Title of Regulation: 24VAC22-40. Independent Motor Vehicle Dealer Operator Recertification Regulations (adding 24VAC22-40-10 through 24VAC22-40-70).

Statutory Authority: §§ 46.2-1506 and 46.2-1506.1 of the Code of Virginia.

Public Hearing Information:

January 27, 2010 - 10 a.m. - Department of Motor Vehicles, 2300 West Broad Street, Room 119, Richmond, VA

Public Comment Deadline: February 19, 2010.

Agency Contact: Bruce Gould, Executive Director, Motor Vehicle Dealer Board, 2201 West Broad Street, Suite 104, Richmond, VA 23220, telephone (804) 367-1100, FAX (804) 367-1053, or email bruce.gould@mvdb.virginia.gov.

Basis: Section 46.2-1506 of the Code of Virginia provides the Motor Vehicle Board with the general authority to promulgate regulations. Section 46.2-1506.1 of the Code of Virginia specifically allows the board to promulgate regulations for additional training or conditions for renewal of certificates or licenses.

Purpose: Federal and state laws and court decisions are in constant change. Recertification requirements for independent (used) car dealers will not only help used car dealers keep up with these changes, but also refresh their knowledge of "old" laws and regulations.

Educated dealers are more likely to comply with the law, thereby enhancing public safety and increasing consumer protection. In addition, education enhances the professionalism of the motor vehicle sales industry, which also improves the welfare and safety of the public.

Substance: The proposed regulations outline how often dealer operators will need to recertify by either successfully completing a course or by successfully passing an exam. They provide an orderly schedule to transition existing and future independent dealer operators into a three year recertification cycle. The proposed regulations allow for entities outside of state government to develop and offer continuing education courses with the approval of the board.

Issues: Since January 1, 2006, by statute, the dealer operator of any new independent motor vehicle dealership has been required to successfully complete a course of study before taking the independent dealer operator qualification test. These regulations are the next logical step as they require dealer operators to keep up with laws, regulations, and guidelines through continuing education in either a formal class or self-study.

The advantage to the public is that educated dealers are less likely to have problems with consumers and regulators. In addition, education enhances the professionalism of the motor vehicle sales industry.

A possible disadvantage is that some dealer operators will feel compelled to take continuing education courses or passing an exam they otherwise would not have done. However, the concept of recertification and continuing education is supported by the Virginia Independent Automobile Dealers Association (VIADA). Requiring continuing education is a trend that many other states are following as it increases consumer protection.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Motor Vehicle Dealer Board (Board) proposes to require independent dealer operators to every three years do one of the following in order to maintain licensure: complete a continuing education course or pass an examination. The Board also proposes to delineate the criteria for approved continuing education courses. The courses, and the examination, must cover the following topics: 1) ethical practice, 2) record keeping, 3) recent changes to state and federal laws and regulations, 4) relevant longer-standing federal regulations, 5) titling and registration requirements including use of dealer related license plates, 6) offsite sales, 7) financing, 8) dealer practices, 9) salespersons licenses, and 10) advertising.

Result of Analysis. There is insufficient data to accurately compare the magnitude of the benefits versus the costs. Detailed analysis of the benefits and costs can be found in the next section.

Estimated Economic Impact. Section § 46.2-1511 of the Code of Virginia states that "No license shall be issued to any independent motor vehicle dealer, … unless the dealer operator holds a valid certificate of qualification issued by the Board." Among other requirements, § 46.2-1511 mandates that "applicants for an original independent dealer operator certificate of qualification … satisfactorily complete a course of study prior to taking the examination."

The Board proposes to require that independent dealer operators either complete a continuing education course or pass an examination every three years in order to maintain licensure. The proposed regulations set out the criteria for Board-approved continuing education courses. Criteria include curriculum and a minimum of six hours of instruction. Under the proposed regulations, vendors may charge no more than $250 to course participants. Additionally, there is a $25 fee to be paid to the Board. The Board anticipates that vendors will set a fee in the $150-$200 range, and that classes will be made available on-line and in community colleges. Courses on-line would of course eliminate travel costs. Given the expected fee range, opportunity to avoid travel costs, and keeping in mind that the proposed regulations will require completing a course once every three years, the average per annum cost for each dealer would be under $100 plus the value of two hours of their time. The proposed examination would cover the same content areas required for the continuing education courses and would have a $50 fee. Any independent dealer operator taking and failing the exam would be required to complete a course in order to maintain licensure.

