USED VEHICLES: INVENTORY LENDERS

COULD RETAIN VEHICLE TITLE UNTIL SALE

House Bill 5668 (Substitute H-3)

Sponsor:  Rep. Bradford C. Jacobsen

Committee:  Commerce

Complete to 6-12-12

A SUMMARY OF HOUSE BILL 5668 AS REPORTED FROM COMMITTEE

Under the bill, a used or secondhand vehicle dealer could enter a voluntary written agreement with an inventory lender allowing the lender to retain possession of the certificate of title for a vehicle subject to an inventory loan if certain conditions are met.  The bill would amend the Michigan Vehicle Code (at MCL 257.217 & 235).

The inventory lender would subsequently have to release the certificate of title to the used or secondhand vehicle dealer, the dealer's designee, and the Secretary of State not more than two banking business days after the dealer received one of the following:  the outstanding principal balance and any other fees and charges due; the written request from the dealer with proof of full payment as evidence that the vehicle had been sold or a similar written request from the purchaser; or a written request from the Secretary of State.  The failure to release a vehicle title could result in a civil fine of $500.

The bill would require a used or secondhand vehicle inventory lender to register with the Secretary of State in order to provide its location and contact information.  There would be no fee for this registration.

The bill specifies that it applies only to dealers licensed to sell  used or secondhand vehicles and does not apply to a licensed dealer who sells new motor vehicles or both new vehicles and used or secondhand vehicles.  

The voluntary agreement could be entered into if all of the following conditions are met:  (1) the dealer posts a notice on the used vehicle window disclosing the existence of the dealer's inventory loan for the vehicle; (2) the dealer maintains a color copy of the certificate of title, either in paper or in electronic form at the dealer's place of business; and (3) the dealer maintains a paper or electronic copy of the inventory loan agreement between the dealer and lender, along with the vehicle inventory list, which could be no more than five days old; these documents would have to be made available to the Secretary of State upon request.

The bill also would impose a $100 late transfer fee (instead of the usual $15) on used vehicle or secondhand dealers that failed to apply for a title and to transfer registration plates and secure a certificate of registration in a timely manner.

FISCAL IMPACT:

House Bill 5668 would have an indeterminate fiscal impact on the Secretary of State.  Any administrative costs realized under the provisions of the bill would be covered in the normal course of business and at current funding levels.  The increase in transfer fees to $100 for the transactions indicated under the bill would have a positive fiscal impact on the Secretary of State.  At this time it is unknown how many transactions will take place and no overall fiscal impact can be estimated.   To the extent that any civil fines are assessed and collected under the provisions of the bill, there would be a positive fiscal impact on the General Fund.

POSITIONS:

According to the minutes of the Commerce Committee meetings on 5-29-12 & 6-5-12, the following support the bill:  The Secretary of State; the Auto Dealers of Michigan, the Michigan Independent Auto Dealers, and the Dealer Services Corporation/Manheim Autos (an inventory lender).

                                                                                           Legislative Analyst:   Chris Couch

                                                                                                  Fiscal Analyst:   Ben Gielczyk

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.