STATE BOARD OF VEHICLE MANUFACTURERS, DEALERS AND SALESPERSONS [49 PA. CODE CH. 19] Consignment Sales [34 Pa.B. 4691] The State Board of Vehicle Manufacturers, Dealers and Salespersons (Board) adds § 19.18a (relating to consignment sales) to read as set forth in Annex A.
Description and Need for Rulemaking
The final-form rulemaking adds § 19.18a to establish 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)). Previously, the Board had not adopted any regulations in this area. By the act of April 19, 1996 (P. L. 104, No. 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 auction or public or retail 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 class of licensure.
Dealers did not previously sell vehicles on consignment. Thus, consumers may be unaware that a dealer does not own the consigned vehicles on display at the dealer's lot and that these vehicles do not have the same protections in title and warranty as vehicles owned by the dealer. The final-form rulemaking is necessary to address important consumer protection issues. The final-form rulemaking will require an exchange of information between a dealer and a consignor, which in turn will require an exchange of information between the dealer and a potential buyer, obviating title and warranty problems after purchase. Additionally, the final-form rulemaking will require that delivery of the vehicle will not occur until after execution of the title and other paperwork.
Summary of Comments and Responses to Proposed Rulemaking
The Board published notice of proposed rulemaking at 32 Pa.B. 6134 (December 14, 2002) with a 30-day public comment period. The Board received comments from Pennsylvania Automotive Association (PAA) and Pennsylvania Independent Automobile Dealers Association (PIADA), but not from any other members of the public. The Board received comments from the Independent Regulatory Review Commission (IRRC) and the House Professional Licensure Committee (HPLC) as part of their review of proposed rulemaking under the Regulatory Review Act (71 P. S. §§ 745.1--745.12). The Board did not receive comments from the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC) as part of its review of proposed rulemaking under the Regulatory Review Act.
The HPLC and IRRC recommended that the Board adopt minimum size and clarity specifications for the written disclosure required by § 19.18a(d) that the vehicle is held on consignment and is not owned by the dealer to ensure proper notice to potential buyers. Because the Board finds this to be a reasonable requirement, the Board has revised the final-form rulemaking to require that the notice be in at least 20-point bold type.
The PIADA objected to the requirement of § 19.18a(b)(1), which requires a separate written consignment agreement to be maintained for each vehicle that is consigned, rather than permitting a dealer to include multiple vehicles on a single consignment agreement with a given consignor. The Board has not revised the final-form rulemaking in response to this comment. A separate consignment agreement permits simplified handling of the paperwork for each vehicle, as well as dealing with potential buyers, without any effect from the sale of, or failure to sell, any other vehicle from the same consignor. The Board believes that this benefit outweighs any benefit of the reduced number of consignment agreements that may result from including additional vehicles from the same consignor on a single consignment agreement.
The PIADA also commented on the requirement of § 19.18a(b)(1)(vii), which requires the consignment agreement to include an account number for each lien holder, objecting that this may violate the privacy of the consignor. The Board has not revised its regulation in response to this comment. This information is required to protect the dealer (and by extension, the buyer) by providing a readily verifiable means to confirm the existence and extent of any lien. The dealer is not obligated to provide this information to every potential buyer.
The PIADA commented on § 19.18a(b)(1)(viii), which requires the consignment agreement to include any material facts relative to the vehicle, including accident history, vehicle condition and odometer disclosure, objecting that this would impose upon the dealer strict liability to know the entire accident history of the vehicle. The PIADA suggested that the Board revise its final-form regulation to require disclosure of accident history and vehicle condition only if the dealer offers a warranty. By promulgating this rulemaking, the Board does not intend to prohibit any ''as-is'' sale by consignment or to make the dealer strictly liable for the condition of any vehicle sold on consignment. The Board included this requirement to provide a source of information to a potential buyer where the consigning seller is not involved in showing the vehicle or directly available to answer questions. The Board included this requirement also to provide additional information to the dealer because § 19.18a(c) requires that the dealer must, at least temporarily, become the owner of the vehicle prior to making the final sale. Accordingly, the Board has not revised its final-form rulemaking in response to this comment, other than to specify that the accident history to be disclosed is that history known to the consignment seller.
The PAA commented that Federal law does not permit the dealer to sign on behalf of the consigning seller on the back of the title, such as by the power of attorney required by § 19.18a(b)(3), as well as buyer, which results from the compliance with § 19.18a(c), which requires the dealer to have title assigned to the dealer prior to applying for title in the buyer's name. Accordingly, the Board has revised the final-form rulemaking to delete § 19.18a(b)(3) as previously proposed.
