Recommended Amendments to the Motor Vehicle Sales Act 2003: Discussion Paper

March 2007

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1. Introduction

The Motor Vehicles Sales Act 2003 (MVSA) came into force in December 2003, replacing the Motor Vehicle Dealers Act 1975. The MVSA made fundamental changes to the way in which sales of motor vehicles were regulated. A registration regime, administered and enforced by government agencies, replaced the previously industry controlled licensing regime. Some restrictions on who could participate and how they could participate in this market were lifted. The Motor Vehicle Fidelity Guarantee Fund was discontinued and the scope of claims that could be taken to the Motor Vehicle Disputes Tribunal was widened. New information disclosure requirements were imposed in the form of a Consumer Information Standard under the Fair Trading Act 1986.

As required by section 163 of the MVSA, the Ministry of Consumer Affairs undertook a review of the operation of the MVSA that was reported to Parliament in March 2006.

The purpose of the Review of the Operation of the Motor Vehicle Sales Act 2003 was to report to Parliament on how the new legislation was meeting its intended objectives as well as to identify any areas of the legislation that may need to be amended with the benefit of two years of operational experience.

General Conclusions of the Review

The Ministry's Review of the Operation of the MVSA noted that the administrative systems for registration are in place and the Motor Vehicle Trader Register is working well. Registration numbers exceeded 2003 estimates, indicating a relatively high level of compliance, although there continues to be some concern from both industry and consumers that there are traders who are continuing to operate outside the system.

With regard to both registration and information disclosure, the Review identified some general concern about levels of compliance concerning internet trading and through car fair operations.

The Review noted that the new Motor Vehicle Disputes Tribunal (MVDT) under the MVSA has created a sound dispute resolution process and that largely the MVDT is an efficient means of redress for consumers. Some areas of concern such as frequency and geographic location of hearings, delays in hearings, and a lack of consumer awareness of the MVDT and misunderstanding as to the full powers of the MVDT, however, were identified.

Overall, the Review concluded that the removal of the Motor Vehicle Dealers Fidelity Guarantee Fund has not caused any significant loss of protection to consumers but that this area will require further monitoring.

The Review suggested that the level of consumer awareness of their rights needs to be strengthened across all aspects of the motor vehicle industry and commented that the number of agencies involved in administering and enforcing various aspects of the regime may be confusing for consumers and may provide a barrier to consumers seeking remedies that are available to them, or from passing on information about unethical traders.

The Review also noted that between the Registrar, National Enforcement Unit, Commerce Commission and the Motor Vehicle Disputes Tribunal a considerable amount of information is collected about trading activity and behaviour and increased communication between these agencies could assist in identifying priority enforcement targets. A regular communications strategy between the agencies could also help to build an evidence base for applications to the District Court to ban a person from motor vehicle trading.

Proposed Amendments to the MVSA

As noted, a specific requirement of the Review was to make recommendations on whether any amendments to the MVSA were necessary or desirable. The Review of the Operation of the Motor Vehicle Sales Act contained 14 recommendations for relatively minor amendments to the MVSA.

As a result of further consideration of the recommendations made in the Review, this discussion paper now sets out specific proposals to amend the MVSA. Of note is that not all of the recommendations of the Review[1] have led to specific amendment proposals following from their more detailed analysis.

The proposed amendments are discussed under the headings:

• Motor Vehicle Trader Registration
• Motor Vehicle Sales Information Disclosure
• Motor Vehicle Disputes Resolution

A list of the proposed amendments to the MVSA is on the next page.

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