New CLRA Section Regarding Price Advertising

The Consumer Legal Remedies Act (CLRA) was amended substantially in order for companies to eliminate “junk” fees and other allegedly unfair pricing schemes such as “drip pricing” whereby, particularly with online purchases, all fees and charges related to the purchase are not stated when the customer begins shopping.

As of July 1, 2024, new section 1770(a)(29)(A) to the Civil Code will forbid, “Advertising, displaying or offering a price for a good or service that does not include all mandatory fees or charges” other than government-imposed taxes or fees, and postage and shipping fees.

The law is not specific to any particular industry, however, it is most likely that Plaintiff’s lawyers will use this new section to sue vehicle dealers. CLRA Demand Letters and Lawsuits can be expected if the additional fee is not properly disclosed to the consumer. This does not mean that previously determined illegal fees can become legal by virtue of disclosure.

What Must You Do?

You are ultimately responsible for your advertisements and the disclosures in them. You cannot rely on your third-party web site vendor in making the disclosures for you. A simple “plus other fees” will probably not be sufficient. A better practice would be to specifically list the fee and the amount and make sure the consumer can easily see it. Make sure the amount listed in the advertisement is the same amount that appears on the Sales Contract.

A detailed review of your advertisement and business practices is a must to make sure that your advertisement matches your business practice. A good rule of thumb is that if there is a fee you are charging, which is not listed on the pre-contract optional products disclosure, then it should be listed in your advertisement.

What If I don’t advertise the Price online?

If you don’t advertise the price online, then the very first place that a price is disclosed, all mandatory fees should be disclosed. If there is any price on your vehicle, then all fees should also be shown on the vehicle at the same time.

How Serious Is This?

This is a very serious matter which could result in the shutting down of your business. Once it is determined that your regular business practice (intentional or not) was to charge mandatory fees to customers without disclosing them on your advertisements, you could be sued for:

● Class Action Lawsuit: This could affect all your sales for at least the previous three years. In other words you might lose all your sales from the previous three years.

● Rescission and Restitution: The customer could ask for rescission of the contract and to return the vehicle. The statute of limitations is at least three years, so you might end up having to accept the return of the vehicle after it has been used for up to three years, and to give back the customer all they paid for the vehicle.

● Consequential and Incidental Damages: In addition to returning the customer's monthly payments and down payment, you may have to pay the customer any repairs they made to the vehicle, insurance payments, and DMV fees and registrations post sale.

● Attorney’s Fees and Costs: Oftentimes, the amounts paid in Plaintiff’s attorney’s fees is more than the price of the car.

● Injunction: In addition to all amounts paid, the Court issues an order against you.

How Can I Protect Myself Against Claims That All Fees were listed in the Advertisement?

As with any other document you have customers sign such as a Carfax or Auto Check, you should print a copy of the advertisement and have the customer sign and date it.

As you may know, consumers sometimes claim that a document was blank when the customer signed it or that the signature is a forgery. In order to prevent these types of claims, you can use the system such as SafeDealsAI, take a photo of the web site or advertisement of the vehicle, which shows the advertised price and disclosures. These photos will be acknowledged by the customer along with their photo, which will make it more difficult for a plaintiff’s lawyer to pursue such a claim.

As our valued members, we try to bring you information that is relevant to your business. For more information or to schedule a consultation, please contact Auto Legal Group today. We are here to help you manage these new requirements and to provide protection before serious harm threatens your business.