Requires automobile dealers to pay a specified amount on the prior credit or lease balance owing on the vehicle purchased or obtained in trade within 21 calendar days

Summary of specific provisions

This bill would:

- provide that when a motor vehicle dealer purchases or obtains a vehicle in trade in a retail sale or lease transaction and the dealer agreed to pay the prior credit or lease balance owing on the vehicle purchased or obtained in trade the dealer shall tender the agreed upon amount to the lessor or legal owner of the vehicle purchased or obtained in trade within twenty-one calendar days of purchasing or obtaining the vehicle in trade;

- prohibit a dealer from selling or transferring any ownership interest in the vehicle purchased or obtained in trade until an amount necessary to discharge the prior credit or lease balance owing on the vehicle has been tendered to the lessor or legal owner of the vehicle purchased or obtained in trade;

- amend subdivision 9 of section 415 of the Vehicle and Traffic Law (Motor Vehicle Dealer Registration Program) to add violations of this section to the list of permissible grounds for suspension or revocation of a registration by the Commissioner;

- provide that any a violation of this section shall be deemed a deceptive act and practice subject to enforcement under Article 22-A and authorize concurrent enforcement by district attorneys, county attorneys, and corporation counsels; and

- provide that a knowing violation of the prohibition against selling a vehicle without paying off a lien shall constitute a class A Misdemeanor.

Justification

Many consumers are losing confidence in the automotive marketplace. They are unable to tell in advance whether a dealer is solvent or about to close its doors, posing unacceptable risks and causing a ripple effect throughout our economy. This bill will serve to restore confidence into the automotive market by implementing fair, common-Sense requirements for situations in which a dealer accepts a vehicle in trade and agrees to discharge the remaining balance of outstanding liens on the vehicle as part of the sale of a new vehicle. Dealers would be required to pay such outstanding liens on traded-in vehicles before they trade or sell the vehicle, and do so within twenty-one days, to ensure the consumer is protected.

There have been several examples of dealerships in New York State closing their doors and leaving consumers with unpaid liens on vehicles they traded-in, as well as a second loan on the newer vehicle they purchased at the dealership. Too often the consequence is destruction of consumer credit, repossession of the vehicles, job losses due to the lack of transportation to get to work, and consumers being forced into bankruptcy. The Attorney General has brought several cases against dealership operators for failing to pay off liens, and the Department of Motor Vehicles has recognized that this practice is a problem in New York State.

Honest dealers are also adversely impacted when unscrupulous dealers siphon off business and then harm the credit of their customers by going out of business without paying liens, as promised, shrinking the automotive market at precisely the time when it is sound public policy to expand the market and accelerate sales of newer, safer, cleaner motor vehicles.

Prior legislative history

New bill.

Fiscal implications for state and local governments

None to the State.

Effective date

Ninety days after enactment.