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Licensing bond increase proposal hopes to protect consumers

JEFFERSON CITY, Mo. – Legislation in the Missouri General Assembly could make a number of changes to how motor vehicle dealers are licensed, but also potentially protect Missouri’s consumers.

Two bills, proposed by Rep. Kevin Engler, R-Farmington, and  Sen. Dan Hegeman, R-Cosby, would increase the size of the bond motor vehicle dealer license applicants are required to put down in order to receive a license to sell automobiles.

Current state statutes require a bond amount of $25,000, and has been that way since the 1980’s. Engler and Hegeman’s bills would raise that number to $50,000. It’s a move that the Missouri Auto Dealers Association (MADA) supports, hoping that the provision, along with other parts of the legislation, will lead to better protection for customers and less restrictive and obsolete regulations for dealers.

Phil Schneiders of MADA says the bill would also go a long way in policing dealers and fixing loopholes, especially in terms of the law concerning the bond. Schneiders pointed out how one dealer, Mark Moak, who co-owns Moak Auto Group in Polk County, shared his complaint with Gov. Eric Greitens, explaining how a required landline just served as red tape regulations on his business. The particular rule was put in place before the rise of mobile phones.

Rep. Engler says that the way the law was written left it so vague that it can be interpreted a number of ways. It is his hope that the proposed legislation would address some of those issues, particularly the practice of mobile dealerships.

“It doesn’t do much good to have a franchise if someone can go and bring in 50 cars and put them 100 yards away from the dealership – with no overhead,” Engler said. “I would like the practice curtailed so it’s fair. If you’re going to come into my market and sell stuff, and be in competition with my people, then maybe you should have some brick-and-mortar location.”

“We have some dealers now that are taking advantage of this law because there are no parameters on it,” Schneiders said. “These guys will take dozens of cars 50, 60, even 70 miles, park them at a Walmart parking lot next to a franchise dealer, who has millions of dollars stuck in their store, and then set up one weekend and have a big high-value sale.

The law also says a reasonable fee may be charged, but Schneiders says that sometimes, these fees can reach up to thousands of dollars. Engler said one of these events even carried a $15,000 fee.

The current law says that in the event of these large sale events, like the one hosted at the Capital Mall in Jefferson City, each dealer within a 10-mile radius must be invited. They do not have to participate, but cannot be excluded.

“This law was built so fellow dealerships could get together and have one big sale once or twice a year,” Schneiders said.

Kent Scism, the president of Sam Scism Ford Lincoln, says that the other concern with this practice is that when a person buys a car from these dealers, they could be left high and dry if something goes wrong with the vehicle after the vendor leaves.

“After their event is over, they pull up and they’re gone. If people have problems, where do they go?” Scism said. “Price is not everything, service is what we’re selling. I think people need to think long and hard before purchasing from someone who isn’t even from that market area and will not be there to help them if they have a problem.”

Scism says it’s not uncommon for those vendors to sell up to 80 or even 100 units during those events, but that these changes could help protect consumers and dealerships throughout the state.

The legislation is SB 492 and HB 1034.