2015-2016 Bill 4548 Text of Previous Version (Mar. 3, 2016) - South Carolina Legislature Online

1 Indicates Matter Stricken 2 Indicates New Matter 3 4 COMMITTEE REPORT 5 March 2, 2016 6 7 H. 4548 8 9 Introduced by Reps. Sandifer, Forrester, Toole, Bales, Chumley, 10 Burns, Hardee, Allison, Tallon, Henderson, Clemmons, Sottile, 11 Crosby, V.S. Moss, Jefferson, Yow, Duckworth, H.A. Crawford, 12 Jordan, Fry, Herbkersman, Lowe, Goldfinch, Hixon, Norman, 13 Hiott, Taylor, McCoy, D.C. Moss, Collins, Rutherford, Anderson, 14 Kirby, Pitts, Corley, Ballentine, Hamilton, Finlay, Huggins, Ott, 15 Govan, Riley, Willis, Thayer, Felder, Hicks, Simrill, G.A. Brown, 16 Bedingfield, Stringer, Ryhal, King, Loftis, Hayes, Mack, Rivers, 17 Ridgeway, Clary, Brannon, Atwater, Daning, Bannister, Anthony, 18 McEachern, Mitchell, Erickson, Weeks, Knight, Cole, George, 19 Horne, G.R. Smith, G.M. Smith, Williams, Limehouse, Pope, 20 Gambrell, Alexander, Stavrinakis, Newton, White, Spires, 21 R.L. Brown, Gilliard, Dillard and Gagnon 22 23 S. Printed 3/2/16--S. [SEC 3/3/16 12:15 PM] 24 Read the first time February 25, 2016. 25 26 27 THE COMMITTEE ON JUDICIARY 28 To whom was referred a Bill (H. 4548) to amend Section 29 372307, Code of Laws of South Carolina, 1976, relating to closing 30 fees assessed on motor vehicles sales contracts, so as to provide, 31 etc., respectfully 32 REPORT: 33 That they have duly and carefully considered the same and 34 recommend that the same do pass: 35 36 Majority favorable. Minority unfavorable. 37 LUKE A. RANKIN BRAD HUTTO 38 For Majority. For Minority. 39 40 41 STATEMENT OF ESTIMATED FISCAL IMPACT

[4548-1] 1 Fiscal Impact Summary 2 This bill would have no expenditure impact on the general fund 3 or federal funds. The expenditure impact on other funds would be 4 up to $10,500 annually. 5 This bill would have no revenue impact on the general fund or 6 federal funds. Other funds revenue would increase up to $10,500 7 annually. 8 Explanation of Fiscal Impact 9 Explanation of Amendment by the House Labor, Commerce, 10 and Industry Committee on February 23, 2016 11 State Expenditure 12 This bill amends Section 37-2-307, which increases the annual 13 registration fee from ten dollars to an amount not to exceed 14 twenty-five dollars for motor vehicle dealers who charge closing 15 fees. This fee is paid to the Department of Consumer Affairs. 16 Prior to charging a closing fee, a motor vehicle dealer must 17 provide written notice on the maximum amount of closing fee they 18 intend to change on an annual basis to the department. The 19 department must review the amount of the closing fee for 20 reasonableness. If the department determines that a closing fee is 21 not reasonable, the department must issue a written order detailing 22 their findings and may require the fee to be reduced or require the 23 motor vehicle dealer to submit a new fee for review. 24 Department of Consumer Affairs. The department indicates that 25 since this bill increases their responsibilities to administer and 26 enforce motor vehicle dealer closing fees, the expenditure impact 27 on other funds would be up to $10,500 annually. 28 State Revenue 29 This bill amends Section 37-2-307, which increases the annual 30 registration fee from ten dollars to an amount not to exceed 31 twenty-five dollars for motor vehicle dealers who charge closing 32 fees. This fee is paid to the Department of Consumer Affairs. 33 Based on data provided by the Department of Consumer Affairs, 34 an average of 700 motor vehicle dealer filings are received 35 annually. If the maximum twenty-five dollar fee is imposed, an 36 additional $10,500 would be generated in other funds revenue 37 annually. 38 39 Frank A. Rainwater, Executive Director 40 Revenue and Fiscal Affairs Office 41

