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Maryland Auto Industry Update

June 19, 2015

The Maryland General Assembly passed an important bill about spot delivery, the practice in which an auto dealer attempts to arrange credit with a third-party lender for a finance or lease transaction and delivers a vehicle before the lender issues a final approval.

The bill, which was signed into law by the Governor, goes into effect on October 1, 2015, and recognizes and governs this long-standing industry practice.  The law requires dealers to provide a specific written notice that must be signed by the customer before the vehicle is delivered, setting forth the rights and duties of the parties.  If the terms are approved by the third-party financial institution, the sale cannot be cancelled.  If the terms are not approved, the dealer must notify the customer in writing within four days of delivery of the vehicle, and the customer must return the vehicle to the dealer, in the same condition in which the buyer received it, except for normal wear and tear, within two days of the receipt of such notice.  The dealer and the customer may agree on new financing or lease terms upon return of the vehicle.  If such agreement is not reached, then the dealer or the buyer may cancel the sale.

The law specifies what the dealer must return to a customer if a sale is cancelled, including return of the trade-in vehicle, the down payment, and certain other fees, taxes, and charges.  A dealer must maintain required insurance on the vehicle until the terms of financing are approved by the third-party institution.  If the buyer does not return the vehicle within two days, the dealer may repossess it in accordance with state law.  A buyer may not waive rights under this law.

Importantly, a violation of this law is an unfair and deceptive trade practice and the dealer is subject to legal action under the Maryland Consumer Protection Act.  Dealers are recommended to contact their legal counsel to make sure they are in compliance with the new law and all of its requirements.

If you would like further information on this Maryland law or Maryland automotive laws generally, please contact Daniel Katz at 410.752.9725.

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