Grounds for Denial, Suspension, or Revocation of License

  1. Law
  2. Tennessee Code
  3. Motor and Other Vehicles
  4. Vehicle Sales Licenses
  5. Motor Vehicle Sales Licenses
  6. Grounds for Denial, Suspension, or Revocation of License

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    1. The commission may deny any application for a license or revoke or suspend any license after it has been issued upon finding that:
      1. The applicant or license holder was previously the holder of a license issued under this part or part 4 of this chapter, which license was revoked for cause and never reissued by the commission, or which license was suspended for cause and the terms of suspension have not been fulfilled;
      2. The applicant or license holder was previously a partner, stockholder, director or officer controlling or managing a partnership or corporation whose license issued under this part or part 4 of this chapter was revoked for cause and never reissued or was suspended for cause and the terms of the suspension have not been terminated;
      3. The licensee or applicant has been convicted of a crime of moral turpitude and fewer than five (5) years have passed since the licensee or applicant has completed serving the licensee's or applicant's sentence, including parole or probation, whichever is later;
      4. The applicant or license holder has filed an application for a license that as of its effective date was incomplete in any material respect or contained any statement that was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;
      5. The applicant or license holder has willfully and continually failed to pay the proper application or license fee;
      6. The applicant or license holder has practiced fraud in the conduct of business; or
        1. (a)  The license holder has failed to return to a customer any parts that were removed from the motor vehicle and replaced during the process of repair if the customer, at the time repair work was authorized, requested return of the parts; provided, that any part retained by the license holder as part of a trade-in agreement or core charge agreement for a reconditioned part need not be returned to the customer unless the customer agrees to pay the license holder the additional core charge or other trade-in fee; and provided further, that any part required to be returned to a manufacturer or distributor under a warranty agreement or any part required by any federal or state statute, rule or regulation or local ordinance to be disposed of by the license holder need not be returned to the customer; or
  2. The license holder has failed to permit inspection of any parts retained by the license holder if the customer, at the time repair work was authorized, expressed the customer's desire to inspect the parts; provided, that if, after inspection, the customer requests return of the parts, the restrictions set forth in subdivision (a)(1)(G)(i)(a ) shall apply;

    CONDITIONAL DELIVERY AGREEMENT THIS TRANSACTION IS NOT FINAL YEAR:   MAKE:     MODEL:  VIN#:  I understand that I am taking possession of this vehicle prior to approval from a financial institution and that this transaction is conditioned upon final approval by a lender and funding to the Dealer. I further understand that by taking possession of this vehicle I have agreed to its purchase at the price agreed upon with the Dealer as shown on the financing contract. I give the Dealer authorization to investigate my credit and place the financing contract with the lender of their choosing. I understand that if the Dealer is unable to obtain final funding of the financing contract within  ( ) business days, or if I am unable to obtain financing of my own within 24 hours after notification from the Dealer that the financing contract has been denied, I will be required to return the vehicle to the Dealer. I agree that if I do not promptly return the vehicle that the Dealer may repossess the vehicle from me wherever it may be found. If a lender requires additional conditions from me before accepting the contract, I will use my best efforts to immediately comply with such conditions. If I do not meet or agree to accept any additional conditions or terms, this purchase and the financing contract will be void. I agree that the Dealer has the right to rely on any representation made by me in connection with the purchase contract and the financing contract, including information I provided on the credit application. In the event any representations are incorrect or false, the Dealer has the right to cancel the purchase and the financing contract immediately. I understand that I am liable for any personal injuries and physical damage that might occur to the vehicle or to other persons or property due to my operation of the vehicle, including any fines charged against the vehicle, even in the event that I am required to return the vehicle. I agree to indemnify the Dealer against such losses. In addition, I have provided evidence of collision/comprehensive and liability insurance which will cover any damage which might occur to the vehicle or other property or persons during my operation of the vehicle. Until this is final, I am responsible for any payments due or to come due on my trade-in vehicle. Dealer: (Type in or stamp dealer name) Customer(s) Print Name Date

