Why Should Arbitration With A Car Manufacturer Be Avoided In Arizona?

Key Takeaways:

• Consumers should not go through a vehicle manufacturer’s arbitration process in Arizona. It is not legally required, nor is it advisable.
• The two main vehicle manufacturer-run arbitration companies in Arizona, BBB Auto Line and the NCDS, are non-compliant with federal regulations, based primarily on their failure to provide all of the remedies available to consumers under Arizona law.
• Vehicle manufacturers’ arbitration processes are unfairly biased in favor manufacturers, who pay for them and the arbitrators that facilitate them. Statistically, they are not in the interest of consumers.

There are several reasons why a consumer in Arizona should not go through a vehicle manufacturer’s arbitration process.

First and foremost, it is not legally required in Arizona. There is a Federal Court opinion called Muller vs. Winnebago which holds that the main arbitration program of vehicle manufacturers in Arizona, the BBB Auto Line, is non-compliant with federal regulations. The BBB is non-compliant with federal regulations because it does not provide all of the remedies available to consumers under Arizona law.

Additionally, the arbitration process of vehicle manufacturers in Arizona is generally not a very fair venue for consumers. At the end of the day, the manufacturers sign the paychecks of the arbitrators involved. Even if the arbitrators do their best to be fair—studies show that people are heavily influenced by who is paying them. As the saying goes, people tend not to bite the hand that feeds them.

This bias is not theoretical. It is clear and evident in the decisions made through this process. Statistically, it is less likely for a consumer to prevail in that process rather than by hiring an attorney to negotiate a settlement.

The process usually only offers three basic remedies:

• Repurchase
• Replacement
• Repair

The percentage of cases where consumers are able to obtain a repurchase or replacement is substantially lower than when consumers are represented by a Lemon Law attorney. Moreover, in many cases, the only option the arbitrator decides on is “repair.” Repair is essentially a loss for consumers because they are already entitled to repair under their vehicle warranty. “Giving” the consumer the remedy of repair isn’t really giving them anything at all, beyond something they are already legally entitled to.

The percentage of consumers that are awarded with repurchase or replacement is very low. Even in those few cases, they manufacturers often find a way to further obviate what the consumer gets.

For example, in other states, when a car manufacturer buys back your car, there is a formula for a mileage offset. In Arizona, there is no such formula for offset. The offset is determined either by settlement (i.e., what both sides agree to as reasonable if they can reach an amicable out-of-court resolution), or—if the matter goes to Court—what the jury decides is reasonable. In either case, there is no specific formula for mileage offset in Arizona, which typically puts consumers at a marked financial disadvantage, because the formula comes out to a very high cents per mile amount, that no reasonable consumer would want to agree to.

For these reasons, we do not recommend that people go through the BBB Auto Line, but the same goes for any other car manufacturer’s arbitration program. The other major auto manufacturer’s arbitration program in Arizona is called the National Center for Dispute Settlement, or NCDS, and it is non-compliant for the exact same reasons. Namely, it does not offer all the breach of warranty remedies that are available to consumers under the law.

While these arbitration processes may only present repair, repurchase, or replacement as the options for settlement, Arizona consumers have additional options. For one example, Arizona consumers making warranty claims are legally entitled to cash compensation for diminution in value. This is a type of settlement that can occur when a consumer didn’t get what they paid for when they bought the vehicle if the defects were foreseeable. This is referred to as a hindsight inquiry. The vehicle sold as new (or relatively new) and is really the equivalent of a roughly used high mileage used vehicle that should have cost thousands of dollars less.

Another type of compensation available to Arizona consumers that is not usually available in vehicle manufacturer’s arbitration processes is called incidental and consequential damages. This is essentially compensation for loss of use of the vehicle. It is based on fair rental value of a like vehicle for the time that the vehicle will be out of service, or on aggravation and inconvenience caused by the vehicle’s defect. This is most often pursued in Court, and the actual amount is up to a jury to decide based on testimony and evidence.

For more information on Avoiding Arbitration in a Lemon Law Claim, a Free Lemon Law Evaluation is your next best step. Get a Free no obligation Lemon Law Evaluation by calling (480) 887-9924 today.