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Tennessee RV dealers subject to new bonding rule

Tennessee RV dealers subject to new bonding rule

By Todd Bryant
President and founder of Bryant Surety Bonds

Franchise recreation vehicles dealers and manufacturers in Tennessee will be subject to new licensing requirements this year. One part of the new regulations has been in force since Jan. 1, and the second part will take effect on July 1.

These requirements were introduced last year, after Bill 1980 was passed (also known as the Tennessee RV Franchise Act of 2016). The bill separated the regulation of RV industry from the automotive franchise law and introduced an RV-specific law. This makes Tennessee the 18th state in the U.S. to introduce RV-specific laws.

Among the new requirements coming into force in July, franchise RV dealers will be required to obtain a $50,000 Tennessee auto dealer bond when getting licensed. Read on for an overview of the licensing requirements for RV dealers.

New RV dealers and manufacturers licensing requirements

The licensing requirements set forth in Section 10 of Bill 1980 are set to come into effect on July 1. Under them, RV dealers and manufacturers but also RV salespeople and factory representatives must become licensed at the Tennessee Motor Vehicle Commission before they can operate as such. Section 10 also requires people engaging in more than one of these activities to hold a separate license for each of them, as well as to have separate licenses for each location in which they operate.

Upon applying for a license, applicants will be required to submit personal as well as trade-related information such as their name and address, and that of their business partners. Information regarding financers and business locations will also be required.

When applying for a license, individuals will need to pay a $400 application fee. If the application is denied or the license is not issued, 75 percent of the fee will be refunded to the applicant. RV dealer licenses issued by the commission will be valid for two years. If they are not renewed in time, applicants may need to pay an additional 50 percent penalty on the application fee.

Under section 10, Tennessee RV license applicants are also required to post an auto dealer bond. This bond is to be in the amount of $50,000. This requirement is meant to provide protection to the public and the state of Tennessee. Read on below for more information regarding the bond.

Tennessee RV dealer bond requirement

The Tennessee auto dealer bond required of RV dealers, manufacturers and others is a financial guarantee agreement which other auto dealers in the state must also obtain. The bond’s purpose is to protect customers against actions by the dealer that violate requirements set forth in the bill.

Violations that may give rise to a claim against the RV dealer’s bond are specified in the bill as those that cause losses due to:

  • A dealer not paying for a customer’s prepaid title, registration and other applicable fees
  • A dealer not providing a valid recreational vehicle title certificate upon the sale of a vehicle that is free of any liens or interests by previous owners

If a claim is made against the bond, the surety bond company that has issued the bond investigates the claim and compensates claimants up to the full bond amount. In turn, the bonded RV dealer must then compensate the surety for its backing. In this way, the bond provides protection to customers and guarantees for compliance on behalf of dealers.

Further provisions of bill 1980 include requirements that came into force Jan. 1 concern the agreements made between manufacturers and dealers. Section 11 of the bill specifies when and how such agreements may be terminated or canceled by either a manufacturer and distributor or by a dealer. Depending on which side decides to cancel or terminate the agreement, the section specifies the necessary actions that must follow.

The bill also includes regulations regarding the:

Succession or transfer of a dealership

Warranty obligations and indemnification by a warrantor or dealer

Inspections and rejections of recreational vehicles by a dealer

A prohibition against manufacturers and distributors attempting to coerce a dealer

All these requirements came into force Jan. 1. RV dealers, manufacturers and other licensees should make sure to familiarize themselves with the provisions of the bill or contact the Motor Vehicle Commission to obtain all required information.

The Tennessee RV Franchise Act of 2016 was negotiated by several Tennessee automotive and RV associations and is considered a success for all sides. As an RV dealer or manufacturer, do you think the new law is helpful and will help the industry in the state? Let us know in the comments!

Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.

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One comment

  1. Two items come to mind: With the costs involved who would want to do business in TN. And two, who’s the big beneficiary of these costs, the Surety Companies!

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