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AUX7561

Course
AUX7561
Course Title
North Carolina Independent Dealer Initial

Description

Students will be given the NC Dealers and Manufacturers Regulations, a copy of the Federal Trade Commission Codes pertaining to Buyers Guides and a hand out that include the Gramm-Leach-Bliley statutes.  The class outline will coincide with the Dealers Regulations Manual, Title Manual and FTC Codes. Instructor will explain and discuss the pertinent material found in these documents, and students will be encouraged to make notations when necessary.

Objectives

To familiarize students with the rules and regulations pertaining to the sale and transfer of used motor vehicles in North Carolina.

Content

 

OUTLINE Rev.9/2013

Course Objective:

To familiarize students with the rules and regulations pertaining to the sale and transfer of used motor vehicles in North Carolina.

Instructor:

Jim Medford

Method of Instruction:

(

Students will be given the NC Dealer and Manufacturer Regulation Manual, a copy of the Federal Trade Commission Codes pertaining to Buyers Guides, and a handout that includes the Gramm-Leach-Bliley statutes. The class outline will coincide with the Dealer Regulation Manual, Title Manual and FTC Codes. Instructor will explain and discuss the pertinent material found in these documents, and students will be encouraged to make notations when necessary. Note: Duplication of this outline is not permitted without approval. The information in this outline is a result of the instructor’s interpretation of the statutes and regulations. It should not be considered as legal advice.)

Instructions for Accessing the Regulation Manual, Title Manual and Property Tax Calculator:

www.ncdot.gov - Click DMV. Click "License and Theft" at top right of the screen. Click Connect NCDOT.

Licensed dealers may call the DMV supply office in Raleigh (919-861-3640) to have forms sent by mail.

Instructions for Finding Statutes on Internet:

www.ncga.state.nc.us - Click on "General Statutes" under shortcuts on right of screen. Enter statute number in blank space under "Look-up by chapter number".

*Note: P

March of 2009. Several statutes pertaining to car dealers have been amended since this date.

age numbers on this outline refer to Dealer Regulation Manual. Manual was last updated in

I. Regulation of motor vehicle distribution in public interest. (20-285)

A. G.S.20-286. Definitions from Dealer Manual p. 2-4

1. Established sales room (#6) p.2; p.92

2. Good faith (#8c) p.3

3. Motor vehicle (#10) p.3

4. Motor vehicle dealer (#11) p.3-5

5. Motor vehicle sales representative (#12) p.5

6. Used motor vehicle dealer (#16) p.6

7. Wholesaler (#17) p.6

8. Moral turpitude (not in manual) "Conduct contrary to expected standards of honest, morality, or integrity."

p.1

II. Related Statutes and Regulations

A. G.S. 20-287- Licenses required; penalties p.6

B. G.S. 20-288-Application for license: license requirements: expiration p.7

(Amended 2011)

C. G.S.20-289- License fees p.9

D. G.S. 20-290- Licenses to specify places of business; display of license and list of sales representatives; advertising p.9

E. G.S. 20-291-Representatives to carry licenses and display it on request; license to name employer p.10

F. G.S. 20-292- Dealers must display motor vehicles for sale at established salesrooms. p.10

G. G.S. 20-294- Grounds for denying, suspending or revoking licenses. The Division may deny, suspend or revoke a license issued under this Article p.10

H. G.S. 20-295- Action on application p.11

I. G.S. 20-296- Notice and hearing upon denial, suspension, revocation or refusal to renew license p.12

J. G.S. 20-297- Retention and inspection of certain records p.12 and p.104

K. G.S. 20-298- Insurance p.8

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L. G.S. 20-299- Acts of officers, directors, partners, salesmen, and representatives p.13

M. G.S. 20-20-301- Powers of Commissioner p.13

N. G.S. 20-302- Rules and regulations p.17

O. G.S. 20-304- Installment sales to be evidenced by written instrument; statement to be delivered to buyer p.18

P. G.S. 20-79. Dealer License Plates p.64-67, p.102-103

(Amended 12-01-2010)

Q. G.S. 20-79.1-Use of temporary registration plates or markers by purchasers of motor vehicles in lieu of dealer plates p.68, p.99-101

R.

