Becoming a Car Salesperson

The purpose of this policy is to establish the standards and financial requirements that the Registrar will consider in determining whether a registrant/applicant must provide a letter of credit as a condition of registration. In the event that there is an indication of potential risk that the registrant, applicant or any other interested party’s financial history or past conduct may risk the proper compensation to consumers in case of the registrant’s failure to fulfill their obligations under the Act, then a letter of credit will be necessary. It will be reviewed on a case-by-case basis based on this policy.

This policy applies to applicants/dealers who are involved in trading motor vehicles with consumers. Primarily, General Dealers.

While it is not mandatory for applicants/registrants to provide a letter of credit for registration, Section 8 of the Act allows the Registrar to approve the registration or renewal of registration with certain conditions if the Registrant is not entitled to registration under Section 6 of the Act. Example: If the Registrar believes that the applicant’s financial position or past conduct, or the financial position or past conduct of the interested person, poses a risk that they may not be able to properly compensate consumers if they fail to meet their obligations under the Act.

During the review process, the Registrar conducts a comprehensive risk assessment in accordance with the policy and considers all potential risks that may directly or indirectly affect consumers. Based on this assessment, the Registrar may determine that a Letter of Credit (LOC) is necessary from the applicant/registrant. The decision to require an LOC is based on various factors, such as the applicant/registrant’s/interested parties’ financial stability, history of compliance and other potential risks.

* Substantially follow the format outlined in the sample LOC (Sample Letter of credit will be provided to applicants/registrant).
* Be irrevocable
* Allow for partial drawings allow automatic renewals unless the Registrar’s office receives a written notice from the financial institution with at least 30 days notice – Note: if letter of credit is to be rescinded by the financial institution, the dealer must provide a replacement letter of credit before the expiry of the notice period.
* Give the Motor Vehicle Dealers Compensation Fund exclusive control over the release of fund

Does it need to be issued by a financial institution, or is obtaining it from a third-party lender acceptable? A letter of credit should come from your bank. Third-party letters or promissory notes will not be accepted.

Does it need to be issued by a financial institution, or is obtaining it from a third-party lender acceptable?
A letter of credit should come from your bank. Third-party letters or promissory notes will not be accepted.

The Registrar may release a portion of the funds held by the letter of credit prior to the Closure of Business, subject to the following conditions:

* The request must be made in writing to the Registrar.
* The request must be submitted by all owners, partners, officers, directors, and shareholders registered with the Registrant, as the case may be.
* The request can only be made after 2 (two) years from when the letter of credit was deposited with the Registrar; and
* The Registrar shall hold back a minimum of $5000.

If a dealer sends a request to release the LOC after two years of registration, the Registrar will consider the risk analysis outlined in the LOC policy and review the request. Based on the outcome of the risk analysis, a decision will be made as to whether the LOC can be released at that time.

In addition to financial stability, history of compliance, and potential risks of the applicant/registrant/interested parties, there are other risk factors that could be considered in the process of determining whether a Letter of Credit (LOC) is required. For example, applicants with a work permit and other immigration matters could be considered a risk factor which potentially may affect the ability of the applicant/registrant to comply with the Act and Regulations.

If an applicant or registrant refuses to provide the LOC, it could result in their application being denied or their registration being revoked, depending on the circumstances.

Contact the Registration Department at 416-226-4500 Toll Free 1-800-943-6002 or send email to registration@omvic.on.ca .

There are no changes in the application process due to this policy as all applications are processed according to the Act and with the careful evaluations outlined in Section 6. However, this policy is designed to ensure that applicants are financially stable, operate with integrity, and comply with the MVDA and its regulations. It also allows the Registrar to exercise regulatory authority and address risks and other concerns related to consumer protection.
This policy is a tool to prevent potential risks and issues that could harm both consumers and the overall integrity of the industry.