Automobile dealers in Maryland may not include settlement fees in financing arrangements with their customers, state Attorney General Francis B. Burch ruled yesterday.
Burch was asked for an opinion after state consumer credit officials received complaints that auto dealers routinely were charging fees during car purchase settlements.
Armed with the legal ruling, state consumer credit commissioner Alan Fell said that dealers who continue to impose the fee will be penalized by loss of all financing charges on the unpaid balances of customer bills.
Fell said the practice appears now to be limited to "a very few" dealers in Maryland. "But if we don't stamp it out now," he said, "it'll spread state-wide like wildfire."
One Baltimore area dealer added settlement fees ranging from $40 to $90 to the unpaid balance of customer bills and then applied financing charges to the total bill, according to Fell.
"Some auto dealers are tryingto get all they can get from their customers," he said. "This (ruling) really nips in the bud a practice that would have mushroomed."
Dealers who already have been named in complaints and those named in future complaints will have 10 days to refund the settlement fee. Fell said. If they do not, he warned, the dealers will be forced to give up financing charges on the unpaid balance of customer bills.
In his ruling, Burch said the state's Retail Installment Sales Act prohibits auto dealers from imposing service charges or other levies, such as settlement fees.