Compensation Fund

The Motor Vehicle Dealers Compensation Fund is the consumer-protection backstop sitting under every retail vehicle trade in Ontario. Section 42 of the Motor Vehicle Dealers Act, 2002 continues the Fund, places it under a board of trustees, and authorises the regulations that set the rules. Sections 61 through 87 of Ontario Regulation 333/08 fill in those rules: who pays in, who can claim, what triggers a claim, the cap on each award, and what a dealer owes the Fund when a claim against them is paid.

The Fund only reaches transactions where the customer is a consumer dealing with a registrant. A dealer-to-dealer wholesale trade is outside it. So is any trade where the customer is related to the dealer, is a spouse of the dealer or one of its officers, is associated with the dealer under subsection 1(2) of the Act, or was complicit in illegal conduct around the trade. Subsection 79(4) lists every disqualifier in flat terms.

What this category covers

This category covers section 42 of the Motor Vehicle Dealers Act, 2002 and Part V (sections 61 through 87) of Ontario Regulation 333/08. That includes the composition of the board of trustees, who pays into the Fund and at what rate, the eleven categories of valid claim, the two-year claim window, the $45,000 ceiling, the appeal route to the Licence Appeal Tribunal, and the dealer’s obligation to reimburse the Fund.

Key rules to remember

Only some dealer classes pay in

Section 75 of Ontario Regulation 333/08 sets the payments. A general dealer or broker pays $300 per registered place of business, and a lease finance dealer pays $300 on registration. The fee is one-time at the point of registration, with an additional $300 owed when a general dealer or broker adds another location. Salespeople pay nothing into the Fund. Wholesalers, outside-Ontario dealers, exporters, and motor-vehicle auctioneers also do not pay, because their classes are not listed in subsection 75(2).

The Fund must stay above $3 million

Subsection 75(4) lets the board declare a shortfall whenever the Fund’s value is, or is anticipated to be, below $3 million. When that happens, the board divides the shortfall by the number of contributing dealers (counting each registered place separately for general dealers and brokers), notifies each dealer in writing, and gives them 60 days to pay. A dealer who misses the 60 days falls under section 76: a 21-day default notice, a 10 per cent penalty on the unpaid amount, and post-judgment interest under the Courts of Justice Act.

Eligibility for a customer claim

Section 79 sets the gate for claims. The customer must have been a consumer within the meaning of the Consumer Protection Act, 2002, the trade must have been with a registered dealer at the time, and the customer must have served a written demand under section 37 of the Act on the dealer that the dealer refused or could not pay. The claim then has to fit one of eleven paragraphs in subsection 79(3): an act or omission that supported a registrar’s proposal to suspend or revoke the dealer’s registration, a trade tied to a conviction, a vehicle seized by police or by another creditor, a deficiency the dealer refused to remedy that was material to the trade, an undelivered vehicle with a deposit not refunded, an unpaid extended warranty or service plan claim, a refund owed after a section 50 rescission, a final court order against the dealer, or a liquidated amount owed by a dealer who has gone bankrupt or into receivership.

Two-year filing window and a $45,000 ceiling

Section 80 gives a customer two years from the date the claim first met the requirements in subsection 79(3) to give written notice of the claim to the registrar. The board may extend that window when it considers extension proper. Section 83 then sets the limits on what the Fund pays. Total compensation per customer claim is capped at $45,000. The Fund will not pay punitive damages, will not pay interest unless a court awarded it, will not pay costs unless a court awarded them and they reflect a real disbursement, and will not pay more than the customer would have been entitled to recover from the dealer.

Appeal route is the Licence Appeal Tribunal

If the board denies a claim or any part of it, section 85 requires written reasons served on the customer. The customer has 15 days from service to request a hearing before the Licence Appeal Tribunal. If they do nothing, the board’s decision becomes final. After a hearing, the Tribunal can allow the claim in whole or part and direct the trustee to pay, or refuse it.

Dealers must reimburse the Fund

Section 87 makes a dealer liable to repay the Fund when the claim arose from a trade tied to a conviction, when the claim was paid on a final court order against the dealer, when the dealer is insolvent, or when the dealer has been put into bankruptcy or receivership. Section 42(9) of the Act lets the registrar refuse to renew the registration of a dealer who is in default of payments to the Fund or has failed to reimburse the Fund as required.

Common mistakes

• Telling customers the Fund covers private-sale or curbsider trades. It does not. Subsection 79(1) requires the trade to have been with a registered dealer.
• Telling customers the Fund acts as insurance for the dealer. It does not. Section 87 makes the dealer reimburse the Fund for amounts paid out, and section 42(9) lets the registrar refuse to renew the registration of any dealer in default.
• Missing the contract notice. Both the retail sale contract and the lease contract must include the prescribed Fund-eligibility statement. Leaving it off is a regulation breach and a Code of Ethics issue.
• Treating the $45,000 cap as a per-vehicle payout. It is total compensation per claim, exclusive only of court-awarded interest and costs.
• Forgetting that the claim window runs from the date the claim first met the subsection 79(3) requirements, not from the date of the trade.
• Assuming a customer can collect from the Fund without first demanding payment from the dealer. Clause 79(1)(e) requires a section 37 written demand and a refusal or inability to pay.
• Confusing service plans with extended warranties when sizing letter-of-credit security. Service plans are not insured or backed by a letter of credit; the Fund itself stands behind them under paragraph 8 of subsection 79(3).

How OMVIC enforces this

OMVIC administers the Fund through the board of trustees and the appointed Trustee under section 70. Routine compliance work focuses on three things: confirming the registration-time payment under section 75 has been made for every place of business, confirming the prescribed Fund-eligibility statement appears on every retail sale and lease contract, and pursuing reimbursement under section 87 when the Fund has paid a customer claim. The board publishes claim outcomes electronically at least four times a year under section 86, including the dealer’s registered name on allowed claims. A dealer in default under section 42(9) of the Act can have a renewal refused and can be carried to the Licence Appeal Tribunal on a registrar’s proposal under section 9.

Where to learn more

Section 42 of the Motor Vehicle Dealers Act, 2002 is on this site, alongside Part V of Ontario Regulation 333/08 where sections 61 through 87 govern the board, the levy, the eleven claim categories, the $45,000 cap, and the reimbursement rules. The DealerPrep iPhone app carries scenario questions on the two-year filing window, the 60-day shortfall payment, and the section 87 reimbursement triggers.