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Dealers still permitted to offer arbitration to vehicle customers

November 16, 2010

A rumor is circulating locally that dealers are prohibited from entering into binding arbitration agreements with customers who buy vehicles. Several dealers called the CATA about a "buzz on the street that they were deemed illegal." That is false.

Legislation to ban dealer-mandated arbitration was introduced to Congress in February, but the measure has been barely debated since then. House Resolution 5312, named the Automobile Arbitration Fairness Act of 2008, counts 12 cosponsors, nine of whom signed aboard the day it was filed.

The CATA developed a binding arbitration agreement several years ago that is supported by the Better Business Bureau. Dealers and their customers who sign the agreement would use a BBB arbiter to resolve disputes arising from the purchase, lease, servicing or repair of a new or used automobile. "Disputes" also include any disputes relating to vehicle service contracts purchased or provided at the time vehicle was purchased or leased, except for alleging criminal violation.

"Simply put, the BBB has created a forum that is fair, equitable, inexpensive and quick," said Irv Capitel, senior counselor of the BBB-Chicago’s alternative dispute resolution division. "We want to see disputes settled smoothly and quickly. Lawsuits are antagonistic."

Two forms can be downloaded from the CATA Web site, Along a tan-colored horizontal bar that runs across the top of the screen, the rightmost category is "Resources." From the ensuing drop-down menu, select "Dealer Forms."  One form is the arbitration agreement itself; the other is an overview of the arbitration process, written on BBB stationery. Customers should receive copies of both forms.

Capitel said customers could be encouraged to sign the agreement based on several savings to them, compared to a lawsuit:

• time used to prepare court documents
• time used to prepare depositions
• time spent in court
• attorneys’ fees and other costs.

"The key word under the BBB arbitration is resolution of the dispute," said Capitel. "Someone wins, someone loses, and everyone gets on with their lives."

Customers who request arbitration pay $100 to cover the arbiter’s expenses. The dealer, in turn, pays $700 to $900.

The National Automobile Dealers Association is neutral on the House bill, said David Hyatt, the association’s chief public affairs officer. The NADA in 2002 considered passage of the ban on manufacturer-mandated arbitration "critical" to the well-being of the franchise system, he said. It would be "inconsistent" to oppose the latest bill, Hyatt said.