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The Honolulu Advertiser
Posted on: Friday, August 24, 2001

State investigates auto dealers' registration fees

By Andrew Gomes
Advertiser Staff Writer

After settling a lawsuit that alleged that Hawai'i's largest auto dealer overcharged for licensing and registering vehicles, the state is investigating whether other dealerships are accurately reflecting the costs of such fees.

Stephen Levins, acting executive director of the state Office of Consumer Protection, said the operations of the approximately 50 new- and used-car dealerships in the state are being reviewed to ensure they are complying with the law covering registration and title transfer fees.

Last month, the state and Cutter Automotive Team Inc. settled a lawsuit that the state filed in 1999 alleging Cutter charged some customers "excessive" registration and title transfer fees.

In the settlement, Cutter Automotive, which operates dealerships on O'ahu and Maui, admitted no wrong-doing. It agreed to pay $600,000 in restitution to more than 15,000 customers, plus $100,000 in administrative expenses to the state. The company also agreed to itemize actual registration and transfer fees on bills of sale.

Nick Cutter, president of Cutter Management Co., which operates the dealerships, declined to comment on the settlement or the suit. Attorney Jeffrey Portnoy, who represented Cutter, was unavailable for comment yesterday.

Levins said that as a result of the Cutter case, his office is looking at other dealerships He declined to be more specific.

"The conduct of other dealerships is certainly being looked at," Levins said. "We are contemplating other enforcement action on this."

The state sought restitution for private individuals who bought or leased new or used vehicles at Cutter Automotive between 1995 and 2000. Levins said the settlement covers transactions between Feb. 2, 1999, and Dec. 31, 2000.

According to the state's suit, which was prompted by consumer complaints and an ongoing investigation, Cutter Automotive told customers that "registration/transfer" fees were paid to county finance departments. The state said the charges were misrepresented because the dealer was paying only part of the fees to the counties.

The suit said fee amounts were "excessive and do not represent the actual cost of the registration and/or transfer fees that are paid to the applicable county authorities."

The state alleged Cutter Automotive in some cases charged customers $150 for a $2 transfer fee, and $185 for a $71 registration fee.

"If a consumer is told the registration fee is $150, that is what the registration fee should be," Levins said. "The consumer should be aware that if there's going to be a fee associated with processing paperwork, they should be clearly informed of that. There should be clear and conspicuous disclosure."

Affected customers will receive about $37 on average from the settlement, according to Levins. Levins said the state is using a California company to distribute checks to affected Cutter customers. Checks should all be delivered by the end of the year.

Dave Rolf, executive director of the Hawai'i Automobile Dealers Association, said dealers are trying to follow a complex statute that governs title transfer and registration fees.

Rolf said, for example, that charging for vehicle licensing and registration can be tricky because some of the fees are based on vehicle weight. In some cases, he said, dealers may use an average weight of new vehicles or an estimated weight.

"The dealer, when he submits the registration, might not know the exact amount," he said. "There is no standard charge."

Joe Nicolai, president of JN Automotive Group of Honolulu, said he agreed with the state that customers should be aware of processing fees, but noted that even he doesn't know how much those fees will be at the time of sale.

Nicolai said he has to hire people to register vehicles at different motor vehicle offices because dealers are limited to transferring five titles a day. That creates an expense he tries to recover. So do late title transfer fines caused by the registration limit, he said.

As a result, he said, JN Automotive is forced to take a loss on its expenses or run the risk of running afoul of the law by estimating processing fees.

"You don't know at the point of sale what the exact costs are going to be," he said. "It's a problem."

Another problem, he said, is selling a car near the end of the month. If it takes several days to process paperwork and the title isn't transferred until the new month, the registration fee is less and a customer ends up paying a few dollars more than agreed.

"Has the dealer shortchanged the consumer? Some people may look at it that way. Have you (the dealer) done something illegal? Maybe. It's the system over here that creates those problems," Nicolai said.

Gary Wassel, head of TheoDavies Euromotors Ltd. of Honolulu, said it costs an average of about $200 to register a vehicle and transfer its title, including dealer expenses to handle paperwork.

When new-car sales involve trade-ins for which customers have outstanding loans, processing work increases because the dealer must pay off the lien and transfer two titles, he added. Out-of-state transfers cost more.

Still, Wassel also believes that customers should know when a dealer processing charge is included in licensing and registration fees.

"It would shock me if any one of my guys told a customer this is what the county is getting," he said.

Dennis Kamimura, licensing administrator for the city's Motor Vehicle Division, said a car buyer can determine actual licensing and registration fees by looking at a vehicle's registration certificate.

For instance, for a new 3,000-pound car bought in Honolulu there is a $37.50 state weight tax, $22.50 county weight tax and $47.50 in combined flat fees for registration, license plate, emblem and highway beautification.

"If you're paying more, that is not being paid to us," Kamimura said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.