On Monday, I posted a story about one of the new hazards of buying a used car, namely the now-common practice by car dealers of forcing customers to waive their rights to access the legal system as a condition of buying a car. The idea is that if the dealership rips you off, you have to submit to private, binding arbitration, conducted by an arbitration firm hired by the dealership instead of filing a lawsuit. The rules in arbitration are a lot different than the regular courts, in ways that create hardships for consumers. Those hardships are a lot worse if you happen to be deployed to Iraq.

Today I heard a story from a Rhode Island consumer attorney named John Longo, who told me about a client of his who had a small dispute with a Jeep dealer over the title of a car he bought with a friend. The Jeep was financed through Daimler Chrysler Financial Services, and the sales contract and financing agreements included a mandatory arbitration clause forcing the car buyer to waive his constitutional right to go to court. So, after having to run up some legal bills fighting the car dealer over $220, Longo's client filed a claim against both the dealer and the financing company with their pre-selected arbitrator from the American Arbitration Association.

Long story short, the customer got deployed to Iraq while the case was moving forward. Longo filed a request for a stay, to postpone the case until his client came back to the States. If the case had been in a regular court, Longo says a judge would have granted the stay automatically under the federal Service Members Civil Relief Act. Instead, though, Daimler Chrysler and the dealership objected and want to proceed without Longo's client present, which they can do because in arbitration, a plaintiff is not even guaranteed a live hearing. It's also unclear whether the federal relief act applies to arbitration.
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By Remar Sutton

The Consumer Task Force For Automotive Issues Mandatory Binding Arbitration Agreements are the newest scam in the arsenal of unethical dealership weapons used to protect dealerships from accountability when they defraud consumers.

More and more automobile dealerships across the country are adding mandatory binding arbitration agreements, also called "dispute resolution mechanisms," to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal-even if the dealership committed fraud.

Such Dealership Mandatory Arbitration Agreements are almost always designed to protect the seller and to make it nearly impossible for the consumer to receive a fair hearing-even when the fraud committed against the consumer is clear and highly destructive.

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But dealers themselves don't think that mandatory binding arbitration is fair. Dealers lobbied for a federal law (passed in November 2002) to prevent automobile and truck manufacturers from requiring the use of mandatory binding arbitration to resolve franchise disputes with dealers.