S T A T E O F N E W Y O R K
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7300--A
I N S E N A T E
March 29, 2010
___________
Introduced by Sen. PERALTA -- read twice and ordered printed, and when
printed to be committed to the Committee on Consumer Protection --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee
AN ACT to amend the general business law and the vehicle and traffic
law, in relation to requiring an automobile dealer to pay a specified
amount on the prior credit or lease balance owing on the vehicle
purchased or obtained in trade to the lessor, or to the legal owner of
the vehicle purchased or obtained in trade within twenty-one calendar
days of purchasing or obtaining the vehicle in trade
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Legislative findings. When consumers choose to purchase
vehicles from motor vehicle dealers that are licensed by the department
of motor vehicles, they have a reasonable expectation that the dealers
have sufficient resources to honor their contractual commitments.
Motor vehicle buyers have no reliable way to know in advance whether a
motor vehicle dealer is on the brink of insolvency or is on a sound
financial footing.
When licensed motor vehicle dealers go out of business they occa-
sionally fail to pay off liens on vehicles purchased or obtained in
trade, as agreed. When this happens, the obligation often reverts to the
consumer who traded in the vehicle. As the consumer has likely not budg-
eted for this extra car payment, the result can be ruinous, including
harm to their credit, repossessions that remain on their credit reports
for seven to ten years, home foreclosures, and bankruptcy. Such conse-
quences are brought about through no fault of the consumer.
Honest dealers are also adversely impacted when unscrupulous motor
vehicle dealers siphon off business and then harm the credit of their
customers by going out of business without paying liens, as promised,
shrinking the automotive market at precisely the time when it is sound
public policy to expand the market and accelerate sales of newer, safer,
cleaner motor vehicles.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD15374-12-0
S. 7300--A 2
S 2. The general business law is amended by adding a new section 198-c
to read as follows:
S 198-C. AUTOMOBILE TRADE-IN PROTECTION. (A) AS USED IN THIS SECTION,
"DEALER" SHALL HAVE THE SAME MEANING AS SUCH TERM IS DEFINED BY SECTION
FOUR HUNDRED FIFTEEN OF THE VEHICLE AND TRAFFIC LAW.
(B) WHEN A DEALER PURCHASES OR OBTAINS A VEHICLE IN TRADE IN A RETAIL
SALE OR LEASE TRANSACTION AND THE VEHICLE IS SUBJECT TO A PRIOR CREDIT
OR LEASE BALANCE, ALL OF THE FOLLOWING APPLY:
(1) IF THE DEALER AGREED TO PAY A SPECIFIED AMOUNT ON THE PRIOR CREDIT
OR LEASE BALANCE OWING ON THE VEHICLE PURCHASED OR OBTAINED IN TRADE,
AND THE AGREEMENT TO PAY THE SPECIFIED AMOUNT IS CONTAINED IN A WRITTEN
AGREEMENT DOCUMENTING THE TRANSACTION, THE DEALER SHALL TENDER THE
AGREED UPON AMOUNT AS PROVIDED IN THE WRITTEN AGREEMENT TO THE LESSOR,
OR TO THE LIEN HOLDER, OR TO THE DESIGNEE OF THAT LESSOR OR LIEN HOLDER
OF THE VEHICLE PURCHASED OR OBTAINED IN TRADE WITHIN TWENTY-ONE CALENDAR
DAYS OF PURCHASING OR OBTAINING THE VEHICLE IN TRADE, PROVIDED, HOWEVER,
THAT THE DEALER MAY RELY UPON THE AMOUNT DUE AS STATED BY THE LESSOR OR
LIEN HOLDER.
(2) IF THE DEALER DID NOT SET FORTH AN AGREEMENT REGARDING PAYMENT OF
A PRIOR CREDIT OR LEASE BALANCE OWED ON THE VEHICLE PURCHASED OR
OBTAINED IN TRADE, IN A WRITTEN AGREEMENT DOCUMENTING THE TRANSACTION,
THE DEALER SHALL TENDER TO THE LESSOR, OR TO THE LIEN HOLDER, OR TO THE
DESIGNEE OF THAT LESSOR OR LIEN HOLDER OF THE VEHICLE PURCHASED OR
OBTAINED IN TRADE, AN AMOUNT NECESSARY TO DISCHARGE THE PRIOR CREDIT OR
LEASE BALANCE OWING ON THE VEHICLE PURCHASED OR OBTAINED IN TRADE WITHIN
TWENTY-ONE CALENDAR DAYS OF PURCHASING OR OBTAINING THE VEHICLE IN
TRADE, PROVIDED, HOWEVER, THAT THE DEALER MAY RELY UPON THE AMOUNT DUE
AS STATED BY THE LESSOR OR LIEN HOLDER.
(3) THE TIME PERIOD SPECIFIED IN PARAGRAPH ONE OR TWO OF THIS SUBDIVI-
SION MAY BE SHORTENED IF THE DEALER AND CONSUMER AGREE, IN WRITING, TO A
SHORTER TIME PERIOD.
(4) A DEALER SHALL NOT SELL, CONSIGN FOR SALE, OR TRANSFER ANY OWNER-
SHIP INTEREST IN THE VEHICLE PURCHASED OR OBTAINED IN TRADE UNTIL AN
AMOUNT NECESSARY TO DISCHARGE THE PRIOR CREDIT OR LEASE BALANCE OWING ON
THE VEHICLE HAS BEEN TENDERED TO THE LESSOR, OR TO THE LIEN HOLDER, OR
TO THE DESIGNEE OF THAT LESSOR OR LIEN HOLDER OF THE VEHICLE PURCHASED
OR OBTAINED IN TRADE.