G.S. 20-79.2 - Transporter plates p.71 (Amended 12-01-2010)

S. G.S. 20-101.1- Conspicuous disclosure of dealer administrative fees p.73

T. G.S. 20-101.2- Conspicuous disclosure of dealer finance yield charges p.74

U. G.S. 20-106- Receiving or transferring stolen vehicles p.75

V. G.S. 20-108- Vehicles or component parts of vehicles without mfg. numbers p.78

W. G.S. 20-109- Altering or changing engine or other numbers p.81

III. Vehicle Mileage Act p.86-91

A. G.S. 20-343- Unlawful change of mileage p.87

B. G.S. 20-344- Operation of vehicle with intent to defraud p.87

C. G.S. 20-346- Lawful service, repair, or replacement of odometer p.88

D. G.S. 20-347- Disclosure requirements p.88

E. G.S. 20-347.1- Odometer disclosure record retention p.90

F. G.S. 20-348- Private civil action p.91

G. G.S. 20-349- Injunctive enforcement p.91

H. G.S. 20-350- Criminal offense p.91

IV. Manner of Operation p.96

A. Vehicles offered for sale owned by dealership shall have title available.

B. Vehicles offered for sale on consignment p.97

C. Vehicles offered for sale on a floor plan lien p.98

D. Bill of sale-written documentation p.98

E. Buyers Guides p.104, p111 and handout containing FTC rules

F. Business records p.103

V. Inspection and Investigation by the Division p.104

A. Division may make periodic inspections of premises and records.

B. All bona fide complaints in writing will be investigated to determine if there is a violation of regulations.

C. Hearings to be held prior to suspending, revoking or failing to renew license

VI. Civil penalties for violations by licensee p.106-111

A. Types of violations subject to civil penalties

1. Type I Violation- First offense within 3 years is $250, second offense is $500 and third and subsequent offenses are $1000

2. Type II Violation- First offense within 3 years is $100, second offense is $250 and third and subsequent offenses are $500

3. Type III Violation- Any offense will be $50

4. Multiple offenses in course of same transaction, the most significant violation only will be charged and assessed

B. Payment of Civil Penalties- Due within 30 days

C. Acts that constitute Type I violations p.108-110

D. Acts that constitute Type II violations p.110

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E. Acts that constitute Type III violations p.111

F. Civil Penalty for selling vehicles without a license is $5000 p.111

VII. Inspection requirements

A. When a vehicle must be inspected; one way trip permits p.84-86

(Amended 2010)

B. Emissions Counties (Title Manual, section 4, Chapter 2, p. 7)

C. House Bill 585 has amended 20-183.2(b)(3) to read as follows: "A motor vehicle is subject to an emissions inspection in accordance with this Part if it meets all of the following requirements: It is (i) a 1996 or later model and older than the three most recent model years or (ii) a 1996 or later model and has 70,000 miles or more on its odometer."

VIII. Transfer of Title or Interest

A. G.S. 20-60. Owner after transfer is not liable for negligent operation. "The owner of a vehicle who

has made a bona fide sale or transfer of his title or interest, and who has delivered possession of such vehicle and the certificate of title thereto properly endorsed to the purchaser or transferee, shall not be liable for damages thereafter resulting from negligent operation of such vehicle by another." If a dealer gives the buyer possession prior to all the legal requirements having been met, he could be held liable for negligent operation resulting in personal injury or property damage.

B. 20-52 (p.55 in Regulation Manual)

Only NC residents, members of the military stationed in NC, college students enrolled in this state

and vehicles owned by out of state residents when the vehicle is garaged in NC for 6 months of the

year may be titled in NC.

C. G.S. 20-72. Transfer by owner.

1. If a vehicle registered in NC is sold, the plate and registration must be forwarded to the DMV

unless the plate is to be transferred to another vehicle. The transfer must be made within " 20

days after the date on which such plates are last used on the vehicle to which theretofore

assigned". If the original vehicle has not been sold then the plate must be transferred at the

license plate office prior to operation

*Note: G.S. 20-279.21(c)

named as insured therein against loss from the liability imposed upon him by law for damages

arising out of the use by him of any motor vehicle not owned by him, and within 30 days

following the date of its delivery to him of any motor vehicle owned by him…..".

A newly purchased vehicle will also have insurance for 30 days if the purchaser has a policy in

effect on another vehicle. Therefore when a plate is transferred to a recently purchased vehicle

the owner can operate it immediately and have coverage.

2. "

motor vehicle delivered to the transferee".

transfer until title and vehicle are delivered to purchaser. "Any person who delivers or accepts a

certificate of title assigned in blank shall be guilty of a Class 2 misdemeanor". (NOTE: If the

seller’s signature has not been notarized, then the title has not been assigned. This definition can

be found in the Title Manual, Section 1, Chapter 5, page 1.)

3. If a certificate of title has been assigned and the purchaser’s name and address has been left off,

the DMV may seize the title until signor appears and verifies the name and address of the

purchaser.

D. G.S. 20-73. Application for registration and certificate of title

1. A title must be applied for within 28 days of purchase.

2. Exceptions: Does not apply to dealers and insurance companies when the transfer meets the

requirements of 20-75.

