Motor Vehicle Traders Registration Regime | Review of the Operation of the Motor Vehicle Sales Act 2003: Report Presented to the House of Representatives Pursuant to Section 163 of the Motor Vehicle Sales Act 2003

Review of the Operation of the Motor Vehicle Sales Act 2003

Review of the Operation of the Motor Vehicle Sales Act 2003: Report Presented to the House of Representatives Pursuant to Section 163 of the Motor Vehicle Sales Act 2003

Motor Vehicle Traders Registration Regime

Motor Vehicle Traders Register (MVTR)

37. The strategic aim of the registration regime is to ensure adequate protection for consumers purchasing motor vehicles. It is expected that this can be achieved through ensuring that

Key Elements of the Registration Regime

38. The MVTR is a public register that contains information about whether a motor vehicle trader is registered and information about the trader's business, including its physical address. The MVTR is operated under the auspices of the Companies Office, which is a business unit of the Business Services Branch of the Ministry of Economic Development. Applications for registration may be made in writing or through the on-line facility [link to MVTR website].

All Motor Vehicle Traders to Be Registered

39. Under the MVSA all motor vehicle traders must be registered. A motor vehicle trader is defined in sections 7 and 8 of the MVSA as any person who carries on the business of motor vehicle trading and includes a car market operator, a car auctioneer and a car consultant. Also treated as a motor vehicle trader is any person, who

Certain Persons Disqualified

40. Certain persons are disqualified from registration and therefore may not legally carry on the business of motor vehicle trading. For individuals this means a person who is either under 18 years of age, or banned, or an undischarged bankrupt, or either has had certain rights cancelled under the Motor Vehicle Dealers Act 1975 (the former Act), or been convicted of crimes of dishonesty or of offences against specified provisions of the Fair Trading Act 1986, or had their registration cancelled under the MVSA within the preceding five years, or has been disqualified or prohibited under specified provisions of the Companies Act (1955 and 1993) from managing a company.

41. A company is disqualified from registration and may not legally carry on the business of motor vehicle trading if it is either banned, or in liquidation, or its licence under the former Act or registration under the MVSA has been cancelled within the preceding five years, or its name has been removed from the Register of Companies, or if a person concerned in its management is disqualified from registration in his or her own right.

Banned Persons

42. Certain persons are banned. These persons may not participate or be employed or engaged in any capacity by other persons, including companies, in the business of motor vehicle trading.

43. Section 68(1)(a) bans any person who has two or more convictions entered against their name over a 10 year period for any of the following offences: trading while unregistered, failure to pay monies to a principal, providing false (or falsifying) information relating to motor vehicles sales or trader registration details.

44. Section 68(1)(b) bans any person who has more than once within a 10 year period, done any of the following: failed to comply with a Disputes Tribunal order, been concerned in the management of a company that is a banned person or is registered as a motor vehicle trader and has gone into liquidation, or has failed to provide compensation owing in relation to a finance company's loss of security interest, or who has failed to comply with a Disputes Tribunal order.

45. Section 68(1)(c) bans any person who, while registered as a motor vehicle trader, is disqualified under the Companies Act 1993 from managing a company, is convicted of a crime of dishonesty, is convicted under specified sections of the Fair Trading Act 1986, or who has more than once in a 10 year period been adjudged bankrupt or failed to provide compensation owing in relation to a finance company's loss of security interest.

46. Section 68(1)(d) bans a person who is convicted of tampering with odometers under section 99.

Offences and Penalties

47. Convictions for breaches such as failing to register, participating in motor vehicle trading while banned, tampering with odometers, or knowingly providing false or misleading information in relation to registration attract a maximum fine of up to $50,000 for individuals and $200,000 for companies.

48. Convictions for engaging a banned person and for failing to provide account for monies owing, attract a maximum fine of up to $20,000 for individuals, and $40,000 for companies.

49. Convictions for providing false information, falsifying information or obstructing inspection, and for failing to provide any changes in registration details attract a maximum fine of $2,000. These latter are also infringement offences.

50. In addition to the above penalties, convictions across the range of offences are linked to the banning criteria under the MVSA. Thus, two or more convictions for the lesser offences in a 10 year period will also invoke the banning provisions.

