Dear Licensees,
It has come to the VSAโs attention that some dealers continue to structure transactions where one dealer sells a vehicle to a consumer, while another dealer provides financing and appears on the transaction documents.
Recent consumer complaints are prompting a reminder to dealers about their responsibilities in these โtwo-dealerโ financing transactions and the obligations that arise when a dealer appears on the sale and transfer documentation.
Dealers participating in two-dealer financing transactions should carefully consider the legal and regulatory implications before structuring transactions in a manner that places another dealer on the sale and transfer documentation.
This scenario typically occurs when:
In some cases, Dealer B may ask the consumer to sign an acknowledgment stating that Dealer B is only providing financing and is not the selling dealer.
These arrangements are often intended to:
However, dealers should be aware that contractual language attempting to disclaim responsibility as the selling dealer may not be effective where the dealer appears on the sale and transfer documentation.
Recently, the Registrar of Motor Dealers found that a motor dealer who obtained financing for the consumer provided in a consumer transaction as per the BPCPA (decision attached here). This means that motor dealers providing financing for transactions are supplying a service to a consumer and have to ensure they follow the BPCPA.
If a dealer takes title to a vehicle and then transfers that vehicle to the consumer, that dealer may still be considered the selling dealer regardless of any side agreement or acknowledgment signed by the consumer.
A term stating that a dealer is โnot the selling dealerโ will generally not override the documented transaction where that dealer appears on the purchase agreement and transfer documents.
Dealers cannot avoid responsibilities under the Motor Dealer Act, the Business Practices and Consumer Protection Act (BPCPA), or the Motor Vehicle Act simply through contractual wording.
Consumer transactions are defined by the BPCPA. If a transaction satisfies the definition in the BPCPA, the dealer will be responsible for ensuring they comply with the BPCPA regardless of side agreements.
Potential Liability for the Financing Dealer
Financing dealers may be:
Best Practices for Financing Dealers
Where a financing dealer is involved in a transaction and appears on the sale or transfer documentation, the VSA recommends the following best practices:
Verify the Consumer and Vehicle
Ensure the Sale Is Conducted Properly
Conduct Independent Due Diligence
Financing dealers should conduct their own due diligence and not rely solely on information provided by another dealer.
As the dealer appearing on the transaction documents, the financing dealer may be responsible for all disclosures required under the Motor Dealer Act and the Business Practices and Consumer Protection Act, including:
If a dealer appears on the transaction documents as the seller or transferor, that dealer may still be responsible for the obligations and liabilities associated with the sale, regardless of any private agreement between dealers or acknowledgments signed by the consumer.
Questions?
If you have any questions please contact theย VSAโs Industry Standards department:
Disclaimer
Please note that compliance related decisions are based on the specific facts of each matter and are made on a case-by-case basis. This bulletin should not be read as a legal interpretation of particular circumstances, and it does not constitute legal advice.ย
