Cars And Binding Mandatory Arbitration

Is it possible these days to buy a car, even a used car, from a dealer without a binding mandatory arbitration clause? Nope, we guess not.

From Mother Jones:

After much hassle, the dealership allowed us to bring home the sales paperwork so we could read it over without the salesman hovering over us. Everything seemed to be above board until we got to the end of the buyer’s order and discovered that if we signed the contract, we would waive our rights to sue the dealership in court, before a jury, should any dispute arise after the sale. Instead, as a condition of buying the car, we had to agree to submit to mandatory pre-dispute binding arbitration, handled by the dealership’s pre-selected company, the National Arbitration Forum (NAF).

After learning this, we called our sales guy, Carlton Cotton, and told him we wouldn’t agree to an arbitration clause, but if they took it out, we’d write a check. “That’s not negotiable,” he said. Cotton explained that the dealership inserted the clause to make things simpler for everyone. “We think it’s fair,” he said, and then went on to inform me that we wouldn’t be able to buy a car anywhere without agreeing to arbitration. Clauses like this are standard fare in car contracts throughout the region, he told us, so we should just sign the contract or lose the car to another customer.

So we walked. Because there is nothing fair about mandatory arbitration.

The article goes on to offer a history of MBA and its general evilness, including a write up of our friend Deborah Williams, the “Coffee Beanery” victim who, despite a judgment in her favor by an actual court, lost in arbitration after the opposing party chose their own lawyer as the arbitrator.

Suckers Wanted: How Car Dealers and Other Businesses are Taking Away Your Right to Sue [Mother Jones]
(Photo:smcgee)

Comments

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  1. Nick says:

    Between mandatory arbitration and the enforcement of shrink-wrap contracts, I think I’m just going to have to wear a shirt that states that anyone who interacts with me in any way waives and invalidates all other agreements, written or verbal, that they may have entered with me.

  2. trollkiller says:

    @schwnj: Make it look nice and I will buy one from you.

  3. fluiddruid says:

    What can consumers do about this other than support legislation? While I’d like to think this can be resolved without state interaction, it doesn’t seem possible to live a normal life in our society without routinely waiving our right to sue.

  4. fairweather says:

    @trollkiller: ditto

  5. SuffolkHouse says:

    F these SOBs!

  6. humphrmi says:

    First problem with this sleazebag salesman’s argument – “Write the check now or lose the car to another customer”. Ah, yeah, right. Carmakers are hemorrhaging money, and if you don’t buy the car, it’ll more likely sit on the lot.

    I’m not big on these boycott efforts a-la “don’t buy gas on Wednesday” but we, Consumerists, have the car dealers by the balls right now. We can choose to keep driving our old beaters and be no worse off than everyone else around us. And when we finally do come back to the car sales pits, we should refuse to buy anything unless they take MBA out of the contract. And then tell them “Change the contract now, or this car sits on the lot another thirty days. Your choice.”

  7. vex says:

    I side with the dealer on this one. Once you sign the paperwork and buy the car, its yours. If somethings wrong with it, you deal with it. Especially used cars. Once the deal is over, they have no further obligation. Go buy a warranty.

  8. humphrmi says:

    Sorry, meant to add this to my previous post. Since it’s clear that most of us right now have no interest in buying cars, we should use this time – now – to make our statement to dealers. Even if you have no intention of buying a car, go and look. Have them write up the contract. Start to look it over, but ignore it all except the MBA clause. Stop. Say take it out. They refuse. You walk. You never intended to buy the car in the first place, but you leverage your willingness (nay, your preference right now) to walk away to send a message.

    If enough people do this, by the time the economy turns around and you’re ready to actually buy a car, dealers will have gotten the message.

  9. trollkiller says:

    @vx001: So if the dealer defrauded you then it is “tough shit”?

  10. trollkiller says:

    @humphrmi:
    I agree with you but the Alice’s Resturant song snapped into my head when I read your post…. sorry

    …And three people do it, three, can you imagine, three people walking in
    singin a bar of Alice’s Restaurant and walking out. They may think it’s an
    organization. And can you, can you imagine fifty people a day,I said
    fifty people a day walking in singin a bar of Alice’s Restaurant and
    walking out. And friends they may thinks it’s a movement.

    And that’s what it is , the Alice’s Restaurant Anti-Massacre Movement. …

  11. huadpe says:

    @vx001: What if the dealer rolled back the odometer? If there was some deliberate fraud, then you should sue…and win.

  12. Boberto says:

    I bought a new Acura in 1997, no arbitration clause however I found it very difficult to sue the dealer in court. They delivered the car with some minor paint issues and promised to fix them. When they tried to fix the issue, they did so in an incompetent manner that did more damage.