Implementation

51. Prior to the MVSA coming into effect in December 2003, it was estimated there were some 3,000 persons (including companies) in New Zealand participating in the business of selling motor vehicles. These persons accounted for 28 percent of used motor vehicle sale transactions. About 2,250 were licensed under the Motor Vehicle Dealers Act (MVDA). This figure does not include car market operators, importers and car auctioneers, as they were not required to hold a licence under the MVDA, or persons that were operating outside of the licensing regime.

52. At the commencement of the MVSA in December 2003, the MVT Registrar contacted those parties identified as participating in the business of selling motor vehicles, inviting them to register and reminding them of their obligation to register. Follow-up letters were sent and in the event of any continued failure to respond the matter was referred to the National Enforcement Unit (NEU) of the Ministry of Economic Development for further action.

53. Information sharing arrangements were set up with the New Zealand Customs Service and the Ministry of Transport, as envisaged by sections 120 and 122 of the MVSA, to allow the Registrar to identify those persons deemed by the MVSA to be motor vehicle traders and to determine whether or not they should be banned or registered under the MVSA.

Registration

54. As of 30 June 2005, there were 3,182 motor vehicle traders registered under the MVSA. This included 101 completing the registration renewal process with a further 37 pending expiry and cancellation. In the same period, 83 applicants were refused registration on the grounds that they were disqualified from registration under sections 24 and 25 of the MVSA.

55. In total, by June 2005, the Registrar had handled 6,274 applications. This included some 2,083 applications that were either deleted or abandoned during the process - such cases occur when applicants make the wrong type of application (individual instead of company), or decide not to pursue an application, or have not completed an application within a set period. Seventy percent of all registrants have used the online registering facility.

56. Eighty-one percent of motor vehicle traders registered as a company and 19 percent registered as individuals. The breakdown in terms of type of trader is as follows:

Note: the sum of traders exceeds 100 percent because of multiple responses as to principal business.

Compliance

Importers of Motor Vehicles

57. Under the information sharing arrangements, Customs data has been used to identify those persons importing more than three motor vehicles per year, the threshold for registration. In the first full year of operation this monitoring revealed 154 such persons who were not registered. Seventy-four persons were either registered under different names (33) or were not required to register (41). Forty registered after further warning. Fourteen have ceased trading and one person has been successfully prosecuted. In April 2005, a further 41 unregistered importers were identified and sent warning letters, resulting in a further 7 applications for registration. There have been a significant number (25 percent) who have failed to respond.

Market Surveillance

58. The Registrar can receive complaints from registered traders and the public regarding breaches of the MVSA. Between December 2003 and March 2005, 82 complaints were received: 29 traders were required to register, 15 complaints were referred to the Ministry of Economic Development's Legal Unit, 16 complaints were referred to the National Enforcement Unit, and 22 cases awaited further investigation. A further 77 complaints had been received by June 2005.

Enforcement

59. The National Enforcement Unit, a business unit of the Ministry of Economic Development, has responsibilities to enforce those parts of the MVSA which relate to non-compliance or breaches of the registration requirements, including illegal trading, and odometer tampering. This does not include offences related to the Supplier Information Notice (SIN) which are enforced by the Commerce Commission.

Car Fairs and Car Yards

60. Since the commencement of the MVSA, the National Enforcement Unit has visited 127 places of business (car yards and car fairs) throughout the country, either in response to referrals from the Registrar or through conducting general enquiries. Illegal traders identified in the course of these visits are now either registered or in the process of registering.

Registration Project

61. The Unit has undertaken several targeted projects. One concerned illegal trading. A total of 76 cases were opened and investigated. Thirty-five (35) of those cases registered, 28 are no longer trading, 1 was prosecuted and 12 cases were closed with no evidence of illegal trading.

Importers/Customs Project

62. Another targeted project was a 6 month project aimed at identifying individuals and companies that have imported more than 3 motor vehicles over a 12 month period, in co-operation with New Zealand Customs. Ninety-five (95) un-registered traders were identified. Of those 95 files, 94 were successfully resolved and compliance achieved. One file is currently before the courts.

Other

63. As at June 2005, in addition to the projects identified above, the National Enforcement Unit has fully investigated and resolved 38 files. Four cases have been successfully prosecuted (three convictions for illegal trading and one for odometer tampering) and one infringement notice has been issued and paid. Thirteen cases are currently under investigation and fourteen cases are before the courts.

