How the Magnuson Moss Act May Affect Warranty problems

To start, the Act makes it easier for consumers to take any of your unresolved warranty problems to court. Secondly, it encourages companies to use a less formal, and cheaper, alternative to going to court. These alternatives, which are commonly known as dispute resolution mechanisms, can be used to settle warranty complaints before they reach the courts.

Consumer Lawsuits 
The Act makes it easier for buyers to sue for breach of warranty by making breach of warranty a violation of federal law, and this act also allows buyers 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 their lawyer's fees. It really makes the whole process useless.

Alternatives to Consumer Lawsuits 
Although the Act makes consumer lawsuits for breach of warranty easier to bring against you, the goal of the act is not to promote more warranty court visits. The Act encourages companies to use informal dispute resolution mechanisms in order for them to settle warranty disputes with their customers. Just in case you weren’t sure, an informal dispute resolution mechanism is a system that works to resolve warranty problems that are at a stand-still.

This kind of mechanism may be run by an unbiased third party, such as the Better Business Bureau, or by company employees whose only purpose is to administer the informal dispute resolution system. The third party then uses various means like conciliation, mediation, or arbitration to settle the warranty disputes.
The Act lets warranties include a provision that asks customers to try to resolve warranty disputes before going to court. If you include such a requirement in your warranty, your dispute resolution mechanism must meet the requirements as they are stated in the FTC's Rule on Informal Dispute Settlement Procedures (the Dispute Resolution Rule). To put it in short form, the Rule requires that a mechanism must:

• Be sufficiently funded and staffed to resolve all disputes quickly;

• Be available for free;

• Be able to settle disputes on their own, without influence from the parties involved;

• Follow written procedures;

• Inform both parties when it receives notice of a problem;

• Gather, investigate, and organize all information that is necessary in order for them to decide each dispute fairly and quickly;

• Provide each party an opportunity to present its side, to submit supporting materials,

• Inform both parties of all decisions and the reasons for them supporting it within 40 days of receiving notice of a dispute;

• Issue decisions that are not binding;

• Keep complete records on all disputes; and

• To be audited every year to ensure their compliance with the Rule.


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