What You Need to Know About Car Dealership Laws in Ohio
With more drivers on the road than ever before, the automotive market remains strong and unyielding. But it is also part of a highly-regulated marketplace with state and federal laws governing various procedures, such as auto sales and dealer regulations.
All car dealers are required to comply with numerous state laws. For instance, Ohio Revised Code Section 4517.02 requires all applicants to submit an application with the appropriate licensing authority. This process requires applicants to furnish information pertaining to their financial statements and the type of dealership they own and operate.
Essentially, Section 4517.02 mandates that applicants receive either a "motor vehicle dealer’s license for franchised, independent, or used automobile and motorcycle dealers" or a "motor vehicle auction dealer’s license." It also requires these dealers to undergo background checks, which may include fingerprinting.
While licensing is the most common way the state regulates car dealerships, there are many more laws that are put in place to ensure these businesses operate within legal frameworks that encourage fair commerce for both consumers and dealers. In the state of Ohio, there are more than 150 statutes, rules and regulations dealers must follow.
One of the primary pieces of legislation car dealerships should become acquainted with is the Ohio Consumer Sales Practices Act. In limiting the reasons consumers can sue businesses , the act provides attorney general-specific remedies in chapter one. This chapter also gives the Ohio Consumer Sales Practices Act statutory foundation in common and appellate court decisions.
This particular act is critical to car dealerships specifically because "vehicle manufacturers and dealers are prohibited from knowing [about] a motor vehicle repair and service defect that is likely to cause death or serious bodily injury to a person if the defect is not repaired." It has established a legal obligation for vehicle manufacturers, dealerships, and distributors to notify all auto dealers and distributors of safe recalls.
Car dealerships need to be particularly mindful of the state of Ohio’s consumer protection statutes, as they regulate a massive number of consumer transactions. In addition to being mandatory for dealers, these statutes are also wide-reaching and support a range of enforcement activities that span from civil actions, which include filing injunctions, to criminal prosecution.
Some of the other notable pieces of legislation car dealers need to be aware of are:
The general framework surrounding Ohio car dealership laws is to protect and provide consumers with sufficient disclosures; ban unfair practices; and establish sufficient penalties for violations.
Car Dealer Licenses: An Overview of Ohio State Requirements
Before opening a dealership, an individual must first apply to the Ohio Department of Public Safety and complete the necessary forms to obtain the proper license for that particular business. To sell used cars, a dealer must obtain an Ohio Pre-Licensing Education Certificate. If a dealer wishes to sell a combination of new and/or used cars, he or she must apply for a motor vehicle dealer license issued by the Motor Vehicle Dealers Board. Additionally, a Motor Vehicle Dealer’s Board Certificate is required to sell used cars. All applicants must first submit an application and non-refundable fee of $25 to obtain a pre-licensing education certificate. A sales representative applicant must submit a non-refundable $25 fee application to receive an Ohio Sales Representatives Certificate and all business entities must submit a non-refundable $25 fee application to receive a business entity dealer’s license. In order to apply for a motor vehicle dealer license and/or a motor vehicle dealer’s license issued by the Motor Vehicle Dealers Board, an applicant must submit fingerprint cards to the Bureau of Criminal Identification and Investigation (BCI&I) and/or the Federal Bureau of Investigation (FBI), as well as an application that outlines the following information about the physical location of the dealership: An applicant must also provide fingerprints to the BCI&I, and/or the FBI for a criminal background check, a dealer’s bond, certificate of liability insurance, and a $10 application fee for a temporary license. If the applicant seeks a temporary motor vehicle dealer or rental motor vehicle dealer license, a car title clerk certificate must be secured while waiting for the results of the criminal records and insolvency checks and dealer license application. All motor vehicle dealer licenses must be renewed every year for a total annual fee of $150, which is distributed to the Department of Public Safety, Ohio Attorney General’s Office, Ohio Highway Patrol and Medicaid. The Motor Vehicle Dealers Board does not charge a renewal fee, but it does require all motor vehicle dealers, who have previously received monetary assistance from the AG’s Office, to prove that the dealers are in compliance with the assistance agreement that was executed, as a prerequisite for application renewal.
How Do Ohio Title and Registration Laws Impact Car Dealerships?
