April 19, 2023
The Honourable Parm Gill
Minister of Red Tape Reduction
Ministry of Red Tape Reduction
7th Floor
56 Wellesley Street West
Toronto, ON M7A 2E7
Dear Minister Gill,
Re: Proposals to Reduce Burden, Improve Regulatory Efficiency, and Protect Consumers
I am writing on behalf of the Used Car Dealers Association of Ontario (“UCDA”) to submit our recommendations for the reduction of red tape for motor vehicle dealer businesses that our members operate throughout the province.
UCDA is a non-profit association of motor vehicle dealers with almost 5,000 members who operate in more than 500 communities across Ontario. We work with members to ensure a fair and informed used vehicle buying experience for consumers in Ontario.
Over the years we have worked with your Ministry and others on a variety of issues including the reduction of red tape for small businesses across the province. We congratulate your government for continually implementing measures that help businesses grow and which allow the public to engage with them in a more efficient and timely manner.
Several years ago, the Ministry of Government and Consumer Services (as it then was), undertook consultations on the provisions of the Motor Vehicle Dealers Act and regulations with a view to reducing burdensome and inefficient provisions that amounted to unnecessary red tape. We wish to follow up on the work that was undertaken and are pleased to make the following recommendations.
Classes of Motor Vehicle Dealers
Sections 18 to 25 of Ontario Regulation 333/08 made pursuant to the Motor Vehicle Dealers Act, 2002 (“MVDA”) provides for classes of motor vehicle dealers and the authorized activities for each class of dealer. These include: general dealers, brokers, wholesalers, exporters, outside Ontario dealer, lease finance dealer and fleet lessor.
UCDA is concerned with the legislative restrictions imposed on the wholesaler and exporter classes:
Wholesalers: Pursuant to section 21 of O.Reg 333/08, a motor vehicle dealer registered as a wholesaler may not act as a motor vehicle dealer, other than:
- to trade in motor vehicles with other registered motor vehicle dealers
- to sell motor vehicles at an auction, among others, to a person who is located in another jurisdiction and registered in that jurisdiction as a person with equivalent status to a registered motor vehicle dealer.
In other words, wholesalers may not trade in motor vehicles with members of the public.
Exporters: Pursuant to section 22 of O.Reg 333/08, a motor vehicle dealer registered as an exporter may not act as a motor vehicle dealer other than to buy motor vehicles for the purpose of export outside of Ontario.
The Need for Amendment of O.Reg 333/0:
Wholesalers were negatively affected by the pandemic, as their usual sources of inventory, such as auctions, were not available. With a lower supply, many new car dealers, another big source of inventory for wholesalers, retained the used inventory they could obtain for sale to the public. The traditional model for sourcing used vehicles no longer worked for many wholesalers. They looked to sourcing vehicles privately, which, under the regulation, they are not permitted to do since that would mean dealing with the public.
Some wholesalers also wished to access the export market which remained relatively strong during the pandemic due to high American dealer demand. Unfortunately, wholesalers are not permitted to sell to dealers outside of Ontario. They can only deal with “registered motor vehicle dealers”, which by definition, means dealers registered in Ontario. The only exception to this is if the wholesaler sells through a wholesale auction, where the purchaser is a dealer from another jurisdiction with equivalent status to the Ontario registered dealer. Otherwise, only general dealers (retailers) and exporters can sell to non-Ontario dealers.
If a wholesaler decided to change its status from wholesaler to exporter, to allow them to sell to dealers outside of Ontario, they would be restricted solely to that market and lose the right to sell to other Ontario registered dealers. Given that a dealer cannot be both an exporter and a wholesaler, their ability to trade in motor vehicles is severely restricted.
The UCDA recommends that O.Reg. 333/08 be amended so that registered Ontario motor vehicle dealers are able to buy and sell vehicles from private sources and to buy and sell vehicles to dealers outside of Ontario regardless of whether they are classified as wholesalers or exporters as the case may be. The definitions of the current classes of dealers unduly restrict dealers from fully operating their businesses as was clear during the pandemic. The changes being proposed provide an enhanced level of commercial flexibility and viability, especially when public emergencies prevent them from carrying on their normal course of business.