3. "A person to whom a vehicle is transferred who fails to apply for a certificate of title within the

required time is subject to a civil penalty of $15 and is guilty of a misdemeanor." A person

acting on behalf of the purchaser is only subject to the $15 civil penalty. 4

. "Such operator’s policy of liability insurance shall insure the person No title to any motor vehicle shall pass or vest until such assignment is executed and the This makes it clear that ownership does not

E. G.S. 20-74. Penalty for making false statement about transfer of vehicle

"A dealer or another person who, in an application required by this Division, knowingly makes a

false statement about the date a vehicle was sold or acquired shall be guilty of a class 3

misdemeanor".

F. G.S. 20-75. Dealers and insurance companies "shall not be required to register the vehicle nor

forward the certificate of title to the Division as required by 20-73". Where a security interest is

obtained from transferee, "the dealer shall deliver the certificate of title to the lien holder and the lien

holder shall forward the certificate of title together with the transferee’s application for new

certificate of title and necessary fees to the Division within 20 days". This statute also makes it a

misdemeanor to deliver or accept a title assigned in blank.

G. G.S. 20-75.1. Conditional delivery of motor vehicles

This statute makes it legal for a dealer to sell a vehicle conditional on the purchaser obtaining

financing within 10 days. Dealers insurance will cover the vehicle until sale is finalized.

H. G.S. 20-76. Title lost or unlawfully detained: bond as condition to issuance of new title

1. When an applicant for title or registration is unable to present a certificate of title because it is

lost or unlawfully detained or otherwise not available, the division is authorized to examine

the circumstances and may issue a new title if it determines that 20-72 has been complied

with.

2. When an applicant is unable to satisfy the Division that he is entitled under subsection (a) the

applicant may "obtain issuance of a new certificate of title by filing a bond with the division".

IX. Salvage Titles and Damage Disclosure

A. Definitions-G.S.20-4.01(33)

a. Flood Vehicle-A motor vehicle that has been submerged or partially submerged in water to the extent that damage to the body, engine, transmission, or differential has occurred.

b. Reconstructed Vehicle-A motor vehicle of a type required to be registered that has been materially altered from original construction due to removal, addition or substitution of new or used essential parts; and includes glider kits and custom assembled vehicles.

c. Salvage Motor Vehicle-Any motor vehicle damaged by collision or other occurrence to the extent that the cost of repairs and rendering the vehicle safe for use on the public streets and highways would exceed 75% of its fair retail market value, whether or not the vehicle has been declared a total loss by an insurer. Repairs shall include the cost of repairs and labor. Fair market retail values shall be as found in the NADA Pricing Guide Book or other publications approved by the Commissioner.

d. Salvage Rebuilt Vehicle- A salvage vehicle that has been rebuilt for title and registration.

e. Non USA Vehicle-A motor vehicle manufactured outside the US and not intended for sale in the US.

B. G.S. 20-71.3- Salvage and other vehicles- Titles and registration cards to be branded.

C. G.S. 20-71.4- Failure to disclose damage to a vehicle is a misdemeanor. p.61

X. Liens and Registration

A. G.S. 20-57- Division to issue certificate of title and registration card

B. G.S. 20-58- Perfection by indication of security interest on title

C. G.S. 20-58.1- Duty of Division upon receipt of application for notation of security interest

D. If an application for a lien is delivered to the Division within 20 days after the date of the security

agreement, the security interest is perfected as of the date of the execution. Otherwise it will be

perfected when it is delivered to the division.

E. G.S. 20-58.4- Release of security interest

F. G.S. 20-59- Unlawful for lienor not to surrender title when lien is satisfied 5

XII. Procedures for transferring title (Section 1, chapter 3, p.4 in Title Manual)

A. Items that constitute a proper sale of vehicle

1. Proper assignment of the title document

2. Delivery of the vehicle

B. Items that constitute a proper assignment of a title document

1. Purchaser’s name and address

2. Date of sale or date of delivery

3. Seller’s signature

4. Odometer reading, damage disclosure

5. Notarization

C. Transferring ownership on title (Explained in full in Section 1, chapter 3, pages 4-7 of Title Manual)

1. Vehicle information on the title must agree with supporting documents

2. Registered owner on title must sign as seller in presence of notary on reverse of title. Proper papers must be furnished if someone other than owner signs.

3. Lien release is required if a lien is shown on the face of the title

4. All liens existing against the purchaser for the vehicle must be entered in the lien section.

5. Assignment must trace from registered owner through dealers to the retail purchaser. Each assignment should include the seller and purchaser’s hand printed name, notarized signature, and date of purchase. Odometer reading must be included if vehicle is less than 10 years old. (Note: Out of state titles may not require notarization.)

6. Joint ownership requires both sellers to sign releasing ownership but only one buyer needs to sign for odometer certification.