Informing the buyer of the requirement to pay sales tax is not the only title and registration-related responsibility with which a dealership should be familiar. First, let’s talk about Ohio’s procedures in these areas. In Ohio, a regular certificate of title application must be made with the county clerk of courts within 30 days from when the purchase agreement is effective. This means the buyer has 15 days to apply with the clerk of courts, and the dealership has 15 days from when the dealer takes possession of the vehicle. (There are some exceptions for leased vehicles and for ATV, mobile homes and motorcycles, although the basic procedures and requirements are the same.) The application for a single vehicle costs $15.00. However, if the buyer wants the county clerk of courts to process the dealer certificate of title, there is a service charge over the base title fee which, in Montgomery County, is $25.00 for each vehicle titled. That amount is charged in addition to the base fee. There are also other fees which could be added depending on the buyer’s use of the car. Here are some examples: 1. There is a $5.00 fee for a notary public acting in his/her official capacity. 2. Kentucky, Pennsylvania, Indiana and Michigan all impose Kentucky Reciprocity Fees of $10.00, $15.00, $20.00 and $30.00 respectively if the buyer has been a resident of those states for 60 days or more in the last 6 months. 3. If the buyer was not a resident of Ohio at the time of registration and/or title, there is an additional $2.00 fee. 4. If the buyer wishes to request a 10-day temporary license plate, there is a $10.00 fee. 5. If the buyer needs personalized plates, there is a $10.00 fee. After the new title is issued by the clerk of courts, (1) the buyer must register the vehicle with the Ohio Bureau of Motor Vehicles ("BMV"), and (2) the dealership must make an entry for the issuance of permanent plates in the TRAILS system. Plates may be registered at the clerk’s office or at any Ohio BMV office, and the buyer must pay two service fees: one to the BMV of $3.50, and the other to the clerk of courts for processing the vehicle assignment of title, the cost of which varies by county. There are three taxes which are applicable to the sale of vehicles in Ohio: Although these taxes are generally collected by the seller and registered at the BMV: Keep in mind that the vehicle must be registered with the clerk of courts or BMV within 10 days of when possession is taken, whether by the dealer or the purchaser. Failure to register a vehicle is a second-degree misdemeanor, which is punishable by up to 90 days in jail and/or a fine of up to $750.00. In subsequent offenses, it’s a first-degree misdemeanor (up to 180 days in jail and/or a fine of up to $1,000.00). In other words, beware of the consequences!
Ohio Car Dealer Agreements and Consumer Protection Laws
The Dealer Agreement refers to the written agreements between the franchised new car dealers and the manufacturer or distributor of the lines of vehicles assigned to the new car dealer. The law prevents the manufacturer or distributor from unilaterally terminating or altering a Dealer Agreement without "good cause". Under Ohio law good cause generally means the failure of the new car dealer to be open for normal business hours and a good faith effort to carry out the provisions of the Dealer Agreement or these other laws.
The Ohio Attorney General has also published a guide to Ohio consumer protection laws. While there are numerous areas of law that relate to the sale of motor vehicles, most consumers have heard of or are familiar with many of the laws that are summarized in the Ohio consumer protection website. However, I summarize a few of the laws which are frequently brought to my attention by new or used car dealers:
If you only remember one thing when it comes to the Ohio Dealership Laws or Ohio Consumer Protection Laws it is this: consult your attorney before you take any action with the Ohio Attorney General. The Ohio AG is looking for violations of the Ohio laws every day. Even if you have a good faith belief that what you are doing complies with the law, you should contact your attorney to make sure you avoid any missteps. Negotiating contracts with your manufacturers and distributors is a complex process that requires careful legal planning and execution. With the fast pace nature of the automotive industry, it’s easy to take actions that could be interpreted as violating your Dealer Agreements.
