Financial Responsibilities and Obligations Guideline

• For the purposes of these guidelines, the word “Act” refers to the Motor Vehicle Dealers’ Act (MVDA).  
• The Regulation refers to Regulation 333/08 GENERAL  
• The Code of Ethics refers to Regulation 332/08 Code of Ethics and Operation of Committees 

The legislation regarding dealers’ non-financial responsibilities and obligations falls primarily under two provincial statutes – the Motor Vehicle Dealers Act, 2002 (MVDA) and the Consumer Protection Act, 2002 (CPA). There is also some interaction with the Sale of Goods Act. The MVDA’s Code of Ethics, in particular, articulates the expectations of dealers with respect to integrity, accountability, compliance, respect and professionalism, among others. What’s listed below is an overview of some of the more relevant sections of the legislation. Other parts also apply. 

Dealers’ requirements:  

Financial responsibility 

• Demonstrate their integrity by being financially responsible and operating their businesses in a professional manner.  

Liens 

• Pay out any outstanding loan on the vehicle or any outstanding bill for the repair or storage of the vehicle.1 

• Ensure that any goods sold are free of encumbrances. 

Negative equity 

• Dealers may choose to include negative equity in a sales transaction. If they do so, it must be done in a manner that is clear and transparent.  
• Negative equity usually occurs when a customer’s trade-in is worth less than the amount still outstanding on the loan. 
• These requirements regarding negative equity speak to dealers’ responsibility under the Code of Ethics to conduct their business with professionalism and integrity. These resources offer additional explanation and support for dealers on this important topic. 

The Ontario Motor Vehicle Industry Council (OMVIC) administers and enforces the Motor Vehicle Dealers Act, 2002 (MVDA), its regulations and code of ethics, as well as relevant sections of the Consumer Protection Act (CPA), on behalf of Ontario’s Ministry of Public and Business Service Delivery. OMVIC’s mandate is to maintain a fair and informed marketplace by protecting the rights of consumers, enhancing industry professionalism and ensuring fair, honest and open competition for registered motor vehicle dealers. 

As businesses and markets evolve, industries continue to experience trends and changes that require regulators to adapt in an effort to ensure regulatory expectations are clear and readily available. Consequently, registrants often seek guidance to ensure their businesses comply with relevant legislation and consumer protection measures.   

The list of available guidelines can be found here. 

Excerpts from the Code of Ethics (Regulation 332/08) 

• Section 3: A registrant shall be financially responsible in carrying on business.   
• A registrant shall not indicate to any person, directly or indirectly, that any payment, commission or other remuneration in connection with a trade in a motor vehicle is fixed or approved by the administrative authority, if any, a government authority or any motor vehicle board or association. 
• Section 9 (5) (c): If a registered motor vehicle dealer enters into a contract to sell or lease a motor vehicle to a purchaser or lessee who is not another registered motor vehicle dealer… the dealer who receives the vehicle being traded in agrees to pay any outstanding loan on the vehicle or to pay any outstanding bill for the repair or storage of the vehicle. 

Excerpt from the Sale of Goods Act 

• Section 13 (c): In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is… an implied warranty that the goods will be free from any charge or encumbrance in favour of any third party, not declared or known to the buyer before or at the time when the contract is made. 

Q1:     What’s the purpose of these guidelines?

A1:      These guidelines, developed in consultation with industry representatives, outline dealers’ financial and non-financial responsibilities and obligations. In doing so, they are intended to provide information to support dealers to and ensure they can carry out their business effectively and provide good service to their customers. They were developed in consultation with industry representatives, and are designed to clarify the legislative and regulatory requirements/ They also outlline OMVIC’s expectations with respect to financial transactions in the automotive sales sector and are also intended to support OMVIC’s role as a modern regulator.

Q2:      What do dealers need to know about their obligations and responsibilities?

A2:      Dealers should remember that they are bound by the requirements of the legislation and regulations of the Motor Vehicle Dealers’ Act (MVDA), as well as the other statutes listed in the guidelines. Especially important in this context is the Code of Ethics, which governs dealers’ overarching responsibility to operate with integrity, professionalism, accountability, etc., in all of their transactions with customers.

Q3:      What’s included in the guidelines?

A3:      The guidelines cover:

• Dealers’ responsibilities and obligations under the legislation, regulations, and Code of Ethics as it relates to integrity, accountability, compliance, respect and professionalism, among others
• The requirements for:
  • Financial responsibility
  • Liens
  • Negative equity
  • Leasing contracts and disclosures
  • Advertising lease and credit offers
  • Records

Q4:      What is negative equity?

A4:      Negative equity usually occurs when a customer’s trade-in is worth less than the amount still outstanding on the loan. Dealers may choose to include negative equity in a sales transaction. If they do so, it must be done in a manner that is clear and transparent.

 Q5:      What are dealers’ responsibilities and obligations when it comes to liens?

A5:      Dealers are required to pay out any outstanding loan on the vehicle or any outstanding bill for the repair or storage of the vehicle. They must also ensure that any goods sold are free of encumbrances.

Q6:     Where can I find all of the guidelines that OMVIC has published?

A6:      The list of available guidelines can be found here. Once the page opens, you’ll see the guidelines listed.