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  3. In addition to the grounds contained in subsection (a), the commission may deny an application for a license, or revoke or suspend the license of a manufacturer, distributor, distributor branch, factory branch or officer, agent or other representative thereof who has:
    1. Refused to deliver to any motor vehicle dealer having a franchise or contractual arrangement for the retail sale of new and unused motor vehicles sold or distributed by the manufacturer, distributor, distributor branch or factory branch any motor vehicle publicly advertised for immediate delivery within sixty (60) days after the dealer's order has been received;
    2. Sold or offered for sale to a franchised dealer any supplies, material, or other things of value at the time of and as a part of the negotiations for a new or renewal franchise or contract renewing or extending for an additional period of time the dealer's franchise agreement, regardless of whether the sale or offer of sale shall be made a prerequisite to the renewal of a franchise agreement or not;
    3. Unfairly or without due regard to the equities or without just provocation cancelled or failed to renew the franchise or selling agreement of a motor vehicle dealer;
    4. Entered into a franchise agreement with a dealer who does not have, or is not able to provide, proper facilities to provide the services to the purchasers of new motor vehicles that are guaranteed by the new car warranties issued by the manufacturer;
    5. Prevented or required, or attempted to prevent or require, by contract or otherwise, any change in the capital structure of the dealership or the means by or through which the dealer finances the operation of the dealership; provided, that the dealer at all times meets any reasonable capital standards agreed to by the dealer and the manufacturer or distributor; and provided further, that no change in capital structure shall cause a change in the principal management or have the effect of a sale of the franchise without the consent of the manufacturer or distributor;
    6. Prevented or required, or has attempted to prevent or require, a dealer to change the executive management of the dealership, other than the principal dealership operator or operators, if the franchise was granted to the dealer in reliance upon the personal qualifications of the person or persons;
    7. Prevented or required, or has attempted to prevent or require, by contract or otherwise, any dealer, or any officer, partner, or stockholder of any dealership, the sale or transfer of any part of the interest of any of them to any other person or persons. No dealer, officer, partner, or stockholder, however, has the right to sell, transfer, or assign the franchise, or any right thereunder, without the consent of the manufacturer or distributor, except that the consent shall not be unreasonably withheld;
    8. Prevented, or has attempted to prevent, a dealer from receiving fair and reasonable compensation for the value of the franchise business. There shall be no transfer or assignment of the dealer's franchise without the consent of the manufacturer or distributor, which consent shall not be unreasonably withheld;
    9. Obtained money, goods, service, or any other benefit from any other person with whom the dealer does business, on account of, or in relation to, the transaction between the dealer and such other person, other than for compensation for services rendered, unless the benefit is promptly accounted for, and transmitted to the dealer;
    10. Required a dealer to prospectively assent to a release, assignment, novation, waiver, or estoppel that would relieve any person from liability to be imposed by this part, or has required any controversy between a dealer and manufacturer, distributor, or its representative, to be referred to any person other than the commission if the referral would be binding on the dealer. This subdivision (c)(10) shall not, however, prohibit arbitration before an independent arbitrator or the commencement of any legal action;
    11. Increased prices of motor vehicles that the dealer has ordered but not delivered for private retail customers prior to the dealer's receipt of the written official price increase notification. A sales contract by a private retail customer shall constitute evidence of each such order. In the event of manufacturer price reductions, the amount of any reduction received by a dealer shall be passed on to the private retail customer by the dealer, if the retail price was negotiated on the basis of the previous higher price to the dealer. Price reduction shall apply to all vehicles in the dealer's inventory that are subject to the price reduction. Price differences applicable to new models or a new series of motor vehicles at the time of the introduction of new models or new series shall not be considered a price increase or price decrease. Price changes caused by either:
      1. The addition to a motor vehicle of required or optional equipment pursuant to state or federal law; or
      2. Revaluation of the United States dollar in the case of foreign-make vehicles;

        shall not be subject to this subsection (c);

