The Real Cost of Adding a Fee to a Customer’s Card Payment

Dealerships like offering options. When a customer wants to use a credit card, it feels natural to say yes. The problem is not the card. California dealers can accept credit cards without much issue. The real trouble starts when a store tries to charge the customer extra for using that card.

Adding even a small surcharge can turn a clean deal into a compliance problem. It can also upset lender agreements, create chargeback exposure, and open the door to claims under the Rees Levering Act. Understanding why helps your store prevent costly mistakes.

The Law Treats Credit Card Fees as Part of the Buyer’s Payment Obligations

Whenever a vehicle is sold with financing, the customer’s entire financial obligation must be laid out in one document. California calls this document the sales contract. It is a mandatory form with fixed fields. There is no line where a dealer can place a credit card fee, convenience fee, or bank charge tied to the payment method.

If a dealer adds that fee somewhere else, such as a supplemental form or disclosure sheet, the structure of the contract breaks down. The Single Document Rule requires that all payment obligations appear in one document only. A fee documented anywhere outside the sales contract becomes a violation, even if the customer signed off.

Why Lenders View Card Surcharges as a Red Flag

Lender agreements are central to the dealership business model. Nearly all of them prohibit dealers from charging the buyer extra fees tied to the extension of credit. A card surcharge falls into that category.

If a lender reviews a deal and discovers that a surcharge was added because the customer paid with a credit card, the dealer can face full recourse. That means the store absorbs the loss if the buyer defaults. A fee of a few dollars is never worth that level of risk.

Chargebacks Become Harder to Fight When a Fee Is Involved

A simple card payment usually causes no problems. The trouble arrives when the customer challenges the charge. Credit card disputes favor the customer unless the dealer provides clear, prompt documentation.

When a surcharge has been added:

• The card processor looks for proof that the fee is part of the agreed payment terms
• The sales contract will not contain the fee
• The separate form used to disclose the fee is usually not accepted
• The card company reverses the charge

The dealership ends up with a chargeback. The customer still has the vehicle. If the contract has already been assigned, the dealer may also have violated its lender agreement by failing to collect the correct amount.

How Surcharges Create Avoidable Liability

A simple fee can trigger:

• Sales contract defects
• Rees Levering Single Document Rule violations
• Arguments that the buyer was misled about pricing
• Funding delays
• Contract unwinds
• Recourse claims
• Attorney involvement that drains time and resources

These outcomes cost far more than any processing fee a dealer hoped to recover.

The Cleanest, Safest Method for Handling Card Payments

Dealers who want to stay compliant keep their process simple:

• Accept the card if you are comfortable
• Do not add a surcharge or convenience fee
• Record the payment like any other buyer funds
• Confirm lender policies before finalizing the transaction

This protects your store on compliance, keeps lenders satisfied, and avoids disputes that can turn a funded deal into a loss.

Build a Policy That Keeps Everyone on Track

A short written policy for your sales and finance teams is the easiest way to prevent problems. When everyone understands that credit cards are fine but credit card fees are not, your dealership avoids unnecessary exposure.

Click here for a COMPLIMENTARY CONSULTATION AND WRITTEN internal policy FORM you can circulate to your entire staff.