Dealership's 'Closing Fees' Ruled Illegal In South Carolina, Court Hands Down $2.8 Million Judgment

November 11, 2015

South Carolina's Supreme Court has handed down a hefty win for auto shoppers. In a 3-2 ruling, justices found that Hendrick Honda of Easley shouldn't have been charging customers a $299 "closing fee" between 2002 and 2006. 

The decision will cost Hendrick some $2.8 million in actual (not punitive) damages. Payouts will be made to plaintiff Julie Freeman and more than 5,300 other shoppers who bought cars at the dealership during the period in question. That amounts to payouts of around $515 each.

Freeman's lawsuit was based on a reading of South Carolina's Dealers Act and the Consumer Protection Code. Under those statutes, dealerships are prohibited from charging customers anything other than actual costs. Unfortunately, Hendrick's $299 closing fee wasn't based on actual costs. During testimony, the dealership's general manager frankly admitted that he had no idea how closing costs were computed.

That, in turn, left the majority of justices to believe that the $299 was arbitrary and therefore in violation of state law. Winning plaintiffs in such cases are able to receive double their actual damages, plus court costs and attorney's fees. 

The decision will have a major impact in South Carolina, where as many as 200 similar lawsuits have been on hold until the Supreme Court issued a decision in this case.

OUR TAKE

Though the decision was very close, this question appears settled in South Carolina. However, there are similar laws on the books throughout much of the country.

Unless you're a very well trained lawyer, though, you can't be expected to know the intricacies of those statutes. You simply have to assume that your dealership of choice is operating within the law. And just to be sure, you have to read the fine print.

Freeman failed to do that until after she'd signed on the dotted line. She filed suit in August 2006, and only received judgment nine years later.

Don't put yourself through that hassle. Read your purchase agreement, and question anything you don't understand. If you're uncomfortable with the explanation you receive, walk away. Worst case scenario, you can come back the next day. But more likely, the dealership will cut you a deal.

And this goes double if you're planning to finance your new ride. Remember: go prepared, or prepare to spend extra.

If you're so inclined, you can read a PDF of the South Carolina Supreme Court's ruling here.

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