alpha
Lesson 3 of 20 Outline

Dealer education / Your license. Lesson 3 of 20. 11 minutes.

Unlawful dealer activities and how the DMV enforces

After this lesson you can

  • Recognize the dealer activities the Vehicle Code names as unlawful.
  • Tell an administrative action from a criminal or civil one, and what each can cost.
  • Know what happens at a DMV inspection and what records an investigator may ask to see.

Three lists, one consequence

Vehicle Code 11705(a) lists what the DMV may suspend or revoke a license for, after notice and a hearing. 11713 lists what a licensee shall not do, and 11713.1 what is a violation of the code for a dealer. Any violation of Division 5, which holds all three, is a misdemeanor (Vehicle Code 40000.11(a)), and 11705(a)(10) makes any violation of the dealer article a ground for license action.

Misusing the plates, lending the supplies

Lesson 2 said what a dealer plate is for. Vehicle Code 11713(j) makes any other use unlawful, and 11705(a)(2) reaches a dealer who made an illegal use of the plates or knowingly or negligently permitted one. Vehicle Code 11713(m) forbids permitting any other person to use your license, supplies or books to buy or sell vehicles, or to run a branch, whether or not you have a financial interest in their deals; the report of sale books remain the department's property and may be taken up at any time (11714(e)). Renting your number is this violation, and a salesperson who runs their own deals through your books loses their own license (11806(j)).

An unlicensed location

Vehicle Code 11713(f) makes it unlawful to do business without at all times maintaining an established place of business, 11713(r) makes it unlawful to display a vehicle for sale anywhere but an established place of business the DMV has authorized for you, and 11714(b) forbids a retail sale at a location not posted under 11709. Selling from a driveway with no licensed lot behind it is all three.

The administrative service fee and the dishonored check

Vehicle Code 4456(a)(2) requires the application and fees for a used vehicle at the DMV within 30 days of sale, 20 for a new one; the dealer pays the penalties for being late and may not charge the buyer for them. 4456.1 adds an administrative service fee for each violation of the report of sale rules, $5 for a copy not displayed or an application filed late, $25 for missing title entries or a returned application not corrected in time, and each is a separate cause for discipline under 11705, though a late application alone is cause only past 50 days for a used sale, 40 for a new one (4456.1(d)). Unpaid on demand, they are a loss to the state that the DMV recovers from your bond (11711(b) and (c)). A bounced check is its own ground: 11705(a)(13) names a check, draft or money order to the department that was dishonored.

Failing to transfer title

Vehicle Code 11705(a)(4) names failing to deliver a properly endorsed certificate of ownership to a transferee lawfully entitled to it. For a dealer, delivery normally means the DMV: 5753(b) says a licensed dealer satisfies the duty by submitting the transfer documents and fees under 4456 and 5906, unless the buyer demands the certificate in writing. Failure to provide good title is also an eligible claim against the Consumer Motor Vehicle Recovery Corporation (12200(c)(5)), and a dealer who does not repay a claim the corporation paid can be refused a license (11703(i)) or lose one (11705(a)(17)).

The unlicensed salesperson and the bird dog

Vehicle Code 11800 makes it unlawful to act as a vehicle salesperson without a license, and 11713(h) makes it unlawful to employ one who lacks the license or whose license is not posted under 11812, or to willfully fail to notify the DMV by mail within 10 days of hiring or ending one. Vehicle Code 675(a) defines the salesperson widely: anyone who sells or negotiates for you for pay, anyone who induces or attempts to induce a purchase and receives or expects anything of value from either side, and anyone with managerial control over sales. Owners are exempt only while selling for the firm they own (675(b)(7)).

The bird dog is the second clause. A person who sends you a buyer for a fee has induced a purchase and expects a thing of value, so they are a salesperson under 675(a)(2), and paying an unlicensed one is 11713(h). The DMV's dealer guide says the ban includes paying a "referral" or "finders" fee to anyone who directs a customer to a dealer (OL 40, rev. 12/2009).

