Can an automotive
dealership void your warranty?
Understanding the Magnuson-Moss Warranty act of 1975.
Nearly everyone has heard about someone
who has taken a vehicle that has been modified with aftermarket parts to a dealer for
warranty service, only to have the dealer refuse to cover the defective items. The dealer
usually states that because of the aftermarket parts the warranty is void, without even
attempting to determine whether the aftermarket part caused the problem.
This is illegal.
Vehicle manufacturers are not allowed to
void the vehicle warranty just because aftermarket parts are on the vehicle. To better
understand this problem it is best to know the differences between the two types of new
car warranties and the two types of emission warranties.
When a vehicle is purchased new and the
owner is protected against the faults that may occur by an expressed warranty - an offer
by the manufacturer to assume the responsibility for problems with predetermined parts
during a stated period of time. Beyond the expressed warranty, the vehicle manufacturer is
often held responsible for further implied warranties. These state that a manufactured
product should meet certain standards. However, in both cases, the mere presence of
aftermarket parts doesn't void the warranty.
There are also two emission warranties
(defect and performance) required under the clean air act. The defect warranty requires
the manufacturer to produce a vehicle which, at the time of sale, is free of defects that
would cause it to not meet the required emission levels for it's useful life as defined in
the law. The performance warranty implies a vehicle must maintain certain levels of
emission performance over it's useful life. If the vehicle fails to meet the performance
warranty requirements, the manufacturer must make repairs at no cost to the owner,
even if an aftermarket part is directly responsible for a warranty claim, the vehicle
manufacturer cannot void the performance warranty. This protection is the result of a
parts self - certification program developed by the Environmental Protection Agency (EPA)
and the Specialty Equipment Market Association (SEMA).
In cases where such a failed aftermarket
part is responsible for a warranty claim, the vehicle manufacturer must arrange a
settlement with the part manufacturer, but by law the new - vehicle warranty is not
voided.
Overall, the laws governing warranties are
very clear. The only time a new vehicle warranty can be voided is if an aftermarket part
has been installed and it can be proven that it is responsible for an emission warranty
claim. However, a vehicle manufacturer or dealership cannot void a warranty simply because
an an aftermarket equipment has been installed on a vehicle.
If a dealership denies a warranty claim
and you think the claim falls under the rules explained above concerning the clean air act
(such as an emission part failure), obtain a written explanation of the dealers refusal.
Then follow the steps outlined in the owners manual. However, if this fails, then phone
your complaint in to the EPA at (202) 233-9040 or (202) 326-9100.
If a dealer denies a warranty claim
involving an implied or expressed new car warranty and you would like help, you can
contact the Federal Trade Commission (FTC). The FTC works for the consumer to prevent
fraudulent, deceptive and unfair business practices in the marketplace and to provide
information to help consumers spot, stop and avoid them. To file a complaint, you can call
toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online
complaint form. The FTC enters Internet, telemarketing, and other fraud-related
complaints into Consumer Sentinel, a secure, online database available to hundreds
of civil and criminal law enforcement agencies worldwide.
WHAT IS THE MAGNUSON-MOSS WARRANTY ACT?
On January 4, 1975, President Ford signed
into law the Magnuson-Moss Warranty Act, Title 1, 101-112, 15 U.S.C.
2301 et seq. This act, effective July 4, 1975, is designed to "improve the
adequacy of information available to consumers, prevent deception, and improve competition
in the marketing of consumer products. . . ." The Magnuson-Moss Warranty Act applies
only to consumer products, which are defined as "any tangible personal property which
is distributed in commerce and which is normally used for personal, family, or household
purposes (including any such property intended to be attached to or installed in any real
property without regard to whether it is so attached or installed)." Under Section
103 of the Act, if a warrantor sells a consumer product costing more than $15 under
written warranty, the writing must state the warranty in readily understandable language
as determined by standards set forth by the Federal Trade Commission. There is, however,
no requirement that a warranty be given nor that any product be warranted for any length
of time. Thus the Act only requires that when there is a written warranty, the warrantor
clearly disclose the nature of his warranty obligation prior to the sale of the product.
