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Dusting off the Cobwebs - Junk Fees of the Past

To keep things simple and keep your business off of regulators' target list, avoid fraud and charging bogus fees.

May 7, 2024
Dusting off the Cobwebs - Junk Fees of the Past

Dealers should simply not engage in fraud and charge bogus fees.

Credit:

Pexels/Phil Kallahar

3 min to read


For many years I worked for the Florida Attorney General’s Office prosecuting dealers, and often I went undercover at dealerships.  These experiences sometimes illuminated inscrutable and fraudulent charges. A recent case brought back memories of dealer violations.

New England Dealer Allegedly Adding Spurious Amounts of Charges 

Two governmental agencies are currently pursuing a case against a dealer alleging that it added “junk fees” without the consumer’s knowledge or consent. These are the purported junk fees:

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  • GAP and service contracts

  • Inspection fees

  • Inflated government taxes and fees.

A Litany of Dealers Adding Spurious Amounts of Charges

As I dwelt upon this New England case, I recalled a number of examples of dealers in the past engaging in similar practices.  

DRP and MVA on the Monroney Label

While a mystery shopper, I noticed these initialisms on the vehicle sticker a number of times.  I learned DRP stood for “dealer retirement plan” and MVA stood for “market value adjustment.”  Both added large amounts to the vehicle price and should have been written out to avoid being deceptive.    

Tire Disposal Fees

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In Florida there is a $1 disposal fee for arranging for the processing of used tires. Merchants are to charge this fee for each of the four tires and a fee for the spare tire. This particular business decided to double the fee to $2 per tire, the additional dollar for its internal administration cost, as it explained to our office. It is simply illegal for merchants to charge more for a governmental fee than is stated in the statute. 

Lease Interest Rates

A woman had been defrauded when she leased a car. I posed as her nephew and had a meeting with the finance manager. He had indicated to her on the buyer’s order that the lease interest rate was .00375, or 3.75%. This was a lie, as he showed her the money factor. A money factor of that amount is 9%.

Renaming Options on the Addendum Sticker and Charging for Them Again

A rather creative but truly illicit practice by a dealer was to add an addendum sticker and rename the options already appearing on the Monroney Label, charging for them a second time.

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Dishonorable Mention

There were two internal charges traceable to payments made by customers that deserve special mention and that were indicated in the deal jacket. At one dealership, one of the cost allocations was indicated as a “fraud fund.” Evidently, money was set aside into a fund for complaining consumers. However, perhaps the most embarrassing fund established by a dealer, which was actually foolishly admitted to by its attorney, was a “T&A Fund” for visiting supplier executives. A further comment about this particular fund isn’t needed.

How Can Dealers Evade the Law and Make Money?

If I were to seriously answer this question, I would recommend that dealers not leave a trail for investigators to track. However, dealers should simply not engage in fraud and charge bogus fees. Unfortunately, dealer management sometimes doesn’t concern itself with the practices of its finance department in the most thorough manner. One of the problematic issues with dealerships is that personnel changes frequently and new salesmen and finance managers may wish to earn more money by fleecing customers. Only a consistent and thorough internal and external auditing protocol will uncover these practices. In addition, determinative sales and finance protocols must be committed to a written form and rigorously followed. Charging honestly should be the practice of all dealers.

Terry O’Loughlin is director of compliance for Reynolds & Reynolds and is admitted to the Pennsylvania and Florida Bars. Before joining Reynolds, he was employed by the Florida Office of the Attorney General, where he investigated automobile dealers and financing sources. He previously was a public accountant.  

Originally posted on Auto Dealer Today

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