data reported by the transferor.\17\ In addition, 
by providing rapid access to records of past transfers, the scheme 
proposed by Texas could potentially provide superior deterrence to 
odometer fraud when compared to the current paper title system. The one 
exception is that Texas's alternate disclosure requirements do not 
require the transferor to state whether the odometer reflects the 
actual mileage or if the actual mileage is unknown. See 49 CFR 
580.5(e). This statement is referred to as the ``brand.''
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    \17\ Further protection is provided by the VTR system itself. 
The system automatically cross references the odometer reading 
entered by the transferor against the odometer reading on the VTR 
system. If the odometer reading entered by the transferor is lower 
than the mileage recorded in the VTR system, the VTR system will 
immediately reject the transaction.
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VI. NHTSA's Initial Determination

    For the foregoing reasons, NHTSA preliminarily grants Texas's 
proposed alternate disclosure requirements on the condition that Texas 
amends its program to enable transferees to obtain a paper copy of the 
title that meets the requirements of TIMA, requires dealers to retain a 
copy of all odometer disclosures that they issue and receive, and 
requires disclosure of the brand, or demonstrates that these 
requirements are met. This is not a final agency action. NHTSA invites 
public comments within the scope of this notice. Should NHTSA decide to 
issue a final grant of Texas' petition, it would likely reserve the 
right to rescind that grant in the event that information acquired 
after

[[Page 59508]]

that grant were to indicate that, in operation, Texas alternate 
requirements do not satisfy applicable standards.

Request for Comments

How Do I Prepare and Submit Comments?
    Your comments must be written and in English. To ensure that your 
comments are filed correctly in the Docket, please include the docket 
number of this document in your comments.
    Your comments must not be more than 15 pages long (see 49 CFR 
553.21). We established this limit to encourage you to write your 
primary comments in a concise fashion. However, you may attach 
necessary additional documents to your comments. There is no limit on 
the length of the attachments.
    Please submit two copies of your comments, including the 
attachments, to Docket Management at the address given under ADDRESSES.
    You may also submit your comments to the docket electronically by 
logging onto the Dockets Management System Web site at http://
dms.dot.gov. Click on ``Help & Information,'' or ``Help/Info'' to 
obtain instructions for filing the document electronically.
How Can I Be Sure That My Comments Were Received?
    If you wish Docket Management to notify you upon its receipt of 
your comments, enclose a self-addressed, stamped postcard in the 
envelope containing your comments. Upon receiving your comments, Docket 
Management will return the postcard by mail.
How Do I Submit Confidential Business Information?
    If you wish to submit any information under a claim of 
confidentiality, you should submit three copies of your complete 
submission, including the information you claim to be confidential 
business information, to the Chief Counsel, NHTSA, at the address given 
above under FOR FURTHER INFORMATION CONTACT. In addition, you should 
submit two copies, from which you have deleted the claimed confidential 
business information, to Docket Management at the address given above 
under ADDRESSES. When you send a comment containing information claimed 
to be confidential business information, you should include a cover 
letter setting forth the information specified in our confidential 
business information regulation (49 CFR Part 512).
Will The Agency Consider Late Comments?
    We will consider all comments that Docket Management receives 
before the close of business on the comment closing date indicated 
above under DATES. To the extent possible, we also will consider 
comments that Docket Management receives after that date. If Docket 
Management receives a comment too late for us to consider it in 
developing the final rule, we will consider that comment as an informal 
suggestion for future rulemaking action.
How Can I Read the Comments Submitted by Other People?
    You may read the comments received by Docket Management at the 
address given under ADDRESSES. The hours of the Docket are indicated 
above in the same location.
    You also may see the comments on the Internet. To read the comments 
on the Internet, go to http://www.regulations.gov, and follow the 
instructions for accessing the Docket.
    Please note that even after the comment closing date, we will 
continue to file relevant information in the Docket as it becomes 
available. Further, some people may submit late comments. Accordingly, 
we recommend that you periodically check the Docket for new material.

    Issued on: November 6, 2009.
O. Kevin Vincent,
Chief Counsel.
[FR Doc. E9-27157 Filed 11-17-09; 8:45 am]

BILLING CODE 4910-59-P