Auto DefenseJames S. SifersUsed-Car Dealerships

Pitfalls in Collecting Licensing Fees

Pitfalls in Collecting Licensing Fees

A new tactic by consumer attorneys, which has gained momentum over the past few years, is filing suit against dealerships who do not refund estimated vehicle license fees where a refund is due. Many dealers tend to overlook the relatively small amounts due to purchasers where an estimate of vehicle license fees is collected, the amount paid is less than what is collected, and where a refund is due to the purchaser. While these amounts can be nominal, the law requires that the fees collected in excess of the actual fees be returned to the purchaser, even without a demand by the purchaser for a refund. A failure to refund can result in a lawsuit where the purchaser may only recover that nominal amount, but where the purchaser’s attorney recovers tens of thousands of dollars in attorneys’ fees and also may succeed in obtaining an injunction against the dealership.

Cal. Veh. Code § 11713.4 allows a dealer to estimate the vehicle license fees to be paid in connection with a sale of a vehicle. Section 11713.4 also requires the dealer to refund any excess “of the actual fees due” to the purchaser “whether or not such purchaser requests the return of the excess amount.” The current vehicle license fees due annually for vehicles is .65% of the market value of the vehicle, generally the purchase price where a vehicle is sold by a dealer. (Cal. Rev. & Tax Code § 10752(a)(3).) The Automobile Sales Finance Act requires vehicle license fees to be separately stated on the purchase contract. (Cal. Civ. Code § 2982(a)(2)(A).) This information can be found on Line 2(A) of the Itemization of the Amount Financed on the standard 553 Retail Installment Sales Contract.

Many dealers have, incorrectly and unwisely so, failed to refund the overcharge due to the purchaser where the vehicle license fees actually paid for actual fees is less than what was collected at the time of the sale. This failure to refund is oftentimes not intentional, but merely an oversight given the relatively small amount due for a refund. California used to take a much more relaxed approach to what courts considered a “trifle.” (Bermudez v. Fulton Auto Depot, LLC, (Cal. App. 3d Dist. 2009) 179 Cal. App. 4th 1318.) However, this resulted in a revision to the Automobile Sales Finance Act where the California legislature removed any requirement that a purchaser be actually damaged and opened the door to lawsuits based upon technical violations without actual harm to a consumer. (See Rojas v. Platinum Auto Group, Inc., (Cal. App. 2d Dist. 2013) 212 Cal. App. 4th 997, 1005.) As many dealers have seen, a technical violation is a favorite go to for the consumer lawyer.

A failure to refund is not only a violation of Section 11713.4, but also may be a violation of the Automobile Sales Finance Act (due to the requirement by Section 2982(a)(2)(A) that the fees be accurately stated) and a Consumers Legal Remedies Act violation. Both of these acts contain attorneys’ fees clauses which may give rise to an award of attorneys’ fees against a dealer who fails to properly refund overcharges for vehicle license fees. Additionally, these violations may give rise to an injunction where the dealer is forever under a court order relating to the disclosure, collection, and/or refunding of vehicle license fees. A violation of which can give rise to criminal and quasi-criminal consequences. Finally, and likely most disturbing for dealerships, these types of cases can oftentimes provide a venue for a consumer attorney to gain access to a dealership’s files in order to find not only other purchasers whose transactions may have issues with vehicle license fees, but to find other, unrelated violations, which could give rise to even more litigation.

In light of the above, dealers would be well served to accurately disclose the vehicle license fees collected and to promptly refund any fees collected over and above what was actually paid.

James S. Sifers, Esq.