[4548-2] 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND SECTION 372307, CODE OF LAWS OF SOUTH 12 CAROLINA, 1976, RELATING TO CLOSING FEES 13 ASSESSED ON MOTOR VEHICLES SALES CONTRACTS, SO 14 AS TO PROVIDE A MOTOR VEHICLE DEALER WHO 15 MEETS CERTAIN STATUTORY REQUIREMENTS MAY 16 CHARGE A CLOSING FEE, TO ESTABLISH DEFENSES FOR 17 A MOTOR VEHICLE DEALER, AND TO AUTHORIZE THE 18 DEPARTMENT OF CONSUMER AFFAIRS TO ADMINISTER 19 AND ENFORCE MOTOR VEHICLE DEALER CLOSING FEES. 20 21 Whereas, the South Carolina Supreme Court interpreted Section 22 372307 in the matter of Freeman v. J.L.H. Investments, L.P., a/k/a 23 Hendrick Honda of Easley issued on November 4, 2015; and 24 25 Whereas, the majority expressly invited the General Assembly to 26 address and correct this interpretation if it disagreed with the 27 aforementioned opinion; and 28 29 Whereas, the General Assembly finds that the court’s dissenting 30 opinion accurately reflects the intent of the General Assembly; and 31 32 Whereas, the General Assembly finds it necessary to clarify any 33 ambiguity in the General Assembly’s intent in enacting Section 34 372307; and 35 36 Whereas, the General Assembly enacted Section 372307 of the 37 South Carolina Code in 2000 and placed the closing fee statute in 38 the South Carolina Consumer Protection Code as a disclosure 39 provision if a motor vehicle dealer intends to collect or charge a 40 closing fee; and 41

[4548] 3 1 Whereas, the General Assembly wishes to clarify that it is the 2 intent of the General Assembly to authorize a motor vehicle dealer 3 to charge a closing fee and to provide protection from civil liability 4 for the charging of a closing fee if the fee is charged in compliance 5 with Title 37 and any Department of Consumer Affairs regulations 6 or administrative interpretations. Now, therefore, 7 8 Be it enacted by the General Assembly of the State of South 9 Carolina: 10 11 SECTION 1. Section 372307 of the 1976 Code is amended to 12 read: 13 14 “Section 372307. (A)(1) Every motor vehicle dealer charging 15 closing fees on a motor vehicle sales contract shall pay a onetime 16 registration fee of ten dollars during each state fiscal before 17 January 31 st of each year to the Department of Consumer Affairs. 18 The department shall set the fee annually in an amount not to 19 exceed twentyfive dollars. 20 (2) The closing fee must be included in the advertised price 21 of the motor vehicle, disclosed on the sales contract, and displayed 22 in a conspicuous location in the motor vehicle dealership. 23 (B) A closing fee is defined as a fee charged for all 24 administrative and financial work needed to transfer the motor 25 vehicle to the consumer including, but not limited to, compliance 26 with all state, federal, and lender requirements, preparation and 27 retrieval of documents, protection of the private personal 28 information of the consumer, records retention and storage costs. 29 (C)(1) Prior to charging a closing fee, a motor vehicle dealer 30 shall provide written notice to the Department of Consumer 31 Affairs of the maximum amount of a closing fee the dealer intends 32 to charge on an annual basis. The department may review the 33 amount of the closing fee for reasonableness using the criteria in 34 item (2). If the department intends to conduct a formal review of a 35 proposed closing fee, the department shall provide written notice 36 to the motor vehicle dealer of the department’s intention to review 37 the proposed closing fee within thirty days of receiving the 38 proposed closing fee. If the department does not provide a motor 39 vehicle dealer with written notice of the department’s intention to 40 review the proposed closing fee within thirty days, the motor 41 vehicle dealer is authorized to charge the proposed closing fee. If 42 the department determines that a proposed closing fee is not 43 reasonable, the department shall issue a written order detailing the

