SEMA eNews Vol. 14, No. 43, October 27, 2011

SEMA Urges Federal Trade Commission to Clarify Law on Warranty Denials

The Federal Trade Commission (FTC) is reviewing its rules and guidance documents on the Magnuson-Moss Warranty Act, a 1975 federal law that governs consumer product warranties. SEMA submitted several recommendations on how the rules can be expanded to clarify manufacturer responsibilities and consumer protections. 

Last December, the FTC issued a Consumer Alert, which confirms that it is illegal to void a warranty or deny coverage based on the mere presence of an aftermarket part. The alert notes that a consumer has the right to patronize independent retail stores and repair shops for parts and service without fear of voiding the new-car warranty. The dealer/vehicle manufacturer has the right to deny a warranty repair if they can demonstrate that the aftermarket part caused the problem. The warranty remains in effect for all other covered parts.

In its comments to the FTC, SEMA recommended that the agency issue a supplemental alert to specifically reference installation of specialty parts. While the Magnuson-Moss Warranty Act covers these types of consumer products, the December alert generally described straight repair/maintenance issues. SEMA also recommended that the FTC’s definition of “consumer product” be clarified to include specialty parts.

SEMA recommended that auto dealerships be required to put in writing why a warranty is being denied. While the law requires that consumer warranties be written in a single, clear and easy-to-read document, there is no corresponding requirement for warranty denials. Under the law, it is the dealership’s obligation to diagnose a problem and demonstrate that the aftermarket part caused the damage or defect. For dealerships that may not be aware of this requirement or may seek to avoid the obligation, a directive from the FTC would be an educational resource.

Documenting the alleged cause of a problem and providing a copy of test results or other evidence upon which the dealership is basing its claim creates a level playing field for the consumer. It may ultimately assist in resolving a dispute by allowing the claim to be properly considered by the consumer and potentially a third-party mechanic, the aftermarket manufacturer or a mediator. 

Click here
(pdf) for a copy of SEMA’s comments.  

For more information, contact Stuart Gosswein at stuartg@sema.org.

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