    When I threatened to sue, they laughed at me. I enjoyed having the last laugh when I prevailed in court.

    As hard as it was to prevail, doing so today would be impossible under MBA.

  13. Boberto says:

    I also remember some time ago, Gateway computer got into some controversy over inserting MBA into the sealed boxes of new computers delivered.

    So much for being ahead of your time.

  14. ianmac47 says:

    How long before the courts simply overrule mandatory arbitration?

  15. TexasScout says:

    I just bought a 2008 Toyota Corolla for my Daughter. While I was signing the papers, they roll out a separate “binding arbitration” clause. I refused to sign it and he said “No big deal”. I went away happy.

  16. AT203 says:

    I just took a peak at the Arbitration Hearing liveblog, and dammit if it is not HILARIOUS! Not the subject matter, but the writing itself. It was informative too. I’m a little surprised. I’ve never clicked on a liveblog before, because I imagined it would be random and disjointed. KUDOS!

  17. bostonmike says:

    The shirt you are looking for already exists:

    [www.mondotees.com]

  18. Buran says:

    @trollkiller: Agreed. The dealer should not have carte blanche to cheat customers. And yet that is what they have.

  19. Buran says:

    @boberto: A good lawyer would argue that you never agreed to it before the sale.

  20. pavelgigov says:

    As a matter of fact something rather bizarre happened to me. A month ago I leased a 2008 Volkswagen Touareg. While going through the paperwork with the financing guy he handed me a binding arbitration form that I refused to sign. He wasn’t happy but i still got the car without signing it.

  21. trollkiller says:

    @bostonmike: Thank you, my wife now knows what to buy me for Christmas.

  22. Rupan says:

    @humphrmi: Absolutely right. With the way the car industry is right now dealers would be stupid to lose a sale over this.

  23. stuckonsmart says:

    Wake up “sheeple” of the United States. Our rights to effective remediation are being stolen from us all over the place.

    A few weeks ago, I was going to entrust MY money (six figures) with a USB Financial broker. Lo and behold — in the fine print — ARBITRATION CLAUSE. Same with MetLife, and EVERY other brokerage firm I have spoken with.

    This mandatory arbitration BS needs to be LEGISLATED out of existence. Contact your politicians. Of course we know whose calls they are taking — and it is NOT ours.

  24. stuckonsmart says:

    OOPS — intended to say UBS Financial not USB. Guess I have IT lingo on the brain.

  25. ideagirl says:

    @trollkiller: me four

  26. BigBoat says:

    Most legislation would be hesitant about outright barring contract clauses made in the process of bargaining. It’s not impossible of course, but understand when you’re signing a contract you’re actually creating law, and that’s a nice bit of empowerment you don’t really want to lose.

    However, what you could argue is forcing a more informed consent. Certainly there could be arguments stating that the signers don’t have full understanding of what MBA allows and denies, and they buyers deserve to have that knowledge. Were I to contact a politician on the issue, that’s the angle I’d hit.

  27. cmdr.sass says:

    I buy my used cars directly from the owner of a local independent dealership who has personally been selling cars for over *50* years. A check and a handshake is all that is required. If I have a problem with a car I bought, he fixes it, no questions asked. No contracts or binding arbitration crap needed. When I need cars now, I just call ask him what he’s got for me. I bought my last two sight unseen based on his reputation alone.

    If you see a contract with an arbitration clause, you’re dealing with a sleazeball who won’t stand behind what they sell.

  28. vvff says:

    I recently purchased a used car from a local dealership and they *were* willing to remove the arbitration clause when I refused to buy the car if I had to sign it… It certainly is worth a try, at any rate.

  29. BigNutty says:

    Remember that arbitration hearing results have been found to be around 90% in favor of the seller.

    I believe Congress is looking into changing this clause which is in almost every contract you can imagine.

    I like to cross the clause out without telling the seller and see if they notice it, many times they don’t.

  30. Neurotic1 says:

    The arbitration clause isn’t just isolated to the auto industry. I had a artho. shoulder surgery done a few years ago and they tried to get me to sign a arbitration clause contract an hour before the surgery. I said no and they still took me in. However, it left a very bad impression because they waited all that time to try to get me to sign it.

    Now I’ve been paying more attention and it’s everywhere! The dentist office! Even at my gym! Just proves how important it is to actually read what we’re signing.

