Tuesday, 29 March 2016 12:00

MD House Bill Debate Over OEM & Aftermarket Parts, Stakeholders Speak

Update:

On Friday, March 18, Rick Impallaria from the Maryland House of Delegates withdrew House Bill 1258 after it received an unfavorable report in a House Economic Matters Subcommittee. 

A controversial bill in Maryland, addressing the type of collision parts being used during a repair, was presented at a committee hearing March 10 in front of state delegates.

Representatives from the collision repair industry testified about whether to put restrictions on the use of OEM and aftermarket parts. This has been a recurring debate in Maryland, as well as across the United States.

Maryland House Bill 1258 would have required insurance companies to pay for the use of car company-branded parts (OEM parts) for repairs made during the first two years after a vehicle’s date of manufacture. For vehicles older than two years, the bill would limit repairs to either “certified” parts or original manufacturer parts. Regardless of the vehicle’s manufacture date, an insured motorist may consent in writing that he or she would like to use aftermarket crash parts or non-certified aftermarket crash parts.

Rick Impallaria from the Maryland House of Delegates introduced the bill—Motor Vehicle Liabiity Insurance—Replacement Parts for Damaged Motor Vehicles—on February 12. He used metaphors like the now familiar Rolex watch and coffee spills on white shirts to make the point: “The quality of what you get is important,” said Impallaria during the hearing. “It really matters with the quality of the project you are working on and what the public expects to get back.”

Those who spoke in favor of HB 1248 during the hearing included: Jordan Hendler, executive director of the Washington Metropolitan Auto Body Association (WMABA); Mark Schaech Jr., president of WMABA; Jack Gillis, executive director of the Certified Automotive Parts Association (CAPA); and Travis Martz, director of government & industry affairs for the Maryland Automobile Dealers Association.

As the executive director of WMABA, Hendler said she represents 1,000 independently-owned businesses in Maryland. “We enjoy in Maryland one of the lowest costs of repair there is in this country and this, in our opinion, is just a measure to protect the consumers [and] give them the best opportunity of the right parts being put back on their vehicle,” said Hendler. “If there were to be an effect in insurance premiums, there are many insurance companies currently with this practice in place and we feel that it’s morally obligating to the remainder of the insurance companies to do the same thing.”

Schaech, president of WMABA, runs a family-owned collision center in Baltimore. The 40-year-old business is certified by 14 manufacturers. “When I have a customer come through the door, generally, regardless of the age of the vehicle, an insurance company usually only reimburses for aftermarket parts,” said Schaech. “Those aftermarket parts are usually the cheapest aftermarket parts available so if a customer is in a lease, which in our facility is 40 percent of the time, they are required to use genuine OEM parts, and in those cases, are forced to pay the difference. In my 18 years in the business as a technician, and as a shop owner, I can tell you that the parts are not equivalent; they are not the same.”

Gillis spoke during the hearing on behalf of CAPA “…to testify in favor of HB 1248 to protect Maryland consumers from both overpriced parts and poor quality repair parts.”

Through a consensus-based technical committee involving manufacturers, collision repairers, parts distributors and insurers, Gillis said CAPA develops objective standards to test which aftermarket parts are functionally equivalent to the car company parts they replace.

“The overarching problem facing Maryland consumers is the cost of getting our cars repaired,” said Gillis. “In addition to the need for competitively-priced parts, there is the concern about repairing cars with poor quality parts. By defining a program that identifies parts that are functionally equivalent to the car company brand parts, HB 1258 complements the consumer protections inherent in competition with protection from poor quality parts.”
Martz also spoke in favor of HB 1258, on behalf of the Maryland Automobile Dealers Association, which represents 300 franchise owners.

Those who testified against the proposed state law included Bruce Bereano, a Maryland lobbyist, Jim Lohan and Marcel Hoover of LKQ and Ray Colas with LKQ government affairs.
Strongly opposed to the legislation, Bereano spoke on behalf of LKQ-Keystone. “This is not a bill to protect the consumer,” said Bereano. “This is not a bill for disclosure to the consumer. It certainly is not a bill for competition. It is a bill for a two-year monopoly.”

Lohan, who represents 186 employees in Maryland and has 50 drivers delivering aftermarket parts on a daily basis, said he is strongly opposed to the bill.

Hoover runs the LKQ facility in Frederick, Maryland and also opposes the bill. He said for over 30 years they have offered consumers and businesses a reputable and economical alternative to expensive OEM parts.

“It unfairly discriminates against the use of aftermarket parts while supposedly protecting consumers,” said Hoover. “It doesn’t really benefit the citizens of Maryland as I see it. This bill limits consumer choice, inflates consumer costs and is unnecessary and will result in increased economic burden on Maryland consumers.”

He said that aftermarket parts are safe and added that the National Highway Traffic Safety Administration (NHTSA) has not found an increase in safety issues with the use of aftermarket crash parts listed in the bill.

Colas is with LKQ government affairs. “We feel that current law does provide consumer choice,” he said during the hearing.

“They [collision repairers] are in business today because we enable them to repair their vehicle. In terms of total loss calculation, we keep vehicles on the road; we allow them to repair vehicles. If we were not here to provide that type of service, you would have more total loss vehicles and they would not be able to repair those vehicles and that’s why they are our customers today.”

The Automotive Body Parts Association (ABPA) has denounced and expressed concern over the proposed legislation 

“Senate Bill 1258 is only good for car companies, giving them a virtual monopoly on parts for the first two years of the vehicle’s life,” said ABPA Executive Director Edward Salamy. “We also have concern about the limits this bill places on a consumer’s desire to use alternative parts and how this would affect them financially.”

Based on the language of the bill, ABPA said that the proposed legislation could potentially exclude NSF certified parts. ABPA said it believes this would further limit choice in the marketplace by eliminating a large portion of the certified parts inventory.

Jim Smith, president of ABPA, added, “This bill is being sponsored by industry special interest groups that are pushing their own agenda and are not concerned about the general welfare of the consumers. If this anti-competitive legislation is passed, insurance premiums will be in jeopardy of being raised and more vehicles will be totaled by insurance adjustors because the cost of repairs would become too expensive.”

Autobody News reached out to Automotive Service Association (ASA) regarding the proposed state law. “Legislation similar to Maryland House Bill 1258 has been considered previously in Maryland,” said ASA Washington D.C. Representative Robert L. Redding, Jr. “ASA supports the provisions requiring two-year OEM parts use only, certified parts after the first two years and the written consent for the use of non-OEM and non-certified parts. We believe the certification language in the legislation needs further discussion.”

According to a consumer report survey, 40% of car owners postpone car repairs due to a financial burden, and AAA survey found one-in-four car owners could not afford major repairs. The Insurance Institute for Highway Safety (IIHS) states that aftermarket parts do not compromise the safety of a vehicle.

According to ASA, in the United States 44 states have laws governing the use of replacement crash parts. Of these 44 states, 36 require notes to consumers when aftermarket crash parts are used and seven states require notice and consent from the consumer.

The bill would have needed to pass a vote in the House of Delegates, and then go to the State Senate before being signed by the governor. If passed, the bill would have taken effect January 1, 2017.

Autobody News will continue to follow this story and invites comment from readers.

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