The consumer may then compare warranty protection, thus shopping for the "best
buy." To further protect the consumer from deception, the Act requires that any
written warranty must be labeled as either a "full" or a "limited"
warranty. Only warranties that meet the standards of the Act may be labeled as
"full." One of the most important provisions of the Act prohibits a warrantor
from disclaiming or modifying any implied warranty whenever any written warranty is given
or service contract entered into. Implied warranties may, however, be limited in duration
if the limitation is reasonable, conscionable, and set forth in clear and unmistakable
language prominently displayed on the face of the warranty. A consumer damaged by breach
of warranty, or noncompliance with the act, may sue in either state or federal district
court. Access to federal court, however, is severely limited by the Act's provision that
no claim may be brought in federal court if: (a) The amount in controversy of any
individual claim is less than $25,000; (b) the amount in controversy is less than the sum
or value of $50,000 computed on the basis of all claims in the suit; or (c) a class action
is brought, and the number of named plaintiffs is less than 100. In light of these
requirements it is likely that most suits will be brought in state court. If the consumer
prevails, he is awarded costs and attorneys' fees. Nothing in the Act invalidates any
right or remedy available under state law, and most suits should proceed on claims based
on both the Code and the Act.
Understanding the Magnuson-Moss Warranty Act
The Magnuson-Moss
Warranty Act is the federal law that governs consumer product warranties. Passed by
Congress in 1975, the Act requires manufacturers and sellers of consumer products to
provide consumers with detailed information about warranty coverage. In addition, it
affects both the rights of consumers and the obligations of warrantors under written
warranties.
To understand the Act, it is useful to be
aware of Congress' intentions in passing it. First, Congress wanted to ensure that
consumers could get complete information about warranty terms and conditions. By providing
consumers with a way of learning what warranty coverage is offered on a product before
they buy, the Act gives consumers a way to know what to expect if something goes wrong,
and thus helps to increase customer satisfaction.
Second, Congress wanted to ensure that
consumers could compare warranty coverage before buying. By comparing, consumers can
choose a product with the best combination of price, features, and warranty coverage to
meet their individual needs.
Third, Congress intended to promote
competition on the basis of warranty coverage. By assuring that consumers can get warranty
information, the Act encourages sales promotion on the basis of warranty coverage and
competition among companies to meet consumer preferences through various levels of
warranty coverage.
Finally, Congress wanted to strengthen
existing incentives for companies to perform their warranty obligations in a timely and
thorough manner and to resolve any disputes with a minimum of delay and expense to
consumers. Thus, the Act makes it easier for consumers to pursue a remedy for breach of
warranty in the courts, but it also creates a framework for companies to set up procedures
for resolving disputes inexpensively and informally, without litigation.
What the Magnuson-Moss Act Does Not Require
In order to understand how the Act affects you as a businessperson, it
is important first to understand what the Act does not require.
First, the Act does not require any
business to provide a written warranty. The Act allows businesses to determine whether to
warrant their products in writing. However, once a business decides to offer a written
warranty on a consumer product, it must comply with the Act.
Second, the Act does not apply to oral
warranties. Only written warranties are covered.
Third, the Act does not apply to
warranties on services. Only warranties on goods are covered. However, if your warranty
covers both the parts provided for a repair and the workmanship in making that repair, the
Act does apply to you.
Finally, the Act does not apply to
warranties on products sold for resale or for commercial purposes. The Act covers only
warranties on consumer products. This means that only warranties on tangible property
normally used for personal, family, or household purposes are covered. (This includes
property attached to or installed on real property.) Note that applicability of the Act to
a particular product does not, however, depend upon how an individual buyer will
use it.
The following section of this manual
summarizes what the Magnuson-Moss Warranty Act requires warrantors to do, what it
prohibits them from doing, and how it affects warranty disputes.
