You asked if the lemon law arbitration panels were replaced with an individual arbitrator and, if so, why.

SUMMARY

The lemon law gives a consumer the right to a refund or replacement vehicle if, after a reasonable number of repair attempts, a manufacturer cannot make the consumer's vehicle conform to its warranty. The right can be enforced through an arbitration process administered by the Department of Consumer Protection (DCP).

In 2007, the legislature replaced the three-member arbitration panels that hear new motor vehicle lemon law disputes with single arbitrators. The proposal to replace the panels with single arbitrators originated with DCP. The department asked for it to reduce burdens on staff. The legislature enacted it stating that it would establish a more expeditious process.

THE LEMON LAW

The lemon law establishes a consumer's right to a refund or replacement vehicle if, after a reasonable number of repair attempts, a manufacturer cannot make the consumer's vehicle conform to applicable express warranties. A “reasonable number of repair attempts” have been made when the vehicle has a defect that substantially impairs its use, safety, or value, and the vehicle has been:

1. repaired four or more times during the first 24,000 miles or two years of service;

2. out of service for a total of 30 days during the same period and the defect remains; or

3. repaired two or more times during the first year or the warranty term, whichever is shorter, and the defect is likely to cause death or serious bodily injury if the vehicle is driven.

AN ACT CONCERNING THE NEW MOTOR VEHICLE LEMON LAW (PA 07-212)

The act replaced the three-member arbitration panels that hear new motor vehicle lemon law disputes with single arbitrators. In addition, it sets standards for arbitrators, allowed the consumer protection commissioner to refer cases to more arbitration organizations, and revises the conditions under which disputes may be settled solely based on written documents.

Under prior law, (1) the consumer protection commissioner had to appoint three-person arbitration panels, only one member of which could be directly involved in a product's production, sale, or service; (2) all three members had to serve without compensation and be interested in consumer disputes; and (3) appointments were for two years at the commissioner's discretion. The act instead requires the commissioner to appoint individuals as arbitrators. An appointed arbitrator must (1) be a member of an arbitration organization; (2) be paid; and (3) not be an employee or independent contractor of a business that manufactures, distributes, sells, or services motor vehicles.

Under prior law, the commissioner could refer disputes to the American Arbitration Association. The act also allows him to refer disputes to other arbitration organizations. It prohibits an arbitration organization and any arbitrators it appoints from being affiliated with a motor vehicle manufacturer, distributor, dealer, or repairer. It requires the organization to follow the lemon law's arbitration procedures.

By law, when a consumer requests lemon law arbitration, he or she must provide DCP any information relevant to the dispute on a complaint form the department makes available. Prior law required the complaint form to state that consumers may present additional oral or written testimony. The act eliminates this requirement.

The act instead allows the department to present a case to an arbitrator solely based on the parties' written documents, but only if the consumer and the motor vehicle manufacturer agree in writing and the agreement is signed after the customer has requested arbitration.

PUBLIC HEARING TESTIMONY

The proposal to replace the panels with single arbitrators originated with DCP. Legislation to implement it was originally part of SB 1059, a bill heard and reported by the General Law Committee. Although SB 1059 died, its substance was added to SB 739 and enacted as PA 07-212.

Only one individual, DCP Deputy Commissioner Jackie Mandyck, spoke about SB 1059. Mandyck stated that the bill would “make more efficient and effective use of staff time, effort, and resources.” (General Law Committee Transcript, February 27, 2007).

DCP and the Office of the Attorney General submitted written testimony. DCP's indicates that arbitrator cancellations were causing undue burdens on DCP staff and that it was difficult to find “a last-minute substitute arbitrator.” The attorney general's testimony indicates that he agrees with the proposed change. Both agencies asked the committee to amend the original proposal, which the legislature did. Copies of spoken and written testimony are attached.

LEGISLATIVE PROCEEDINGS

Representative Stone introduced SB 1059 into the House of Representatives on May 22, 2007 and stated that it was requested by DCP and would establish “a more expeditious hearing process.” A copy of the transcript is attached.

DD:ts