The Destination Is in Sight
We all have destinations; the real question is how we get there. Recently in New York, the issue of the amount of the destination fee assessed in the sale of motor vehicles took center stage.
In 1958, Oklahoma Senator Almer Stillwell Monroney sponsored the Automobile Information Disclosure Act (Act) which gave rise to the requirement of a window sticker disclosure in motor vehicles named after the Senator commonly known as the Monroney sticker. As pertains to this article, the Act requires a window label containing: “true and correct entries disclosing…the amount charged, if any, to such dealer for the transportation of such automobile to the location at which it is delivered to such dealer [referred to as the destination charge].”
In May 2021, a class action suit was filed in New York claiming that various car manufacturers committed unfair and deceptive trade practices by including not only the cost of delivering vehicles to their dealer destination in the destination charge on the Monroney sticker, but also including profit in that number without disclosing that profit was included.
The lawsuit claimed that a destination charge is generally understood to represent the manufacturer’s average cost to deliver one of its vehicles to a dealership and complained that $1,495 per Chrysler-, Dodge-, Ram-, Jeep-, and Fiat-branded vehicle was improper. In addition, it compared the increase in destination charges of the class action vehicles (90% for Chrysler, Dodge and Jeep since 2021, 74% for Ram trucks since 2011, and 113% for Fiat since 2012) with the average increase of less than 20% for Audi, BMW, Infiniti, Lexus, Lincoln, Mercedes-Benz, and Volvo over the past decade.
In addition to the claimed disparity between the percentage of increase compared to other brands, was the more important claim that the defendants built in “a significant amount of profit” into their destination charge. The suit claimed that consumers are not allowed to negotiate the amount of the destination charge and understood that the destination charge was a pass-through cost, not the cost of shipping the vehicle plus profit. The claim also stated that there was no correlation between that actual the cost of delivery and the amount on the Monroney sticker. By way of comparison, the suit pointed out that Toyota’s Monroney sticker does not use the term “destination charge” but instead labels it “Delivery, Processing and Handling Fee” and explains on its website: “Toyota may make a profit on the Delivery, Processing and Handling Fee.”
While many dealers do not concern themselves with the Monroney sticker placed on vehicles by the manufacturer, the issue of clear and correct disclosure is a consistent theme in the compliance field. Everywhere in the sales process, from the first handshake until the delivery of keys, a dealer is required to make complete disclosures of such things as condition of the vehicle, credit scores, adverse action, and many others. Your best defense against concealment claims is clear and conspicuous disclosures, signed by the consumer.
While the road less traveled may not be the quickest path to our metaphorical destination, in the compliance world, both the destination and all other charges should be clearly and accurately disclosed and acknowledged by the consumer.
DISCLAIMER: Content provided in this article is intended for informational purposes only and should not be construed as legal advice and should not be relied upon or acted upon without retaining counsel to provide specific legal advice based upon your particular situation, jurisdiction, and circumstances. No duties are assumed, intended, or created by this communication. No attorney-client relationship is being created by your review or use of this material.
© 2021 Robert J. Wilson, All Rights Reserved
Robert J. Wilson, Esquire (Bob) is a Philadelphia lawyer and is General Counsel for ARMD Resource Management Group. Bob’s practice is largely in the consumer finance space, and he regularly consults with Lenders and contributes articles on various compliance related issues.