What the Magnuson-Moss Act Requires
In passing the Magnuson-Moss Warranty Act, Congress specified a number
of requirements that warrantors must meet. Congress also directed the FTC to adopt rules
to cover other requirements. The FTC adopted three Rules under the Act, the Rule on
Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure
Rule), the Rule on Pre-Sale Availability of Written Warranty Terms (the Pre-Sale
Availability Rule), and the Rule on Informal Dispute Settlement Procedures (the
Dispute Resolution Rule). In addition, the FTC has issued an interpretive rule that
clarifies certain terms and explains some of the provisions of the Act. This section
summarizes all the requirements under the Act and the Rules.
The Act and the Rules establish three
basic requirements that may apply to you, either as a warrantor or a seller.
- As a warrantor, you must designate, or title, your written
warranty as either "full" or "limited."
- As a warrantor, you must state certain specified information
about the coverage of your warranty in a single, clear, and easy-to-read document.
- As a warrantor or a seller, you must ensure that warranties
are available where your warranted consumer products are sold so that consumers can read
them before buying.
The titling requirement, established by
the Act, applies to all written warranties on consumer products costing more than $10.
However, the disclosure and pre-sale availability requirements, established by FTC Rules,
apply to all written warranties on consumer products costing more than $15. Each of these
three general requirements is explained in greater detail in the following chapters.
What the Magnuson-Moss Act Does Not Allow
There are three prohibitions under the Magnuson-Moss Act. They involve
implied warranties, so-called "tie-in sales" provisions, and deceptive or
misleading warranty terms.
Disclaimer or Modification of Implied Warranties
The Act prohibits anyone who offers a written warranty from disclaiming
or modifying implied warranties. This means that no matter how broad or narrow your
written warranty is, your customers always will receive the basic protection of the
implied warranty of merchantability.
There is one permissible modification of
implied warranties, however. If you offer a "limited" written warranty, the law
allows you to include a provision that restricts the duration of implied warranties to the
duration of your limited warranty. For example, if you offer a two-year limited warranty,
you can limit implied warranties to two years. However, if you offer a "full"
written warranty, you cannot limit the duration of implied warranties.
If you sell a consumer product with a
written warranty from the product manufacturer, but you do not warrant the product in
writing, you can disclaim your implied warranties. (These are the implied warranties under
which the seller, not the manufacturer, would otherwise be responsible.) But, regardless
of whether you warrant the products you sell, as a seller, you must give your customers
copies of any written warranties from product manufacturers.
"Tie-In Sales" Provisions
Generally, tie-in sales provisions are not allowed. Such a provision
would require a purchaser of the warranted product to buy an item or service from a
particular company to use with the warranted product in order to be eligible to receive a
remedy under the warranty. The following are examples of prohibited tie-in sales
provisions.
In order to keep your new Plenum Brand Vacuum Cleaner
warranty in effect, you must use genuine Plenum Brand Filter Bags. Failure to have
scheduled maintenance performed, at your expense, by the Great American Maintenance
Company, Inc., voids this warranty.
While you cannot use a tie-in sales
provision, your warranty need not cover use of replacement parts, repairs, or maintenance
that is inappropriate for your product. The following is an example of a permissible
provision that excludes coverage of such things.
While necessary maintenance or repairs on your AudioMundo
Stereo System can be performed by any company, we recommend that you use only authorized
AudioMundo dealers. Improper or incorrectly performed maintenance or repair voids this
warranty.
Although tie-in sales provisions generally
are not allowed, you can include such a provision in your warranty if you can demonstrate
to the satisfaction of the FTC that your product will not work properly without a
specified item or service. If you believe that this is the case, you should contact the
warranty staff of the FTC's Bureau of Consumer Protection for information on how to apply
for a waiver of the tie-in sales prohibition.
Deceptive Warranty Terms
Obviously, warranties must not contain deceptive or misleading terms.
You cannot offer a warranty that appears to provide coverage but, in fact, provides none.
For example, a warranty covering only "moving parts" on an electronic product
that has no moving parts would be deceptive and unlawful. Similarly, a warranty that
promised service that the warrantor had no intention of providing or could not provide
would be deceptive and unlawful.
