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S.C. Supreme Court Upholds Jury Court’s $3.6 Million Doc Fee Ruling

November 12, 2015

COLUMBIA, S.C. — On Nov. 4, the South Carolina Supreme Court upheld a jury court’s nearly $3.6 million ruling that a dealer’s document fee was in violation of a state consumer-protection law despite it being certified by the South Carolina Department of Consumer Affairs.

The main question before the state Supreme Court was whether the trial judge was correct in his pretrial interpretation of the closing fee dealers can charge. There was also the question of whether the plaintiff’s suit, which was filed as a group claim nine years ago, could be brought under a state consumer-protection law instead of a “Closing Fee Statute” the state legislature enacted in 2000 — neither of which provide specific guidance on the amount of the fee, what can be included, and how the fee could be set.

The statute, which is administered by the state’s Department of Consumer Affairs and falls under the South Carolina Consumer Protection Code (SCCPC), requires that dealers pay the department a $10 one-time registration fee each state fiscal year, include the closing fee in the advertised price of the motor vehicle, disclose the fee on the sale contract and display it in a conspicuous location in the dealership — requirements with which the dealership, Hendrick Honda of Easley (S.C.), complied.

But because the statute doesn’t offer guidance on what dealers can charge, the trial judge applied a ruling in another similar case and interpreted “closing fee” to mean a “predetermined set fee for the reimbursement of closing costs, but only those actually incurred by the dealer and necessary to the closing transaction.”

Under that interpretation, Hendricks had to provide evidence it calculated the cost comprising its closing fee, which it could not do. Because of that, the jury court — acting on the judge’s closing fee interpretation — ruled that the dealership violated the South Carolina Regulation of Manufacturers, Distributors and Dealers Act, which prohibits dealers from engaging in any action "which is arbitrary, in bad faith, or unconscionable …” It also provides consumer redress, whereas the Closing Fee Statute does not.

The ruling was upheld by a South Carolina circuit court judge early last year before the case went before the South Carolina Supreme Court, which supported those rulings by a 3-2 decision. In the court’s majority opinion, Justice Donald Beatty wrote that because Hendrick posted a notice that it charged a closing fee “as a means of reimbursing it for certain overhead costs, Hendrick clearly communicated that that the closing fee was intended to be repayment for that which was expended.”

“Notwithstanding this notice, Hendrick failed to offer any evidence that the calculated costs that comprised the closing fee,” Justice Beatty added. “When questions to how Hendrick arrived at the closing fee, Don Pendleton, the general manager, testified that he ‘didn’t sit there and do the math,’ and he was not sure about the actual costs of retrieving and preparing documents for closing, and he did not know ‘the exact charge.’

Pendleton also didn’t know how the dealership arrived at its original $199 document fee and how subsequent increases were determined

Dissenting in a separate opinion were Associate Justice John Kittredge and Acting Justice James Moore. “Not only were Hendrick Honda’s actions not prohibited by statute, they were specifically approved,” Justice Kittredge wrote. “Under the Court’s ruling today, Hendrick Honda is being punished for doing exactly what South Carolina permitted it to do.”

The trial court awarded the plaintiff, Julie Freeman, and more than 5,000 customers who paid the dealership’s closing fee — which, according to court documents, ranged between $249 and $399 — between August 2002 and August 2006 more than $1.4 million. That amount was doubled to $2.8 million by Circuit Court Judge Doyet Early last year, bringing the amount the dealership’s former customers will receive to around $526. The plaintiffs will also receive more than $750,000 in legal fees and costs.

The Supreme Court’s decision comes nine years after Freeman purchased a pre-owned vehicle from Hendrick Honda, one of 94 dealerships operated by Charlotte, N.C.-based Hendrick Automotive Group. After discussing the dealership’s $299 fee with an attorney friend, Freeman, who testified that she was “very happy at the time [she] bought the car,” filed her lawsuit on Aug. 29, 2006, seeking damages under the Dealers Act.

