SB 221: Car Dealers
July 24, 2007
By Jerry Kopel
Do you remember the "old neighborhood"? Well, the Colorado Motor Vehicle
Dealers Board is somewhat like the "old neighborhood".
It was supposed to protect consumers from the bad guys, but in my
opinion, it mostly protects car dealers from consumers. When the board
comes up for Sunset review, the Dept. of Regulatory Agencies (DORA)
often issues a scathing report and recommends policy changes.
The 2006 Sunset report was such a report even though it was issued under
a Republican governor and a former Republican legislator as DORA
director. It pulls no punches (but did it with diplomacy).
Along with recommending continued licensing and oversight of car
dealers, DORA urged changes, some of which were essential to ensure
protection of consumers.
The car dealers board is composed of three new car dealers, three used
car dealers and three members of the public. DORA stated "The board is
dominated by industry representatives and regulatory programs are often
captured by the industry in such scenarios.
"When a regulatory program is captured by the industry it is supposed to
regulate, the public suffers because the government offers little or no
recourse when statutes and regulations are violated. In some cases,
competition can be stifled as the industry driven regulatory authority
uses the police power of the state to distort the market."
DORA wanted to remove one used car dealer and one new car dealer and
replace them with a county clerk and an executive in the financial
"The underlying function of the board is to protect the consumers and
the public" according to DORA. When you examine the title to SB 221, you
will find the bill was intended to "modify the composition of the board"
but when you read the final version signed by Gov. Bill Ritter, you will
find NOTHING about changing the board's composition.
Protecting the public? DORA was provided with FALSE information as to
disciplinary actions taken between July 2003 through July 2006. DORA was
told there were 168 punishments (revocation, suspension, probation) when
there were only 96 punishments. There are approximately 19,000 car
dealers and salespersons licensed.
When you average 32 suspensions, revocations and probations per year on
that many licenses, it makes sense for DORA to state "previous Sunset
reports were highly critical of the enforcement and discipline record of
the board." In 2005-2006 there were actually NO revocations.
In my opinion, there is no reason to believe disciplinary numbers
provided prior to 2003 were any more correct than the false numbers
reviewed in the report.
DORA recommended "require the board to utilize administrative law judges
to conduct motor vehicle dealer licensure and disciplinary hearings and
Dept. of Revenue hearing officers to conduct salesperson licensure and
SB 221 utilized an administrative law judge or a hearing officers in CRS
12-6-104 (3) (e), but in CRS 12-6-119 (2) "the board may, upon a
unanimous vote of the members present when the vote is taken, conduct
the hearing (on car dealers, wholesalers, buyer's agents and wholesaler
auction dealers) in lieu of appointing an administrative law judge."
"If the board conducts greater than 40 percent of the hearings, the
executive director shall analyze the hearing procedures and acts and
issue a report to the general assembly which shall include any
recommendations of the executive director."
What the board giveth, the board taketh away. The motion to hear a
matter has nothing to do with a majority of the board, just whatever
number is present when the motion is made. It could be one, two, or
three members. If more than 40 percent of the hearings are held by the
board, the executive director cannot say "enough". He or she can just
notify the legislature, which doesn't have to do anything about it.
DORA recommended that the car dealers' bond be raised from $30,000 to
$50,000 based on 70 actual cases where damages far exceeded $30,000. The
cost to the dealers will be about $500. SB 221 did raise the bond to
As to salespersons, DORA recommended the $5,000 bond, which cost the
salesperson about $50 be eliminated. DORA states "No (available) record
indicated a single salesperson's bond has been opened or accessed over
the past five years."
Take 16,000 salespersons either original, renewed or reissued in a
fiscal year, times $50 as the cost of the bond to the salesperson, with
no payouts. That equals $800,000 mostly profit for bonding companies or
company, and commissions for the sales agent, who can be the auto
Instead of eliminating the bond, SB 221 raised it to $15,000, possibly
assuming the raise will draw more legal actions. If not, it means a
yearly profit of about $2,400,000.
DORA suggests doing away with the open book "test" for dealers and
salespersons as useless and (in my opinion ludicrous) since if all else
fails, the test taker is told the correct answers. Instead of
elimination, SB 221 requires a "psychometrically valid and reliable
salesperson exam that measures the minimum level of competence necessary
So dealers continue to take an open book test, and salespersons are
tested on their mental abilities. Will it be "open book"?
The past and present language regarding the scope of power of the motor
vehicles dealers board is in CRS 12-6-104 and stated as "The board is
authorized and empowered to..."
While some other agencies still use similar language, many of the boards
under DORA, such as podiatrists, dentists, pharmacists, chiropractors,
use the term "shall", making the activities listed "mandatory" instead
of "possible". In CRS 12-6-105, the executive director of the motor
vehicle division "shall" (do the following).
And SB 221 added a new subsection (4) to CRS 12-6-104 using the word "sha;ll"
to provide for equitable assessment of penalties depending on the
seriousness of the violation. This was a major consumer gain.
To me the one insertion of "shall" indicates the board wanted no mandate
for the other powers it controls under CRS 12-6-104 such as providing,
under SB 221 written notice to car buyers of the board's authority over
car sales. That language could have stated "The board SHALL (emphasis
That would have guaranteed the providing of written notice to the
purchaser of the board's authority to get involved in a consumer
DORA recommended a short period of approval until the year 2012 "based
on the quality (Kopel: meaning lack of quality) of data submitted by the
Auto Industry Division and the thought that this will improve over the
next few years, making the next Sunset review more meaningful."
In my opinion the last thing the car sale industry owners want is a fast
turnaround (2011 review and what it would reveal) and so they had the
original 2012 Sunset changed to 2017 in the bill signed by the governor.
What is stated here is not a criticism of the legislators involved in
carrying SB 221. They did no better and no worse than their
predecessors. I can personally attest to the inability to overcome car
dealers' desires at the legislature.
SB 221 passed the Senate 34 to 0 and the House 64 to 1.
(Jerry Kopel served 22 years in the Colorado House.)