How the Magnuson Moss Act May Affect Warranty
Disputes
Two other features of the Magnuson-Moss Warranty Act are also important
to warrantors. First, the Act makes it easier for consumers to take an unresolved warranty
problem to court. Second, it encourages companies to use a less formal, and therefore less
costly, alternative to legal proceedings. Such alternatives, known as dispute resolution
mechanisms, often can be used to settle warranty complaints before they reach litigation.
Consumer Lawsuits
The Act makes it easier for purchasers to sue for breach of warranty by
making breach of warranty a violation of federal law, and by
allowing consumers to recover court costs and reasonable attorneys' fees. This means that
if you lose a lawsuit for breach of either a written or an implied warranty,
you may have to pay the customer's costs for bringing the suit, including lawyer's fees.
Because of the stringent federal
jurisdictional requirements under the Act, most Magnuson-Moss lawsuits are brought in
state court. However, major cases involving many consumers can be brought in federal court
as class action suits under the Act.
Although the consumer lawsuit provisions
may have little effect on your warranty or your business, they are important to remember
if you are involved in warranty disputes.
Alternatives to Consumer Lawsuits
Although the Act makes consumer lawsuits for breach of warranty easier
to bring, its goal is not to promote more warranty litigation. On the contrary, the Act
encourages companies to use informal dispute resolution mechanisms to settle warranty
disputes with their customers. Basically, an informal dispute resolution mechanism is a
system that works to resolve warranty problems that are at a stalemate. Such a mechanism
may be run by an impartial third party, such as the Better Business Bureau, or by company
employees whose only job is to administer the informal dispute resolution system. The
impartial third party uses conciliation, mediation, or arbitration to settle warranty
disputes.
The Act allows warranties to include a
provision that requires customers to try to resolve warranty disputes by means of the
informal dispute resolution mechanism before going to court. (This provision applies only
to cases based upon the Magnuson-Moss Act.) If you include such a requirement in your
warranty, your dispute resolution mechanism must meet the requirements stated in
the FTC's Rule on Informal Dispute Settlement Procedures (the Dispute Resolution
Rule). Briefly, the Rule requires that a mechanism must:
- Be adequately funded and staffed to resolve all disputes
quickly;
- Be available free of charge to consumers;
- Be able to settle disputes independently, without influence
from the parties involved;
- Follow written procedures;
- Inform both parties when it receives notice of a dispute;
- Gather, investigate, and organize all information necessary to
decide each dispute fairly and quickly;
- Provide each party an opportunity to present its side, to
submit supporting materials, and to rebut points made by the other party; (the mechanism
may allow oral presentations, but only if both parties agree);
- Inform both parties of the decision and the reasons supporting
it within 40 days of receiving notice of a dispute;
- Issue decisions that are not binding; either party must be
free to take the dispute to court if dissatisfied with the decision (however, companies
may, and often do, agree to be bound by the decision);
- Keep complete records on all disputes; and
- Be audited annually for compliance with the Rule.
It is clear from these standards that
informal dispute resolution mechanisms under the Dispute Resolution Rule are not
"informal" in the sense of being unstructured. Rather, they are informal because
they do not involve the technical rules of evidence, procedure, and precedents that a
court of law must use.
Currently, the FTC's staff is evaluating
the Dispute Resolution Rule to determine if informal dispute resolution mechanisms can be
made simpler and easier to use. To obtain more information about this review, contact the
FTC's warranty staff.
As stated previously, you do not have to
comply with the Dispute Resolution Rule if you do not require consumers to use a mechanism
before bringing suit under the Magnuson-Moss Act. You may want to consider establishing a
mechanism that will make settling warranty disputes easier, even though it may not meet
the standards of the Dispute Resolution Rule.
You can view a slightly more detailed legal explanation of
the Magnuson - Moss Warranty act of 1975 by clicking on the following link: http://www.pipeline.com/~rmantis/webdoc14.htm
Sources of the above information include:
- Superchips Inc. Newsletter / Car Craft September 1994 issue.
- Federal Trade Commission Website.
- State Bar of Texas Website (texasbarcle.com)
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