    12. Failed to pay a dealer, within a reasonable time following receipt of a valid claim by a dealer thereof, any payment agreed to be made by the manufacturer or distributor to the dealer by reason of the fact that a new vehicle of a prior year model is in the dealer's inventory at the time of introduction of new model vehicles;
    13. Denied or attempted to deny the surviving spouse or heirs designated by a deceased owner of a dealership, the opportunity to participate in the ownership of the dealership or a successor dealership under a valid franchise after the death of the owner, unless there are reasonable grounds for the denial;
    14. Offered any refunds or other types of inducements to any person for the purchase of new motor vehicles of a certain line-make to be sold to the state or any political subdivision thereof or to any other person without making the same offer to all other dealers in the same line-make within the state;
    15. Employed any person as a representative who has not been licensed pursuant to this part;
    16. Denied any dealer the right of free association with any other dealer for any lawful purpose;
    17. Competed with a dealer in the same line-make operating under an agreement or franchise from a manufacturer or distributor in the relevant market area. A manufacturer or distributor shall not, however, be deemed to be competing when operating a dealership either temporarily for a reasonable period of time, or when operating a bona fide retail operation that is for sale to any qualified independent person at a fair and reasonable price, or when there is a bona fide relationship in which an independent person has made a sufficient investment subject to loss in the dealership and can reasonably expect to acquire full ownership of subject dealership on reasonable terms and conditions. An exclusive motor truck manufacturer, when selling vehicles having a gross vehicle weight over six thousand (6,000) pounds, shall not be deemed to be competing when operating a dealership that sells motor trucks at retail if, for at least six (6) years prior to January 1, 1977, the manufacturer has continuously so operated the dealership;
    18. Unfairly discriminated among its franchisees with the respect to warranty reimbursement or authority granted its franchisees to make warranty adjustments with retail customers;
    19. Sold motor vehicles to persons not licensed under this part as motor vehicle dealers, except as provided in § 55-17-102(1)(C);
    20. Granted a competitive franchise in the relevant market area previously granted to another motor vehicle dealer. “Relevant market area,” as used in this subdivision (c)(20), means that area as described or defined in the then existing franchise or dealership of any dealer or dealers; provided, that if the manufacturer wishes to grant a franchise to an independent dealer, or to grant an interest in a new dealership to an independent person in a bona fide relationship in which the person has made a sufficient investment subject to loss in the dealership, and can reasonably expect to acquire full ownership of the dealership on reasonable terms and conditions, then the manufacturer shall give written notice to the existing dealer or dealers in the area, and the matter shall be submitted to the commission for final and binding action under the principles herein prescribed for a determination of the relevant market area, the adequacy of the servicing of the area by the existing dealer or dealers and the propriety of the granting of additional dealerships. The complaint, whether filed by an existing dealer or upon motion of the commission, shall be filed within thirty (30) days of the receipt by affected dealers of notice as required herein, and if no protests are filed, the manufacturer may proceed to grant the additional franchise;
    21. Committed any other act prejudicial to the dealer by threatening to cancel the franchise or any contractual agreement existing between the dealer and the manufacturer, manufacturer branch, distributor, or distributor branch. Written notice in good faith to any dealer of the dealer's violations of any terms or provisions of the franchise or contractual agreement shall not constitute a violation of this subsection (c);
    22. Coerced or attempted to coerce any motor vehicle dealer to accept delivery of any motor vehicle or motor vehicles, appliances, equipment, parts, tools or accessories therefor, or any other commodity or commodities that have not been voluntarily ordered by the dealer;
    23. Coerced or attempted to coerce any motor vehicle dealer to contribute or pay money or anything of value into any cooperative or other advertising program or fund;
    24. Coerced or attempted to coerce any motor vehicle dealer to engage in any business pursuit that is not directly related to the sale of motor vehicles as defined by the commission; or
    25. Forced, coerced or otherwise required a franchisee to use reconditioned parts in warranty repairs without disclosing such to the owner or lessee.
  4. In addition to the grounds contained in subsection (a), the commission may deny an application for a license or revoke or suspend the license of an automobile auction or agent thereof who has:
    1. If acting as an automobile auction as defined in § 55-17-102(1)(A), willfully permitted any person or persons to buy, sell, exchange or in any other manner participate in automobile auction sales without first determining that the person or persons are duly licensed motor vehicle dealers or duly authorized agents licensed either under this part or under a similar act of another state, unless a motor vehicle dealer license is not required by law;
    2. Failed to provide and make available for inspection to the commission or its agents, all books, records and other memoranda of all transactions, transfers or sales of motor vehicles that take place during the course of business;
    3. Engaged in the business of an automobile auction or agent without posting the bond required by law; or
    4. If acting as an automobile auction as defined in § 55-17-102(1)(B), sold motor vehicles on consignment without showing on the title that the motor vehicle was purchased directly from the auction and not from a third party.
  5. The commission may revoke or suspend any license that the commission has issued upon finding that the licensee has not maintained any of the requirements for issuance of such license.

