Judge strikes down opinion on auto fees

June 04, 1991|By Ted Shelsby

A Harford County Circuit judge has overturned a 3-year-old opinion by Maryland Attorney General J. Joseph Curran that auto dealers violated the law by charging car buyers millions of dollars through the "document fees" or "market adjustment fees" that were routinely added to the cost of vehicles.

Mr. Curran ruled in August 1988 that such fees, and a number of others charged by dealers, violated the state's Retail Installment Sales Act. His legal opinion was limited only to deals in which the car's financing was arranged by the dealer. Consumers who paid cash for their vehicles or arranged their own financing were not affected by the attorney general's decision.

In a decision handed down Friday, Judge Cypert O. Whitfill said that charging such fees did not violate provisions of the Retail Installment Sales Act or another credit law, but he left the door open to further legal action against the dealers involved.

"The conduct complained of may in fact be fraudulent," Judge Whitfill said in his 25-page decision, which parties on both sides received in the mail yesterday. "However, it is fraud practiced in the negotiation of the cash price and not fraud in the execution of the installment sales agreement.

"The fraud has nothing to do with the extension of credit," he added.

Joseph P. Carroll, executive vice president of the Maryland New Car and Truck Dealers Association, yesterday hailed the judge's opinion as "a very nice victory" for the auto dealers. The trade association represented the dealers in the court action.

Mr. Carroll said that he was not surprised by Judge Whitfill's decision. "We felt that we had a good case," he said. "We felt all along that what we were doing was legitimate."

That view, however, was not shared by the attorney general's office.

Evelyn O. Cannon, chief of litigation for the department and counsel on the case, said she was "disappointed, very disappointed," by the decision.

She said the state is still in the process of deciding its next move but will probably appeal the decision.

She said the attorney general's office also will take a close look at the judge's decision that the practice of dealers charging such fees may be in violation of other law.

When the state first took action against the auto dealers in August 1988, it estimated that about 200 dealers were involved in the practice of adding on the fees.

The state charged that the fees ranged between $25 and $99 in most cases and averaged about $75. But the state said that in at least one case the dealer charged $750.

At that time, the state said that it was seeking between $9 million and $12 million in refunds for car buyers and that the legal action had the potential of being the largest consumer action case in Maryland's history.

Last summer, the state settled with 158 of the dealers, resulting in about $5 million in refunds.

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