(C) IF THE AGREEMENT GIVES EITHER PARTY THE RIGHT TO RESCIND THE
ENTIRE AGREEMENT WITHIN A REASONABLE TIME PERIOD, RESCISSION OF THE
ENTIRE AGREEMENT SHALL EFFECTIVELY RESCIND THE OBLIGATIONS PURSUANT TO
THIS SECTION WITHOUT VIOLATING THIS SECTION.
(D) THIS SECTION SHALL NOT APPLY TO AGREEMENTS OR TRANSACTIONS THAT
INVOLVE A STATE OR FEDERAL PROGRAM IN WHICH A DEALER IS ISSUED A VOUCHER
TO OFFSET THE PURCHASE PRICE OR LEASE PRICE FOR A QUALIFYING LEASE OF A
NEW VEHICLE UPON THE SURRENDER OF AN ELIGIBLE TRADE-IN VEHICLE TO A
DEALER PARTICIPATING IN THE PROGRAM.
(E) (1) EVERY VIOLATION OF THIS SECTION SHALL BE DEEMED A DECEPTIVE
ACT AND PRACTICE SUBJECT TO ENFORCEMENT UNDER ARTICLE TWENTY-TWO-A OF
THIS CHAPTER. IN ADDITION, THE DISTRICT ATTORNEY, COUNTY ATTORNEY, AND
THE CORPORATION COUNSEL SHALL HAVE CONCURRENT AUTHORITY TO SEEK THE
RELIEF IN PARAGRAPH TWO OF THIS SUBDIVISION, AND ALL CIVIL PENALTIES
OBTAINED IN ANY SUCH ACTION SHALL BE RETAINED BY THE MUNICIPALITY OR
COUNTY.
(2) IN EVERY CASE WHERE THE COURT SHALL DETERMINE THAT A VIOLATION OF
THIS SECTION HAS OCCURRED, IT MAY IMPOSE A CIVIL PENALTY OF NOT MORE
THAN FIVE THOUSAND DOLLARS FOR EACH VIOLATION. SUCH PENALTY SHALL BE IN
S. 7300--A 3
ADDITION TO ANY DENIAL OF REGISTRATION OR RENEWAL, SUSPENSION OF REGIS-
TRATION OR REVOCATION OF REGISTRATION OR ASSESSMENT OF A FINE AUTHORIZED
BY SUBDIVISION NINE OF SECTION FOUR HUNDRED FIFTEEN OF THE VEHICLE AND
TRAFFIC LAW.
(3) NOTHING IN THIS SECTION SHALL BE CONSTRUED TO RESTRICT ANY RIGHT
WHICH ANY PERSON MAY HAVE UNDER ANY OTHER STATUTE OR THE COMMON LAW.
(4) NO DEALER SHALL BE DEEMED TO HAVE VIOLATED THE PROVISIONS OF THIS
SECTION IF SUCH DEALER SHOWS, BY A PREPONDERANCE OF THE EVIDENCE, THAT
THE VIOLATION WAS NOT INTENTIONAL AND RESULTED FROM A BONA FIDE ERROR
MADE NOTWITHSTANDING THE MAINTENANCE OF PROCEDURES REASONABLY ADOPTED TO
AVOID SUCH ERROR.
(F) ANY PERSON WHO IS CONVICTED OF KNOWINGLY VIOLATING PARAGRAPH FOUR
OF SUBDIVISION (B) OF THIS SECTION SHALL BE GUILTY OF A CLASS A MISDE-
MEANOR.
(G) IF ANY PART OR PROVISION OF THIS SECTION OR THE APPLICATION THERE-
OF TO ANY PERSON OR CIRCUMSTANCES BE ADJUDGED INVALID BY ANY COURT OF
COMPETENT JURISDICTION, SUCH JUDGMENT SHALL BE CONFINED IN ITS OPER-
ATIONS TO THE PART, PROVISION OR APPLICATION DIRECTLY INVOLVED IN THE
CONTROVERSY IN WHICH SUCH JUDGMENT SHALL HAVE BEEN RENDERED AND SHALL
NOT AFFECT OR IMPAIR THE VALIDITY OF THE REMAINDER OF THIS SECTION OR
THE APPLICATION THEREOF TO OTHER PERSONS OR CIRCUMSTANCES.
S 3. Subdivision 9 of section 415 of the vehicle and traffic law, as
amended by chapter 7 of the laws of 2000, is amended to read as follows:
9. Suspension, revocation and refusal to issue or to renew a registra-
tion. The commissioner or any person deputized by him may deny the
application of any person for registration under this section and
suspend or revoke a registration under this section or refuse to issue a
renewal thereof if he or such deputy determines that such applicant or
registrant or any officer, director, stockholder, or partner, or any
other person directly or indirectly interested in the business:
a. Has made a material false statement in his application; or
b. Has used or permitted the use of number plates contrary to law; or
c. Has been guilty of fraud or fraudulent practices, or has practiced
dishonest or misleading advertising; or
d. Has failed to comply with any of the rules and regulations of the
commissioner for the enforcement of this article or with any provision
of this chapter applicable thereto; or
e. Has wilfully violated any provisions of the motor vehicle retail
instalment sales act [or], the motor vehicle retail leasing act OR
SECTION ONE HUNDRED NINETY-EIGHT-C OF THE GENERAL BUSINESS LAW; or
f. Does not have a place of business within the meaning of this
section; or
g. Has been convicted of any crime involving dishonesty or deceit; or
h. Was the former holder, or was an officer, director, stockholder, or
partner, in a corporation or partnership which was the former holder of
a dealer's registration, which was suspended or revoked by the commis-
sioner.
S 4. This act shall take effect on the ninetieth day after it shall
have become a law.
