A Perth car dealership and a salesperson managing the business have been fined $31,500 in total for duping consignors who they were selling vehicles for.
PAG (WA) Pty Ltd, trading as Xoticar of Welshpool and Mr Zeljko Grujin each pleaded guilty to a total of seven contraventions of the Motor Vehicle Dealers Act (MVDA) and two breaches of the Australian Consumer Law (ACL) at the Perth Magistrates Court on 27 May 2019.
The dealership, specialising in consignment sales, did not comply with the MVDA by:
- failing to deposit proceeds of sales into a trust account by the next business day; and
- failing to pay net proceeds to the owner within two business days of receiving payment.
The ACL was breached when false or misleading representations were made to vehicle owners about the sale price, so the dealership could make higher profits. In December 2015 the seller of a Mercedes Benz was told a $40,000 sale could be achieved resulting in him receiving $36,300 but the reality was Xoticar had been offered $44,000 for the car. In 2016 a consignor got $25,000 thinking the sale price was $29,000 but in truth Xoticar had secured $35,000.
Commissioner for Consumer Protection David Hillyard said laws relating to consignment sales are designed to keep transactions transparent and prevent vehicle owners from being deceived.
“With consignment sales, the vehicle seller is not directly involved and needs to be able to trust the dealer. In this case customers were lied to about what sale price could be achieved when in fact the dealership had already secured a higher amount.
“The sizeable penalty and the prosecution should send a powerful message that this sort of conduct is unacceptable in the consignment sales industry.”
The Commissioner advised West Australians considering selling vehicles by consignment to be aware of the rules and let Consumer Protection know if a dealer is suspected of failing to meet their obligations.
“Verbal agreements are not allowed – instead motor vehicle dealers must ensure all consignment contracts are in writing, stating the amount the owner should be paid and the amount to be kept as commission. If that agreed sales amount changes, the contract must be updated. This written record prevents disputes at a later date.
“The dealer can keep any money they receive from the sale in excess of the amount they agree to pay the owner but must give the owner a copy of the consignment agreement immediately after the agreement is signed.
“Additionally the dealer must get approval from the owner to conduct repairs prior to selling the vehicle and must pay for all warranty repairs after the vehicle is sold.”