Removing the requirement for registrants to return their registration certificates
Pursuant to subsections 29(7) and 29(8) of O.Reg 333/08, registrants are required to return their certificate of registration to the registrar when they cease to be registrants. During consultations on the Motor Vehicles Act, 2002, (the “MVDA”) the Ministry proposed the removal of this requirement. UCDA fully supports this proposal for the following reasons:
- The current requirement is very difficult to enforce.
- The Ontario Motor Vehicles Industry Council (“OMVIC”) has been issuing electronic certificates to registrants since March 2020, thereby making the requirement for registrants to return their certificate of registration outdated.
- While the savings would be modest, the proposal will nevertheless save registrants the cost of returning the certificate to OMVIC.
UCDA also agrees that there is a risk to consumers that dealers or salespersons who are no longer registered would retain their certificates and use it to act as registrants. To mitigate that risk, OMVIC should increase its public education efforts to ensure that consumers are made aware of the online search tool that consumers can use to check to see if a registrant is actively registered.
Reducing burden in the day-to-day operations of registrants
Extending the time period for the return of warranty documentation and payments received
The Ministry proposed an extension of the period of time for dealers to provide a warranty seller with required warranty documentation and payments received from consumers from seven to thirty days.
Pursuant to subsection section 47(7) (c) of O. Reg. 333/08, seven days after entering into the contract for the warranty, dealers are required to provide the warranty seller with all available documentation detailing the contract, all payments the dealer has received from the purchaser, and a statement that describes the condition of the vehicle and the distance the vehicle has been driven, if available.
It is often difficult for dealers to provide the required documentation and payments received within the seven-day period; 30 days is more reasonably aligned with industry practice. In fact, warranty sellers often require dealers to submit warranty payments and documentation on a monthly basis. This change will have no impact on consumers.
We do recognize that there may be circumstances in which unscrupulous registrants will collect fees from customers for third party warranties and then not submit the premium to the warranty provider, in the hope that the customer would never require the use of the warranty and never be aware of any issue. However, this risk is present regardless of the turnaround time. As a practical matter, however, the longer the time period the more likely it is that this may occur without it being discovered. For that reason, we recommend that OMVIC strongly encourage dealers to comply with the prescribed time period and to closely monitor and enforce the revised provision through random checks and enforcement.
Exploring changes to required disclosures in a contract
The Ministry is exploring updating the requirements for certain disclosures that a dealer needs to include in a contract of sale or to lease a motor vehicle with a consumer. The rationale for these changes was set out in the Ministry’s consultation document:
Subsections 39, 40, 41 and 42 of O.Reg 333/08 among others, require dealers to include a number of items in the contract with a consumer depending on if the transaction is the sale of a new vehicle, used vehicle or a lease. Similarly, under section 5 of O. Reg. 332/08, dealers are required to list a number of items in a contract for sale or lease with another dealer. Please see Appendix I for the relevant sections containing these required disclosures.
The ministry has heard from industry that some of the information required to be disclosed by the regulation is difficult for the dealer to know or obtain. For example, dealers may not be able to determine if a used vehicle was registered in another jurisdiction in the past seven years. Additionally, the ministry has heard from industry that consumers
may not be concerned with certain information elements that are required in a contract.
However, the ministry has also heard from OMVIC that the required disclosures in contracts are very important pieces of information for consumers and provide significant protection for consumers. For example, information on where a used vehicle was previously registered provides vital information to the consumer if the vehicle was registered in a jurisdiction that may have different vehicle safety standards than Ontario. Therefore, removing requirements to provide any such disclosures may pose a risk to consumers that they may not be fully informed about the vehicle they are purchasing.
Additionally, OMVIC noted that the fact that dealers are required to provide this information to consumers in a contract gives them a competitive advantage over private sellers who are not required to provide this information to consumers. Consumers may be more likely to buy from a dealer if they are comfortable they have received the information they need about the vehicle as required by the MVDA and its regulations.