[4548] 4 1 department’s findings. The department may require the fee to be 2 reduced or require the motor vehicle dealer to submit a new fee for 3 review. During the pendency of the review period, a motor vehicle 4 dealer is authorized to charge a closing fee at an amount not to 5 exceed the amount most recently on file and permitted to be 6 charged by the department. If the department finds that a closing 7 fee is not reasonable, the motor vehicle dealer may request a 8 hearing in accordance with the Administrative Procedures Act. 9 (2) In determining the reasonableness of a closing fee, the 10 department shall allow the following items to be included in a 11 reasonable closing fee: 12 (a) all administrative expenses, costs, staff, supplies, 13 materials, and financial work needed to transfer the motor vehicle 14 to the consumer and to procure the closing of the motor vehicle 15 transaction; 16 (b) all costs for administrative expenses, costs, staff, 17 supplies, and materials necessary by dealer to comply with all 18 state, federal, and lender requirements; 19 (c) all costs for administrative costs, staff, and materials 20 needed for the preparation and retrieval of documents; 21 (d) all costs for administrative costs, staff, supplies, and 22 materials necessary for the protection of the private personal 23 information of the consumer; and 24 (e) all costs for administrative costs, staff, supplies, and 25 materials necessary for records retention and storage costs. 26 (D) Whether the vehicle transaction is a credit sale or cash 27 transaction: 28 (1) notwithstanding another provision of law, a motor 29 vehicle dealer who complies with this section and any regulation 30 promulgated under it and who charges a closing fee is not 31 engaging in any action which is arbitrary, in bad faith, or 32 unconscionable for purposes of Section 561540 with regard to the 33 charging of a closing fee and may lawfully charge a closing fee; 34 (2) a motor vehicle dealer may assert any defenses provided 35 to a creditor pursuant to the provisions of this title; and 36 (3) a purchaser injured or damaged by an action of a motor 37 vehicle dealer in violation of this section or any regulation 38 promulgated thereunder, may assert the remedies available 39 pursuant to the provisions of this title. 40 (E)(1) The Department of Consumer Affairs shall administer 41 and enforce the subject of motor vehicle dealer closing fees 42 including, but not limited to, this section. The department shall 43 make and promulgate such rules and regulations relating to motor

[4548] 5 1 vehicle dealer closing fees to administer and enforce this section. 2 The department shall have access to a motor vehicle dealer’s 3 books, accounts and records to determine if the dealer is 4 complying with the provisions of this section, and this financial 5 information must be kept confidential and privileged from 6 disclosure, except as provided by law. 7 (2) If the department determines that a closing fee is not 8 reasonable, the department shall issue a written order detailing the 9 department’s findings. The department may require the fee to be 10 reduced or require the motor vehicle dealer to submit a new fee for 11 review. If the department finds that a closing fee is not reasonable, 12 the motor vehicle dealer may request a hearing in accordance with 13 the Administrative Procedures Act. 14 (F) It is the intent of the General Assembly to authorize a 15 motor vehicle dealer to charge a closing fee in compliance with 16 this section and to protect a motor vehicle dealer from civil 17 liability for charging a closing fee if the fee is charged in 18 compliance with this title and any Department of Consumer 19 Affairs regulation or administrative interpretation. It is further the 20 intent to protect consumers by the disclosure and notice provisions 21 established in this section and with the remedies provided by this 22 title.” 23 24 SECTION 2. This act takes effect upon approval by the 25 Governor; provided, however, a motor vehicle dealer must be 26 allowed an additional period of thirty days from the effective date 27 to comply with Section 372307(C). 28 XX 29

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