7. The owner must personally sign and handprint when transferring ownership. NC recognizes handprint as handprinted, not typed or computer generated.

D. The Title Manual includes instructions on the use of all forms required in the proper transferring of

vehicles. The forms can be downloaded and printed.

1. MVR 191- Certificate of Title (Section 1, chapter 3, pages 4- 7)

2. MVR-1- Application for Title (Section 1, Chapter 2, pages 2- 6)

3. MVR-2- Dealer’s Reassignment Form (Section 1, Chapter 5, p.1)

4. MVR-3- Certificate of Repossession (Section.1, Chapter 6, p. 4)

5. MVR-4- Duplicate Title (Section.1, Chapter.6, p. 1)

6. MVR-5- Title correction and substitute title (Section 1, Chapter 6, p.1)

7. MVR-6- Lien Recordings (Section 1, Chapter 6, p. 2)

8. MVR-6T- Temporary lien filing to be used by licensed dealer when title is not available

(Section 1, Chapter 6, p. 4)

9. MVR-7- Recording assignment of lien and application for transfer of lien

(Section 1, Chapter 6, p. 5)

10. MVR-8- Removal of lien (Section 1, Chapter 6, p. 6)

11. MVR-92A- Requirements for obtaining title by filing an indemnity bond

(Section 4, p. 66)

12. MVR-106- Requirements for obtaining NC Registration (Section 4 p.71)

E. Documents needed for dealer transfer at the license plate office

1. Copy of buyer’s driver’s license

2. Copy of bill of sale

3. Copy of damage disclosure

4. MVR-1 "Title Application" signed and notarized

5. MVR-2 "Dealer Reassignment of Title" (unless assigning on the back of title)

6. Title with all attached reassignments

7. MVR 615A completed by buyer

8. Proof of insurance 6

XIII. Installment Sales

A. G.S. 25-9-609 – Secured party has the right to take possession after default without judicial process, but cannot breach the peace during repossession. Advice from an attorney is recommended to prevent costly lawsuits. "Breach of the peace" is defined as conduct "plainly likely to provoke violent retaliation".

B. G.S. 25A-29 Default charges "not to exceed 5% of the installment past due or six dollars ($6.00), whichever is the lesser. A default charge may be imposed only one time for each default."

C. 25A-15 (c) The rate set forth below may be imposed in a consumer credit installment sale contract repayable in not less than 6 installments for a self-propelled motor vehicle:

1. 18% on one and two model years old

2. 20% on three model years old

3. 22% on four model years old

4. 29% on five model years old

(Note: Dealers who intend to finance vehicles should download 25A-15 in its entirety and read

thoroughly.)

XIV. Highway Use Tax

A. 3% tax is imposed for privilege of using highways of NC and is in addition to all other taxes. The

sales price minus the trade-in value is taxed when sold by a dealer, and the market value determined by DMV is used for casual sales. Tax must be paid when applying for title. Bill of sale is required when sold by a dealer. Gift of a vehicle to an immediate family member is exempt from highway use tax.

XV. Gramm-Leach-Bliley Act -15

A. Sec.6801. Protection of nonpublic information

B. Sec. 6802. Obligations with respect to disclosures of personal information

C. Sec.6803. Disclosure of institution privacy policy

D. Red Flag Rule: Dealers who finance vehicles must have a written security plan to protect against

identity theft or "flag" suspicious activity that may indicate identity theft. The FTC website explains

how to comply with the rule. Congress passed an amendment to the rule on 12-13-2010. Information

on the internet dated after this date may not be correct. If the dealer does not allow non public

information to be released to the public then the security plan would probably not be necessary.

XVI. 20-354.3 -NC Motor Vehicle Repair Act

A. Written motor vehicle repair estimate and disclosure statement required if costs exceed $350. Shop and environmental fees included in estimate.

XVII. USA Patriot Act

A. Dealers must check to see if customers are on suspected terrorist list.

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ttp://sdnsearch.ofac.treas.gov/

B. Dealers must report to IRS if they receive more than $10,000 in cash

C. When a customer making installment payments is called to active military duty, creditor must lower

the interest rate to 6% if requested to do so.

XVIII. Tag and Property Tax Together (Effective July 1, 2013)

Effective July 1, 2013, when a vehicle is sold, titled and registered, the vehicle property

tax is due along with the other fees required to title the vehicle. The owner will have the

option of paying the property tax or obtaining a limited registration plate and deferring

payment of property taxes for 60 days. The Property Tax Calculator can be found at

www.ncdot.gov where the Regulation Manual is located.

USED MOTOR VEHICLE DEALER PRELICENSING CLASS (12 hrs.)

Prerequisites

None

Method of Instruction

Traditional

Evaluation

None