UCDA agrees that there are opportunities to tighten up disclosure requirements in the regulations made pursuant to the MVDA. For example, the requirements for registering vehicles that were previously registered in another province requires amendment. While a consumer might not be concerned about whether a vehicle was registered in another province, it might nevertheless be difficult for an Ontario dealer to be aware of that registration many years later.
While OMVIC’s concerns about different safety standards in other provinces, even assuming that concern is justified, would have less relevance after a vehicle has been operational in Ontario for months and years after arrival in Ontario. For reasons of consistency, if the Ministry wishes to maintain a declaration requirement, we recommend that it should mirror the declaration requirement that applies to rental vehicles: if the vehicle is not previously owned by a consumer in Ontario, then that fact must be declared. Having said that, we question the need for a declaration relating to rental vehicles. It has never been accurate to state that any of these vehicles are less trustworthy than other used vehicles. In
fact, it may be argued that they might be better maintained by owners than many privately owned used vehicles, as those owners have a vested interest in preserving retail values.
We also recommend that the delivery date requirement be removed from a contract of sale. From our experience, this requirement is more honoured in the breach. Most dealers and consumers conclude sale agreements with that date left blank, as both parties know the vehicle will be made ready in a reasonable time. Sometimes that schedule can vary due to holidays or mechanic availability so some flexibility is required. Rarely do we receive complaints about this issue.
We further recommend that the requirement to disclose the provisions of the Canadian Motor Vehicle Arbitration Plan (“CAMVAP”) be removed. CAMVAP, under which consumers and manufacturers can resolve various disputes, including those relating to material defects or the application of the new vehicle warranty, applies to relatively few used vehicles. Moreover, there are fewer and fewer manufacturers participating and, in any event, if consumers are properly educated, the bill of sale is not where they will learn about the existence of CAMVAP. The MVDA’s CAMVAP requirement does little to help consumers become aware of the plan if they do not read the sale agreement.
UCDA opposed the requirement for a declaration about repair costs greater than $3,000 when it was first introduced in 2010. What we foresaw would happen has actually happened in that some dealers feel that if a vehicle repair is less than $3,000, they do not have to declare a prior repair incident. We maintained then, and continue to believe that “material fact” disclosure is more flexible, workable and relevant to the consumer. However, if the Ministry believes that a dollar threshold must be maintained, we recommend that it be raised to a more realistic amount such as $5,000. In 2023, it takes very little damage to result in repairs amounting to $3,000. On some vehicles, a single damaged headlight can cost close to $2,000 to replace.
Finally, we recommend that disclosure relating to replaced panels be removed. From our experience, we not believe that the mere fact that two or more body panels have been replaced, other than bumper panels, is of concern or interest to a consumer. Previous accident damage is of concern to a consumer and we have commented on that above. The reality is that panels can be replaced because of rust, body-work or other cosmetic reasons not related to accident damage and should therefore not be a stand-alone declaration absent any material fact background.
Increasing the minimum fine for acting as a registered motor vehicle dealer or salesperson
UCDA supports the Ministry’s proposal to increase the minimum fine for the offence of an unregistered person acting as a motor vehicle dealer or salesperson from $2,500 to $5,000 (Subsection 32(4) of the MVDA).
The Ministry has noted that fines levied pursuant to the MVDA have not changed in over a decade and the violation of an unregistered person acting as a registrant is still taking place too often in the sector. For example, OMVIC has informed the Ministry that over the last five years there were approximately 30
convictions each year for “curbsiding” (acting as a motor vehicle dealer while unregistered). From 2018 to 2020, OMVIC laid an average of 334 charges against alleged curbsiders per year. This is an average of about 60 per cent of all charges laid by OMVIC over that period.
We agree with the Ministry position that “curbsiding” and acting as a salesperson while unregistered continue to be common issues in the marketplace and that an increase to the minimum fine for this offence would act as a deterrent and provide a more appropriate minimum penalty for those who attempt to deceive consumers.
Adding provisions to the Code of Ethics
The ministry proposed that specific requirements that are found in the General regulation should be added to the Code of Ethics regulation:
The Code of Ethics regulation (O. Reg. 332/08) made under the MVDA contains requirements for registered motor vehicle dealers and salespersons to act with honesty, integrity, and fairness in carrying on business. For example, registered motor vehicle dealers and salespersons must be clear and truthful in describing the features, benefits, and prices connected with the motor vehicles in which the registrant trades and in explaining the products, services, programs, and prices connected with those vehicles.