Banned Persons

64. Since its commencement, two individual persons have been banned under the MVSA; Mark Gregory was banned under section 68 for 5 years from 17 May 2005 for a conviction under section 99 (for odometer tampering), and Timothy Andrew Whittle was given an indefinite ban from registering as a motor vehicle trader. The judgement of the Christchurch District Court in the Whittle matter marks the first court-ordered prohibition made under the MVSA. The ban on Mr Whittle, made pursuant to section 69 will last until such time as he successfully reapplies to Court to have it varied or cancelled.

Assessment against the Registration Objectives

65. In assessing the effectiveness of the new registration regime it is important to acknowledge that the motor vehicle trader legislation has only been in operation since December 2003 and that the full effect of this Act may be difficult to gauge within such a short period. This early review, however, provides an opportunity to signal any major shortcomings in the MVSA and to identify where there may be process issues that can be fine-tuned to better achieve the consumer protection outcomes. Each of the four objectives of the MVTR (as listed in paragraph 37) are now evaluated.

Objective: All Motor Vehicle Traders Are Subject to the Regulatory Regime

66. Compliance is a key component of the successful implementation of the MVSA. As was to be expected with the introduction of new legislation, the major focus of the Registrar in the first 18 months to June 2005 was to manage the transition from an industry controlled licensing regime, to ensure that all those participating in the business of motor vehicle trading were informed of their obligations to register and to encourage voluntary compliance with those obligations.

67. Systems for administering the registration regime are established and operating well. Seventy percent of registered traders made an online application. A paper based process is also available to those without access to, or who are uncomfortable with, the electronic medium.

68. The Registrar has entered into information sharing arrangements with various government agencies in regard to trader activity, to assist with the monitoring of import and market transactions. This has enabled the Registrar to follow up and subsequently have registered a significant number of motor vehicle traders. The number of traders now registered (3,182) has exceeded the pre 2003 estimate and includes motor vehicle importers (12.4 percent), auctioneers and those operating car markets or selling through the internet (6.3 percent). The final six months of the review period have seen an increase in prosecution activity, signalling a move from a voluntary compliance approach to a more enforcement oriented approach.

69. The proximity of the Motor Vehicle Trader Registrar to the Companies Office means that information can be efficiently collected and maintained.

Objective: Consumers Can Have Confidence They Are Dealing with Registered Traders

70. The MVTR is available to any consumer to confirm the registration status of a motor vehicle trader. An evaluation of the consumer education campaign showed that immediately after the campaign there was a significant increase in consumer awareness (after prompting) of the registration system. Whether this awareness has been retained, however, is debatable. Submissions indicated there is little general knowledge about the Register or Banned Persons list and, therefore, that relatively few consumers would know how to check either. Consumer representatives have suggested that the number of agencies involved in administering and enforcing the MVSA has the potential to confuse consumers and deter them from following through with reporting any unregistered traders they come across.

71. Industry representatives have highlighted the fact that the significant majority of used motor vehicle transactions continue to be conducted as private sales, despite an overall increase in the number of used vehicle transactions. It is suggested that the removal of the requirement for motor vehicle traders to operate from a physically located car yard has introduced a less visible type of trader into the retail market and that consumers are more vulnerable to "fly-by-night" operations. Some traditional operators have felt compelled to change their own methods of operating, to reduce overheads, in order to compete with those not maintaining an independent car yard.

72. These are important observations and it will be critical to the effectiveness of the overall regime in the longer term that enforcement effort is directed towards those less visible in the retail market. For instance, internet sales, both private and commercial, have increased markedly. Attention should be directed to this area, particularly the importance of providing consumers with information about the kind of seller with whom they are transacting. Consumers have many reasons for preferring private transactions, not least because they consider they will obtain a better price without third party involvement. For others, it is the availability of finance that directs where they go to make their purchases.

73. The above analysis suggests that consumer confidence could be improved. Possible approaches could be initiatives to improve consumer awareness and through the creation of a single consumer enquiry centre. At this early stage, there is insufficient evidence to support any fundamental change to the registration regime.

Objective: Traders Can Be Located

74. There is concern in the industry and from consumers that in some cases when transactions have gone wrong, the unscrupulous trader has made some minor change to their trading name as a means of evasion. The Motor Vehicle Disputes Tribunal (MVDT) has also experienced difficulties in some instances in locating a trader against whom a claim has been made.

75. Registration details must include an "address for service". A formal notice sent to this address is deemed to have been served. In addition traders must provide their "full name" which includes under the MVSA all the trading names under which they are carrying out their business. These details are available to the consumer and any change in these details is required to be notified to the Registrar within 10 working days. Failure to provide these details is an offence under the MVSA and can ultimately lead to a person being banned.

