Regulatory, Licensing

Do OMVIC suspensions of car dealerships go too far?

By Staff

The Ontario Motor Vehicle Industry Council (OMVIC) issues immediate suspensions of car dealerships when it determines their actions are putting the car-buying public at risk, but the practice is raising questions, Toronto licensing and compliance lawyer Anar Dewshi writes in The Lawyer’s Daily.

As a regulator, OMVIC’s role is to ensure compliance with the Motor Vehicle Dealer Act (MVDA), not to decide the fate of a licensed dealership that hasn’t undergone the appropriate due process, says Dewshi, principal of Dewshi Law Practice.

“That role is for the tribunal and by issuing immediate suspensions, I believe that OMVIC is ultra vires of its prescribed legislative authority,” she writes. “There is no definition in the MVDA or the regulations that define public interest. How is this defined and how is it determined by OMVIC?”

In 2017, the provincial regulator issued three immediate suspension orders along with “Proposal to Revoke Registration” notices to dealerships in the province, says Dewshi.

“Within 15 days of the issuance of an immediate suspension order, a hearing is held before the Licence Appeal Tribunal,” she says. “The tribunal will determine if the order should be extended until a final determination is made regarding the associated proposal(s) to revoke registration.”

While suspensions are temporary, they cause irreparable damage to the dealerships as OMVIC issues a public notice of the suspension along with a consumer warning regarding the dealer, Dewshi writes.

“Immediate suspensions tarnish the reputation of the dealership within the auto industry and in the eyes of the public, halts all business activity and leaves employees without pay and perhaps without a job,” she says.

Until 2017, the last time a suspension order was issued was in 2014, when OMVIC temporarily shut down two Sudbury dealerships, both of which filed a Notice of Appeal before the tribunal, but ultimately abandoned them, the article says.

In April of 2017, Dewshi says OMVIC ordered the immediate suspension of a dealership in Sault Ste. Marie, Ont., which prevented it from selling, leasing, buying or consigning vehicles.

“The suspension was triggered following an OMVIC inspection and investigation whose findings alleged that the dealer received the monies required from the customers’ banks to pay for their new vehicles and pay off the loans on their trade-ins; however, the dealer didn’t pay off the loans,” she writes. “Instead, it’s alleged he tried to keep up the monthly payments on his customers’ old loans; and he sold the trade-ins to other customers, even though they had liens on them.”

When the dealer allegedly stopped making payments, the article notes, the lien holders demanded money from the consumers who had traded in their vehicles and the vehicles that were resold to new customers were at risk of being repossessed.

In July of 2017, OMVIC issued another immediate suspension order to a North Bay, Ont. dealer, triggered by an investigation alleging the dealer didn’t remove liens from two trade-in vehicles, leaving the consumers potentially responsible for the debts, Dewshi says. It was also alleged that the dealer sold one vehicle with a registered lien to a consumer, making the purchaser potentially responsible for removing the lien or at risk for having the vehicle repossessed, the article notes.

“In addition, there were numerous compliance issues,” she says. For example, Dewshi explains, the dealer allegedly conducted unauthorized consignment sales, employed unregistered salespeople, failed to operate at the registered location and failed to inform OMVIC that the corporation had filed for bankruptcy. "The totality of non-compliance infractions led to the immediate suspension.”

The third suspension OMVIC issued in 2017 was to a Toronto dealership for allegations of numerous non-compliance and regulatory issues, Dewshi writes.

It was alleged the dealership was employing an unregistered salesperson who allowed the owner to use her identification documents to secure access to wholesale auctions, she adds.

The dealer was also under investigation for allegedly misrepresenting the actual distance a vehicle had logged on the retail customer’s bill of sale and for failing to disclose the accident history of some of the vehicles sold, the article notes.

“This begs the question, are immediate suspensions warranted or do they go too far?” Dewshi writes. “From the examples above, there is no particular conduct nor is there a threshold of the number of violations that warrant immediate suspensions.”

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