Bait and switch

One ad can break several sections.

  • Vehicle Code 11713(a): an untrue or misleading statement before the public, or any statement made as part of a plan or scheme not to sell at the advertised price or as advertised.
  • 11713(b): advertising a vehicle not actually for sale at your premises; 11713(c): failing to withdraw an ad in writing within 48 hours after the vehicle sells.
  • 11713.1(e): failing to sell at the advertised total price while the vehicle is unsold, unless the ad set a time limit that has passed. 11713.1(i): advertising a price with intent not to supply the demand it will draw, unless the ad says how many are in stock at that price.
  • 11713.1(o): violating any law against bait and switch advertising, including the Federal Trade Commission's guides at 16 CFR 238. 11713.1(w): a simulated check in an ad.

Confidential dealer computer records

Vehicle Code 11713.25 governs your dealer management system's vendor. A computer vendor may not access, modify or extract information from a confidential dealer computer record, any record holding consumer data or your own financial data, without your express written consent and safeguards for it, and may not make that consent a condition of doing business except for narrow purposes such as fraud prevention. You may revoke the consent on 10 days' written notice (11713.25(b)). Subdivision (d) leaves your own duty untouched, and 13 CCR 272.02(b)(5) requires access controls and physical security on any device holding your electronic records.

Administrative action

It begins with an accusation. Vehicle Code 11705(a) lets the DMV suspend or revoke a license after notice and a hearing under the Administrative Procedure Act (Government Code 11500 and following), for any ground on its list, from the acts above to fraud or deceit on any person, violations of the registration, finance contract and smog laws, and breaking a settlement. Every ground to refuse a license is also a ground to take one (11705(b)). Before any hearing, the DMV may suspend the license and plates for up to 30 days when the director finds the public interest requires it, with a hearing and decision within 30 days (11706).

A case may end in a stipulated compromise settlement under 11707: probation, monetary penalties or both, the penalty not over $1,000 for each violation and set from a schedule the DMV adopts by regulation, filed with the Office of Administrative Hearings. Break its terms and it is void; the DMV may refile, and the breach is a new ground under 11705(a)(15). A dealer whose license is revoked may reapply after one year (11703.3), and the DMV may issue the new license on probation, with conditions that do not appear on its face (11718).

Criminal action

The DMV's investigators build the case the district attorney prosecutes. Vehicle Code 1655(a) gives them the powers of peace officers for the laws the department administers, and 1655(b) lets them inspect any vehicle on a used car lot to check its title and registration. Every violation of Division 5 is a misdemeanor (40000.11(a)), carrying a fine of up to $1,000, up to six months in county jail, or both, unless the code sets a different penalty (42002). A conviction for a crime substantially related to the business is itself a ground to refuse or revoke a license (11703(d), 11705(b)).

The Car Buyer's Bill of Rights, AB 68 of 2005 (Chapter 128, operative July 1, 2006), added four sections to the dealer article, and its Legislative Counsel's digest says each created a new crime, since a violation of the dealer article is a misdemeanor. The four were 11713.18, selling a used vehicle as "certified" when its odometer, title, frame or sale terms disqualify it; 11713.19, adding undisclosed charges after the terms are negotiated or padding payments to hide them; 11713.20, failing to give a buyer whose credit score you pulled a separate disclosure of it; and 11713.21, selling a used car under $40,000 without offering the two-day contract cancellation option. One of the four is gone: SB 766 of 2025 (Chapter 354) repealed 11713.21 on October 1, 2026 and put a three-day right to cancel on used vehicles sold for $50,000 or less in Civil Code 1784.43; contracts signed before that day keep the option. The other three stand, each still a misdemeanor.

