CAR DEALERSHIP RIPOFF: MANDATORY BINDING ARBITRATION AGREEMENT

Car dealerships have yet another way to rip you off – mandatory binding arbitration agreements. Today, mandatory arbitration agreements are frequently found in financing contracts and car dealership contracts for new and used cars.

What is arbitration?

Arbitration is also known as an “alternative dispute resolution” method where, instead of suing in court, two parties agree to present their claims and have their dispute settled by a neutral arbitrator or arbitration panel.

What is mandatory binding arbitration?

In mandatory binding arbitration, companies like car dealerships require consumers to sign contracts with a mandatory binding arbitration agreement  in the contract where the consumer agrees to give up their right to sue in court and are bound to use the arbitration process to settle any future disputes.

Why is mandatory binding arbitration bad for consumers?

Arbitration agreements are designed to preserve the seller’s right to sue consumers in court while preventing consumers from suing sellers in court by binding them to mandatory arbitration. Arbitration supporters say that arbitration proceedings are faster and more cost efficient than handling disputes in the court system. However, arbitration supporters fail to consider that the secrecy of arbitration proceedings hides fraudulent and unethical companies from public knowledge.  Further, arbitration businesses often claim to be fair and impartial to consumers like the now defunct National Arbitration Forum that was sued in 2008 by the City of San Francisco for running an “arbitration mill, [and] churning out arbitration rewards in favor of debt collectors… without regard to whether consumers actually owe the money sought.”

To keep your legal rights, consumers should only purchase cars from dealerships and financing companies that utilize a fair consumer contract that does not contain a mandatory binding arbitration agreement.

8 Ways Car Dealerships Use Mandatory Arbitration Agreements To Rip Off Consumers:

  1. Consumers usually do not know they are agreeing to a mandatory binding arbitration agreement – Consumers usually sign a ton of paperwork when they are ready to buy, sign and drive their new car home. Dealers use different tactics to keep consumers from making an informed decisions such as, hiding mandatory arbitration agreements in fine print or at the end of contract, briefly mentioning the arbitration agreement late in the signing process, or not mentioning the mandatory binding arbitration agreement to the consumer at all.
  2. Arbitration follows Arbitrary laws and procedures – Arbitration does not follow court procedures that are set in place to ensure fairness. For example, “discovery” is used in courts to ensure complete information for opposing parties by allowing parties to request information from the other party, is not followed in arbitration. As a result, consumers disputing their defective car are often not able to request information from dealerships and car manufacturers to support their claim. If the right to obtain documents is available, consumers sometimes must pay for the document production.
  3. Consumers are bound to arbitration but not dealerships – many mandatory arbitration agreements are written so that the seller retains the right to sue in court while consumers can only use arbitration for settling disputes.
  4. Dealerships Choose the Arbitration Company – Although arbitrators are supposed to be neutral, their bias may be with business clients because the arbitrators income is dependent on businesses choosing their company for arbitration. For example, the now defunct National Arbitration Forum, which provided arbitration services for various states, always ruled in favor of businesses when the business filed the claim with National Arbitration Forum.   
  5. Consumers Fight Blind – Even though a consumer lacks the necessary evidence from the car dealership and manufacturer to support their claim, arbitrators will proceed with the arbitration.
  6. Arbitrators Not Legally Trained – Consumers face a high risk of arbitrators misunderstanding and misapplying the law since arbitrators are not required to have legal training.
  7. Consumers are required to bring the defective car to arbitration – A defective car becomes a lemon if  the defect exists during the time period that the law provides. The condition of the defective car at the time of arbitration is irrelevant and a burden for consumers. “It’s fixed now” is not a valid defense to the lemon law. However, arbitrators can, and do require consumers to bring the car to arbitration for a test drive, regardless of the consumer having already met their legal burden.
  8. Consumers always pay legal fees – win or lose. Currently, there are no mechanisms for consumers to recover legal fees, even if they win!

2 Ways To Protect Yourself from Mandatory Binding Arbitration

  1. Read all documents for a mandatory binding arbitration agreement before signing anything.
  2. Ask dealerships if they require mandatory binding arbitration agreements. If the dealership requires an agreement, then do not sign anything, tell them why you refuse to buy a car from them, and take your business elsewhere.

