VA Dealer Board Eyes Dealer Practices, Licensing
Dealer practices were a top agenda item as the Virginia Motor Vehicle Dealer Board and its committees met in July. The MVDB considered a number of cases involving payments of commissions to unlicensed salespersons. The cases serve as a reminder to dealers of several issues:
1. It is unlawful to pay a commission or compensation in any form to a person in connection with a sale of a motor vehicle unless the person is licensed as a salesperson employed by the dealer.
2. Until a new employee has a salespersonês license in his or her possession, the employee may not negotiate the sale of a vehicle or be paid a commission. A new employee awaiting a license may engage in activities that do not involve negotiating with a customer such as showing a particular vehicle and accompanying customers on test drives.
3. If a dealer employs a company to run a short-term sale for the dealership and the sale companyês employees will be involved in selling vehicles to customers, those employees involved in sales activities must be licensed as salespeople for the dealer.
The MVDB also took the following actions of note:
Dealer Licensing. There have been a number of discussions over the last several months about the need to license sales managers and finance and insurance officers. As a result of those discussions, a resolution was offered and passed unanimously, to establish a committee to study the authority and processes of the MVDB. The committee will study ways in which the MVDB can improve its service to the dealer community and to the public. The resolution calls for further study of such subjects as who should be licensed, what requirements should be met to maintain a license, what changes might be made to the transaction recovery fund processes, and what types of electronic means of meeting may be used to simplify decision making by the MVDB.
Advertising. In reviewing the large number of first advisory letters that have been sent to dealers on Truth in Lending Act issues, the MVDB took the opportunity to remind dealers that advertising the number of months for which a loan is available is a trigger term. This problem has arisen in connection with a large number of no interest and low interest rate loans available as a result of manufacturersê programs. These rates are sometimes only available for loans of limited duration. If a dealer identifies the month limitation in its advertising, that is a trigger term requiring the full range of TILA disclosures.
Practice tip for dealers: A dealer can avoid triggering TILA disclosures while still giving notice to consumers that the rate may only be available for loans of limited duration by noting in advertisements for no interest financing or low interest financing with a month limitation that the interest rate may vary based upon the length of term of the loan.
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