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2012 dealer licenses to cost $500 more to help unpaid lien victims

September 2, 2011
The Dealer Recovery Trust Fund takes effect Oct. 1, in time to assess 2012 dealer licenses an extra $500, after Illinois Gov. Pat Quinn signed the measure into law on Aug. 22.
The trust fund will be endowed by adding $500 to the price of an annual license for a dealer’s established place of business and $50 for each additional place of business. The secretary of state’s office currently counts 895 new-vehicle dealers, 2,831 used-car dealers, and 771 motorcycle dealers, meaning the fund would collect more than $2.2 million in its first year.
The new law provides that when the fund balance reaches $3.5 million as of Aug. 31, collection of the fee will be suspended the following year for dealers who did not have a claim paid from the fund; or a suspended or revoked license; or have any civil penalties assessed against them during the previous three years.
Beginning Oct. 1, consumers and dealers are eligible to file a claim against the fund if they purchase a vehicle on or after that date from a dealer who goes out of business without satisfying a trade-in lien. A claim cannot exceed $35,000.
The fund was sought by the Illinois attorney general’s office, after being contacted by a number of consumers in recent years who were harmed by the unpaid liens. Assistant Attorney General Greg Grzeskiewicz described consumers who subsequently saw their credit scores damaged while they were saddled with two vehicle loan payments. Grzeskiewicz said Illinois was the only state without a recovery fund or a bonding mechanism to help those consumers.
Dealers from the CATA and the IADA involved in shaping the legislation were able to steer endowment of the recovery fund toward a hike in dealer licenses and away from more costly surety bonds. Former CATA Chairman Steve Foley Jr. also succeeded at widening the circle of those who could be compensated by the fund to include dealers, who similarly can be harmed by unpaid liens on dealer trades.
“I know in my 30-plus years in the car business we have been burned three times on dealer trade checks going bad,” Foley said. “If you look at it logically, we have a payoff on floorplan just like a consumer does on a consumer loan. Since the fund is endowed entirely by dealers, it should also benefit dealers.”
Also, dealers managed to steer the proceeds held in the fund away from the state treasury and to a separate account that will be administered by the IADA, thus preventing the General Assembly from using any interest money to shore up the state budget.
“For a lot of reasons, I also like the idea of the IADA having control of the money,” said Foley. “Other than the state sweeping the money for other uses, we need to know firsthand when it is sufficiently funded so we no longer have to contribute.
“Remember the promise of the tollway was that as the road was paid for, there would be no more tolls. We know how that turned out.”
Grzeskiewicz said his office estimates unpaid liens of $5 million statewide and is suing seven closed dealers to recoup some of that. He counts 60 dealerships that closed in the last eight years without paying off traded-in vehicles. He said a “typical” dealership closes without settling 10 trade-ins totaling $250,000.