February 28, 2003
LEMON LAW FILING FEE AND LEMON LAW SURCHARGE
By: Daniel Duffy, Principal Analyst
You asked why a consumer is charged both a $50 filing fee when seeking Lemon Law arbitration from the Department of Consumer Protection (DCP) and a $3 surcharge when buying a new car.
Both the filing fee and the surcharge were established to cover the costs of the Lemon Law program.
The $50 filing fee was set when DCP-run Lemon Law arbitration program was established in 1984. The reason for the fee was discussed in an OLR report written during the legislative session, at the Appropriations Committee public hearing on the bill, and during the House debate.
Governor Rowland proposed the $3 surcharge in 2001 as part of the legislative package accompanying his proposed budget. DCP Commissioner Fleming testified for the bill in 2001 to the Appropriations Committee and said that the purpose of the surcharge was to cover the administrative cost of the Lemon Law program. He did not mention the $50 filing fee.
The $50 filing fee was set in 1984 when DCP-administered arbitration panels were established to consider consumers' lemon law complaints. An OLR report describing proposed revisions to the legislation written during the session discusses the filing fee. “Upon receipt of the request [for arbitration], DCP would mail out a form inquiry for detailed information which the consumer would have to return within five days, together with an arbitration filing fee of $50…All fees received would be earmarked to defray the administrative costs of the DCP program through a fund to be known as the Automobile Dispute Settlement Fund” (OLR Report 84-R-0229).
Representative Polinsky and DCP Commissioner Heslin discussed the fund at an Appropriations Committee public hearing. Polinsky said that she understood that the bill would set up “sort of a revolving fund.” Heslin replied that she knew “that the term is taboo but it would operate pretty much on the same principle” (Appropriations Committee Hearing, February 23, 1984, p. 867).
The bill, as reported to the floor (File 868), included the $50 filing fee but did not establish a separate fund. During the House debate on the bill, Representative Neumann noted that he was not satisfied with the Appropriations Committee discussion about the bill. He said that the bill included “a need for expenditures and there are also offsetting fees.” He stated that his concern was “that the $100,000 appropriation to run this would not be covered by fees.”
In the final form of the legislation, the $50 filing fee remained but the special fund was not established. It is reasonable to infer that the legislature established the filing fees to pay for the program without seeing a need to establish a special non-appropriated fund. The fiscal note on the bill validates this inference. The note, prepared by the Office of Fiscal Analysis, stated both annualized costs of $87,000 to administer the program and annualized revenue of $210,000 to $270,000 generated by filing fees.
Governor Rowland proposed the $3 surcharge on all new motor vehicles sold in the state in 2001 as part the legislative package accompanying his budget proposal (SB 1156). In the budget summary for the Department of Consumer Protection, the proposal is simply described as “Fund the State-run Lemon Law Arbitration Program from Required Automobile Manufacturer Contributions” The budget documents states that, “Automobile manufacturers are using the State Program for automobile consumer disputes rather than establish[ing] their own program as was the intent of the original lemon law legislation.” The document does not state that consumers would pay the surcharge or mention the $50 filing fee.
DCP Commissioner Fleming supported the bill during the Appropriations Committee hearing on the department's budget. “The Governor is also recommending revisions to the lemon law arbitration funding mechanism….[The original] bill, as a matter of fact I voted for it, but that bill was designed, really, to be funded not so much by the general fund but really by the buying public, those people who are purchasing automobiles. So what the Governor has asked the Legislature to do is to change the funding mechanism which will place a $3 fee on each new car that is purchased in Connecticut and then those dollars would be used to fund the lemon law program. So I think it makes sense.” In response to a question about the revenue generated by the surcharge, Fleming stated, “There are about 200,000 new cars presently sold in the state so it's going to be somewhere between $600,000 and $700,000 if the legislature agrees to set it at $3. That would more than cover the cost associated with the arbitration. Given our past history of arbitration, that would be more than adequate” (Appropriations Committee Public Hearing, February 21, 2001).
Although SB 1156 died during the session, its provisions were incorporated into An Act Concerning The Expenditures Of The Office Of Policy And Management (HB 7507, §§ 23 & 24).