PROPOSED RULEMAKING
STATE BOARD OF VEHICLE MANUFACTURERS, DEALERS AND SALESPERSONS
[49 PA. CODE CH. 19]
Consignment Sales
[32 Pa.B. 6134] The State Board of Vehicle Manufacturers, Dealers and Salespersons (Board) proposes to add § 19.18a (relating to consignment sales) to read as set forth in Annex A. The Board published a proposed rulemaking at 31 Pa.B. 822 (February 10, 2001) amending § 19.19 (relating to consignment sales). After further consideration, the Board determined that its prior proposed rulemaking did not adequately address consumer concerns with consignment sales. Therefore, the Board determined that it should republish its proposed rulemaking to read as set forth in Annex A.
The proposed rulemaking establishes requirements for licensed vehicle dealers who wish to sell vehicles on a consignment basis without holding a vehicle auction license, as authorized by section 5(f)(3) of the Board of Vehicles Act (act) (63 P. S. § 818.5(f)(3)).
Effective Date
The proposed rulemaking will be effective upon final-form publication in the Pennsylvania Bulletin.
Statutory Authority
The proposed rulemaking is authorized under section 4(a)(9) of the act (63 P. S. § 818.4(a)(9)), which authorizes the Board to promulgate regulations necessary to the effective administration of the act.
Background and Need for the Proposed Rulemaking
By the act of April 19, 1996 (P. L. 104, No. 27) (Act 27), the General Assembly made substantial amendments to the act. Among the changes, the General Assembly eliminated licensure for brokers and created a new class of licensure for public or retail auctions and wholesale auctions. In addition, the activities of brokering--selling at auction and selling on consignment--were divided between dealers and the new auction licensees. Specifically, section 5(f)(3) of the act now provides that ''[a] dealer licensed under this act without possessing a wholesale vehicle auction or public or retail vehicle auction license shall be permitted to sell vehicles on consignment.'' The General Assembly did not specify consumer protection provisions that would apply to the new classes of licensure.
Dealers did not previously sell vehicles on consignment. Thus, consumers may be unaware that vehicles on display at a dealer's lot are not owned by the dealer and do not have the same protections in title and warranty as vehicles owned by the dealer. The proposed rulemaking is necessary to address important consumer protection issues. The proposed rulemaking will require an exchange of information between dealers and consignors, which in turn will require an exchange of information between dealers and potential buyers, obviating title and warranty problems post purchase.
Section 19.19(a)(2) of the proposed rulemaking published at 31 Pa.B. 822 provided that ''[t]he dealer need not possess the title while displaying the vehicle, but shall provide the executed title by the time of delivery of the vehicle to the buyer.'' The Board determined that this provision would not adequately protect the public because it did not ensure that the dealer could obtain clear title to the consigned vehicle. Therefore, the Board decided to amend this subsection in a new proposed rulemaking to provide that the dealer must have either an unexecuted title if the title to the consigned vehicle is unencumbered or a title release from each lien holder if the title to the consigned vehicle is encumbered. In addition, the Board made several other changes to the prior proposed rulemaking. The Board followed the suggestions of the Independent Regulatory Review Commission (IRRC) relating to the wording ''vehicle auction.'' The Board added the provision that the dealer has a separate consignment agreement for each vehicle on consignment. The Board added the requirement that the consignment agreement specify the length of the consignment period. The Board added the provision that the dealer maintain an executed power of attorney authorizing the dealer to sell the vehicle on behalf of the consignor. Finally, at IRRC's suggestion, the Board deleted the provision requiring dealers to comply with applicable Federal and State laws regarding consignment sales, as dealers are already required to abide by these laws.
Description of Proposed Rulemaking
The proposed rulemaking requires a dealer who engages in consignment sales to enter into and keep a copy of the written consignment agreement between the dealer and the consignor covering the consigned vehicles. The agreements must be kept at the location where the vehicle is displayed for sale. The consignment agreement must contain the name and signature of the consignor to be legally binding. The consignment agreement must contain information that identifies the vehicle, to avoid fraud. The consignment agreement must set forth the length of the consignment period, so it is clear at any time whether the dealer has the right to negotiate the sale of the vehicle. The consignment agreement must include the terms of sale to protect the consignor from unauthorized actions by the dealer. The consignment agreement must contain the terms of insurance coverage to forestall arguments between the dealer and consignor if the vehicle is damaged or destroyed while on the dealer's lot. The consignment agreement must contain information regarding any lien holders, which the dealer is, in turn, already required to disclose to potential buyers. This will protect the lien holders and potential buyers by assuring payment of the lien and assisting buyers in obtaining clear title. The consignment agreement must include a copy of the current registration card or title to alleviate concerns about the ability to later obtain clear title. Finally, the consignment agreement must include any warranties extended by the consignor and any material facts relative to the vehicle. This last provision helps protect the potential buyer by ensuring that the dealer will have the information necessary to properly represent the vehicle.
