STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6594

July 17, 1989

MOTOR VEHICLE SALES FINANCE ACT:

Imposition of documentary, service or inspection fees on buyer

The Motor Vehicle Sales Finance Act does not authorize either installment sellers or sales finance companies to impose, directly or indirectly, documentary, service or inspection fees upon an installment sales buyer of a motor vehicle.

Eugene W. Kuthy, Commissioner

Financial Institutions Bureau

Department of Commerce

Grandview Plaza, 5th Floor

206 E. Michigan Avenue

Lansing, Michigan 48933

You have requested my opinion relating to the costs and fees which are authorized under the Motor Vehicle Sales Finance Act (MVSFA). 1950 Ex Sess PA 27, MCL 492.101 et seq; MSA 23.628(1) et seq. Specifically, you ask whether "documentary fees," "service fees," and "inspection fees" are authorized under the MVSFA.

The MVSFA was enacted by the Legislature to benefit and protect retail installment buyers of motor vehicles by regulating installment sales, including their financing and other costs. The Financial Institutions Bureau (FIB) is statutorily charged with the administration and enforcement of the MVSFA. There are generally three parties to an installment sale transaction: the "installment seller," the "installment buyer," and the "sales finance company" (which includes banks, savings and loan associations and credit unions), as each is defined in Sec. 2 of the MVSFA, MCL 492.102; MSA 23.628(2). Under the MVSFA, Secs. 3 and 7, the FIB licenses both installment sellers and sales finance companies to engage in the installment sales of motor vehicles. MCL 492.103 and 492.107; MSA 23.628(3) and 23.628(7).

You question the legality of two types of fees. First, you indicate it is a widespread practice of installment sellers to impose so-called "documentary fees" or "service fees" on the installment buyer at the time of purchase of an automobile. You state that these fees have ranged in amount from $18.50 to as much as $447.00. Generally, the documentary fee or service fee is explained as a charge by the installment seller purportedly to cover their costs in preparing the paper work involved in the sale of the automobile, as well as the cost of gas and personnel to take the paper work to a Secretary of State office for a transfer of title and license plates.

Secondly, you state you have also observed the widespread imposition of so-called "inspection fees" ranging in amount from $88.00 to $360.00. This fee is purportedly a cost imposed on the installment buyer to have the automobile mechanically checked to determine if it is in good running condition so as to qualify for an extended warranty, and to defray the cost of preparing attendant paper work.

A review of several sample motor vehicle installment sales contracts discloses that these documentary fees, service fees, and inspection fees are added to the cash price of the vehicle and may appear for the first time when the sales contract is presented. Moreover, they are generally included in the amount financed. In some instances, these fees are not included within the cash price of the automobile for which sales tax is paid to the State of Michigan.

Section 31(a) of the MVSFA, MCL 492.131(a); MSA 23.628(31)(a), limits the charges which a licensee can collect from the buyer, either directly or indirectly:

This subsection prohibits a licensee from collecting fees from the buyer in excess of those premium costs, fees and expenses "which are authorized by the provisions of this act." By use of this statutory language, the Legislature has evidenced its intent to limit the fees and charges that can be collected to those which are specifically "authorized." The fact that this prohibition against the collection of unauthorized fees and costs is applicable "directly or indirectly" further evidences the Legislature's intent to limit the charges to only those which have been specifically provided for in the Act.

The only authorization in the MVFSA for the payment of a "service fee" for the preparation of paper work by the seller appears in Sec. 31(c), where it is provided in pertinent part that:

Thus, Sec. 31(c) does expressly provide for the payment of a service fee in a carefully limited amount if the seller prepares the credit information, contract, note, mortgage and application for title. However, the service fee provided in Sec. 31(c) may only be paid by "the holder, finance company or banking institution" from the finance charge authorized by the act and shall not be charged to the buyer as an addition to the finance charge.

With the exception of the limited service fee provided therein, Sec. 31(c) limits the receipt of money by the installment seller to "a sum equal to the unpaid time balance reduced by the portion of the finance charge which a unearned at the time an installment sale contract is acquired by such holder,...."

" 'Time balance' means the sum of the principal amount financed and the finance charge." MVSFA, Sec. 2(14), MCL 492.102(14); MSA 23.628(2)(14). See also MVSFA, Sec. 13(8), MCL 492.113(8); MSA 23.628(13)(8).

In Sec. 2(12) of the MVSFA, MCL 492.102(12); MSA 23.628(2)(12), "[p]rincipal amount financed" is defined as including insurance premiums and "other costs necessary or incidental to the sale ... which the seller contracts to pay on behalf of the buyer...." Section 13(b)(5), MCL 492.113(b)(5); MSA 23.628(13)(b)(5), further permits the "principal amount financed" to include "[o]ther costs, necessary or incidental, which the seller contracts to pay on behalf of the buyer and for the amount of which the seller agrees to extend credit to the buyer as authorized by this act." The documentary fees, service fees, and inspection fees about which you inquire are not encompassed within the "principal amount financed." First, the fees are not necessary or incidental to the sale of the motor vehicle. In referring to a "necessary and incidental" cost, the MVSFA contemplated a disbursement of the type set forth in Sec. 17 of the MVSFA, MCL 492.117; MSA 23.628(17), infra, made by the installment seller in the course of transferring the vehicle from the seller to the buyer and paid "on behalf of" the buyer. An installment seller does not "contract to pay on behalf of the buyer" fees which the seller himself imposes. Secondly, I see no authorization in the MVSFA for the imposition of the questioned fees.