Hendrick Honda argued that Freeman could not pursue action under the Dealers Act because the exclusive remedy for her alleged closing-fee violation fell under the SCCPC. It also argued that Freeman waived her claim by voluntarily paying the closing fee.

The trial court disagreed, ruling that the Closing Fee Statute established procedural requirements a dealer must satisfy before charging a closing fee, “whereas the Dealers Act sets forth the remedy for an alleged closing fee violation.

“Although we agree with Hendrick that the Closing Fee Statute is a disclosure state and the department serves as a repository for the required filings, we find that the Closing Fee Statute does more than require disclosure of the 'Closing Fee,'” Justice Beatty wrote.

As for the dealership’s contention that Freeman freely paid the fee, Justice Beatty wrote that Freeman did not allege an unfair practice regarding the financing of her vehicle, which the SCCPC was designed to protect consumers against. “Rather, she claimed she was unfairly charged a closing fee that bore no relation to the actual expenses incurred by Hendrick,” he wrote.

Hendrick’s expert witness, Michael Thompson, testified that the dealership’s average closing costs, which were $506.96 in 2006, greatly exceeded the $299 fee Freeman paid. But he also admitted that he did not see anything to suggest Hendrick conducted any type of analysis before setting its fee.

“Moreover, in calculating the average closing cost, Thompson included expenses for the salaries of finance and sales managers, the building, utilities and outside services,” Justice Beatty wrote. “All of these are general operating expenses and not directly tied to the closing of motor vehicle sales. If a motor vehicle dealer wishes to be compensated for these expenses, it may include them as part of the overall purchase price of a vehicle.

“However, by specifically delineating a closing fee from the purchase price of the vehicle, the dealer must account for the costs that comprise the fee,” he added. “Without such an accounting, a dealer is charging a consumer an additional amount that is not directly related to the expense incurred in closing the sales of a motor vehicle … We find that such practice effectively circumvents the purpose of the ‘Closing Fee’ statute and the Dealers Act, which is, in part, to protect consumers from charges that are above the advertised price listed by the dealer.”

Justice Kittredge disagreed, noting that dealers are given little guidance in determining what costs may or may not be included in a closing fee. “The lack of guidance is at odds with the ideal legal frameworks, which are designed to provide reasonably discernable and objective criteria,” he wrote. “In my view, the absence of known objective criteria renders it difficult to characterize a dealer’s closing fee as arbitrary.”

Kittredge acknowledged that the lack of guidance doesn’t mean dealers can charge a “disguised profit,” but noted the legislature entrusted the state’s Department of Consumer Affairs with the role of protecting consumers by approving dealers’ closing-fee requests.

Danny Collins, general counsel and then-deputy of regulatory enforcement for the Department of Consumer Affairs, testified that the department generally accepts all registration forms submitted by dealers, but does not establish the closing fee charged by the dealer.

“Notably, Collins stated that ‘it’s pretty much just a registration,’” Justice Beatty pointed out.

Justice Kittredge noted in his opinion, however, that Collins did testify to the department’s rejection of an excessive closing fee and indicated that the department closely scrutinized others. “Contrary to the majority’s suggestion, the department does not merely rubber-stamp those requests,” he wrote.

“I reject as meritless the trial court’s determination that the legislature intended the predetermined closing fee to equal the dealer’s precise cost in unknown, future transactions,” Kittredge added. “Even assuming Freeman may pursue a claim under the Dealers Act, a new trial would nevertheless be warranted due to the trial court’s erroneous construction of the Closing Fee Statute.”


  1. 1. Sheldon Wolff [ November 13, 2015 @ 06:47AM ]

    Hurray for the court system. For years this hidden profit clandestine documtary fee just adds to the gross profit of the sale. What other industry charges the consumer a fee to get their bill of sale? Does a restaurant charge extra to present you a check for food, a real estate transaction for a purchase and sale, a hotel for a nights stay? Seriously the automotive industry has gotten away for years charging for a business side cost of doing business of typing up a few documents which are computer generated anyway. This properly adjudicated case just brings out and perpetuates the clandestine dealings of retail automotive sales. When will this industry who has so hard to make it an honorable and necessary profession that provides a service, and has tried to separate and eliminate greedy dealers from themselves. It's time for the "big guys" who have the wherewithal to start to change the industry and start advertising " NO DOC FEES!" Will this hurt your bottom line, perhaps, but the goodwill value will defiantly go up!