If the Discipline Committee makes a determination that a registrant has failed to comply with the Code of Ethics, it may order any of the following, as appropriate:
- Require the registrant to take further educational courses.
- In accordance with the terms that may be specified by the committee, require the motor vehicle dealer to fund educational courses for salespersons employed by the dealer or to arrange and fund such educational courses.
- Impose such fine as the committee considers appropriate, to a maximum of $25,000, or such lesser amount as may be prescribed, to be paid by the registrant to the administrative authority.
- Suspend or postpone further educational courses or the imposition of the fine for a designated period.
- Fix and impose costs to be paid by the registrant to the administrative authority.
It may be appropriate to update the Code of Ethics to include specific requirements currently in the General regulation in the Code of Ethics regulation. For example, under subsection 36(7) of the General regulation, advertisements that indicate the price of a motor vehicle must set out the price in a clear, comprehensible, and prominent manner and include the total amount a buyer would be required to pay for the vehicle including charges for freight, charges for inspection, fees, levies, and taxes. The same requirement may be appropriate to include in the Code of Ethics regulation.
The UCDA supports this proposal are in favour of requirements that might be added to the Code of Ethics to strengthen wholesale fairness between dealers and at wholesale auctions where many of these transactions are conducted, and where many problems arise.
For example, if a dealer sells a vehicle to another dealer at an auction and the condition of the vehicle is such that engine light is off, but it subsequently is illuminated after 48 hours, this issue cannot be arbitrated because the time for initiating auction arbitration is limited to 48 hours after the purchase. OMVIC has been reluctant to get involved in disputes between dealers as consumers are not involved. If the purchasing buying dealer commences legal action against the seller, the auction house might bar the dealer from engaging in future business with them, so the purchasing dealer is left with no recourse.
If a dealer sells a vehicle to another dealer “as is”, the Regulations must make it clear that existing known defects must still be declared. Again, some auctions will not arbitrate any complaint on the sale of “as is” vehicles. If the law was clearer, arbitration rules would need to follow suit. For example, in a dealer-to dealer sale, at auction or otherwise, the law is clear that pollution controls must be functioning on all vehicles sold in Ontario. However, appears to be a controversial proposition in some wholesale transactions, where “as is” is interpreted to mean “what you see is what you get”. This must be clarified.
Making Housekeeping Amendments
UCDA supports the Ministry’s proposal to implement housekeeping amendments to the MVDA and the General Regulation as follows:
The ministry is proposing housekeeping amendments to the MVDA and the General regulation. The intent of the proposed housekeeping amendments is to remove provisions that related to the transition from the previous version of the MVDA. These provisions are no longer relevant.
Examples of provisions the ministry is proposing to remove include:
Subsection 34(3) of the MVDA
This provision allows for fines for convictions under the previous Motor Vehicle Dealers Act to be payable under the current act.
Section 41 of the MVDA
This provision allows for those who were registered under the previous Motor Vehicle Dealers Act to remain registered under the current act until the time of their next registration renewal.
Section 10 of O. Reg. 333/08
This provision allows for transitional matters related to registration at the time the current MVDA came into effect in 2010 regarding which classes dealers would be registered under.
Section 88 of O. Reg. 333/08
This provision relates to claims to the Motor Vehicle Dealers Compensation Fund prior to 2010. OMVIC confirmed with the ministry that there are no outstanding claims from prior to 2010.
We are confident that these recommendations, if implemented, will reduce the regulatory burden on motor vehicle dealers while at the same time offer further protections to consumers. We would be pleased to discuss these proposals with you at your convenience.
Yours truly,
James F. Hamilton
Interim Manager and Legal Services Director
cc Sam Oosterhoff, MPP for Niagara West, Parliamentary Assistant to the Minister of Red Tape Reduction; Robert Thompson, Chief of Staff to the Minister of Red Tape Reduction