Tales From The Cooler: California "Helps" Car Buyers By Raising Documentation Fee

Despite the Golden State being 16 billion dollars upside down and spinning towards bankruptcy, its legislators still find time to concoct regulations to confound the thousands of franchised and independent auto dealers within its borders. These statutes are always enacted to “protect the consumer.” That may not be the case this time.

Effective July 1, California Law AB 1215 will allow dealers to charge car buyers up to $80 for the so-called documentation fee, up from the previous $55 cap. This charge, rationalized by the retailers as needed to “process your paperwork,” is universally loathed by customers. Most states do not regulate this cost, leading to tales of retailers extracting up to $495 for this phantom fee.

InCalifornia’s case, the increase came as a trade-off to ease the pain of several new regulations for their dealers, despite them already being burdened with more DMV laws and paperwork than in any other state. The silliest one is designed to help car buyers know when they are purchasing a unit with a branded title – a vehicle that has been totaled and rebuilt, been in a flood, or is a manufacturer’s “Lemon Law” buyback.

There are strict state and federal disclosure requirements and severe penalties already in place for failing to disclose a branded title vehicle. But that is not good enough for Sacramento. AB1215 requires dealers to place red stickers on each such car, alerting consumers to the branded title.

California reckons that the slimy lot owner who is falsifying, or “washing,” titles on his rebuilt wrecks is going to think, “Well, they got me now. When I put those red stickers on my salvage cars, everybody will know. Dang it!”

These new laws means all automotive lenders have to rewrite and distribute new retail and lease contracts to California car dealers, reflecting these changes. The banks also have to make some monumental verbiage changes to the contracts, such as:

• Change “Document Preparation Fee” to “Document Processing Charge”
• Change “License Fee” to “Vehicle License Fee”
• Change “Smog Fee” to “Emissions Testing Charge”

Over the past few months, thousands of man hours and millions of dollars have been spent by lenders and dealers’ computer programming companies as they scramble to arm the dealerships with the new paperwork.

The problem is that after July 1, there will be many dealer finance managers who either missed the memo or are so busy selling their clients warranties or paint protection that they will accidentally use the old retail or lease contract. When they submit it to the lender, it will be summarily rejected, meaning the dealership will have to bring the client back into the store to sign the correct contract, one of the most tricky transactions for both car buyer and car dealer.

And that unhappy buyer had just paid $80 to ensure the dealer did the paperwork correctly….