DMV adds late fees and penalties after drivers register their cars with e-checks

SAN JOSE, Calif. (KGO) -- It's happened to several 7 On Your Side viewers. They renew their registration on the DMV website, receive a confirmation of payment -- and even get their new registration card and sticker in the mail. But then, a month later, they're hit with a demand for payment plus late fees and penalties -- and no idea why.

"To be quite honest, I didn't believe it. I thought it was a scam," Terri Brown of San Jose said.

Brown's ordeal began two years ago when she paid for her car registration online.

She got a receipt, the DMV mailed her registration stickers and everything seemed fine -- but weeks later, she got a letter from the DMV, demanding payment plus late fees and penalties.

Brown thought it was a fake.

"I even took it to my mom. I said, 'Mom, look how good these guys are getting at scamming,'" said Brown.

But it was real. The DMV notice said the electronic check she submitted was no good, even though the DMV receipt said "successful payment." Now, she had to pay $148 in late fees and penalties.

"I had to go get a cashier's check and go in person to the DMV. And I thought the issue was over," said Brown.

But it wasn't. The same thing happened when Brown renewed online again. She paid by e-check, got her registration and stickers -- but weeks later the DMV sent this demand for payment plus penalties, saying her e-check bounced.

"I just couldn't believe that it was the same thing -- got the successful payment received, my registration stickers. And now I'm being charged this astronomical, you know, late fee, which, like I said, the system is broken," said Brown.

Brown says the DMV should have notified her right away if the check didn't go through, instead of waiting until she was hit with late fees.

"I can't imagine how much money they're pulling in with these 60% penalties," said Brown.

"I felt that this was very very odd and misleading, even fraudulent,'' Alex Lee of Saratoga.

The same thing happened to Lee. He paid with an e-check, got a receipt for payment -- and the DMV sent his registration, then -- the shock.

"I'm sorry, your, your payment actually didn't go through and now you owe us a late payment fee," said Lee.

The DMV said he now owed $457 and could only pay by cashier's check or money order.

So Alex mailed the payment -- but instead of a renewal, he got a final demand for payment, threatening to seize his car!

"Double the amount, and also your registration might get locked and forfeited. And I just, and I was scratching my head, like, this is ridiculous," said Lee.

Turns out both Lee and Brown had mistakenly entered their savings account numbers, which won't generate an e-check. The DMV acknowledged its online payment system was accepting payments even if an account number was invalid -- and it mailed out registration cards anyway, quote, "as a courtesy to the customer." But customers said late fees were anything but a courtesy.

"If this was a private company I would think it was purposeful," said Lee. "It's kind of a bit over the top to just threaten to take away my car. And the system is very outdated."

However, after 7 On Your Side's inquiries, the DMV changed the e-check system to flag incorrect account numbers.

It also refunded late fees for Brown and Lee, and several others who came to 7 On Your Side for help, saying: "As soon as the DMV became aware of the increase in the number of customers inconvenienced by this issue, the department took action to further improve the e-check payment process and address customer complaints."

The DMV did not say how many customers were hit with unwarranted late fees but promised refunds for those who thought their payment went through. If it happened to you, contact 7 On Your Side.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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