The proposed rulemaking also requires a dealer who engages in consignment sales to keep an executed power of attorney from the consignor to the dealer and either an unexecuted title, if the title is not encumbered, or a title release from each lien holder to pay off all liens, if the title is encumbered. These provisions are designed to ensure that the buyer will be able to obtain title to the vehicle. Subsection (c), requiring that the dealer take title from the consignor prior to applying for title in the name of the buyer, also helps ensure that the buyer can obtain title to the vehicle. Finally, the requirement in subsection (d), that the dealer display vehicles clearly marked as consignment, puts potential buyers on alert that the vehicle is not owned by the dealer and may have other than the usual warranties.
Compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation''
The Board sent this proposed rulemaking to dealer organizations as required under the directives of Executive Order 1996-1. In addition, the Board considered the impact the proposed rulemaking would have on the regulated community and on public safety and welfare. The Board finds that the proposed rulemaking addresses a compelling public interest as described in this Preamble and otherwise complies with Executive Order 1996-1.
Fiscal Impact and Paperwork Requirements
The proposed rulemaking will have no adverse fiscal impact on the Commonwealth or its political subdivisions. The proposed rulemaking will impose no additional paperwork requirements upon the Commonwealth or political subdivisions. Dealers will be required to comply with additional paperwork requests of § 19.18a.
Sunset Date
The Board continuously monitors the cost effectiveness of its regulations. Therefore, no sunset date has been assigned.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on November 14, 2002, the Board submitted a copy of this proposed rulemaking to IRRC and the Chairpersons of the Senate Consumer Protection and Professional Licensure Committee and the House Professional Licensure Committee. In addition to submitting the proposed rulemaking, the Board has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Board in compliance with Executive Order 1996-1. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, if IRRC has objections to any portion of the proposed rulemaking, it will notify the Board within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria that have not been met by the portion of the proposed rulemaking to which an objection is made. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of objections raised.
Public Comment
Interested persons are invited to submit written comments, suggestions or objections regarding this proposed rulemaking to Teresa Woodall, State Board of Vehicle Dealers, Manufacturers and Salespersons, P. O. Box 2649, Harrisburg, PA 17105, www.dos.state.pa.us within 30 days following publication of this proposed rulemaking in the Pennsylvania Bulletin.
EDWARD J. CERNIC, Jr.,
ChairpersonFiscal Note: 16A-607. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 49. PROFESSIONAL AND
VOCATIONAL STANDARDS
PART I. DEPARTMENT OF STATE
Subpart A. PROFESSIONAL AND
OCCUPATIONAL AFFAIRS
CHAPTER 19. STATE BOARD OF VEHICLE MANUFACTURERS, DEALERS AND SALESPERSONS
DEALERSHIP LICENSE § 19.18a. Consignment sales.
(a) A licensed dealer is permitted to engage in consignment sales without being licensed as a wholesale vehicle auction or public or retail vehicle auction, as defined in section 2 of the act (63 P. S. § 818.2), if the dealer meets the requirements of this section.
(b) The dealer shall maintain the following documents at the lot where the vehicle is displayed:
(1) A copy of a separate written consignment agreement with the consignor for each vehicle. The written consignment agreement shall contain the following information:
(i) The name and signature of the consignor.
(ii) The make, model, year, vehicle identification number and license plate number of the vehicle.
(iii) The length of the consignment period.
(iv) The terms of sale, including the minimum selling price, if any, and the amount of or formula for determining the dealer's commission.
(v) The terms of insurance coverage during the period of consignment, including the name, address and telephone number of the consignor's insurance agent, if any.
(vi) The express identification of any warranties extended by the consignor.
(vii) The name and address or telephone number of all current lien holders, together with the account number for each lien.
(viii) Any material facts relative to the vehicle, including accident history, vehicle condition and odometer disclosure.
(2) A copy of the current registration card or title.
(3) An executed power of attorney from the consignor to the dealer which authorizes the dealer to assign title of the vehicle.
(4) Either an unexecuted title, if the title is unencumbered, or a title release from each lien holder to pay off all liens, if the title is encumbered.
(c) The dealer shall have the title of the vehicle assigned from the consignor to the dealer prior to applying for title in the name of the buyer.
(d) Whenever a vehicle is displayed for sale on consignment, the dealer shall disclose in writing on or attached to the vehicle that the vehicle is held on consignment and is not owned by the dealer.
[Pa.B. Doc. No. 02-2229. Filed for public inspection December 13, 2002, 9:00 a.m.]
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