MD DOC Fee Seminar Spells Out New Law Dealers Get Ready for Increase in Fees, New Requirements July 1
A full house for the Maryland DOC fee seminar.
Following a strong grassroots effort and an aggressive lobbying campaign by MNCTDA and WANADA, Maryland dealers celebrated last month when Governor Robert Ehrlich ended a ten year effort to increase dealer processing charges by signing a new law raising the maximum fee from $25 to $100. Also accepted was a dealer amendment making the change in the law effective July 1, 2003, instead of October 1, 2003, so dealers can begin collecting higher fees sooner.
But with that new law comes requirements and responsibilities. To address those issues, MNCTDA held a seminar last week that spelled out the new requirements for buyerês orders, advertising, freight charge, disclosures and a written explanation for the charge.
Nearly 100 dealers and managers attending this important meeting heard from MNCTDA President Peter Kitzmiller, Mike Johansen of Rifkin, Livingston, Levitan & Silver, government relations counsel to MNCTDA and WANADA, and Mike Charapp of the firm Charapp, Deese & Weiss.
Dealer processing charge
The dealer processing charge includes the following primary elements:
If a dealer charges a dealer processing charge, the charge shall be justifiable and may not exceed $100. (Effective July 1, 2003)
The charge should reflect the dealerês expenses generally incurred for the services identified in a written disclosure statement.
A written disclosure of the services included in the dealer processing charge should be available on request by the purchaser.
A price statement must be attached to the window of the vehicle for sale, next to any other price disclosure required by law. The dealer processing charge sticker must be printed in at least 10 point type, and must include the statement Not Required by Law.
The Total Purchase Price means the price of a vehicle agreed on by the buyer and the seller, including any dealer processing charge. The dealer processing charge, which shall be disclosed above the total purchase price in at least 10-point type as Dealer processing charge (Not Required by Law…………$ .00.
The total price may exclude only the taxes and title fees payable to the State.
The dealer processing charge will be a taxable item. (Effective July 1, 2003)
The dealer processing charge does not have to be included in the advertised price of the vehicle, but the ad must clearly and conspicuously disclose the amount of the dealer processing charge and the actual freight charge in at least 10-point bold font within reasonable proximity to the advertised price of the vehicle.
To avoid noncompliance and the threat of lawsuits, the seminar speakers emphasized three areas of DOC fee disclosure: new buyerês orders, advertising and window stickers. Inspections by Maryland officials are expected, so these areas should be done now so dealers are in compliance by July 1.
The fees must be substantiated by actual services rendered by the dealership, but not those compensated for by other sources, and must use the phrase Not Required by Law. Training sales staff on exactly what processing fees cover is critical. It was suggested salespeople say: This is a fee we are allowed to charge by law for services in selling the car. For more a detailed explanation, customers who request it should be given a brochure or hand out explaining the fees. But dealers do not and should not assign dollar amounts to services, which are for the dealershipês records only.
Although the fees are negotiable, dealers should not charge a higher fee because they know a percentage of customers will not pay the fee, and they should not charge different fees to different groups of buyers, i.e., credit versus cash customers.
To avoid antitrust danger, the speakers also stressed the importance of keeping processing fee determinations in-house by not discussing it with any competitors. Dealers were also reminded that there are literally hundreds of active class-action lawsuits throughout the country for millions of dollars against auto dealers and other businesses for fraudulent or excessive processing fees. In some well-publicized cases, dealerships have been convicted of criminal acts and suffered heavy fines.
So, as Mike Charapp pointed out, The consequences of not following the statute are serious.
MNCTDA and WANADA are preparing a more comprehensive guide for dealers by July 1. For further information on the dealer processing charge law, contact WANADA or MNCTDA at (202) 237-7200 and (301) 261-1717 respectively.
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