Tracking compliance with state doc fee caps using AI

AI can allow auto dealers to weed through the complex language of state statues and ensure they are compliant when it comes to document fees.

States use varying terms to describe services, including documentary, processing, conveyance, handling, administrative and doc fees. 

Documentary fees are the fees that dealers charge consumers for the costs of closing a vehicle sale. They include fees for transferring a vehicle’s ownership; verifying, clearing and certifying vehicle titles; perfecting and satisfying liens; complying with state security and privacy requirements; and engaging in administrative and clerical services.

According to a report by the state of Connecticut, at least 15 states put a cap on dealer document fees, with allowable fees ranging from $70 to more than $560

For insight into industry compliance, Informed conducted a case study earlier this year with a large national indirect auto lender. We examined dealer documentary fee charges in Oregon and Minnesota, which have hard documentary fee caps.

Oregon state law permits a dealer to charge $150 for document processing fees if the dealer uses an integrator, and $115 if the dealer does not. Under Minnesota law, a dealer can charge up to $125 dollars for a documentary or a document administration fee.  

Informed examined 2,300 deal jackets between January 2022 and March 2023, originating from 295 dealers. During the study period, Informed found 0.35% of doc fees in Minnesota and 0.47% in Oregon exceeded state caps. Overall, fewer than 1 in 200 deals exceeded state caps. The maximum doc fee charge was $200, which exceeded the Minnesota state law cap by $75. 

Though limited to two states, the study indicates that dealers are generally complying with state limits. Errors or overcharges do occur, but the overall results reflect well on the dealer community and show that — at least in these two states — dealers are complying with the law. 

Tom Oscherwitz is vice president of legal and regulatory adviser at Informed.IQ. He has 25 years’ experience as a senior government regulator (CFPB, U.S. Senate) and fintech legal executive working at the intersection of consumer data, analytics and regulatory policy.  

Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas. To learn more about the 2023 event and register, visit Tracking compliance with state doc fee caps using AI

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