The PAA and the PIADA suggested that the Board remove from § 19.18a(b)(4) any requirement for a dealer to hold the title to a vehicle held on consignment. In proposing this rulemaking, the Board sought to protect a buyer from a consignor (or dealer) failing to provide the title by the time of sale. As the PAA has indicated, the requirement that the dealer notify potential buyers that the vehicle is being sold on consignment, rather than out of the dealer's inventory, puts the buyer on notice that the sales process is different and may be slowed by involving a seller other than the dealer and the resultant need to delay the sales transaction until the seller has produced the title (or appropriate substitute) to the dealer. Accordingly, the Board has revised the final-form regulation to omit any requirement that the dealer must hold the unexecuted title. As part of making this revision, the Board has removed from § 19.18a(b)(2) the alternative of holding a copy of the title and instead, placed into § 19.18(b)(3) the requirement that the dealer hold a copy of the title or a printout of the electronic lien verification. Compliance with this requirement will establish the owner's identity and alert the dealer to any title brands or lien holders. Additionally, the Board has revised the final-form rulemaking to remove all requirements for lien satisfaction documentation, because compliance with § 19.18a(c) will result in satisfaction of all liens by the consignor.
Finally, the Board added to the final-form rulemaking a prohibition that a dealer may not deliver a vehicle sold on consignment until the paperwork associated with that transaction has been completed. Delaying the sale until title and other documents are provided will also serve the purpose of protecting the buyer from a consignor (or dealer) who is unable to provide the title. Because the vehicle cannot be delivered prior to providing the title, there is no need to require a dealer who fails to provide a title to the purchaser to accept return of the vehicle and refund the entire purchase price, less actual depreciation, as suggested by the PIADA. Moreover, the Board does not have the authority, under the act, to order a licensee to make restitution or otherwise provide a remedy.
Fiscal Impact and Paperwork Requirements
The final-form rulemaking has no adverse fiscal impact on the Commonwealth or its political subdivisions and imposes no additional paperwork requirements upon the Commonwealth, political subdivisions or the private sector.
Effective Date
The final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.
Statutory Authority
The final-form rulemaking is promulgated under section 4(9) of the act (63 P. S. § 818.4(9)) and section 5(f)(3) of the act.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on December 14, 2002, the Board submitted a copy of the notice of proposed rulemaking, published at 32 Pa.B. 6134, to IRRC and the Chairpersons of the HPLC and the SCP/PLC for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on June 15, 2004, the final-form rulemaking was approved by the HPLC. On July 14, 2004, the final-form rulemaking was deemed approved by the SCP/PLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on July 15, 2004, and approved the final-form rulemaking.
Additional Information
Persons who require additional information about the final-form rulemaking should contact Teresa Woodall, Board Administrator, State Board of Vehicle Manufacturers, Dealers and Salespersons, P. O. Box 2649, Harrisburg, PA 17105-2649, (717) 783-1697, st-vehicle@state.pa.us.
Findings
The Board finds that:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the rulemaking promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) A public comment period was provided as required by law, and all comments were considered.
(3) The final-form rulemaking adopted by this order is necessary and appropriate for the administration of the act.
(4) The final-form rulemaking does not enlarge the scope of proposed rulemaking published at 32 Pa.B. 6134.
Order
The Board, acting under its authorizing statue, orders that:
(a) The regulations of the Board, 49 Pa. Code Chapter 19, are amended by adding § 19.18a to read as set forth in Annex A.
(b) The Board shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as required by law.
(c) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) The final-form rulemaking shall take effect upon publication in the Pennsylvania Bulletin.
EDWIN K. GALBREATH, Jr.,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 34 Pa.B. 4082 (July 31, 2004).)
Fiscal Note: Fiscal Note 16A-607 remains valid for the final adoption of the subject regulation.
Annex A TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS PART I. DEPARTMENT OF STATE Subpart A. PROFESSIONAL AND
OCCUPATIONAL AFFAIRSCHAPTER 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 known to the seller, vehicle condition and odometer disclosure.
(2) A copy of the current registration card.
(3) A Copy of the title or a print-out of an electronic lien verification.
(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 in at least 20-point bold type on or attached to the vehicle that the vehicle is held on consignment and is not owned by the dealer.
(e) A dealer may not deliver a vehicle on consignment sale without having all title, lien and registration documents signed by the buyer or consignor, or both, as appropriate.
[Pa.B. Doc. No. 04-1589. Filed for public inspection August 27, 2004, 9:00 a.m.]
