1. (a) Generally. When reviewing a seller's documentary fee increase for reasonableness under Texas Finance Code, §348.006(e), the commissioner may consider the resources required by the seller to perform the seller's duties under state and federal law with respect to the handling and processing of documents relating to the sale and financing of a motor vehicle. This section only applies to retail sales as defined by the Texas Transportation Code. A documentary fee may only include costs that are imposed uniformly in cash and credit transactions.
2. (b) Permissible documentary fee costs. For a cost to be included in a documentary fee, a cost must directly relate to the retail seller's handling and processing of documents for the sale and financing of a motor vehicle in compliance with state and federal law.
3. (c) Costs relating to sale of motor vehicle. For a cost to be included in a documentary fee, the cost must be incurred either concurrently or after the negotiation and preparation of the buyer's order, the bill of sale, or the purchase agreement and must directly relate to the sale of a motor vehicle. Any costs or resources expended prior to the negotiation and preparation of the buyer's order, the bill of sale, or the purchase agreement may not be included in the documentary fee. The cost may also directly relate to the evaluation by the retail seller of the creditworthiness of the retail buyer, the completion of the retail installment sales contract by the retail seller, or the perfection of the lien against a motor vehicle.

4. (d) Costs excluded.

   1. (1) Generally. A documentary fee may not include any costs or resources expended after the title of a purchased motor vehicle is actually transferred or when the title is legally obligated to have been transferred, whichever is earlier. If the sale includes a trade-in vehicle, the documentary fee may not include costs or resources expended after the title of the trade-in is actually transferred or when the title is legally obligated to have been transferred, whichever is earlier.
   2. (2) Costs associated with negotiation or assignment of contract. The retail seller cannot include any costs associated with either the negotiation of or the assignment of the retail installment sales contract to another financial institution or related finance company.
   3. (3) Costs of credit evaluation by other parties. A retail seller may not include the cost of any resource or expense in the documentary fee analysis that relates to the evaluation of the creditworthiness of the prospective retail buyer by an entity that may purchase the underlying retail installment sales contract.
   4. (4) Other excluded costs. The retail seller may not include any costs associated with advertising, the retail seller's credit arrangements for the purchase of its inventory, the processing of manufacturer or distributor's rebates, the compensation of a person for the sale of the motor vehicle, the price of any report on the condition or history of the motor vehicle to be purchased or traded-in, or the cost associated with the disbursement of money (i.e., certified checks or capital expenses). A retail seller cannot increase any authorized charge or expense from a third party associated with the documentary fee. A documentary fee may not include the cost of preparing the Truth in Lending disclosure statement or any other cost that would be considered a finance charge under the Truth in Lending Act (15 U.S.C. §§1601-1667f).

5. (e) Reasonable documentary fee.

   1. (1) To be reasonable, a documentary fee cannot exceed the amount necessary to cover the cost of performing the processing and handling of the documents required for the sale and financing of a motor vehicle.

   2. (2) To be considered reasonable, proposed costs must meet three critical tests:

      1. (A) Allowable. For a cost to be allowable, it must meet the following criteria:

         1. (i) be necessary for the proper and efficient sale and financing of a motor vehicle;
         2. (ii) be authorized or not prohibited under local, state, or federal laws or regulations or be necessary in order to comply with a local, state, or federal law or regulation;
         3. (iii) be determined in accordance with generally accepted accounting principles; and
         4. (iv) be adequately documented, including any applicable credits.
      2. (B) Allocable. Allocable costs are logically related to, or required in the performance of the handling and processing of documents relating to the sale and financing of a motor vehicle. In determining whether a cost is allocable, consideration will be given to whether the goods or services involved are chargeable or assignable to the objective of processing and handling of the documents required for the sale and financing of a motor vehicle in accordance with relative benefits received.

      3. (C) Prudent business person. The prudent business person standard is the amount a prudent business person would pay in a competitive marketplace. A cost can be allowable and allocable, and still not be what a prudent business person would pay (e.g., hiring a limousine to deliver documents). In determining whether a given cost is prudent, consideration will be given to:

         1. (i) whether the cost is of a type generally recognized as ordinary, customary, and necessary for the processing and handling of the documents for the sale and financing of a motor vehicle;
         2. (ii) the restraints or requirements imposed by such factors as sound business practices, arms-length bargaining, and federal, state and other laws and regulations;
         3. (iii) market prices for comparable goods or services; and
         4. (iv) the necessity for the cost.
   3. (3) The Office of Consumer Credit Commissioner will review any written notice of an increased documentary fee over $125 provided by a seller. The review may include an analysis of the resources required by the seller to perform the seller's duties under state and federal law with respect to the handling and processing of documents relating to the sale and financing of a motor vehicle. The review may result in a determination of the maximum amount of a documentary fee that a specific seller may charge. A retail seller must comply with the Truth in Lending Act when disclosing a documentary fee in cash and financed transactions.
6. (f) Reduction or suspension of unreasonable documentary fee. The commissioner may order a seller to reduce its documentary fee to a reasonable amount retroactively. The order to reduce a documentary fee retroactively will require the seller to provide restitution to all retail buyers who were charged a fee in excess of the amount the commissioner determines to be reasonable over $125. The commissioner may also suspend by order a seller's ability to charge any documentary fee above $50 for a specified period of time.

Source Note:The provisions of this §84.205 adopted to be effective March 14, 2010, 35 TexReg 1956.