The proposed continuing education/examination requirement will likely result in many dealer operators becoming more cognizant of changes to federal and state laws (statutory and administrative) and court decisions, as well as being reminded of longer-standing law and procedures. To the extent that greater knowledge of the law leads to greater compliance with the law, Virginia's citizens will likely benefit through greater consumer protection and enhanced public safety. For example, dealer operators are required to follow policies that are designed to detect and thwart identity thieves. Further, Federal Executive Order 13224 – "Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism" requires that dealer operators "make an effort to ensure that they are not doing business with restricted individuals or entities." The Federal government maintains lists of restricted individuals. If dealer operators encounter such individuals they are to report this information to the federal government. Thus, increased compliance with Federal Executive Order 13224 might help the tracking of potential terrorists. Since the overall level of current understanding of law by dealer operators is not known, the magnitude by which their knowledge of the law may be increased cannot be accurately estimated with currently available information. Also, the extent to which greater awareness of the law will lead to greater compliance is also unknown. Thus the magnitude of the benefit of the proposed requirements cannot be accurately estimated, though it is likely significant.

Businesses and Entities Affected. The approximate 3,000 independent motor vehicle dealers in the Commonwealth are affected by the proposed regulations. All or nearly all are small business. Potential providers of continuing education for independent motor vehicle dealers are affected as well. The Board anticipates that at least two vendors will offer courses. Community colleges and the Virginia Independent Automobile Dealers Association are likely providers.¹

Localities Particularly Affected. The proposed amendments apply statewide and do not disproportionately affect particular localities.

Projected Impact on Employment. The proposal to require independent dealer operators to complete a continuing education course (or pass an examination) every three years in order to maintain licensure will likely moderately increase employment for organizations that potentially will provide such services.

Effects on the Use and Value of Private Property. Under the proposed regulations, once every three years independent motor vehicle dealers would either have to: 1) pay a fee in the $150-$200 range to a vendor, a $25 fee to the Board, and have at least six hours of the dealer operator's time occupied in training, or 2) pass an examination and pay a $50 fee.

Small Businesses: Costs and Other Effects. Under the proposed regulations, once every three years independent motor vehicle dealers would either have to: 1) pay a fee in the $150-$200 range to a vendor, a $25 fee to the Board, and have at least six hours of the dealer operator's time occupied in training, or 2) pass an examination and pay a $50 fee.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposal to allow licensees to test out of taking continuing education courses if they already possess the requisite knowledge does minimize adverse impact.

Real Estate Development Costs. The proposed amendments are unlikely to significantly affect real estate development costs.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

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¹ Source: Motor Vehicle Dealer Board

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis: The Motor Vehicle Dealer Board concurs with the analysis of the Department of Planning and Budget.

Summary:

The dealer operator is the individual who is in charge of the day-to-day operations of a motor vehicle dealership. For most independent (used) dealers, this individual is the owner. These regulations would require independent dealer operators to recertify every three years by either completing a course of study or passing an exam. The regulations also establish criteria for entities that provide continuing education.

CHAPTER 40
INDEPENDENT MOTOR VEHICLE DEALER OPERATOR RECERTIFICATION REGULATIONS

Part I
General Provisions

24VAC22-40-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Anniversary month" means the month in which a person became a certified dealer operator.

"Board" means the Motor Vehicle Dealer Board.

"Certificate of qualification" means a designation issued by the board acknowledging that the individual has been certified by the board as dealer operator pursuant to § 46.2-1511 of the Code of Virginia.

"Course" means a course of study leading to recertification for independent dealer operators offered by correspondence, electronically, or in person.

"Course provider" or "provider" means any person or entity presenting or offering one or more recertification education courses.

"Exam" or "examination" means a test administered by the board.

"Executive director" means the executive director of the board.

"Franchise motor vehicle dealer" means a dealer in new motor vehicles that has a franchise agreement with a manufacturer or distributor of new motor vehicles, trailers, or semitrailers.

"Independent dealer operator" means the individual who works at the established place of business of an independent dealer and who is responsible for and in charge of day-to-day operations of that place of business.

"Independent motor vehicle dealer" or "independent dealer" means a dealer in used motor vehicles who is not also licensed as a franchise motor vehicle dealer.

"Original application" means an application for an independent dealer operator certificate of qualification from an applicant who has never been issued an independent dealer operator certificate of qualification in Virginia or whose Virginia independent dealer operator certificate of qualification has been expired for more than 60 days.

"Recertification" means completing the requirements of this chapter to recertify a dealer operator certificate of qualification.

24VAC22-40-20. General.

A. The board shall transmit a recertification notice to the home address or email address of record of independent dealer operators at least 90 days prior to the expiration date of the certificate of qualification. Failure to receive a recertification notice does not absolve the dealer operator from the recertification requirements.

B. Independent dealer operators must maintain an original copy of the proof of completing a recertification course or exam for a period of five years.