76. It is considered that on balance, the MVSA contains an appropriate range of measures to ensure that a trader can be located. At the implementation stage a more cautious and conciliatory approach was taken to ensure traders were aware of their obligations and to gain voluntary compliance. However, to be fully effective, the enforcement and disputes resolution agencies may need to toughen their approach and serve notice that evasion tactics will not be tolerated. Between them the Registrar, National Enforcement Unit and MVDT collect a considerable amount of information about trading activity and behaviour and increased communication between these agencies could assist in identifying priority enforcement targets.

Objective: Unsuitable Persons Are Prevented from Participating in Motor Vehicle Trading

77. This objective is arguably the most contentious aspect of the registration regime. Motor vehicle trading has always attracted some characters with dubious ethics and media attention has ensured that questionable behaviour in this industry retains a highly visible profile. Views on how to deal with the less scrupulous element of the industry tend to be polarised. The difficulty is setting criteria that will provide sufficient protection for consumers while at the same time safeguarding the benefits that arise from competition and preventing industry capture.

78. Concerns raised with regard to the eligibility criteria for motor vehicle traders included:

Entry Standards

79. Industry representatives have proposed that before registration, traders should be able to demonstrate knowledge of the motor trading industry and the relevant legislation (Motor Vehicle Sales Act, Consumer Guarantees Act 1993, Fair Trading Act 1986, Personal Property Securities Act 1999, Credit Contracts and Consumer Finance Act 2003). This could be administered in the form of a trader qualification, similar in concept to the four-day training course used by the Queensland Government in Australia and it is suggested that the Ministry of Consumer Affairs booklet Motor Vehicle Sales Act and Related Laws would serve as a good starting point in the development of such a qualification.

80. Industry qualifications are certainly supported as a complement to government regulation. These can, however, be introduced in the form of voluntary self-regulation and can provide a strong promotional tool for those who can demonstrate compliance with them. In the context of a market in which the majority of transactions take place without the protections available (private sales are not covered by the MVSA), the imposition of trader qualifications may be considered rather heavy handed.

"Fit and Proper" Test

81. Of particular concern to industry and consumers is that there are persons who have been allowed to register who later prove to be manifestly unsuitable. Industry representatives assert that this is because insufficient screening of applicants is undertaken, there is no public notification of applications received, and hence no facility to challenge those who do apply. This, it is argued, provides easy entry of undesirable/rogue traders who, once registered, are not easy to challenge.

82. Under the repealed Motor Vehicle Dealers Act, the Motor Vehicle Dealers Institute (MVDI) could refuse to grant a licence to any person whom it did not consider a "fit and proper" person in respect of motor vehicle trading. Under the MVSA, the assessment of "fit and "proper" was removed from the registration process as it was considered too subjective. Eligibility criteria that could be substantiated were developed based on a trader's recorded history (i.e. convictions for serious offences) and the power to assess whether or not a person was "fit and proper" was placed with the District Court.

83. Concerns have been expressed that there seems to be too heavy a reliance on the ability and willingness of private individuals to proceed to the District Court with concerns about a registered trader's fitness to trade. Submissions to the MVSA review further recommended that the scope of the National Enforcement Unit be expanded to receive complaints from the public, and the powers of the National Enforcement Unit, where appropriate, be extended to the ability to investigate and pursue traders who may not be banned under section 68 but who on first impression appear not to be fit and proper persons in terms of section 69 of the Act (the banning provisions ordered by Court).

84. The National Enforcement Unit can, and does, receive complaints from the public about both registered and unregistered traders. A single enquiry point for consumers and the establishment of a regular communication strategy between agencies could help to build the necessary evidence base for applications to the District Court. Publication of applicants for registration was rejected in the development of the MVSA because of issues relating to privacy. However, this does mean that greater responsibility is placed on the enforcement agencies to proactively monitor the "character" of those participating in this market. The highly publicised case of Mr Whittle, who was convicted on multiple counts of fraud in relation to sales of motor vehicles, has highlighted one area of the banning provisions that require attention. This is discussed more fully as a specific issue below.

Penalties Not a Disincentive

85. Industry representatives have also expressed disappointment at the level of fines imposed and suggest that these do not provide sufficient disincentives to unethical traders. The low level of fines is not surprising - the Courts cannot be expected to come down hard on what at this early stage can only be presented to them as a failure to comply with administrative requirements. Consideration needs to be taken, however, of the extremely severe consequences, automatic banning, should these traders be convicted of further breaches. Any trader, who elects to carry on their business without being registered, places their future ability to carry on, or participate in, the business of motor vehicle trading at risk.

