STATE OF WISCONSIN
DEPARTMENT OF TRANSPORTATION
PROPOSED ORDER AMENDING EMERGENCY RULE
The Wisconsin Department of Transportation proposes an order to:
The Statement of Scope for this Emergency Rule, SS 054-22, was approved by the Governor on June 3, 2022, published in Register No. 799A1 on July 5, 2022, and approved by Secretary of the State of Wisconsin Department of Transportation (“department”) Craig Thompson, as required by s. 227.135(2), Stats, on May 27, 2022. The emergency rule was approved by the Governor on April 13, 2023. The analysis below was prepared by the department. ANALYSIS
Finding of emergency:
The welfare of retail consumers in the state of Wisconsin are at risk of harm from the sale of motor vehicles from unlicensed motor vehicle dealers. Previously, the department interpreted provisions of s. 218.34, Stats., as authorizing the department to issue motor vehicle buyer licenses only after the statutory procedure for assessing and issuing licenses has concluded, and only permits persons holding said license to bid on automobiles at an auction after the license process is completed. However, the department’s interpretation of the language in s. 218.34, Stats., and the department’s procedures have been invalidated by a recent court decision. The result is that unlicensed dealers can obtain vehicles at Wisconsin motor vehicle auctions through an existing licensing process, where applicants can bid on and purchase vehicles while their license is applied for with the department. The department is seeking a change to ch. Trans 138 through emergency rulemaking in order to close this loophole in the licensing process. Statutes Interpreted: s. 218.34, Stats. Explanation of Agency Authority:
Section 218.0111 (1), Stats., requires that the department be the entity to issue all motor vehicle buyer licenses. Sections 218.0114 (1) and (4), Stats., set forth the licensing requirement the legislature has adopted for entities to engage in business as a motor vehicle dealer in Wisconsin. Section 218.0152 (3), Stats., authorizes the department to promulgate rules necessary for the effective administration and enforcement of permits it issues. Section 218.34, Stats., prohibits motor vehicle auctions from accepting bids from customers who do not possess a valid motor vehicle dealer, motor vehicle wholesaler, or motor vehicle buyer license. Section 227.10 (1), Stats., requires the department is required to promulgate a rule when interpreting an ambiguous statute. Plain Language Analysis:
In 2004, the department recognized the need to implement policy consistent with the statutory requirements of s. 218.34, Stats. To this end, the department permitted motor vehicle auctions to accept bids from customers under the following conditions: 1) the auction collected a buyer’s license application from the customer; 2) the auction issued a receipt of application to the customer; and 3) the auction forwarded the application to the department. This allowed customers to obtain motor vehicles at auction while the department reviewed their application and issued a license. Over time, the department observed increases in unlicensed motor vehicle dealer sales and odometer fraud directly connected to the sale of motor vehicles allowed under the 2004 policy. To correct this trend, the department changed policy regarding buyer’s licenses in 2018, prohibiting out-of-state customers from bidding at an auction until their application was reviewed and a valid license was issued by the department. In 2021, this policy was further refined to encompass all buyers, regardless of whether they were in Wisconsin or out-of-state.
In 2021, five plaintiffs representing Wisconsin motor vehicle auctions filed an injunction to prevent the department from implementing the 2018 policy. An order from the Jefferson County Circuit Court, in the case, 21CV172, issued January 11, 2022, prohibited the department from implementing the 2018 policy against the named plaintiffs. The department has continued to enforce the 2018 policy against auctions not involved in the injunction. This has created an uneven playing field for auctions and buyers, leading to potential adverse economic impacts to businesses without fully addressing the problem of illegal vehicle sales. Adding to the regulatory uncertainty, on October 31, 2022, 2 additional auto auctions filed a lawsuit against the department in Milwaukee Circuit Court, case 22CV7001, seeking a court order that the pre-2018 policy apply to those plaintiffs as well.
This rulemaking codifies the department’s 2021 interpretation of s. 218.34, Stats. The rule clarifies that a license is valid only when the applicant for the license receives written authorization from the department. This is to close the loophole in the licensing process that previously allowed applicants to participate in auctions while the department reviewed their application. This rulemaking also clarifies the requirements an applicant must meet in order to hold a valid license. The applicant must be employed by a licensed motor vehicle dealer and, if employed by more than one dealer, be licensed by each employer. The applicant must also be at least 18-years-old and pay the required fees to receive the license. Currently, the fee for an out-of-state buyer’s license is $6 and expires on the same date as the person’s home state dealer license or 12 months from the date the department receives the application, whichever is sooner. An in-state buyer’s license expiring in one year or less is $6 and an in-state buyer’s license expiring in more than a year is $12. In-state buyer’s licenses expires on the same date as the employer’s dealer license.
Summary of, and Comparison with, Existing or Proposed Federal Statutes and Regulations:
There are no known existing or proposed federal regulations addressing motor vehicle purchases at auctions.
Comparison with Rules in Adjacent States:
Illinois.
625 ILCS 5/5-701
(a) No person, other than a licensed new vehicle dealer, a licensed used vehicle dealer, or municipality, shall engage in this State in the business of auctioning vehicles, for more than one owner, at auction or shall offer to sell, solicit or advertise the sale of a vehicle at auction without first acquiring a commercial vehicle auctioneer license from the Secretary of State under the provisions of this Section. A vehicle auction licensee shall be entitled thereunder to sell, solicit, and advertise the sale of used vehicles belonging to others at auction.
(b) An application for a vehicle auctioneer license shall be filed with the Secretary of State, duly verified by oath, in such form as the Secretary of State…”
Iowa.
Iowa Admin. Code 761-425.20 (322)
425.20(2) Retail auction sales. Any person who sells at public auction more than six vehicles in a 12-month period shall obtain the appropriate dealer's license. All certificates of title for the vehicles offered for sale at public auction shall be duly assigned to the dealer.
425.20(3) Place of business. A dealer's license issued under this rule does not require a place of business.
425.20(4) Exceptions.
a. The state of Iowa, counties, cities and other governmental subdivisions are not required to obtain a dealer's license to sell their vehicles at retail.
b. This rule does not apply to a vehicle owner, or to an auctioneer representing the owner, selling vehicles at a retail auction if the vehicles were acquired by the owner for consumer use, the vehicles are incidental to the auction, and only one owner's vehicles are sold.
Michigan.
