(a) The rules and regulations promulgated by the department shall make suitable provisions for the use by an applicant of the duplicate copy of his or her application for a certificate of title to serve as a permit for the operation of the motor vehicle described in the application until the department either issues the certificate of title of such motor vehicle or refuses to issue the certificate; and every designated agent receiving an application for the certificate of title, when the provisions of this chapter have been otherwise complied with, shall deliver to the applicant the duplicate copy of his or her application which shall contain a suitable permit for the purposes mentioned in this subsection. After the certificate of title is issued, the owner's permit copy of the application for this certificate of title shall continue to serve as evidence of ownership and as a permit for the operation of the vehicle.

(b) In the event the department refuses to issue the certificate of title, the applicant shall, immediately upon receiving written notice from the department that such certificate will not be issued for the reason or reasons stated in the notice, deliver or mail to the department by registered or certified mail the duplicate copy of his or her application containing the permit mentioned in subsection (a) of this section and the current license tag which was issued for the vehicle; and the motor vehicle described in the application shall not be operated on the highways or other public places of this state after the applicant receives notice that the certificate will not be issued unless its operation is subsequently authorized by the department either by the issuance of a new permit or certificate of title. If for any reason the duplicate copy of the application for certificate of title and the current license tag which were issued for the vehicle in question are not received by the department within 10 calendar days after the department mails written notice to the applicant that it will not issue the certificate of title applied for, the department, or, at the request of the department, any state highway patrolman, sheriff or other peace officer of this state is authorized and empowered to and shall require and compel the surrender of the duplicate copy of the application for certificate of title and the current license tag; and the department, after it obtains possession of the duplicate copy of application for certificate of title and the current license tag, is authorized to retain same until it is satisfied that the applicant is entitled to receive a certificate of title to the vehicle in question.