In order to eliminate some of the confusion surrounding the Title Defect Rescission (TDR) Fund, the Ohio General Assembly made some changes to TDR effective September 29, 2011. The TDR law was established a helpful tool to allow car dealers to sell a used car without having first obtained title in the dealer’s name. However, dealers must understand both the requirements of the TDR law as well as the consequences if the Attorney General must tap the TDR Fund to pay a claim against a dealer. What should you know?

Before displaying any vehicle for sale without first securing title in your dealership name, you must possess a bill of sale, properly executed power of attorney, or other related documents from the prior owner that would allow the dealer to secure title to the vehicle in its name. Whereas before, dealers in business less than three years were required to post a bond with the Attorney General’s Office, the dealer must post a $25,000 bond with the Attorney General’s Office only if the Attorney General has paid a retail purchaser from the TDR Fund within the preceeding three years.

The remedies available to a retail purchaser can be severe if a dealer fails to comply with certain obligations. A retail purchaser is entitled to demand that the dealer rescind the transaction when the dealer fails to obtain title in the consumer’s name within 40 days of the transaction, fails to disclose in writing that a vehicle’s title is branded as a rebuilt salvage prior to execution of the purchase agreement, the title indicates that the dealer made an inaccurate odometer disclosure, or the dealer fails to disclose in the purchase agreement that the vehicle title is branded as a “buyback” if that is the case.

In order to seek a remedy under the statute, the retail purchaser must notify the dealer of the request for rescission. When the dealer has failed to deliver title within 40 days, the retail purchaser must provide this notice within 60 days of the date the vehicle is titled in the name of the retail purchaser. When the dealer has failed to properly disclose a rebuilt salvage or buyback branded vehicle or has provided an inaccurate odometer disclosure, then the retail purchaser must notiofy the dealer within 180 days of the date the vehicle is titled in the purchaser’s name. In either event, once notice is provided, the dealer has 7 days to refund the full purchase price of the vehicle or reach a satisfactory compromise with the retail purchaser. If the retail purchaser traded in a vehicle, the dealer is required to return the trade-in vehicle or the value of the trade-in as contained on the purchase agreement.

Failure to provide proper notice to the dealer within these time frames bars the retail purchaser from recovery. However, if proper notice is provided and the dealer failed to rescind the transaction in accordance with the statutory requirement, the Attorney General will reimburse the retail purchaser the full purchase price and the cost of additional temporary tags from the TDR Fund. A payout from the Fund will likely lead the Attorney General to pursue an action to reimburse the Fund in addition to seeking civil penalties under Ohio’s Consumer Sales Practices Act (CSPA). The retail purchaser also has a private right of action under the CSPA, which could lead to treble damages and attorney’s fees.

Dealers often ask us if participation in the TDR Fund is mandatory. The short answer to the question is yes it is! With the recent changes to the law, each dealer must pay $150 to the Attorney General for deposit into the Fund if at anytime the Fund dips below $300,000. The Attorney General will send notice of the assessment to a dealer’s licensed location. Additionally, fifty cents of the the title fee collected from a licensed dealer for resale purposes is deposited into the Fund. While the changes to the TDR law are a great benefit to dealers, as always, compliance is the key to success. Follow the law and stay on safe ground. One slip can unwind an entire deal.