Resourcing and Direction of Enforcement Effort

86. There is concern from both industry and consumer representatives that most of the enforcement action taken to date appears to have centred on the traders most visible - those who follow the traditional model with a yard, signage and stock. There is also concern that insufficient resources have been provided or committed to monitor and enforce compliance.

87. In examining the effectiveness of the regime it is important to consider the eligibility criteria in their totality; that is the interrelation of the disqualification and banning criteria with the right to register. The disqualification provisions establish an objective test based on recorded history of behaviour (primarily criminal history or insolvency) while the banning provisions target persistent, unethical or unlawful behaviour and need to be considered for their effectiveness over the longer term.

88. In the two years of operation, 83 applicants were refused registration. Ninety-five people have had their registration cancelled or surrendered. People who have their registration cancelled are disqualified from registration for a further five year period, while those struck-off must meet the Registrar's requirements before re-registration will be considered. Two people have been banned outright.

89. Convictions have been entered against the names of three others for illegal trading. There are currently 14 cases before the courts and 13 under investigation. Successful prosecutions have been described as "strike one" in a regime which allows two strikes only; the banning provisions are invoked for two or more breaches and these need not be offences which individually attract the highest fines.

90. At this early stage of the MVSA, it is considered that for the most part the criteria for entry have been set at an appropriate level and that the legislation has sufficient tools within it to deal adequately with those who are prepared to behave unethically. In the longer term it will be critical to the effectiveness of the regime, and for optimal protection for consumers, that the enforcement agencies develop a visible enforcement profile, particularly in those areas where the traders themselves are not as clearly identified in the market to consumers. More regular information sharing between agencies will assist in prioritising enforcement effort and a single consumer enquiry point will improve access for consumers to the information and assistance they may require.

Specific Issues

91. Additional registration issues identified, including those raised in submissions and discussions, not previously addressed, are now considered.

Requirement for Statutory Declaration in Renewal of Registration

92. Registration applies for a period of 12 months. Section 39 of the MVSA requires the same process for renewal of registration as for an original application (sections 31 to 38), thus statutory declarations from each director of a company must be submitted each year. This requirement has been identified as unnecessarily onerous and, in particular, problematic for those companies that have directors residing outside of New Zealand. By way of comparison, renewal of registration under the Companies Act requires a simple confirmation that the particulars have not changed.

93. There are no perceived difficulties in reducing this administrative burden. Under the MVSA, changes in circumstances are required to be notified within 10 working days (section 40) and therefore the statutory declaration requirement on renewal is redundant.

94. Recommendation: It is recommended that section 39(2) be amended to remove the requirement for motor vehicle traders to make an annual statutory declaration of their trading details where these have not changed. This would be replaced by the requirement to confirm with each annual renewal that details have not changed.

Notification Period for Changes in Details

95. Section 40 requires that written notice be given to the Registrar within 10 working days of any change in circumstances, including company details and the particular details of directors. Some difficulties have been identified in meeting this requirement in respect of changes in details of directors residing outside of New Zealand. In some cases the New Zealand company is not aware of the change of director before the 10 working day period has elapsed. It has been suggested that the 10 day period be extended.

96. The Ministry of Consumer Affairs understands that there are genuine difficulties with complying with the Act regarding changes to overseas directors. It is important, however, that individual and company details are accurate and current. There is anecdotal evidence that some traders may change their name to evade receiving notices with regard to a disputes claim to the MVDT and extending the notification period may open up loopholes or potential means of evasion for less scrupulous traders.

Proposal to Require IRD Number

98. It has been suggested that an applicant for registration be required to provide their IRD number. Traders must enter their "full name" on registration and under the MVSA this is defined to include also any trading name that they may operate under. However, advice from the MVDT indicates that some traders will change their name in a small way to evade customers who have raised a claim against them. Matching company details with an IRD number will help to verify the company's trading status and assist enforcement of the requirement to provide all trading names under which a trader is operating.

99. Recommendation: It is recommended that consideration be given to amending section 32 to include the requirement that applicants for registration as a motor vehicle trader provide details also of their IRD number.