  31. Neurotic1 says:

    @BigNutty: Yeah, I had a lemon case against Nissan a few years ago. I made the mistake of trying to go through BBB’s arbitration process and boy was that a joke. I had everything stacked in my favor- the dealer’s records showing that they attempted to fix the problem with my car more than the req. 3 times (5 times!); a notarized letter from my mechanic stating that the problem was bigger than the dealer claimed; BBB’s own independent mechanic/inspector who inspected my car and reported that there indeed was a problem; and Nissan’s own rep admitting to a problem the day of the arbitration hearing to the arbitrator herself. That last bit blew my mind- Nissan’s own rep admitted that there was a problem! I thought it was a slam dunk. Guess what? I lost.

    Yes, arbitration is a joke.

  32. WraithSama says:

    @BigNutty:

    FYI, crossing out the clause doesn’t remove it from the contract unless both parties initial the change. If you attempted to bring a claim to trial citing your striking out that clause, the dealership would likely prevail and it would go to arbitration.

  33. savvy999 says:

    As documented here many times before, the problem with arbitration is the cozy and corrupt relationship between arbitrators and contractors. The reason a government-based judiciary works is because it’s plausibly impartial; remove that one aspect and you get the mess we’re in now.

    In a consumer-tilted world, the simple fix would be that the contractee should be able to choose the arbitrator. Of course this would cause the entire arbitration system to be dropped like a hot rock, so some other mechanism is necessary.

    I would suggest seating 12 random persons–perhaps one’s peers– in a room and having them decide over a preponderance of the evidence who is right. That might work.

  34. hapless says:

    I ran into no such clause buying a car recently. I’d never even heard of it being included in auto sales agreements until today.

  35. jnews says:

    @WraithSama: So you’re saying I can be lawfully bound to contract terms which I have expressly and explicitly rejected during negotiation simply because the other party got the chance to write the contract of adhesion first? Far from that being enforceable on me, it would indicate there was no agreed upon contract at all, so it’s null and void — which would necessarily invalidate the mandatory arbitration. Which court has upheld such a travesty of justice? I want to stay far away from there.

  36. Joe_Bloe says:

    @stuckonsmart: your message is lost instantly on me, and I suspect, a lot of other people, when you call me “sheeple.” You sound like any other nutjob ranting on a blog with that crap. You’re preaching to the choir here, no need to resort to pejoratives.

  37. Nytmare says:

    @Joe_Bloe: He didn’t call you or us “sheeple”. He called sheeple “sheeple”.

  38. cerbie says:

    @BigBoat: the option is take it or leave it. Not a lot of bargaining going on, there. You are not given similar negotiating power to the entity you’re signing the contract with.

    Then, there’s the fact that it is unconstitutional. But hey, it’s just a piece of paper…

  39. ShadowArmor says:

    As I understand it, arbitration “can” be a better option than court if and only if the parties are of relatively equal means. Arbitration between two companies, for example, can speed up the process.

    I agree that in a consumer setting, given the structure of the system, is just a way for the big guy to beat the little guy without the expenses of a full fledged court date.

  40. CSchnack says:

    So many industries now require arbitration that there is little a consumer can buy or do that doesn’t require a “take it or leave it” choice. That means credit cards, houses, computers, softeware, medical or nursing home care, phones, and any number of things that have become necessary for most people nowdays. So, consumers really do not have much if any choice. This used to be considered unenforceable but not anymore.

    Now consumers are bound by these clauses, even in cases where they didn’t see or sign it: home warranties are notorious for this. The builder or seller, or a real estate agent, buys the policy, and the home buyer is bound by the warranty’s arbitration clause which is seen for the first time AFTER closing the house sale. If the homeowner needs to make a warranty claim they quickly find out how illusory the coverage is, and that the arbitration clause burries most disputes. Because it’s all private, consumers trying to research these co’s before buying usually can’t find out much.

    Arbitration firms woo corporations for their business, and they don’t keep that business unless they make their customer–the corporation–happy.

  41. kbarrett says:

    Think outside the box, people.

    If some used car dealer screws you over, tell him you will picket his lot on weekends until they make this good.

    One day of picketing is more than enough to cost the dealer more than giving you a refund.

  42. swalve says:

    @fluiddruid: Don’t sign the contract. YOU are the customer, YOU are giving them money, YOU dictate the terms (up to a point).

  43. mac-phisto says:

    or put an endorsement clause on the back of the check (a check is a contract too!)

    “the endorser of this check acknowledges receipt of a copy of the disclosures and agreement applicable to this transaction and agrees to any and all terms and conditions therein.”

    draw up your own contract. by endorsing the check, the dealer is agreeing to your contract. a judge would have to compare the two & determine if there was a meeting of the minds. absent of that, no contract exists.