Laws that regulate the sale of motor vehicles on consignment in WA are under review with a ban being considered as one of the options.
Consumer Protection has begun consulting the industry and community about the future of these laws, proposing three options: maintaining the status quo; strengthening the consumer safeguards and training requirements; or banning consignment sales altogether.
The consignment sale of a motor vehicle is where the owner engages a licensed motor vehicle dealer to sell their vehicle. The dealer undertakes the transaction on behalf of the owner and pays the proceeds of sale to the owner, less any agreed costs and commission. There are 985 licensed motor vehicle dealers in Western Australia, of which 138 were approved to sell vehicles on consignment.
Currently under the Motor Vehicle Dealers Act, the rules for consignment sales involve:
- All consignment contracts must be in writing, contain certain regulated terms and conditions and state in writing the amount which the owner should be paid;
- The dealer can keep any money they receive from the sale in excess of the amount they agree to pay the owner. At times this has resulted in unscrupulous dealers giving below reasonable value sale price estimates to vehicle owners;
- The dealer must give the owner a copy of the consignment agreement immediately after the agreement is signed;
- All proceeds or money from any consignment sale must be held in a trust account;
- The dealer must pay the total net proceeds to the owner within two business days of receiving payment;
- The dealer must get approval from the owner to conduct repairs prior to selling the vehicle; and
- The dealer must pay for all warranty repairs after the vehicle is sold.
Commissioner for Consumer Protection Lanie Chopping said, for those who don’t have the confidence to negotiate the sale of their vehicle privately, selling on consignment is a viable option but comes with some risk.
“When it comes to consignment selling, significant risk exists where unscrupulous dealers behave in a way that is designed to avoid transparency and to take advantage of vehicle owners who may not be aware of their rights,” Ms Chopping said.
“We have had several major cases of non-compliance with the laws recently which have resulted in significant losses to vehicle owners, so that’s why a ban is being considered as one of the options for reform.
“As an alternative to a ban, the current safeguards could be strengthened to include the stringent assessment of financial viability of motor vehicle dealers and specific requirements for fidelity guarantees and operating trust accounts to make the process even more transparent.
“The consultation paper considers marketplace factors, industry compliance issues and the effectiveness of existing protections around consignment agreements between licensed dealers and consumers.”
The review was prompted by two high-profile cases involving the closure of Luxuride and the prosecution of PAG (WA) Pty Ltd trading as Xoticar. Consumers are estimated to have lost a combined total of almost $2 million from both of these cases.
- Car consignment company and Director banned from holding a licence (Luxuride / Nicholas Ngo) – 3 February 2020
- Motor vehicle dealer banned after deceiving owners and business now up for sale (Zeljko Grujin / Xoticar Auction House / PAG (WA) Pty Ltd) – 27 August 2020
Additionally, in August 2019 a caravan dealer selling caravans on consignment ceased trading resulting in losses to 24 owners of around $550,000.
“The consultation paper presents possible options for reform and seeks feedback from everyone with an interest in the sale of vehicles on consignment. This is your opportunity to have your say in assisting to guide future decisions involving the regulation of consignment sales in WA,” the Commissioner said.
Those interested in making a submission can view or download the Consultation Regulatory Impact Statement from the Consumer Protection website