As you may be aware, the Law Form retail installment contract, commonly known as the 553, was changed this month. Most of the changes will not be apparent, except for one, the insertion of a pre-delivery service fee section along with the Florida statutory disclosure for this fee. This change was Reynolds’ effort to respond to dealer requests to solve a problem that had created a cottage industry for plaintiffs’ attorneys.
Most decision-makers had been under the impression that dealer fees were itemized only on the buyers orders and were then rolled into the cash price (i.e., line 1) on the finance contract. However, over the last 18 months we learned that many dealers were netting out the dealer fee from line 1 of the finance contract and adding it back in below based on the belief, in some cases correct and others not, that lenders advanced more if the fee is not included in line 1. (By way of example, we did discuss this with, among others, SET’s lending arm, and it confirmed that it advanced more if the fee was not included in line 1, but that practice has since been changed.)
So why the change to the form? F.S. 501.976 creates the statutory dealer fee disclosure (“This charge represents cost and profit . . .”) and indicates that the disclosure is to be “printed on all documents that include a line item” for this fee. Until this recent change to the Law form finance contract, this statutory disclosure was not on this form. Therefore, dealers that separated the dealer fee on both the buyers order and the finance contract were now targets for attorneys who have made hundreds of claims against dealers for this alleged violation.
While it is unclear how consumers are harmed as the disclosure is in the buyers order and perhaps even on a hand written buyers order, and the benefit of repeating that disclosure a second or even third time is at best dubious, the statute is written as it is written and there appears to be no political appetite to attempt to amend it. Therefore, in order to facilitate this practice for dealers that choose to break out the fee in the finance contract, Reynolds modified their form to include pre-printed line items for these fees (if any) along with the pre-printed statutory disclosure.
If you do not want to break out this fee in the finance contract, you don’t have to. If you didn’t break it out before, you don’t have to do so now. (Simply insert “Included in cash price” on these lines.) This change was simply to accommodate dealers who previously separated the dealer fee on the finance contract and who wish to continue to do so with the protection of the statutory disclosure.
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