SENATE BILL REPORT

SB 5706

BYSenators Metcalf, Patterson and Bender

Authorizing establishment of escrow accounts to satisfy vehicle dealer bonding requirements.

Senate Committee on Transportation

Senate Hearing Date(s):January 18, 1988

Senate Staff:Gene Schlatter (786-7316)

AS OF JANUARY 15, 1988

BACKGROUND:

To protect the purchasers of motor vehicles in the state of Washington, the Legislature requires that vehicle dealers meet certain criteria including the filing of a security bond with the Department of Licensing in the amount of $15,000 for motor vehicle dealers, $30,000 for mobile home and travel trailer dealers ($15,000 if the dealer does not deal in mobile homes), and $5,000 for miscellaneous dealers.  Wholesale dealers are not required to file a security bond.

Any retail purchaser who has suffered any loss through breach of warranty or any other act in violation of Chapter 46.70 RCW (Unfair Practices - Dealers' Licenses) has the right to file for recovery against the dealer and the surety bond.  When the penalty of the bond is exhausted or if the bond is cancelled, the dealer's license is automatically cancelled.  Dealers are required to maintain a bond for each business location in this state and bond coverage for all temporary subagencies. 

Surety bonds are also required of other types of similar retail transportation businesses such as vessel dealers and aircraft dealers in varying dollar amounts.

SUMMARY:

Vehicle dealers may deposit money or government securities in an escrow account in lieu of filing a surety bond with the Department of Licensing.  The amount of the deposit must be in the amount required of the bond as required by the department.  The dealer's license is automatically canceled if the escrow account is exhausted or terminated.  Any income earnings from the escrow account may be received by the dealer.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested