Team VADA eViews
The Digital Newsletter of Your Virginia Automobile Dealers Association
August 2008
Pre-dispute mandatory arbitration agreements that are used in vehicle purchase contracts with customers are on the radar screen of the U.S. Congress. Recently, a sub-committee of the House Judiciary Committee approved a bill that would prohibit auto dealers from utilizing mandatory pre-dispute arbitration agreements in customer contracts. The approval went along party lines, with Democrats generally in favor and Republicans generally opposed.
This bill still has a long way to go before it is law. Nevertheless, given the partisan split on the bill, many observers believe that enactment of the bill in the next session of Congress is likely, especially if there is an increase in Democratic control of Congress as a result of the November elections.
Given the possibility that mandatory pre-dispute arbitration may be eliminated, dealers should take some time to review their complaint processes to be sure that the dealership is adequately addressing complaints. This is a good idea whether or not you use a mandatory pre-dispute arbitration provision in your vehicle sale contracts.
Goal.
Keep the dispute from the hands of the lawyers. Goal number 1 in any dispute is to keep the customer from having a reason to retain a lawyer. A customer looking for an attorney will often contact a lawyer referral service. Lawyers who list themselves as specialists in dealer matters on behalf of consumers make an industry out of finding problems in car deals. When they get a case, they look for common problems in deals to create leverage on behalf of the customer. As a result, lawyer generated settlement demands often do not even resemble the problem the customer originally raised.
Sometimes the demands of a customer can get so unrealistic that it takes the intervention of a lawyer to bring the client’s expectations back to reality. This is not usually the case, however. Generally, when a customer gets to a lawyer, claims multiply, they generally differ significantly from the original problem, and the case invariably gets much more expensive.
Flag complaints for special handling.
The first step in resolving consumer complaints is to find out that they exist. Too often, the person who receives the complaint is the source of the complaint. That employee may choose to disregard the complaint as meaningless, or even worse, may seek to bury the complaint to hide the customer’s dissatisfaction. Establish a strict customer complaint policy. Complaints should go to a senior manager who will be responsible for follow up. Consider establishment of a toll free number or special email address so that customers may raise complaints directly to a person responsible for resolution. Establish a policy that you enforce that all complaints, no matter how seemingly frivolous, must go to the person in charge of handling them.
Utilize a complaint handling process.
What happens when a complaint is identified? Who is in charge of resolving it? Who supervises the handling? How is the complaint investigated? Who contacts the customer? Are the results of the investigation reported to the customer with an attempt to resolve the problem? What leeway does the employee making contact have to resolve a customer’s concerns? The company’s policy should answer all of these questions.
Is the customer satisfied?
The dealership wants to know that the customer is fully satisfied. When a dealership employee solves the problem with the customer, the employee should ask whether the customer is completely satisfied. If the customer indicates less than total satisfaction, steps should be taken to see what else can be done to satisfy the customer.
Have a dealer review process.
Any complaint that results in less than total customer satisfaction must be routed to a senior dealership executive in charge. The purpose of that process is for a new pair of eyes to review the situation. Can more be done? Should more be done? A senior dealership executive who understands the difficulties and costs involved in litigation may well decide to take the extra step necessary to fully satisfy the customer, recognizing that early resolutions of customer problems are generally the least expensive resolutions.
Meet with the customer.
If a customer is still less than totally satisfied, do everything possible to have a personal meeting with the customer. Face to face discussions can often lead to an understanding by both sides that cannot be achieved by letters, emails, or telephone conversations.
Is mediation is the answer?
If mandatory pre-dispute arbitration is eliminated by Congress, mediation may be the answer. Mediation may be the answer anyway for a dealer that is dissatisfied with arbitration.
Arbitration and mediation differ significantly.
Arbitration is the informal substitute for litigation. Each side presents its case to an arbitrator, and the arbitrator makes a decision that is binding on the parties. Mediation involves a similar process in which both sides make a case to a mediator, but the mediator is not charged with making a decision. Instead, the mediator encourages the parties to seek a solution acceptable to both. Often, mediation can be successful in resolving disputes. An experienced mediator, during the course of mediation, can explain the strengths and weaknesses of both parties’ cases. Dealers who have implemented mediation have been pleasantly surprised by the ability of a mediator to defuse anger and lead the parties to a resolution. Having a set of independent eyes reviewing the matter and letting parties know where they really stand can go a long way to solve a problem.