Amendment to Consumers Legal Remedies Act Imposes New Rules on Junk Fees
Last year, the California legislature passed SB-478 designed to target so-called “Junk Fees.” Upon signature by the Governor, SB-478 led to the amendment of the Consumers Legal Remedies Act (“CLRA”) and several other related statutes. That amendment will become effective on July 1, 2024.
The CLRA has long been used as a basis for consumers to bring suit against auto dealers and auto finance companies. SB-478 amended the CLRA to add Cal. Civ. Code § 1770(a)(29), which in pertinent part makes unlawful to engage in:
Advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:
(i) Taxes or fees imposed by a government on the transaction.
(ii) Postage or carriage charges that will be reasonable and actually incurred to ship the physical good to the consumer.
To specifically carve out an anticipated issue for dealers, the California legislature also amended Cal. Veh. Code § 11713.28 to note that “[a] motor vehicle manufacturer, or any other person, that advertises a motor vehicle manufacturer’s suggested retail price (MSRP) set by an automobile manufacturer, or lease payments based upon an MSRP, does not, by doing so, violate paragraph (29) of subdivision (a) of Section 1770 of the Civil Code.”
Prior to the amendment of Section 1770, it was already actionable wrongful conduct to fail to sell a vehicle at the advertised price or to include charges not properly disclosed. (Cal. Veh. Code § 11713.1.) Section 11713.1(c)(2) provides a model statement to be included in advertisements to properly disclose the presence of additional, usually required, fees to the purchase: “Plus government fees and taxes, any finance charges, any dealer document processing charge, any electronic filing charge, and any emission testing charge.”
The Automobile Sales Finance Act also has a number of specified disclosures which must be made for a financed vehicle purchase. Specifically, Cal. Civ. Code § 2982(a)(1)(A) requires the disclosure of:
The cash price, exclusive of document processing charges, charges to electronically register or transfer the vehicle, taxes imposed on the sale, pollution control certification fees, prior credit or lease balance on property being traded in, the amount charged for a service contract, the amount charged for a theft deterrent system, the amount charged for a surface protection product, the amount charged for an optional debt cancellation agreement or guaranteed asset protection waiver, and the amount charged for a contract cancellation option agreement.
Section 2982 goes on to require the disclosure of charges for:
- A theft deterrent device (2982(a)(1)(D));
- A surface protection product (2982(a)(1)(E));
- A service contract (2982(a)(1)(I)); and
- Optional debt cancellation agreement or guaranteed asset protection waiver (2982(a)(1)(K)).
While California law likely already had in place various statutes designed to prohibit undisclosed and/or unauthorized charges in a vehicle purchase, the amendment of Section 1770 to add “Junk Fees” to the list of prohibited and unlawful practices provides an even greater incentive to dealerships to ensure all advertisements are accurate and all charges incurred by a purchaser are properly disclosed to avoid liability.