(a)  The license holder has failed to post in a prominent location notice of this subdivision (a)(1)(G); or

The license holder has failed to print on the repair contract notice of this subdivision (a)(1)(G); or

The license holder need not retain any parts not returned to the customer after the motor vehicle has been returned to the customer.

The commission shall promulgate a rule to provide that consumer information regarding chapter 24 of this title will be made available to their customers.

(1)  In addition to the grounds contained in subsection (a), the commission may deny an application for a license or revoke or suspend the license of a motor vehicle dealer or salesperson who:

Has required the purchaser of a motor vehicle as a condition of sale and delivery thereof to also purchase special features, appliances, accessories or equipment not desired or requested by the purchaser, unless the features, appliances, accessories or equipment are the type that are ordinarily installed on the vehicle by the manufacturer or distributor when the vehicle is received or acquired by the dealer;

Has represented or sold as a new or unused motor vehicle any vehicle that has been operated for demonstration purposes or that is otherwise a used motor vehicle;

Has sold or offered for sale as a new or unused motor vehicle any motor vehicle for which the dealer or salesperson cannot secure for the purchaser of the motor vehicle such new car warranty as may be extended by the manufacturer of the vehicle to purchasers of one (1) of its new vehicles, unless the fact that the vehicle is being sold without a manufacturer's warranty is communicated to the purchaser and disclosed prominently in writing on the bill of sale;

Has no established place of business that is used or will be used primarily for the purpose of selling, buying, displaying, repairing or servicing motor vehicles;

Resorts to or uses false or misleading representations in connection with that person's business as a motor vehicle dealer or salesperson; provided, that dealers are specifically authorized to charge a document preparation fee, processing fee or servicing fee in addition to the sales price of the motor vehicle and these fees shall not be deemed to be a false or misleading representation made in connection with the sale of a motor vehicle, nor a violation of the Tennessee Consumer Protection Act of 1977, compiled in title 47, chapter 18, part 1; and provided further, that the amount of these fees is separately stated and clearly and conspicuously disclosed on the face of the sales contract or buyer's invoice prior to the buyer's execution thereof. For purposes of this subdivision (b)(1)(E), the disclosure shall be deemed to be “conspicuous” if it is listed on the contract or invoice in the same place and manner and in type face no smaller or less obvious than the other type face used therein with respect to other charges listed, and shall be deemed to be “clear” if it states that the charge is a fee for “document preparation,” “processing” or “servicing” or language or abbreviations to the same or a similar effect. The authorization provided by this subdivision (b)(1)(E) shall not apply if the dealer represents to the buyer that the fee is required by or will be paid to any governmental agency or entity;

Gives false or fictitious names or addresses for the purpose of registering the sale of a motor vehicle or who makes application for the registration of a motor vehicle in the name of any person other than the true owner;

Employs any person who has not been licensed as a salesperson pursuant to this part;

Fails to reasonably supervise agents, salespersons or employees;

Uses or permits the use of special license plates assigned to that person for any purpose other than those permitted by law;