  2. 2. Bubba B [ November 13, 2015 @ 08:31AM ]

    California has capped the doc fees at $55 for years and recently let them go up to $80 when filed with the DMV electronically (which is required anyway). In Arizona we charge $399, which I'll acknowledge seems excessive. There are definitely forms that have to get filed with the state after a vehicle sale, but those are usually done by clerical level workers and does not take more than a few minutes. There's also the process of obtaining the title if there is a trade and paying off liens on trades, but the dealer should be able to make that up by lowballing the customer on their trade. Seems to be "business as usual" on doc fees, unfortunately Hendrick got nailed. Sheldon - ever heard of resort fees? That was a seriously bad analogy.

  3. 3. Mike [ November 13, 2015 @ 08:47AM ]

    Low or no doc fee will = higher price to the consumer. Either way the 20 million dollar facilities needs to operate and pay the 250 employees. Profit is not a dirty word.

  4. 4. Mo N [ November 13, 2015 @ 08:52AM ]

    We are a small dealer that only charges what the DMV fee is, no extra. The problem is alot of these big dealers low ball a price for a vehicle and make it up with the fee. The mark up on most new cars is so low the average consumer wouldn't believe it.

  5. 5. David [ November 13, 2015 @ 09:31AM ]

    Does this ruling apply to all cable companies, cell companies, water department, electric companies, healthcare companies etc. ?

    Sure hope it does!

  6. 6. Ron Yager [ November 13, 2015 @ 10:23AM ]

    California sets the DOC FEE at $80 and the dealer MUST charge this on every transaction. When it was first mandated in 1980, the dealer was given a choice to charge it or not. If they elected to charge it and a year later they let someone buy a car without it, then they were to refund all Doc Fees they had ever collected. $80 is not excessive for anyone and it does help defray the state mandated paperwork costs. It seems to me that charging $399 for a Doc Fee is very excessive, and to have Hendricks charge that much is insane, after all they have a number of dealerships in California.

  7. 7. Sheldon Wolff [ November 14, 2015 @ 07:58AM ]

    Bubba, the resort fee is just another end run around the daily supply and demand room charge. Many facilities will remove this if you ask, and don't use the pool, golf course, etc. it's an accounting system to properly access profitability. The hospitality industry has also come into limelight for blocking wifi making you use their system which was also stopped. Do you pay a doc fee when you buy or sell on the block? We're not talking about the buy sell fee, or the run fee. The dealers would be up in arms if they were being screwed on a wholesale level. Any state that allows these erroneous fees have been scammed by a lobbyist. Typing ones name on a bill of sale is just a cost of doing business and necessary to get the tail lights over the curb. Consumerism is very dynamic and changing dramatically, interesting enough on my way to the recent SEMA show, I bought my airline ticket, checked in, got a rental car, selected my hotel room and more ironically almost the entire trip was self selected. And in case you're wondering no resort fee. I'm sure there is some sort of software that will allow the consumer to self document it. Times are changing and consumers are getting more financially aware.

