Informal Dispute Resolution

by Deb Murphy on September 16, 2008

Negotiating a Deal

Before you get all excited at the prospect of resolving your lemon issue with the manufacturer in an informal setting, be warned. The rules of this game were written by the federal government and are about as “informal” as a black-tie gala and not nearly as much fun.

Informal Dispute Resolution Background

The logic is fairly seamless. The Magnuson-Moss Act required manufacturers to back up their warranties. It was determined that civil lawsuits could be both expensive and time-consuming for the average person, but a less formal mechanism would be available to everybody. Congress figured out that if they allowed manufacturers to require participation by complainants in an Informal Dispute Resolution (IDR), the rules governing the procedure had to be fair. And so, the Federal Trade Commission (FTC) came up with what has been described as “elaborate and burdensome rules.”

IDRs are supposed to be independent third parties such as the Better Business Bureau Auto Line. However, the Auto Line is funded by 25 car manufacturers. An article in the American Bar Association compared the situation to a “wolf guarding the chicken coop.” That same article indicated that in 1993, 25 percent of manufacturer-funded IDR decisions granted consumers replacements or refunds while state-run arbitration programs granted replacements or refunds in 65 percent (Washington), 50 percent (Florida) and 48 percent (New York) of the cases.

Regardless of the rhetoric, if your state’s lemon law supports a manufacturer’s requirement that you participate in an IDR, you will be able to judge its fairness. The important thing to remember is that these IDRs are not binding on consumers. If you’re not satisfied with the arbitrator’s decision, you can file a civil lawsuit.

Here’s a quick run-down of the IDR rules:

  • Adequately funded and staffed in order to resolve disputes quickly
  • Free of charge to consumers
  • Settle disputes without influence from the parties involved
  • Follow written procedure
  • Inform both parties when it receives notice of a dispute
  • Investigate and organize information necessary to decide the dispute fairly
  • Each party has an opportunity to present its case and rebut points made by the other party
  • Reach a decision and inform both parties within 40 days of receipt of notice of the dispute
  • Provide the reasons behind the decision
  • Decisions are not binding on either party (however, manufacturers often agree to be bound)
  • Keep complete records
  • Be audited for compliance with the rules.

Independent IDR

If your lemon’s manufacturer uses BBB Auto Line, here’s what to expect. Because the rules governing non-optional IDRs are the same, so are the procedures whether they’re administered by independent third parties or states. We’ll give you a more thorough run-down of the Auto Line process, then skim through the IDR administered by Texas.

  • You call BBB Auto Line (800-955-5100) and request an information packet that explains the procedure and includes a claim form. You fill out and return the form, following the instructions provided.
  • Auto Line staff investigates your claim, opens your case and forwards the claim form to the manufacturer.
  • You may be contacted by a manufacturer’s representative. You can attempt to reach a settlement alone or be assisted by Auto Line staff. Auto Line will make an effort to resolve the dispute at this level.
  • A pre-hearing settlement conference may be held over the phone. If no settlement is reached, you move to arbitration.
  • Arbitration is less formal than a hearing, but contains many of the same elements. You can bring a lawyer to this procedure, heard by an impartial third party.
  • Depending on the state laws, an impartial technical expert may review the problem and present a report at the arbitration.
  • In preparation for the arbitration, gather your documentation on your vehicle’s journey through lemondom.
  • You will have an hour to present your case and your witnesses. You will also have an opportunity to question the manufacturer’s witnesses and rebut any testimony presented by the other side. Obviously, the manufacturer has the same opportunities with you and your witnesses.
  • Potential witnesses may include mechanics or sales personnel. They can either appear in person or submit written statements.
  • The arbitrator will have a chance to question both sides to clarify the issues.
  • Your evidence should include proof of your vehicle’s problem, why that problem is the responsibility of the manufacturer, why you’re not responsible for the problem, how the problem represents an impairment to the use, value or safety of the vehicle and that the manufacturer and dealer have had ample opportunity to correct the defect.
  • In addition to your documentation, you may want to bring other documents that support your case, photos, consumer group information, brochures and technical information or newspaper/magazine articles.
  • The arbitrator will present his decision—either a final decision for reimbursement, replacement or nothing, or an interim decision requiring a repair to be performed within a 30-day period.
  • If you’re not satisfied with the decision, there are remedies. You can ask the arbitrator to clarify or correct the decision or you can simply reject it.
  • If you reject the decision, the last recourse is to file suit in the civil courts.

Automakers in the BBB Auto Line Program:

  • Acura
  • AM General
  • Audi
  • Buick
  • Cadillac
  • Chevrolet
  • Ford
  • GMC Truck
  • Oldsmobile
  • Pontiac
  • Honda
  • Hyundai
  • IMS
  • Infiniti
  • Isuzu
  • Kia
  • Lincoln
  • Lotus
  • Land Rover
  • Mazda
  • Mercury
  • Nissan
  • Saab
  • Saturn
  • Volkswagen

State-Run IDR

If you live in Texas, you might be in luck. The state’s IDR procedure resulted in 62.5-percent of the claims bringing relief to consumers, to the tune of $5.9 million, in 2002. We’ll use the Texas Department of Transportation (DoT), Motor Vehicle Division procedure outline as an example of state-run programs. We’re leaving out some of the detail in each step where it mirrors the BBB Auto Line process. Again, check your state lemon laws to verify what is required and/or available.

  • Complaints are filed in writing using the form available in the procedure booklet.
  • The DoT contacts the manufacturer and dealer.
  • The manufacturer may send a factory expert to the dealership to identify and, hopefully, fix the problem.
  • If that doesn’t work, the DoT rep can send its own expert to meet with all parties. In many cases, the problem is resolved at this stage, within 30 to 60 days of the original complaint.
  • If that doesn’t work, a hearing is scheduled.
  • The hearing is heard by an administrative law judge (ALJ) with a format and procedures similar to a small claims court hearing. It follows a process similar to that of the independent IDR procedure, but is more formal.
  • The DoT issues a decision, including the ALJ’s summary, findings and conclusions of law, after the hearing.
  • If you win, the ALJ orders a refund, replacement or repair.
  • If you lose, you can file a motion for rehearing within 20 days after you receive the decision.
  • If you’re denied the rehearing, you can appeal.
  • If that doesn’t work, you can file a lawsuit.

If you suspect your vehicle is a lemon, contact us using the form on the right and we’ll help you find a lemon lawyer.

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