Moreover, the definition of "finance charge" in Sec. 2(13) of the MVSFA, MCL 492.102(13); MSA 23.628(2)(13), further reaffirms the statutory scheme limiting the payment of fees to those specifically authorized in the MVSFA. There, "finance charge" is defined as follows:

Thus, only those "other costs" which are specifically authorized by the MVSFA are to be included in the installment sale contract.

The "other costs" chargeable to the buyer which are authorized by the MVSFA are set forth with specificity in Sec. 17, MCL 492.117; MSA 23.628(17):

Thus, Sec. 17, supra, permits the installment seller to require the installment buyer under the terms of the installment sale contract to pay filing fees payable to the State of Michigan, filing or recording fees payable to a public official, and fees for notarization and registration payable to the State of Michigan. These fees are permitted to be charged the buyer in anticipation of those fees required to be paid by law. These fees may be paid by the buyer independently of the installment sale contract or included in the principal amount financed under the installment sale contract. However, in the event the fees received by the installment seller are not actually disbursed as contemplated, they must be immediately refunded or credited to the installment buyer.

OAG, 1981-1982, No. 5869, p 81 (March 31, 1981), addressed the question of whether the payment of a premium by the buyer for an indemnity bond protecting the lender against default by the buyer is an authorized cost item chargeable to the buyer under the MVSFA, or whether it violates Sec. 16 of that Act. In holding that the cost of the indemnity bond may not be included in the installment sales contract, the opinion addressed the interpretation to be given Sec. 17, supra, by stating:

Because the Legislature had not authorized the cost of the indemnity bond as a cost to the buyer under either Sec. 17 or Sec. 16 of the MVSFA, the cost may not be included in the installment sales contract.

The primary and fundamental rule of statutory construction is to ascertain and give effect to the intention of the Legislature. Evans Products Co v State Bd of Escheats, 307 Mich 506, 548; 12 NW2d 448 (1943). Where the Legislature lists items in a statute, other similar items are excluded. People v Malik, 70 MichApp 133, 136; 245 NW2d 434 (1976). It is a general rule of statutory construction that expressio unius est exclusio alterius, that is, the express mention in a statute of one thing implies the exclusion of other similar things. Stowers v Wolodzko, 386 Mich 119, 133, 19; NW2d 355 (1971). Where certain things are specified in a statute, intention to exclude all others from its operation may be inferred. Wolverine Steel Co v City of Detroit, 45 MichApp 671, 675; 207 NW2d 194, lv den 390 Mich 771 (1973).

The fees and costs set forth in Sec. 17, supra, are the only "other costs" authorized by the MVSFA. All references throughout the MVSFA to "other costs" incurred in the sale of a motor vehicle under an installment sale contract for which the installment seller may require payment by the installment buyer must be read to refer to those "other costs" set forth in Sec. 17 of the MVSFA. There is no provision there for or reference to any "documentary fees," "service fees," or "inspection fees" of the type you describe.

An installment seller may not circumvent the provisions of the MVSFA by requiring payment from the installment buyer independently of the installment sale contract by accepting cash and omitting such unauthorized fees from the "amount financed."

It should be pointed out that the provision in any installment sale contract for the payment of any unauthorized fees to the installment seller by the buyer is prohibited. Section 32 of of the MVSFA. MCL 492.132; MSA 23.628(32), provides that:

Further, Sec. 31(d) of the MVSFA, MCL 492.131(d); MSA 23.628(31)(d), provides:

Thus, Sec. 31(d) of the MVSFA provides not only that all prohibited costs or charges are void and unenforceable, but also any prohibited costs or charges paid by the buyer shall be applied on the principal of such contract. Moreover, even when such "other costs" are authorized under Sec. 17 of the MVSFA, they cannot exceed the actual amount the seller expends or intends to expend. Costs such as title and transfer fees may only be charged as the dealer pays on behalf of the buyer. Any amounts not disbursed by the seller "shall be immediately refunded or credited to the buyer."

Finally, the Legislature has made the wilful or intentional violation of any provision of the MVFSA a crime by providing in Sec. 37(b), MCL 492.137(b); MSA 23.628(37)(b), that:

It is my opinion, therefore, that the Motor Vehicle Sales Finance Act does not authorize installment sellers or sales finance companies to impose, directly or indirectly, documentary, service or inspection fees upon an installment buyer of a motor vehicle.

Frank J. Kelley

Attorney General