  8. 8. Craig [ November 14, 2015 @ 09:09AM ]

    Sheldon Wolff disclosing to a consumer where your money is going is not a bad thing. If a dealer for instance needs to make $2500 per unit to keep the doors open with a $500 Doc fee, would it matter if they didn't put the $500 on the bill of sale and charged you $300? IT was a stupid lawsuit that only opened the doors up to the consumer paying more hidden costs in buying a car. I hope the attorney's that pushed the lawsuit don't handle closings on mortgages. This has a spiral affect that can affect attorney's next. How many trillions of dollars are home buyers charged each year for closing costs? Do you really think that the attorney did a closing cost analysis before charging it? Does Judge Thompson really think that salaries don't calculate into closing costs on automobile purchases? I am a sales manager at a dealership. I pay the closing costs on every car I buy and I work for the dealer. Every time I get a litigation mailer from an attorney I throw it in the trash. i am smart enough to know the more costs any company pays an attorney to defend the company, the more I will pay in the long run as a consumer.
    In talking with an owner this morning he indicated 100's if not 1000's of dealer's could be put out of business with this ruling. How much will we pay as consumers with fewer dealers in the state? Just some thoughts....

  9. 9. Randy Henrick [ November 14, 2015 @ 01:59PM ]

    Shekdon, you have obviously never taken out a mortgage or financed an appliance or overdrawn your checking account. Typical consumer pounding on auto dealers and not others who hide fees, charge higher fees, and recover their overhead through overpriced items like title insurance. Do you know anyone who has ever made a successful title insurance claim? Dealers pay lawyers to look over their documents and have to pay DMS (Dealer Management System) fees to prepare them. Title and registration fees are not always passed on either. And they have to pay the salaries and benefits of the people who prepare the documents, remit the sales taxes, give customers risk-based pricing notices and Truth in Lending statements, etc. You all treat auto dealers differently than other merchants and financial service providers. You want to buy at wholesale. Both the vehicle and the financing. Sorry but the world doesn't work like that. Go to Wal-Mart and try to buy a raincoat at their wholesale price. Get the mortgage company (who charge fees beyond belief) to give you a mortgage at their cost of funds. Not to mention the resort fees which I have never been able to get refunded even when I never used the resort. So don't lay it on dealers without doing some more homework and some more thinking. In this case, the Slate of South Carolina effectively approved the doc fee. End of story but not in the CFPB crazy world in which we live.

  10. 10. Sheldon Wolff [ November 21, 2015 @ 08:31AM ]

    Craig and Rendy ,thank you for you input, however preparing a sales document is nessecary to sell the vehicle and get it out of inventory and off floor plan and get paid. Most of any required documents are already computer software generated and boiler plate forms. These forms are also provided by your local banks and lending institutions. Oh don't forget about the deal and kick back and profit sharing from these banks and sales commissions for other add ons as the " business manager " also adds to the profit center. Don't cry to me and say oh we need $500 bucks to sell you the car or truck other wise we'll go out of business.Evey department inside the umbrella of the dealership is responsible for making a profit, sales, new and used separate , service, parts, finance, and each department has normal business expenses as a subset of the total. Craig I'm sure you're getting a bonus for your profit. If your not getting enough up front then that's your issue. What about the so called "pack" the profit that a sales person does not get commission on? We're not talking about some rinky dinky slick clandestine dealership here, we're talking about supposedly community minded upstanding legitimate business here who knowingly gouged his clientele. If you want to sell your vehicles at list price and a consumer will pay, fine that's free enterprise but we're talking about after the sale gouging the consumer that was evidently allowed by law. Quite frankly it seems this self serving statute was put into legislation by a strong lobbying effort. Making a profit is fine but to take advantage of unsuspecting consumers is wrong, morally and as the court finds it legally as well. Randy your tirade has no basis. Every penny paid by a consumer is documented on a HUD statement, as far as the title insurance claim that has to protect any discrepancies in the title for the bank, and often the consumer. Your analogy is erroneous as

  11. 11. Sheldon Wolff [ November 21, 2015 @ 09:18AM ]

