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Date: August 17, 2024 Sat
Time: 2:48 am
Time: 2:48 am
Results for used-car industry
1 results foundAuthor: New Jersey Commission of Investigation Title: Gaming the System II: Abuses in the Used-Car Industry Summary: SUMMARY In 2015, the Commission examined conditions in the used-car industry and found serious flaws and discrepancies in the regulation and oversight of hundreds of dealers licensed in group settings known as multi-dealer locations, or MDLs. Focused primarily on New Jersey’s largest MDL complex – the New Jersey Dealers Auto Mall in Bridgeton, Cumberland County – the investigation revealed that while NJDAM operated under a veneer of apparent legitimacy, it was, in reality, a sham enterprise that enabled rampant dealer abuses ranging from consumer and bank fraud to tax evasion and money laundering. Under the MDL business model, a landlord leases space and provides other services to individuals or entities who are tenants – at least on paper – giving them an apparent base of operations within New Jersey and allowing them to meet the minimum requirements for obtaining used-car dealer licenses from the State. In fact, a large number of such dealers actually are based elsewhere, with many conducting business from locations out-of-state – mainly in New York – where stricter licensing rules make it difficult, if not impossible, for them to qualify for certified dealer credentials. During that inquiry, the Commission found that dealers who rented cubicles at NJDAM and similar entities were able to profit from an assortment of questionable and unscrupulous activities at the expense of taxpayers, consumers and legitimate commercial interests, and that much of this occurred because MDLs exist and function beyond the reach of basic rules governing licensure and oversight of car dealers in New Jersey. Despite the best efforts of line personnel at the state Motor Vehicle Commission (MVC) to scrutinize these dealers and enforce official regulations, the SCI found that meaningful oversight routinely was thwarted by MVC managers. In numerous instances, their actions, and in some cases, inaction, coincided with outside influence on behalf of NJDAM in the form of aggressive legal maneuvering and behind-the-scenes pressure from a prominent Trenton lobbyist – the former Director of MVC’s precursor, the New Jersey Division of Motor Vehicles. Favored treatment allowed MDLs and their tenant-dealers to be exempt from certain inspections and audits that are standard for other types of vehicle dealerships in New Jersey. For instance, the complexes were permitted to flagrantly misrepresent compliance with the MVC’s requirement that dealers be present at their licensed locations and be open for customers a minimum of 20 hours per week. Ignoring this basic requirement essentially became standard operating procedure at one particular complex after the MVC agreed to recognize the landlord NJDAM’s clerical personnel as “employees” of each of its more than 300 rent-paying tenant-dealers. To its credit, the MVC took steps during and soon after completion of the initial SCI investigation to address some of the most blatant regulatory weaknesses and resultant abuses detailed in the report. That effort had barely gotten off the ground, however, when a counteroffensive to undo the reforms was launched in the New Jersey Legislature. A lobbyist pressing for the bill was the same individual criticized in the SCI’s 2015 report for meddling in agency matters on behalf of NJDAM. The pending legislation would effectively legitimize nearly all of what the Commission found to be wrong in this corner of the used-car industry. This fact, along with credible allegations that extensive dealer abuses endured at these complexes absent comprehensive oversight as recommended by the SCI, prompted a follow-up inquiry into the continuing proliferation of MDLs in New Jersey. Commission investigators discovered that not only has the MDL business grown significantly over the past three years – there are now more than 100 additional tenant-dealers statewide than in 2015 – but that these sites remain a base camp for deceitful and, in some cases, unlawful activity. Once again, the Commission found dozens of instances in which consumers were ripped off after spending thousands of dollars for vehicles that in some instances turned out to be thinly disguised piles of junk. Aside from being unfit for the road, some were downright dangerous, such as the Ford Explorer SUV so thoroughly corroded that the buyer’s elderly mother narrowly escaped injury when she attempted to board the vehicle via a rusted step-rail that fell away. Other types of unscrupulous activity persisting at these sites include schemes by tenant-dealers to evade sales tax, to commit insurance fraud and to sell access to dealer credentials to unlicensed individuals. The Commission also learned of a pattern of abuse by some MDL-based dealers to circumvent inspection requirements for certain salvage vehicles – potentially putting cars too damaged to repair back on the road. Indeed, this practice has been so rampant that it recently prompted regulators in New York State to stop accepting salvage titles from New Jersey in order to protect unsuspecting consumers. Meanwhile, notwithstanding progress made by the MVC to address some regulatory gaps, the agency simultaneously has undermined that improvement by continuing to allow tenant-dealers to circumvent certain rules, including the requirement that dealers be present during posted business hours. The agency also lacks written guidelines for handling disciplinary action against used-car dealers who violate rules and regulations, relying instead on informal judgment calls by staff. Those decisions vary widely and can result in inconsistent penalties for violations, according to a detailed SCI review of MVC records. The Commission realizes that the MVC is responsible for overseeing a vast portfolio of entities, including but not limited to used-car dealers, and that it must do so with finite resources. It is also important to note that not all of the tenant-dealers housed at the various MDLs across New Jersey are involved in nefarious activity. Nonetheless, as the findings of this follow-up inquiry amply demonstrate, failure to enact any meaningful supervision of MDLs means that dishonest dealers will continue to victimize consumers and that other illicit activity at these complexes will continue with impunity. Given the SCI’s persistent findings, it may be that the only way to eradicate the myriad problems associated with the absentee tenant-dealers who use these sham complexes as a subterfuge is to eliminate the MDL system altogether. Short of that, the Legislature and the MVC need to impose authentic oversight and genuine consequences for those who violate statutory and regulatory rules to the public detriment. At the very least, the State should adopt more stringent requirements or those seeking to both obtain and retain retail used-car dealer licenses to deter abuse and ensure the presence of legitimate commercial enterprises. Finally, the Legislature should enact stronger protections for consumers who seek to buy used cars. The State of Massachusetts, for example, requires dealers to make repairs or to give buyers a refund if the vehicle in question fails to pass inspection within a week from date of purchase. The Bay State extends these protections to vehicle purchases costing a minimum of $700 and with an odometer reading of up to 125,000 miles – far more expansive than the limits covered under existing New Jersey law. Details: Trenton, New Jersey: State of New Jersey Commission of Investigation, 2018. 28p. Source: Internet Resource: Accessed January 16, 2019 at: https://www.state.nj.us/sci/pdf/CarAbusesSCIReport.pdf Year: 2018 Country: United States URL: https://docplayer.net/18264083-State-of-new-jersey-commission-of-investigation-gaming-the-system-abuse-and-influence-peddling-in-new-jersey-s-used-car-industry.html Shelf Number: 154189 Keywords: Bank Fraud Consumer Fraud Licensed Dealers Money Laundering Motor Vehicle Commission Multi-Dealer Locations (MDLs) New Jersey Dealers Auto Mall New Jersey Division of Motor Vehicles Regulation Tax Evasion Tenant-Dealers Used Cars Used-Car Dealer License Used-Car Industry |