Requirement to Define Place of Business

100. It has been suggested that applicants for registration be required to define their place of business and provide evidence of local authority approval to operate from these premises. These proposals have been recommended in the current review of Queensland's Property Agents and Motor Dealer Act 2000.

101. As noted earlier, the MVSA has removed the requirement to operate from a physical car yard and has thereby legitimised internet based sales, car fairs and roadside displays. This provides a lower cost approach (lower overheads and operating costs), but also means traders are less visible and can shut up shop if the situation demands it. There is also concern that many traders are now operating from residential addresses.

102. One of the factors driving the introduction of the MVSA was the changing nature of the motor vehicle sales market and the differing means of offering vehicles for sale. The registration details require a physical address to be provided and while this may not be the actual place of business it serves as the formal contact point for the trader. Local bodies have powers to issue by-laws in relation to where business is conducted and have therefore the means to address any physical or local problems that arise with less formal sales approaches.

103. Local bodies can also, and should be encouraged to, pass on any information about potential illegal trading to the appropriate agencies.

104. A clear need for, or significant advantage from, having a defined place of business and local authority approval to operate from these premises have not been established.

Definition of Motor Vehicle Trader - Deeming Provisions

106. Section 8 of the MVSA provides that any person who sells more than 6 motor vehicles, or imports more than 3, in a consecutive 12 month period is deemed to be a motor vehicle trader. Industry interests have requested that these transactions be reduced to sales of 3 and importation of one vehicle only in a consecutive 12 month period. These concerns stem mainly from the possibility that some persons and their families can be involved in a significant number of motor vehicle transactions by sharing the sale and import over a range of family members' names.

107. There would be significant increases in administrative costs if numbers were to be reduced, (both processing further registrations and exemption requests). It is considered that this behaviour can be effectively dealt with through the information sharing arrangement with Customs, through close monitoring of the trading names provided with registration and through a targeted enforcement approach. The proposal to require an IRD number may also assist in identifying traders who are hiding behind multiple names.

Definition of Motor Vehicle - Motor Cycle

109. The MVSA currently does not require a person who deals in motor cycles under 60 cc to register as a motor vehicle trader. The definition of motor vehicle under section 6 of the MVSA specifically excludes motor cycles which have a cylinder capacity which does not exceed 60 cubic centimetres (60 cc).

110. The MVSA reference to 60 cc motor cycles does not align with the Land Transport Rules or with the Customs import tariff categories. The Land Transport Rules categorise a motor cycle as a two wheeled vehicle exceeding 50 ml (equivalent to 50 cc) while the tariff categories under which Customs operates identify motor vehicles in bands under 50 cc; or from 50 cc to 250 cc.

111. Under the MVSA there is an information sharing arrangement between Customs and the Registrar, and between the Ministry of Transport and the Registrar. The discrepancy between the Act and the tariff category has been identified by the enforcement agencies and industry representatives.

112. The Ministry of Consumer Affairs has been unable to find out why the decision was taken to use an above 60 cc rating for motor cycles under the MVSA. However, it would seem desirable to ensure that the various administrative and regulatory controls regarding motor cycles operated within a common classification.

113. Recommendation: It is recommended that section 6 (b)(iii), the definition of motor vehicle, be amended to exclude motor cycles up to 50 cc (not 60 cc as currently worded) to reflect ratings used on other relevant legislation.

Definition of Motor Vehicle - List of Vehicle Classes

114. Currently under the MVSA a motor vehicle is defined as a road vehicle that is drawn or propelled by mechanical power and is of a kind ordinarily acquired by consumers for personal, domestic or household use and as a vehicle of any other class or description declared by the Governor-General, by Order in Council, to be a motor vehicle for the purposes of the Act (there is a list of exceptions to this definition). Industry has suggested modifying the definition of motor vehicle from that as described in section 6 of the MVSA to a prescribed list of vehicle classes to avoid any doubt as to what is considered a motor vehicle.

115. A prescribed list of vehicle classes may be too constraining a definition of motor vehicle. If the definition of motor vehicle was changed to a list of prescribed vehicle classes, the Act would have to be amended every time a vehicle class was changed or modified. The current definition is in line with the Consumer Guarantees Act and other transport regulations. Altering the definition would potentially have an inappropriate ripple effect across many areas including the Consumer Guarantees Act and Customs data programs.

Requirement for Dual Registration

117. The Motor Trade Association recently expressed concern that second hand dealers are unnecessarily paying dual compliance fees under the MVSA and Secondhand Dealers and Pawnbrokers Act 2004 as a result of quad and farm bikes being classified as motor vehicles under the MVSA.

