Opinion ID: 3151871
Heading Depth: 3
Heading Rank: 4

Heading: Definition of Closing Fee

Text: The trial judge interpreted closing fee to mean: A 'closing fee' is a predetermined set fee for the reimbursement of closing costs, such as document retrieval and document preparation, but only those actually incurred by the dealer and necessary to the closing transaction. Hendrick challenges this definition primarily by differentiating between the definitions of the word fee and cost. Hendrick contends that [g]iven the ordinary definition of fee, the proper construction of the [Closing Fee] Statute is that a closing fee is simply a fee 18 The parties stipulated that the remaining procedural requirement was not at issue because Freeman did not purchase her vehicle as the result of seeing a publicized advertisement. charged at closing for services rendered by a dealership. Hendrick further asserts that the term cost in the context of the Closing Fee Statute would refer to the amount of money a dealer is required to expend to perform the services it provides to a customer at closing, and to otherwise comply with the disclosure, documentation, and record retention requirements imposed under state and federal law. For reference, Hendrick cites to several statutes from other jurisdictions where the state legislature expressly directed how a closing fee should be determined. Because our Legislature failed to provide specific directives regarding the amount of the fee, what can be included in the fee, and how the fee should be set, Hendrick maintains the Closing Fee Statute is effectively a disclosure statute that is administered by the Department. For several reasons, we agree with the trial judge's definition of the term closing fee and conclude that it did not render the Closing Fee Statute unconstitutionally vague19 or require prospective application.20 Because this term is undefined in the Closing Fee Statute, the judge properly looked to the usual and customary meaning of the term fee. See Branch v. City of Myrtle Beach, 340 S.C. 405, 409-10, 532 S.E.2d 289, 292 (2000) (When faced with an undefined statutory term, the Court must interpret the term in accord with its usual and customary meaning.). While we recognize the difficulty a dealer may face in determining the exact amount of a specific purchaser's closing fee prior to closing, we agree with the trial judge's interpretation that the amount charged must bear some relation to the actual 19 See S.C. Dep't of Soc. Servs. v. Michelle G., 407 S.C. 499, 506, 757 S.E.2d 388, 392 (2014) ([A]ll the Constitution requires is that the language convey sufficiently definite warnings as to the proscribed conduct when measured by common understanding and practices.(quoting Curtis v. State, 345 S.C. 557, 572, 549 S.E.2d 591, 599 (2001))); Curtis v. State, 345 S.C. 557, 572, 549 S.E.2d 591, 599 (2001) (recognizing that an undefined term in a statute does not automatically render the statute unconstitutionally vague (citing State v. Hamilton, 276 S.C. 173, 276 S.E.2d 784 (1981))). 20 See Toth v. Square D Co., 298 S.C. 6, 8, 377 S.E.2d 584, 585 (1989) (The general rule regarding retroactive application of judicial decisions is that decisions creating new substantive rights have prospective effect only, whereas decisions creating new remedies to vindicate existing rights are applied retrospectively. Prospective application is required when liability is created where formerly none existed. (citations omitted)). expenses incurred for the closing.21 As stated in language recommended by the Department, Hendrick posted a notice that it charged a closing fee as a means of reimbursing it for certain overhead costs such as document retrieval and document preparation. By notifying customers that it sought to be reimbursed, Hendrick clearly communicated that the closing fee was intended to be repayment for that which was expended. See Black's Law Dictionary 1157 (5th ed. 1979) (defining reimburse to mean to pay back, to make restoration, to repay that expended, to indemnify; or make whole). Notwithstanding this notice, Hendrick failed to offer any evidence that it calculated the costs that comprised the closing fee. When questioned as to how Hendrick arrived at the closing fee, Don Pendleton, the General Manager, testified that he didn't sit there and do the math, he was not sure about the actual costs of retrieving and preparing documents for closing, and he did not know the exact charge. Further, Pendleton believed that Hendrick was limited to seeking reimbursement for [Hendrick's] closing costs. Pendleton also acknowledged that he did not know how the original $199 closing fee was determined and that Hendrick's subsequent increases in the amount charged for the closing fee were not tied to Hendrick's costs. Although Hendrick's expert, Michael Thompson, testified regarding the average closing cost per year, he admitted that he did not see anything to suggest that Hendrick did any kind of analysis at the time Hendrick set the closing fee. Moreover, in calculating the average closing cost, Thompson included expenses for the salaries of finance and sales managers, the building, utilities, and outside services. All of these are general operating expenses and not directly tied to the closing of a motor vehicle sale. If a motor vehicle dealer wishes to be compensated for these expenses, it may include them as part of the overall purchase price of a vehicle. However, by specifically delineating a closing fee from the purchase price of the vehicle, the dealer must account for the costs that comprise this fee. Without such an accounting, a dealer is charging a consumer an additional amount that is not directly related to the expenses incurred in closing the sale of a motor vehicle but is, nevertheless, identified as a closing fee. We find that such practice effectively circumvents the purpose of the Closing Fee Statute and the Dealers Act, which is, in part, to protect consumers from charges that are above the advertised price listed by the dealer. 21 If the Legislature disagrees, it is free to correct our interpretation and specifically direct how a dealer determines the amount of a closing fee. Thus, although we agree with Hendrick that the Closing Fee Statute is a disclosure statute and the Department serves as a repository for the required filings, we find that the Closing Fee Statute does more than require disclosure of the closing fee. It also requires that the closing fee be included in the advertised price in order to avoid unexpected, additional costs for the purchase of an automobile. Consequently, we affirm the trial judge's definition of closing fee. We emphasize that a closing fee is not limited to expenses incurred for document preparation, retrieval, and storage. However, any costs sought to be recovered by a dealer under a closing fee charge must be directly related to the services rendered and expenses incurred in closing the purchase of a vehicle. Given that each vehicle purchase is different, compliance with the Closing Fee Statute does not require that the dealer hit the bull's-eye for each purchase. While each sale may be different, it is inconceivable that each closing requires performance of dissimilar tasks. To the contrary, the category of tasks required to close a sale is the same in every sale. However, the number of times a certain task is performed may differ. As a result, a dealer may comply with the statute by setting a closing fee in an amount that is an average of the costs actually incurred in all closings of the prior year.