SB2296.DOC

SECTION 1. Chapter 437, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§437- Release of motor vehicles from auction. Prior to the transfer of any motor vehicle to a dealer pursuant to an auction, the motor vehicle shall be insured as required under section 431:10C-104."

SECTION 2. Section 437-7, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Requirement for lines of credit shall be as follows:

(1) Applicants for issuance of a dealer's license shall obtain an inventory or flooring line of credit from a federally insured financial institution or from a financing source having a net worth of at least $50,000,000. The line of credit shall be in the following amount:

(A) For new motor vehicle dealer applicants, $500,000 or the amount required in the applicant's dealer sales and service agreement, whichever is less;

(B) For used motor vehicle dealer applicants, $50,000; and

(2) Applicants for issuance of a dealer's license shall provide the board with a photocopy of the financing statement filed at the bureau of conveyances of the department of land and natural resources, securing the line of credit;

(3) Applicants for the issuance of an auction license shall obtain a secured line of credit in the amount of $100,000 from a federally insured financial institution; and

(4) [When an inventory or flooring line of credit cannot reasonably be obtained by a dealer, the board may provide that a bond, in an amount set forth in the board's rules, be obtained as an alternative form of security for the inventory or flooring line of credit.] In lieu of a flooring line of credit pursuant to paragraph (1), dealers of used motor vehicles and new and used motorcycles and motor scooters may submit a bond in an amount as determined by the board, but not to exceed $100,000; provided that the bond shall be obtained on similar terms and conditions as required of brokers under section 437-18."

SECTION 3. Section 437-11, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Requirements to be met before issuance of dealer's and auction's license.

(1) The following requirements shall be met by an applicant for a dealer's license before a license may be issued by the motor vehicle industry licensing board:

(A) The applicant has a site that is zoned to allow the sale of motor vehicles which will be used primarily for the purpose of selling, displaying, offering for sale, or otherwise dealing in motor vehicles;

(B) The site has a permanent building thereon and space suitable for the display at any one time of at least three motor vehicles having an average wheel base of at least ninety inches; [~~and~~]

(D) The applicant presents proof of motor vehicle insurance required under section 431:10C-104 for each vehicle to be sold;

(2) The following requirements shall be met by an applicant for an auction's license before a license may be issued by the motor vehicle industry licensing board:

(A) The applicant has a permanent site which will be used primarily for the purpose of selling, displaying, offering for sale, or otherwise dealing in motor vehicles; and

(B) The site has suitable sanitation facilities."

SECTION 4. Section 437-18, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) The bond shall be subject to the following conditions:

(1) That the broker will faithfully and truly comply with all the valid provisions of this chapter as the same now are or may hereafter be amended, and with any rule adopted by the board pursuant to this chapter;

(2) That the broker will not be guilty of fraud, misrepresentation, or other improper business conduct in connection with the selling, purchasing, negotiating for purchase, financing, or otherwise dealing with motor vehicles or any other property related thereto[,] with regard to any person, and will satisfy all judgments rendered against the broker based in whole or in part upon representations or warranties made in connection with any retail sale or negotiation for the purchase of a motor vehicle; and

(3) That the broker will protect the treasurer of the county and any purchaser of any vehicle or any person acquiring any lien thereon or successor in interest of any such person against any loss on account of any defect in or undisclosed encumbrance upon the title of any motor vehicle, registered by the treasurer in reliance upon any certificate, affidavit, or other representation of the dealer, or registration or transfer of registration procured by the broker."

SECTION 5. Section 437-29, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Where any applicant for a license or stockholder owning more than a ten per cent interest in the applicant or any officer, director, trustee, employee, or partner of the applicant has been guilty of any act or omission involving personal misconduct which by this chapter is made ground for refusing to issue a license or for revoking or suspending a license, such as the making of a false statement of a material fact in an application, the commission of a fraudulent act in connection with the sale or negotiation for the purchase of motor vehicles, and the like, the board shall have discretion, nevertheless, to issue the license or suspend or reject the revocation of the license, upon such reasonable conditions, including the furnishing of an additional bond [~~not exceeding $5,000, as to future good conduct of the applicant and other person concerned, as the board determines,~~] requirement in an amount not to exceed fifty per cent of the applicable line of credit under section 437-7(d)(1) for a period not to exceed three years; provided the board finds:

(1) That there are extenuating circumstances that indicate that the act or omission was not due to moral turpitude; [or]

(2) That a reasonable time fixed by rule of the board, not less than one year, has elapsed since the act or omission occurred, together with evidence of the person's rehabilitation or general good character, sufficient to indicate that the person is not likely to repeat the offense or engage in illegal, unlawful, or unconscionable practices; or

(3) That the favorable action by the board will not jeopardize the public interest."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2296
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII