Texas Dealer Ethics and Dealer License Suspensions

Texas Dealer Ethics and Integrity

It is imperative that you operate your new business with complete integrity and the highest ethical standards at all times. You must follow every State and Federal guideline on every transaction, PERIOD!

If you don’t operate strictly under all State and Federal regulations, your Texas dealer’s license could result in suspension or revocation. Once you have had a dealer’s license revoked, it is time consuming and may be costly (legal fees for legal representation, if applicable) in order to obtain another dealer license.

Being completely honest with every one of your customers is a win-win situation. You will build your reputation your first few weeks in business and you must build an ethical reputation. A good, positive selling experience with a customer will lead to more sales to the customer’s friends, their co- workers, and their family. A bad, negative selling experience will result in customers leaving negative reviews of your dealership all over the internet. It is very easy for your customer to leave negative reviews and comments on Google, Facebook, Twitter, and more. When future customers see these reviews, they will not purchase vehicles from you.


To maintain your honest reputation, you must offer full disclosure on all vehicles before the sale. Always disclose every minor mechanical malfunction that you are aware of before the test drive. By disclosing everything you know about a vehicle before the test drive you will build an incredible reputation in your area.

Unethical dealers can never discard a dishonest reputation.

By operating your dealership with complete honesty and the highest ethical standards at all times, you will gain an honest reputation that will lead you to many more sales than that of a dishonest dealer.

Being completely honest with your customers is a win-win situation. You will have the best reputation in your area, you will have the highest profits, and you will be in business for many, many years.


Reasons for Suspension or Revocation of a Used Motor Vehicle Dealer’s License

When you are granted a dealer’s license the state of Texas is giving you an opportunity to enter a business field that can be quite lucrative, however, you MUST follow several sets of rules and guidelines.

All Texas motor vehicle dealers must follow the laws we discuss in this course and the TXDMV has zero tolerance for any dealer that does not follow the rules. Any dealer that does not comply, or follow, the rules can have their dealer’s license suspended, revoked and pay extensive fines.

Reasons for License Suspension or Revocation of a Texas Motor Vehicle Dealer’s License: if you are following along in your training manual you can read these with me.

• Falsifying or forging documents.
• Filing a false or forged document.
• Keeping Open Titles.
• Not assigning titles.
• Misuse of plates or tags.
• Making Material Misrepresentations on Applications.
• Failing to maintain qualifications for GDN.
• The department shall cancel a dealer’s GDN if the dealer obtains the number by submitting false or misleading information
• Refusal to provide evidence of being in business.
• Not Remaining Regularly and Actively Engaged in the Business.
• Failing to Report or Pay Taxes.
• Misuse of license.
• Off-site Sales, Curbstoning.
• Failure to apply for title within 30 working days of the date of sale. or 45 days if offering financing, or 60 days if sold to a military purchaser.
• Giving the title work to the customer.
• Incomplete or No Records.
• Not responding to request for records.
• Forgery or Fraud.
• Spot Deliveries.
• Dehorsing.
• Parking on the Right-of-Way.
• Failing to Settle Civil Penalties.
• Odometer Tampering.
• Does not maintain established place of business
• Uses false or deceptive advertising
• Failed to notify TxDMV MVD of license entity changes within 10 days
• Fails to maintain $50,000 dealer surety bond for entire licensure period

Failure To File Annual Vehicle Inventory Tax
Failure To File Monthly Tax
Failure To Sell 5 Vehicles Per Year
Premises Violations, Including Bond Violations
Filing False Tax Statements When Transferring Title (Example: Dealers Sells A Vehicle To A Consumer For $4,000 But When Doing The Title Transfer Says That He Sold The Vehicle For $2,000 that is a big, big no no

Reasons for Denial of a Texas Motor Vehicle Dealers License Application

• False statement of material facts in application
• Criminal History Specified in Texas Administrative Code §211.3
• Criminal History Specified in Texas Occupations Code §53.021
• Has no established place of business
• Does not have working telephone
• Does not have display lot/area
• Display Lot is Not Physically Separated from All Other Businesses’ Parking
• Business is not physically separate from another business


TxDMV Dealer Motor Vehicle Dealer Fine Matrix

The TxDMV has what is known as the Motor Vehicle Dealer Fine Matrix. The fines for certain violations of State law are set in the Matrix and written into the Texas Occupational Code and the Texas Administrative Code.

Here you see the TxDMV Motor Vehicle Dealer Fine Matrix
As you can see if you willfully defraud a customer the fine starts at $1000 and can lead to revocation of the license
Falsification or forgery of tax documents starts at a 1000 fine and can lead to revocation, and the federal fines for this could be much more, so be advised we are looking at the State sanctions here, which would be in addition to any Federal penalties
Lets look at some more here, misrepresenting mileage starts at 2000 dollars and leads to revocation, federal penalties could also include prison time for odometer crimes
False VIT statements start at 1000 dollars and can lead to revocation

Lets look at some more violations here, allowing someone to used your GDN, allowing someone to use your dealer license carries fines of 500 to 4000, you can never let unlicensed persons act as a dealer with your dealer license
Take a look at this one towards the bottom, acting as a manufacturer or distributor will lead to fines that START at 5000 and can lead to charges being filed by the Attorney General, these are some serious violations

Take a look at a couple more here, violation of the Blue law can lead to fines up to 2000, selling or leasing a vehicle that does not meet emissions can lead to fines of up to 4000 dollars, overcharging documentary fees can lead to fines of up to 2000, we will show you how to comply with documentary fee laws later in the course so you will never over charge

If you follow every rule, law, and guideline required for your business you will never pay any fines and you will always keep your license. Remember 100 percent compliance equals100 percent profits,

TxDMV Enforcement Division

Texas laws are enforced by the Texas Department of Motor Vehicles Enforcement Division and they receive about 12,000 complaints a year, they investigate lemon law violations and also respond to dealer complaints. The Enforcement Division receives approximately 12,000 complaints per year. Enforcement investigators make contact with licensees and complainants to collect information based on complaints received. Investigators also assist law enforcement by training officers and other agents on rules and regulations that apply to licensees.

The Enforcement Division is made of five sections under the direction of a single director who reports to the TxDMV Executive Director.

The five sections are:
Administrative, Legal, Lemon Law, Motor Vehicle Investigations, and Motor Carrier Investigations.
The Legal section employs attorneys that review investigations and, if needed, prosecute violations.
Administrations supports the other sections with the functions of Human Resources, Purchasing, and Accounting
The Lemon Law section administers the Texas Lemon Law and Warranty compliance programs that mainly affect franchised dealers that sell new motor vehicles.
Motor Vehicle Investigations, and Motor Carrier Investigations are carried out as well.

Dealer Complaints

The TxDMV makes it very easy to log a complaint against any Texas motor vehicle dealer, they have several phone numbers, email address, and the online dealer complaint form they can complete at the following website:

As you can see it is very easy for customers to log a complaint against your dealership using this online form

Texas state laws are called statutes and if you ever want to read a statute, which is Texas law, you can go to google, or whatever search engine you use, and type in Texas Statute, then click on Texas Statutes

Then you can scroll down and click on the category you are interested in to read how the law applies to that category

We are here to help you obtain and renew your Texas Dealers License!

Texas Dealer License

Delus Johnson-Lead Instructor
Automobile Dealer Training Association