VOLKS AUTO SCANDAL

Case proposes insurance scheme for vehicle purchase deposits in wake of scams

Mr K.K. Lo (above) suggests that consumers pay the $10,000 certificate of entitlement bidding deposit directly to the Land Transport Authority instead of through dealerships. Volks Auto (above, right) shut its doors more than two weeks ago after coll
Mr K.K. Lo (above) suggests that consumers pay the $10,000 certificate of entitlement bidding deposit directly to the Land Transport Authority instead of through dealerships. Volks Auto (above, right) shut its doors more than two weeks ago after collecting at least $3.6 million from car buyers without delivering the vehicles.ST PHOTOS: DESMOND WEE, AZIZ HUSSIN
Mr K.K. Lo (above) suggests that consumers pay the $10,000 certificate of entitlement bidding deposit directly to the Land Transport Authority instead of through dealerships. Volks Auto (above, right) shut its doors more than two weeks ago after coll
Mr K.K. Lo (above) suggests that consumers pay the $10,000 certificate of entitlement bidding deposit directly to the Land Transport Authority instead of through dealerships. Volks Auto (above, right) shut its doors more than two weeks ago after collecting at least $3.6 million from car buyers without delivering the vehicles.ST PHOTOS: DESMOND WEE, AZIZ HUSSIN

Proposal from Case meets with some reservations

The consumer watchdog has suggested an insurance scheme to protect those who have put down money to buy vehicles, in the wake of a cheating case involving millions of dollars in deposits.

The scheme could work like the one for the spa industry, said the Consumers Association of Singapore (Case), in which customers who buy a package provide details like their identity card number and get a certificate of insurance on the spot. Premiums are paid by the spas, which have CaseTrust accreditation.

Such a scheme is worth adapting for the motor industry, said the Singapore Vehicle Traders Association (SVTA), which has a joint CaseTrust accreditation scheme with Case.

Right now, dealerships in the accreditation scheme furnish an insurance bond of $50,000, which would help settle any customer dispute that might arise. But this sum is not enough to cover all buyers in cheating cases, considering how most of them pay a deposit in the tens of thousands.

SVTA honorary secretary Raymond Tang said it is considering either doubling the bond to $100,000 or adopting the spa industry's model - but changes can be made only after next June, when the current insurance plan is up for renewal.

The CaseTrust-SVTA accreditation scheme has only 28 members, with eight more being renewed. This is a small number out of SVTA's nearly 400 members and of Singapore's total car dealers, estimated by Mr Tang to number 700 to 800.

"Most of the dealers say that whether they have it or not, it's not a very big issue," he said. "If more customers are going to CaseTrust dealers, then there will be more dealers wanting to join us."

Case had suggested the insurance scheme to safeguard car buyers' interest after a case involving dealer Volks Auto. It shut its doors more than two weeks ago after collecting at least $3.6 million from buyers without delivering the cars. It is the first time a motoring business owner has "outright cheated" consumers of such a large sum, said Case executive director Seah Seng Choon.

But car dealers and consumers alike have expressed reservations about the proposed scheme.

Zion Auto Gallery director Lawrence Tan is open to buying an insurance policy for customers' deposits, but asked if this would weed out rogue dealers. CaseTrust accreditation is more valuable as participating firms would have had their finances vetted by Case, he added.

Corporate banker Melvin Lai, 47, thought the scheme feasible but feared that costs would be passed on to consumers.

Mr K.K. Lo, 53, who represents 108 people claiming to have been cheated by Volks Auto, suggested consumers pay the $10,000 certificate of entitlement bidding deposit directly to the Land Transport Authority instead of through dealerships, as is the case now. The IT system integrator said this would prevent rogue dealers from absconding with the money.

Case has suggested that the authorities "look into" pre-payment, especially for big-ticket items like vehicles.

When asked, the Ministry of Trade and Industry said the Government does not regulate the purchase of motor vehicles and the collection of deposits by car dealers. This is similar to practices in places such as Australia, Britain, Canada and Hong Kong, it said.

kxinghui@sph.com.sg