118. There is widespread anecdotal evidence that quad and farm bikes are targeted for theft from farms and are subsequently illegally traded. The Secondhand Dealers and Pawnbrokers Act aims to hinder such activity.

119. If quad and farm bikes are classified as motor vehicles under the MVSA, the issue is essentially about whether the current legislation requires secondhand dealers to incur unnecessary compliance costs. Based on the information available, the Ministry of Consumer Affairs has concluded that as the Acts provide different consumer and market protection functions and create different obligations it may be necessary for a dealer/trader to pay compliance fees under both Acts.

120. While the dual compliance costs increase costs for traders, these costs do not overlap. The fees assist with the administration of the Acts and provision of different services such as the Secondhand Dealers and Pawnbrokers Act's requirement of record keeping pre-sale to help recover stolen vehicles. On balance the benefits of requiring traders and second hand dealers to comply with both acts outweigh the dual fees requirement.

Banning Provisions

122. The case of Tim Whittle has highlighted a loophole in section 68(1)(c), which provides for the banning of a trader who may have only been convicted of one serious offence. At the time of Whittle's conviction (he was convicted on 73 counts of fraud in 2005), Whittle's registration had lapsed. This meant the automatic banning provisions could not be applied because he was no longer a registered motor vehicle trader.

123. The problem in this case arose because the banning provisions are conditional on the status of the person convicted (i.e. a registered motor vehicle trader or not) rather than being attached to a conviction for specified unlawful activities.

124. This means that the section 68(1)(c) banning provisions of the MVSA are unequally applied across the industry - the unregistered trader, already operating outside the law, cannot be automatically banned for offences for which a registered trader may be automatically banned.

125. In Whittle's case, a successful application was made to the District Court under section 69 of the MVSA and Whittle was subsequently banned indefinitely. However, taking a claim to court can be a resource consuming process and it would be more appropriate if the banning provisions automatically applied to unregistered as well as registered traders.

126. Recommendation: It is recommended that section 68(1)(c) be amended to ensure that persons convicted of breaches of the MVSA that would invoke the banning provisions while registered, are similarly banned regardless of their registration status at the time of conviction.

Concluding Comments on the Motor Vehicle Trader Registration Regime

127. The administrative systems for registration are in place and working well. The proximity of the Motor Vehicle Trader Registrar to the Companies Office means that information can be efficiently collected and maintained.

128. Registration numbers have exceeded 2003 estimates which suggests 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 and that some traders although registered are not operating within the confines of the MVSA.

129. Activity over the first two years has been primarily directed towards education and voluntary compliance. However, in the last six months a more enforcement oriented approach has been signalled.

130. In the longer term it will be critical to the effectiveness of the overall regime that enforcement effort is directed towards those less visible in the retail market, and in particular towards transactions conducted through car fair operators and over the internet. Between them, the Registrar, National Enforcement Unit and the Motor Vehicle Disputes Tribunal collect considerable information about trading activity and behaviour and increased communication between these agencies could assist in identifying priority enforcement targets.

131. The number of agencies involved in administrating various aspects of the regime is 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.

132. Consideration should be given to the establishment of a single consumer enquiry centre.

Recommended Amendments to the MVSA in Relation to Registration

Renewal of Registration of Motor Vehicle Traders

It is recommended that Section 39(2) be amended to remove the requirement for motor vehicle traders to make an annual statutory declaration of their trading details where these have not changed. This would be replaced by the requirement to confirm with each annual renewal that details have not changed (see discussion paragraphs 92 to 93).

Provision of IRD Number as Part of the Details Required on Registration Application

It is recommended that consideration be given to amending section 32 to include the requirement that applicants for registration as a motor vehicle trader provide details also of their IRD number (see discussion paragraph 98).

Technical Amendment to the CC Rating of Motor Cycles

It is recommended that section 6 (b)(iii,) the definition of motor vehicle, be amended to exclude motor cycles up to 50 cc (not 60 cc as currently worded) to reflect ratings used on other relevant legislation (see discussion paragraphs 109 to 112).

Amendment to Banning Provisions

It is recommended that section 68(1)(c) be amended to ensure that persons convicted of breaches of the MVSA that would invoke the banning provisions while registered, are similarly banned regardless of their registration status at the time of conviction (see discussion paragraphs 122 to 125).