Losses incurred by owners when selling their motor vehicles and caravans on consignment have prompted action by the McGowan Government with a new licence category to be established under proposed new laws.
A more stringent character test for licence holders and applicants, as well as improved training for motor vehicle dealers, are other aspects of intended changes to the Motor Vehicle Dealers Act 1973.
The consignment sale of a motor vehicle is where the owner engages a licensed motor vehicle dealer to sell their vehicle as an alternative to selling privately. The dealer undertakes the sale on behalf of the owner and pays them the proceeds, less any agreed costs and commission.
Currently, motor vehicle dealer licences specify that consignment sales are not allowed and separate applications to have this restriction removed are made to Consumer Protection.
Under the proposed new laws, consignment sales will become a separate licence category with applicants having to comply with specific conditions, allowing for greater flexibility if disciplinary action becomes necessary.
Applicants will also need to pass a strengthened ‘fit and proper person’ character test with an added assessment of an applicant’s close associates, a move aimed at preventing unsuitable people from obtaining a licence or being involved in the business.
The training course for motor vehicle dealers will be updated to ensure dealers have a clear understanding of their legal obligations when selling on consignment.
These measures will be additional to current consignment sale rules, which include:
- all consignment contracts must be in writing, contain certain regulated terms and conditions, and state in writing the amount which the owner should be paid;
- the dealer can keep any money they receive from the sale in excess of the amount they agree to pay the owner;
- the dealer must give the owner a copy of the consignment agreement immediately after the agreement is signed;
- all proceeds or money from any consignment sale must be held in a trust account;
- the dealer must pay the total net proceeds to the owner within two business days of receiving payment;
- the dealer must get approval from the owner to conduct repairs prior to selling the vehicle; and
- the dealer must pay for all warranty repairs after the vehicle is sold.
The review was prompted by two high-profile cases involving the closure of Luxuride in West Perth and the prosecution of PAG (WA) Pty Ltd, trading as Xoticar, in Welshpool. Clients are estimated to have lost a combined total of almost $2 million from both of these cases. Additionally, a caravan dealer selling caravans on consignment ceased trading in August 2019 resulting in losses of around $550,000 to 24 owners.
The proposals are the result of a comprehensive community and industry consultation conducted by Consumer Protection. Recommendations are contained in a Decision Regulatory Impact Statement, available for viewing on the Consumer Protection website.
As stated by Commerce Minister Roger Cook:
“While there were options in the consultation for no changes or to ban consignment sales completely, the consensus from the feedback received suggested that consignment sales were important to both dealers and vehicle owners, but stronger laws were required.
“We have responded to that call by proposing changes that will hopefully prevent the significant losses incurred by the vehicle owners in the past who have encountered unscrupulous operators or have been affected by a business closure.
“For owners who don’t have the confidence or time to negotiate the sale of their vehicle privately, selling on consignment is a viable option, but currently comes with some risk. These changes to the laws are designed to reduce that risk by promoting trust and transparency, and keeping dishonest operators out of the industry.”