    Randy, your analogy is erroneous, real estate transactions are federally regulated and state regulated and are reviewed. We're also talking about title issues, cars what you see is what you get, you can check if it's salvage or not by auto check registry info and car fax. Property may have liens encroachments, attachments and more. Consumers are not paying hundreds of thousand of dollars and keeping the car for 20-30 years. If you want to make extra profit then sell them a value, undercoating, alarm system, simonize wax protection, stripes, don't take advantage for no value. This dealership has once again stigmatized and added the clandestine workings of the used car horse trader. This is an affront to every professional HONEST sales person in the industry. Make a profit make as much as you can, that's fine, it's supply and demand, it's capitalism, but what this dealership did knowingly is so egregious that it fuels the antagonistic views of the respectability of the auto industry. It also validates the necessity of over zealous consumer watchdog groups. This rampant disregard for their consumers has hurt the profession and just validated the dealerships arrogance and greed. At the up coming NADA conference it would be nice to have an educational seminar on why should todays modern legitimate dealers new and used, start treating their customers and clothes with respect and provide additional value added products and services, rather than using them as targets for easy pickings!

  12. 12. Bubba B [ November 23, 2015 @ 08:55AM ]

    Sheldon - doc fees - like anything else on a car deal, e.g. the interest rate, vehicle price, add-ons, they are negotiable. The doc fees are clearly disclosed on the contract and the customer can object to them prior to signing. The customer can walk away and buy their vehicle elsewhere. Or, if the dealership does not want to lose the deal, they can waive the doc fees (except when bound by local and state laws). Therefore, no one is being taken advantage of and no one is unsuspecting. The fees are right on the contract and the customer is agreeing to them when they sign.

  13. 13. Sheldon Wolff [ November 23, 2015 @ 10:39AM ]

    Bubba, Thanks for your reply, And you're correct in your statement, However I'm assuming here the DOC is preprinted on the contract as if it is mandatory fee. We in the auto industry knows anything is negotiable, however, I'm sure there's no sign on the wall disclosing the DOC fee may be optional! Just because it's there doesn't mean it's morally or legally correct. This whole issue is from overcharging their consumers and they're not the only one. New car stores, MUST set an example so it will trickle down and set an accepted practice of fair dealings with the consumer. Doc Fees are nothing but an extra blind profit center for the house. Ironically look around on the net with so many companies offering Free shipping! to type up or enter some information does NOT cost $500! are they paying the cleric a huge salary or by the hour? The paperwork is still a business expense not the consumers. Seriously , how long does it take to print out a few forms? 15 minutes? Less? 5 minutes more to make several thousand dollars in legitimate profit........ If the only profit made is the DOC fee then don't sell the vehicle or run it thru the block! This dealership and others just continue to disrespect the changing honorable profession of Vehicle sales.

  14. 14. Jerry [ December 05, 2015 @ 10:29AM ]

    We are in a state where it is on every deal or on no deals. When our state changes the time that we have to keep files in storage or the hoops we have to jump through they adjust what they have determined to be a true cost. It can be no more the $250.00. We would love to collect the money for the car and sign the title over to the customer and let the customer worry about all the expense and hassle with transferring the title, paying the tax, notifying the state that they bought as well as the manufacturer. I promise we would save a lot more than $250.00 per car. We have 2 employees that do all of that work. Not to mention 2 different storage units that get emptied sorted and shredded every year. Most industries in this state charge for those types of fees and expenses including several thousand dollars in closing cost for most mortgage companies on home loans. It may be different in some states but we have a state set amount and it is based on true expenses.

  15. 15. Sheldon Wolff [ December 08, 2015 @ 03:46PM ]

    Jerry, what state are you in? Also mortgage companies do not charge thousand of dollars in closing costs. Check your federally mandated HUD statement. if they charge you points then that's part of their commission. It's obvious in this discussion that this real estate transaction document is clearly misunderstood. prepaids, insurance, transfer taxes, credit reports, escrows, and alike are not car dealer dock fees. Mortgage companies make money from their applicants and sell the paper before its even signed in most cases. You're far better off going to a credit union or a ban that portfolios a loan.

  16. 16. jr [ February 29, 2016 @ 03:37PM ]

    toyota dealers in sw fl charge 699 and the answer everyone does and 3 dealers i checked were exactly the same.collusion also a illegal process. they lost the sale and i lucked in on a friend that was trading a good car in .


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