Disconnects, turns back or resets the odometer of any motor vehicle in violation of state or federal law, except as provided for in §39-14-132(b);

Commits any act or practice involving the purchase, sale, repair or servicing of a motor vehicle or the parts or accessories of a motor vehicle, that, in the opinion of the commission, is false, fraudulent or deceptive;

Increases the price of a new motor vehicle to a retail customer after the dealer has accepted an order of purchase or a contract from a buyer, except that a trade-in vehicle may be reappraised if it subsequently suffered damage, or parts or accessories have been removed. Price differences applicable to new models or a new series of motor vehicles at the time of the introduction of new models or new series shall not be considered a price increase or price decrease;

Possesses any certificate of title that is not a closed title, unless the motor vehicle dealer maintains an executed consignment form developed by the commission on each motor vehicle that does not have a closed title;

Issues more temporary plates than allowed by law or fails to maintain a record of the issuance of temporary plates;

Engaged in curbstoning, as defined in §55-16-103;

Prior to a motor vehicle being subject to a public automobile auction, the public automobile auctioneer shall verify that the motor vehicle has a clean and unencumbered title, by obtaining a valid motor vehicle title history from the department of revenue or if the motor vehicle is registered in a state other than this state, the appropriate titling agency in the other state;

All public automobile auctions must take place at the established place of business listed on the motor vehicle dealer license;

The public automobile auction shall not sell new or unused motor vehicles or vehicles with a manufacturer's statement of origin;

The public automobile auctioneer shall take possession of and retain title to each motor vehicle offered for sale at the auction. If the sale is finalized on a motor vehicle, the owner of the vehicle shall sign the title over to the public automobile auctioneer who shall then sign the title over to and deliver the title to the buyer on the date of the sale. If a sale of the vehicle is not made, then the unsigned title shall be returned to the owner of the vehicle who offered the vehicle for sale at the auction. At all times, the public automobile auction shall be deemed the seller of the motor vehicle with the same duties and responsibilities as other licensed motor vehicle dealers; or

Fails to maintain a record of a customer's motor vehicle liability insurance coverage or other proof of financial responsibility for any customer who is issued a temporary plate by a motor vehicle dealer who finances the sale of used motor vehicles and retains the title to such vehicles. The record shall be maintained in the same manner or for the same period of time as the record of issuance of temporary plates described in subdivision (b)(1)(N).

Whenever any licensee pleads guilty or is convicted of the offense of odometer tampering or any other criminal offense involving moral turpitude, the licensee must within sixty (60) days so notify the commission and must provide the commission with certified copies of the conviction. The licensee's license shall automatically be revoked sixty (60) days after the guilty plea or conviction unless, during the sixty-day period, the licensee makes a written request to the commission for a hearing. Following the hearing, the commission in its discretion may impose upon the licensee any sanction permitted by this part.

A motor vehicle dealer shall pay off the agreed upon indebtedness on the trade-in vehicle within thirty (30) days after the dealer has received actual payment on the financing contract for the new motor vehicle purchase.

(A)  Notwithstanding any law to the contrary, the commission may revoke or suspend the license of or levy a civil penalty against any motor vehicle dealer who, in a motor vehicle transaction that is conditioned upon final funding to the dealer by a third-party financial institution, fails to:

Provide in writing to the customer the conditional delivery agreement set forth in subdivision (b)(4)(D);

Retain possession of any vehicle used by the consumer as consideration, commonly known as a trade-in vehicle, until the dealer has received funding from the financial institution;

Allow the consumer to void the motor vehicle transaction if any of the terms of the transaction change after the consumer has approved and accepted the terms; or

Pay off the agreed upon indebtedness on the trade-in vehicle within thirty (30) days after the dealer has received funding from the financial institution on the financing contract for the new purchase.

As used in this subdivision (b)(4), “funding” means actual payment to the dealer by the financial institution purchasing the financing contract or lease.

Compliance with subdivisions (b)(4)(A) and (B) may not be waived by any consumer.

The form of the conditional delivery agreement shall be as follows:


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