By Sloan Schickler, Esq. and Edward P. Kaye, Esq.
Lessors have been engaged in funding and brokering vehicle leases for decades. Many funding sources from nationally recognized banks and captive financing companies have entered into direct vehicle leases and accepted deals from auto broker businesses for just as long. It is nothing new for the auto broker business to be targeted by auto dealers, but there is a bill pending in the New York State Legislature that could change the law and require all vehicle lessors doing business in New York to obtain a New York motor vehicle dealer’s license.
NVLA board member and legal counsel Sloan Schickler has represented the New York Automobile Leasing Brokers Association (“NYABA”) for the last several years to oppose pending auto broker legislation. The newest iteration of anti-broker legislation is Senate Bill 4332-A and Assembly Bill 1932-A (the “Bill”). This Bill requires all lessors, whether commercial, consumer, fleet, independent leasing companies, auto lease brokers, auto brokers, captive or bank lessors, to obtain a motor vehicle dealer’s license if they lease five or more vehicles in any calendar year. Until now, lessors were not automatically required to obtain a dealer’s license-it depended on the nature of the lessor’s business.
The Bill also has onerous requirements for auto brokers to post a $250,000 bond (this is more than for dealers), obtain three bids for every deal (unconstitutional) and even financially guaranty that the vehicles they are brokering are manufactured in accordance with U.S. safety and environmental specifications! These are steep hurdles for auto lease brokers-anti-competitive measures designed to put them out of business.
Failure to obtain the license authorizes the New York Motor Vehicle Commissioner to assess a penalty of up to $10,000 for each vehicle sold or leased without a license. Essentially, the Bill will put auto lease brokers out of business and force many lessors and banks out of compliance in New York.
The auto brokering business has always been a niche industry in various parts of the U.S. and caters to minority and insular communities that often do not speak English well. The benefit is that the broker speaks the language, knows the customs, and is a member of the community.
For example, in the borough of Queens in New York City there is a large Korean American population. The auto district in this part of Queens is lined with franchised and independent automobile dealers as well as auto brokering businesses that cater to the local Korean American population. They transact business in Korean, are helpful to the consumers in their community and like most small businesses, pay their taxes, create jobs and are good corporate citizens. Clearly, the auto brokers in this community are an important intermediary between the consumers and the auto dealers.
The auto dealers claim the law must be amended to deal with bad acts of brokers. Notably, auto dealers were number 5 on the New York Attorney General’s list of top 10 consumer complaints for 2020 (they fell from the number 3 position in 2019 due to COVID-related complaints in an unusual year). The auto brokers did not show up on the list. Franchised auto dealers argue that brokers have minimal capital investments in their businesses, engage in deceptive practices, do not disclose their fees and add no value to the consumer. Yet dealers benefit from having brokers bring them business and sell more cars.
While the NVLA strongly opposes this Bill, the battle is far from over. Automobile dealers and vehicle lessors are usually aligned; however, requiring that all lessors obtain a vehicle dealer’s license in this proposed legislation is casting a wide net for no clear purpose.
Sloan Schickler and Ed Kaye are partners in the vehicle finance law firm, Schickler Kaye LLP Schickler, a veteran vehicle leasing, finance, and bank attorney, has been the NVLA Legal and Legislative counsel since 2017 and currently sits on the board of directors. Kaye is the former CEO and General Counsel of a prominent independent vehicle leasing company and the immediate past president of the NVLA. He currently sits on the NVLA board of directors. Together, they provide decades of experience representing and protecting lessors and lenders in all facets of the vehicle leasing and financing business. They can be reached at email@example.com or firstname.lastname@example.org or 212-262-6400.