Civil action

The bond comes first. Vehicle Code 11711(a) gives a right of action against the dealer, the salesperson and the surety, up to the value of the vehicle, to anyone who suffers loss from fraud by the dealer or a salesperson acting for it while holding a written instrument from the dealer whose promises were broken, from a violation of the registration laws in Division 3, or from selling a vehicle to the dealer and not being paid. The state's claims come first, then claimants who are not licensees (11711(b), (d) and (e)). A licensee hurt by your willful violation may sue for damages and attorney fees (11726); a buyer sold a false "certified" car may sue under the Consumers Legal Remedies Act (11713.18(b)). Behind the bond, the Consumer Motor Vehicle Recovery Corporation pays a consumer when a dealer fails to remit fees, clear a trade-in's lien, pay a consignor or deliver good title (12200(c)); dealers fund it with a fee on each sale they may not pass on (12201(c)).

The inspection

An inspection is unannounced (OLIN 2023-08); the DMV's dealer license page lists what it covers: the office, all books and records pertinent to the business, the display area and the signs (read 2026-10-22). 13 CCR 272.00(a) defines the records open to inspection under Vehicle Code 320 as those kept in the regular course of business that directly concern the purchase, sale, rental or lease of a vehicle, kept for at least three years (272.00(b)). 272.02 keeps the original paper at the principal place or the branch for 90 days; after that it may go offsite in California or become an electronic copy, if it can be produced on three business days' notice, cannot be altered, and sits behind access controls. A storage company does not take over the duty (272.02(c)).

What the investigator may ask to see:

  • The report of sale books and every stub and copy, which are DMV property (11714(e)).
  • Each deal file (13 CCR 272.00(a)), and any consignment agreement, whose required text tells the consignor to call a DMV investigator if you break it (11730(b)(8)).
  • The registration card for each dealer plate, in the vehicle that carries it (11715(f)), and any vehicle on the lot (1655(b)).
  • The posted licenses and notices, and the salesperson licenses with their hiring and termination notices (11709(a), 11812, 11713(h)).

Two clocks run longer. Civil Code 2984.5 requires each conditional sale contract, the credit documents relied on and any assignment to be kept seven years or the life of the contract, whichever is longer, with a $5,000 civil penalty for defying a court order to produce them. Since October 1, 2026, Civil Code 1784.44 requires two years of records showing compliance with the CARS Act: pricing, contracts, add-ons, cancellations and complaints.

Sources

  • Vehicle Code 11705, grounds for suspension and revocation; 11713, 11713.1, 11713.18, 11713.19, 11713.20, 11713.21 and 11713.25, unlawful acts; 11714(b) and (e); 675, 11800, 11806 and 11812, salespersons, read 2026-10-22.
  • Vehicle Code 4456 and 4456.1, report of sale deadlines and the administrative service fee; 5753, delivery of title; 11730, consignment, read 2026-10-22.
  • Vehicle Code 11703 and 11703.3, refusal and reapplication; 11706, 11707 and 11718, temporary suspension, compromise settlement and probation; 11711 and 11726, actions on the bond and between licensees; 12200 and 12201, the Consumer Motor Vehicle Recovery Corporation; 1655, investigators; 40000.11 and 42002, misdemeanors and their penalty, read 2026-10-22.
  • 13 CCR 272.00 and 272.02, business records and their location, read 2026-10-22.
  • Civil Code 2984.5, retention of finance documents; 1784.43 and 1784.44, the three-day right to cancel and CARS Act records, read 2026-10-22.
  • AB 68 (Chapter 128, Statutes of 2005), Car Buyer's Bill of Rights, chaptered text and Legislative Counsel's digest; SB 766 (Chapter 354, Statutes of 2025), sections 8 to 10, read 2026-10-22.
  • DMV, Vehicle Dealer License, inspection list, read 2026-10-22; DMV industry memo OLIN 2023-08, OL Industry Compliance (June 30, 2023), read 2026-10-22.
  • DMV, Guide for Licensed Vehicle Dealers and Lessor-Retailers, OL 40 (rev. 12/2009), Use of "Bird Dogs", read 2026-10-22.
  • DMV, Lesson Plan Guidelines for Used Vehicle Dealer Education Programs, OL 2000 (rev. 12/2007), topics 11 and 19.