Advertising Regulations That Govern Ohio Car Dealerships
In addition to basic compliance with Ohio’s Unfair and Deceptive Trade Practices Act, all motor vehicle dealerships are subject to regulations imposed by the Ohio Revised Code and the Ohio Administrative Code. The first rule of advertising is that all advertising for the sale of cars must be truthful. Under Ohio law, advertising is defined as "any written or oral representation made in connection with the distribution of a commodity." See R.C. ยง1345.01(C). This definition has been construed very broadly in the context of advertisements. For example: While the statute does not define "advertisement," the [Federal Trade Commission] and Ohio courts have interpreted its meaning very broadly to include any notice meant to bring a merchant’s goods to the attention of the public at large. See, e.g., Lyon v. Davis (1955), 161 Neb. 473, 73 N.W.2d 776 (newspaper advertisement determined to be an advertisement under Nebraska law). Harris v. Callahan (2001) , 143 Ohio App.3d 666, 757 N.E.2d 1201 (Ohio Ct. App.). As a car dealership owner, you must be conscious of this definition when advertising your dealership’s cars. Among other factors you should consider, be sure to avoid any advertisement that would tend to deceive a reasonable or ordinary consumer to a "material fact" about the item you are selling, including: Don’t put your company or dealership’s name on advertisements or ads that are intended to induce the solicitations of purchases and that are misleading, deceptive, or false. Your duty extends to advertisements that misstate a material law or legal duty. R.H. Brown Co., Inc. v. Bergstrom (1987), 32 Ohio St.3d 220. Ohio law is clear that a legal disclaimers in fine print cannot absolve responsibility for false advertisement: Griffin v. Allstate Ins. Co. (1992), 77 Ohio App.3d 201.
Resolving Ohio Car Dealer Complaints and Legal Disputes
Even when you act with the utmost integrity, there may still be times when you face customer complaints or legal disputes. Among the most common complaints that you may face involve what a customer believes is non-disclosure of certain facts related to a sale. For example, if the vehicle had a pre-existing damage issue or if it had a prior lien, these issues need to be disclosed on a prior owner disclosure statement. Some complaints involve identity theft, where an individual was not legitimately able to sign a sales contract and did not receive a true copy of the paperwork. Or it could involve the assertion of a breach of contract clause. The key to dodging liability in these situations lies in contacting a consumer protection lawyer skilled at dealing with cases of alleged state enforcement actions.
Update: The Latest Changes to Ohio Car Dealership Laws
Recent changes in the law are the enactment of the F&DIY right. The statute amends the definition of a dealer and provides exemptions from dealership licensing requirements. The specific areas in which this is done are in vehicles sold at auction or used vehicles a dealer takes into inventory, sells on consignment, and certain classifications of used vehicles including, but not limited to: automobiles primarily for business use (person must pay property tax); farm implements (customarily serves a specialized need on a farm or ranch); and trailers having a gross weight rating of not less than 10,000 pounds. A vehicle is also not a motor vehicle if it is an unbranded, previously previously owned vehicle that I no longer meets the definition of a salvage motor vehicle (vehicle had received a salvage certificate of title because it was wrecked, abandoned, stolen, or not repaired, but the vehicle now is in a condition that is operable and does not have a salvage title), or dealership consigned training vehicle (vehicle used by a person or entity licensed as a dealer to train prospective dealership employees or buyers) for carrying out a dealership operations including delivery to the dealership for sale.
Conclusion: Complying with Ohio Car Dealer Laws
In our exploration of state laws governing car dealerships in Ohio, we have covered the Ohio Revised Code (specifically Chapters 4517 and 4505), as well as relevant administrative code provisions from the Ohio Administrative Code (specifically Rules 4501:1-3 and 4501-7-08). Additionally, we have also examined other state laws with applicability to car dealers (e.g., the CSPA and the ACHSA), and a relevant federal law (the Privacy Act).
Because so much of the compliance landscape is contextual, and because we could not possibly cover every law or regulation that could impact every car dealership in Ohio, there is not a definitively singular strategic approach . As a general rule of thumb, though, compliance requires that a car dealer in Ohio needs to develop and implement compliance programs that are relevant, and that they apply their resources wisely (i.e., carefully targeting relevant areas with specific investigations and compliance plans), much like is required under federal law (i.e., under the FCRA, Dodd-Frank, and GLBA).
That said, there are several key points that all Ohio car dealers should keep in mind when developing a general compliance strategy.
Also, in addition to collating the obligations set forth in Chapters 4717 and 4505 of the ORC and Rules 4501:1-3 and 4501-7-08 of the OAC on a state-wide basis, the dealer should also pay attention to local ordinances, and applicable federal laws.