By Andy Brack, editor and publisher | Car dealers and consumers backed by plaintiffs’ lawyers are clashing in the General Assembly over the transparency of a closing fee paid by some consumers who bought cars a decade ago. But an attempt to remedy what some see as a problem could cause all sorts of constitutional issues, according to those familiar with the conflict.
At issue is a law enacted in 2000 by the General Assembly over “closing fees” charged to seal a deal on an automobile purchase. The law said that if dealers wanted to charge the fee, they had to pay a $10 registration fee to the state. Caveats in the law, as interpreted by the S.C. Department of Consumer Affairs, required dealers to do three more things, too — to disclose that a closing fee would be charged in any ads about the price of a vehicle, to disclose it in the sales contract and to display the information publicly at a dealership.
The amount of the fee, which was to cover processing and other actual costs borne by dealers, was not specified. Some dealers, seeking to avoid the hassle of filing registration paperwork with the state, decided against charging any closing fee, sources said.
But some did, which eventually prompted lawsuits by consumers who felt that paying anywhere from $299 to $1,000 on top of an agreed-upon sales price wasn’t justified and served simply as a way for dealers to pad profits. In an Aiken county case, the car dealer won. Then in a Pickens County case, the car purchaser won on behalf of a group of similarly-affected purchasers who bought cars from 2002 to 2006. The case was appealed by dealers and in November 2015, S.C. Supreme Court ruled 3-2 for the consumers. The court approved of a judgment for $1.4 million for the group of car buyers.
The high court essentially ruled the dealer charged a fee that didn’t relate to actual closing expenses. Two justices who dissented emphasized that the dealer complied with current procedures interpreted by the state and did nothing wrong.
According to plaintiffs’ lawyers who pursued groups of cases related to closing fees, there are about 150 lawsuits — some with many plaintiffs — that have pending for about a decade “with customers claiming car dealers charged closing fees that did not represent their actual closing costs,” according to a summary document.
Now what?
In December, lawmakers filed bills in the House and Senate to try to undo what the Supreme Court ruled. Senate Bill 911, submitted by Senate Judiciary Committee Chair Larry Martin (R-Pickens) with 27 cosponsors, calls for the process of a claim being brought under the closing fee statute to be changed so that group cases (called “mass actions”) won’t be allowed. Redress would be allowed individually, however, according to Martin. (House Bill 4548 by Rep. Bill Sandifer, R-Oconee, is a companion bill with 32 cosponsors.)
“It will not be a shakedown of an entire industry,” Martin said this week, explaining why he thought it was important for pending actions to be filed individually, not collectively. “I’ve had dealers suggest to me that if we don’t address this, it’s going to bankrupt them.” He added, referring to the Supreme Court’s decision, “It’s one of the most extreme injustices I’ve seen directed at a whole sector of business in my three decades of service.”
Sims Floyd, who represents the S.C. Automobile Dealers Association, did not respond to Statehouse Report’s inquiries for comment.
A constitutional problem may exist, some say
But Democratic state Sen. Brad Hutto, an Orangeburg lawyer who sits on a subcommittee considering the Senate bill, said he found it convenient that car dealers sought a legislative solution only after the Supreme Court’s November ruling.
“It’s not like this ‘problem’ hasn’t been known,” he said. “As soon as the first certification letter (of a case) was delivered, dealers knew there was an issue. They thought they were going to win in court and they didn’t complain. They didn’t come and ask us for a change.”
He said passage of the bill to undermine the court’s decision would set a bad precedent because it would open up any decision by the court to be overruled retroactively through the legislative process — and that would spawn more lawsuits about constitutional separation of powers.
Plaintiffs’ lawyers are more pointed in an executive summary of issues surrounding by the case. The document was provided by Barnwell lawyer Dan Haltiwanger:
“Supreme Court opinions [then] become meaningless. The legislature would always be able to undo the opinion and apply it retroactively. While the legislature can always establish new policy going forward, it cannot take on the role of the Supreme Court and rewrite past court decisions.
“If the car dealer legislation passes as written, every future litigant that loses in the Supreme Court will go to the legislature to overturn the decision and apply it retroactively.”
The Senate bill currently is being reviewed by its Judiciary Committee, which Martin chairs. The House bill is in the Labor, Commerce and Industry Committee, which is chaired by Sandifer.
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