C. Continuing education or a course required by a disciplinary order may not be used to satisfy recertification requirements.

Part II
Recertification

24VAC22-40-30. Recertification schedule.

A. Independent dealer operator certificates of qualification are valid for 36 months and shall expire on the last day of the thirty-sixth month. Certificates of qualification shall be deemed not to have expired if the recertification is completed within 60 days of the expiration date.

B. All independent dealer operators must recertify according to the following schedule:

1. Independent dealer operators certified after January 1, 2010, must complete the recertification requirement within 36 months of the anniversary month of their original qualification and every 36 months from their anniversary month thereafter.

2. Independent dealer operators who were certified between January 1, 2006, and December 31, 2009, must complete the recertification requirement by their 2013 anniversary month and every 36 months from their anniversary month thereafter.

3. Independent dealer operators who were certified between January 1, 1995, and December 31, 2005, must complete the recertification requirement by their 2012 anniversary month and every 36 months from their anniversary month thereafter.

4. Independent dealer operators whose original qualification date is prior to January 1, 1995, must complete the recertification requirement by their 2011 anniversary month and every 36 months from their anniversary month thereafter.

C. Independent dealer operators may complete the recertification requirement up to six months prior to the expiration date of their certificate of qualification.

D. The executive director may for good cause grant an extension for the completion of the recertification requirements provided a written request from the dealer operator is received by the executive director at least 15 days prior to the expiration date. Such extension shall not relieve the licensee of the recertification requirement.

E. Any application received from an applicant whose certificate has expired shall be considered an original application.

F. For independent dealer operators who have served outside of the United States in the armed services of the United States, the certification shall be deemed not to have expired if the recertification requirement has been completed not more than 90 days from the date they are no longer serving outside the United States in the armed services of the United States.

24VAC22-40-40. Recertification requirements.

To become recertified, an independent dealer operator must either:

1. Successfully complete a board-approved course; or

2. Successfully complete an examination administered by the board. Any independent dealer operator taking and failing the exam must then successfully complete a course in order to become recertified.

Part III
Course Providers

24VAC22-40-50. Course approval.

A. The board may approve a course provider under the following provisions:

1. The provider has submitted an application to the board prior to offering the program.

2. The submitted application includes at a minimum the following information:

a. Name of provider;

b. Proposed course schedule including locations (as applicable);

c. Charges to participants;

d. Description of program content and objectives;

e. Credentials of faculty members;

f. Method of delivery;

g. Evaluation procedure;

h. Mechanism for recordkeeping; and

i. Any such information as the board deems necessary to assure quality and compliance.

3. Course curriculum must include but is not limited to the following:

a. Ethical practice;

b. Recordkeeping;

c. Recent state and federal laws and regulations;

d. Review of relevant federal regulations;

e. Titling and registration requirements including use of dealer related license plates;

f. Offsite sales;

g. Financing;

h. Dealer practices;

i. Salespersons licenses; and

j. Advertising.

4. At least six hours of each course offering if in person or the equivalent of six hours for electronic and correspondence based courses, as approved by the executive director, must be directly related to the scope of dealer operators. A course containing content which promotes, sells, or offers goods, products, or services shall not be approved. However, the provider of a course may promote goods, products, or services at the conclusion of a course provided that it is made clear to participants that the course has concluded and that attendance at any additional presentations are optional.

B. The board shall notify the provider within 60 days following the receipt of a completed application of approval or disapproval of a program.

C. The board shall periodically review and monitor programs.

D. Any changes in the information previously provided about an approved program or provider must be submitted to the board. Failure to do so may cause the board to withdraw its approval of the course provider or program.

E. The executive director has the authority to suspend the approval of any course or provider and the board may withdraw approval for good cause.

24VAC22-40-60. Course provider responsibilities.

The provider of an approved program shall be responsible for the following:

1. Providing to each participant who successfully completes the required recertification course a certificate with at minimum, (i) the name of the provider; (ii) name of the participant; and (iii) the date of completion.

2. Maintaining all records on courses and its participants for a period of five years and making those records available to the board upon request.

3. Entering names of participants completing the course into a database as directed by the board within five days of the participant completing the course.

4. Collecting the recertification application fee from applicants and transmitting such fee to the board as directed by the board within 15 days of receiving the fee from the applicant.

Part IV
Fees

24VAC22-40-70. Fees.

A. The recertification application fee shall be $25 for taking the course and shall be paid directly to the course provider.

B. The fee for returned checks shall be $35.

C. In addition to the recertification application fee, course providers may charge applicants a course fee of no more than $250.

D. The recertification application fee for taking the exam shall be $50 and shall be paid at the time the exam is administered.