Protect Your Lemon Law Rights

The bottom line is, defective cars are expensive and fighting for your consumer rights under New York can be complicated.  Make sure you get everything in writing and keep all of the documents from the deal.  If your car keeps on breaking down despite repeated repairs, check your warranty coverage. If it doesn’t make sense, have them explain it.  If you think you are being taken advantage of or if the car is having problems that just don’t seem right for a car you just bought, contact a lawyer because you may be able to do something about it.

For more information or to schedule a consultation, please email me at David@KasellLawFirm.com or call (718) 404-6668. I look forward to working with you!

 

This material may be viewed as attorney advertising and does not constitute legal advice. This information does not create an attorney-client relationship between you and the author. This article strictly represents the personal views of the author on the date it was written and such views are subject to change without notice. 

FEDERAL PROTECTION FOR DEFECTIVE CARS NOT COVERED BY NEW YORK LEMON LAW: THE MAGNUSON-MOSS WARRANTY ACT

After many expensive auto repair bills and wasted company time at the mechanic’s, your car is certainly a “lemon”. Does your defective commercial or personal car fall outside the protections of New York’s Lemon law? The federal Magnuson-Moss Warranty Act may offer protection for consumers with defective cars that do not qualify as a “lemon” under New York state law. Further, the federal lemon law act can better assist commercial consumers with defective cars used for commercial rather than personal use because New York’s Lemon law does not apply to commercial vehicles. Now is the time to act!

What is the Magnuson-Moss Warranty Act?

Magnuson-Moss is a federal law that protects consumers that purchase any product that costs more than $25 and has a written warranty. A warranty is a promise from a manufacturer or seller that a product is sound, that the manufacturer or seller guarantees to correct product failures. Under the federal act, Manufacturers and Sellers that provide written warranties on consumer products must provide consumers with detailed information about warranty coverage and allow consumers the opportunity to compare warranty coverage before buying the product.

How does the federal Magnuson-Moss Act apply to car consumers?

To qualify under the Magnuson-Moss Act, a vehicle purchaser must have a written warranty on their car that is still defective despite numerous repairs, in order to sue the manufacturers for breach of warranty. Unlike New York lemon law, the federal lemon law does not place mileage restrictions on cars for consumers to obtain protection. In other words, the Magnuson-Moss Act offers protection to consumers with car defects outside of the New York Lemon law provisions.

Does New York Lemon law apply to my car?

New York Lemon Law has a four year statute of limitations from the delivery date of the car to the start of a filing a claim under the law. Consumers should check if their new or used car is protected subject to limitations of New York Lemon law listed below:

New Cars Covered by NY Lemon Law Used Cars Covered by NY Lemon Law
  • Covered by a warranty at original delivery;
  • Was purchased, leased or transferred within the earlier of 18,000 miles or two years from the date of original delivery; AND
  • Was either purchased, leased or transferred in New York State or is presently registered in the state; AND
  • Is used primarily for personal purposes.
  • At least 4 repairs or 30 days out of service within 18,000 miles or 2 years, whichever comes first.
  • Purchased, leased or transferred after the earlier of 18,000 miles or two years from original delivery; AND
  • was purchased or leased from a New York dealer; AND
  • had a purchase price or lease value of at least $1,500; AND
  • has been driven less than 100,000 miles at the time of purchase/lease; AND
  • is used primarily for personal purposes.
  • 3 repairs; or 15 days out of service within:
    • 90 days or 4,000 miles for vehicles with 18,001 – 36,000 mile at time of delivery.
    • 60 days or 3,000 miles for vehicles with 36,001 – 79,999 miles at time of delivery.
    • 30 days or 1,000 miles for vehicles with 80,000 – 100,000 miles at time of delivery.

Protect Yourself and Your Lemon Law Rights

The bottom line is, defective cars are expensive and fighting for your consumer rights under New York or federal law can be complicated.  Make sure you get everything in writing and keep all of the documents from the deal.  If your car keeps on breaking down despite repeated repairs, check your warranty coverage. If it doesn’t make sense, have them explain it.  If you think you are being taken advantage of or if the car is having problems that just don’t seem right for a car you just bought, contact a lawyer because you may be able to do something about it.

For more information or to schedule a consultation, please email me at David@KasellLawFirm.com or call (718) 404-6668. I look forward to working with you!

This material may be viewed as attorney advertising and does not constitute legal advice. This information does not create an attorney-client relationship between you and the author. This article strictly represents the personal views of the author on the date it was written and such views are subject to change without notice.