Archive for March, 2009

Obama Administration’s New Warrantee Commitment Program

Today, the Treasury Department announced an innovative new program to give consumers who are considering new car purchases the confidence that even in this difficult economic period, their warrantees will be honored. This program is part of the Administration’s broader program to stabilize the auto industry and stand behind a restructuring effort that will result in stronger, more competitive and viable American car companies.

The Administration has committed to working with both GM and Chrysler during a finite period to develop improved restructuring plans. The goal in both cases is to help these companies emerge with a fresh start toward becoming competitive businesses without taxpayer assistance. During this period of restructuring, the Administration is committed to standing behind the process. The Administration is confident that GM will emerge as stronger company and is hopeful that Chrysler can reach an agreement with Fiat that leads to a viable future. However, no matter what the outcome, consumers should have confidence that if they buy new cars from either company their warrantees will be honored.

The warranty program will cover all warranties on new vehicles purchased from participating auto manufacturers during the period in which those manufacturers are restructuring. Both General Motors and Chrysler have agreed to participate in the program. Specifically, the program will:

• Create a separate account that will be funded with cash contributed by the manufacturer and a loan from the US Government to pay for repairs covered by the manufacturer’s warranty on each new vehicle sold by a participating domestic auto manufacturer during its restructuring period. The cash contribution will be 125% of the costs projected by the manufacturer to satisfy anticipated claims under the warranty issued on that vehicle; and

• In the event of a failure of a participating auto manufacturer, appoint a program administrator who, together with the US Government, will identify an auto service provider to supply warranty services.

The program will help provide much needed certainty to consumers, and a boost to the auto industry, during the restructuring period. While the Administration recognizes that general economic uncertainty may continue to impact new vehicle sales, and that the ultimate solution for a healthy auto industry is a broad restructuring of the industry and a general economic recovery, the program will support and encourage the continued viability and restructuring of the auto industry by mitigating consumer uncertainty that is depressing demand for new vehicles.

What does the program mean for consumers?

• If you buy a new GM or Chrysler car during this restructuring period you will be eligible.

• You do not have to do anything to receive the U.S. commitment to your warrantee. It is automatic.

• The U.S. Treasury will work with the auto companies to back-stop your warrantee, and will commit to honoring that warrantee in the event that the manufacturer cannot.

Program Operation:
As part of their normal business operations, auto manufacturers establish an accounting reserve for each new vehicle sold, which reflects the expected cost of providing warranty services on that vehicle. Under the Warranty Commitment Program, the participating auto manufacturer will contribute cash to a separate special purpose company whose sole purpose is to pay covered warranty claims. The total amount of cash to be contributed will equal to 125% of the expected cost of paying for warranty service on each covered vehicle. The manufacturer will contribute 15% of the projected cost from its own funds, and Treasury will provide additional funds to cover 110% of the projected cost. The company holding the funds will be run separately from the auto manufacturer and will be able to continue paying warranty claims even if the auto manufacturer goes into bankruptcy or goes out of business. In that case, the special purpose company will use the funds in that account to facilitate the transfer of warranty obligations from the issuing manufacturer to a new warranty services provider.

The program will be run by a third party program administrator with the backing of financial resources allocated from the Treasury Department’s Troubled Asset Relief Program (TARP).

Eligible Auto Manufacturers:
Any domestic auto manufacturer is eligible to participate in the program. If a manufacturer decides to participate, it will work with the third party administrator to establish a warranty support program. Participating auto manufacturers will contribute 15% of the cash reserve for each new warranty they issue. The US Government will provide the remainder of the funding for the cash reserve on each new warranty issued by the participating auto manufacturer during the period in which it is enrolled in the program.

If the auto manufacturer goes out of business, the program administrator and the US Government will conduct a process to identify a qualified third party warranty service provider to assume responsibility for all of the manufacturer’s warranties covered by the program, in exchange for the assets of the program. Because of the significant funding of the reserve account, Treasury is confident that qualified third parties will be interested in taking over the warrantee obligations.

Eligible Warranties:
The program will cover the participating manufacturer’s warranty on every new car sold during its restructuring period

American Holding On To Their Cars

Americans are holding onto their cars for longer periods. According to a recent report by the research firm R. L. Polk & Company, the median age of cars in operation hit a record 9.4 years in 2008, up from 9.2 in 2006 and 2007, while the percentage of cars taken out of circulation fell to 5.1 percent, from 5.5 percent in 2007.

“People are hunkering down,” said Dave Goebel, a consultant with R. L. Polk. “There is great uncertainty about what the future holds, so people are going to avoid anything out of pocket.”

A separate survey of 713 vehicle owners by R. L. Polk found that 64 percent of them were “very likely” or “extremely likely” to keep their vehicles longer and 81 percent said they were going to take better care of their vehicles so they would last longer.

The overall results of Americans holding onto their cars, may result in a future drop in lemon law claim, since less new cars are being sold. Presently, 1-800-MY-LEMON has actually experienced a rise in overall lemon law and breach of warranty claims this year and has seen a significant increase in new clients, seeking lemon law help, over the last several months.

Repossessed Car? Learn Your Rights

Each year 1-800-MY-LEMON receives calls from new clients
requesting lemon law help for their repossessed car. The rate of repossessions are increasing at an alarming rate, especially in light of the poor economy. If your car has been repossessed, you have rights which could help you avoid or limit the cost of the repossession.

We are happy to post the following repossession information courtesy of our good friend, and fellow Pennsylvania consumer law attorney, William Bensley.

Repossessions happen to good, responsible people every day. They get far less media attention than home foreclosures, but they are just as disruptive. Moreover, the same abusive practices that have plagued mortgage lending have plagued car sales and lending, and now plague repossessions.

The good news is that repossessions are highly regulated, primarily under state law. Everyone should note that the law may very slightly from state to state. This article pertains strictly to Pennsylvania law.

In Pennsylvania, if the bank (creditor), debt collector or repossessor breaks the rules, then the repossession victim may be able to get her car back, get out from under the alleged debt, or even get the bank, debt collector or repossessor to pay her.

It is highly advisable that any repossession victim contact a qualified attorney immediately to evaluate her possible claims. Most attorneys will provide free evaluations. Most evaluations can be completed over the telephone in under 30 minutes.

Let’s start at the beginning. Most vehicles are purchased on credit. Until the buyer makes her last payment, the seller/creditor retains the right to “repossess” (take the car back), if the buyer “defaults” (breaches the agreement). The buyer’s and creditor’s rights are spelled out in the finance purchase contract (the big 8.5” x 14” or 8.5” x 17” contract) and state law.

A default can occur in a number of circumstances. The most common is where the consumer does not make payments as agreed. A default can also occur, if the consumer allows insurance on the car to lapse or subjects the car to seizure by using it for illegal purposes.

The first thing that a consumer must understand is that the creditor may not have the right to repossess the vehicle. Under state and federal law, the finance contract holder is responsible for the seller’s wrongdoing. This is true, even where the seller/creditor sells the finance purchase agreement. In short, if the dealer arranged the financing, then the bank is liable for the dealer’s wrongdoing.

If dealer tricked the consumer into buying the vehicle, if the vehicle is defective, if the seller misrepresented any significant fact, if the seller did not fully or accurately disclose the vehicle’s prior use, then the contract may be unenforceable. Not only may the creditor not repossess the vehicle, but may be responsible for paying the consumer for any harm caused by the seller’s wrongdoing.

The second thing that a consumer must understand is that if the creditor agreed to accept late payments or to change the payment due date, then the terms of the original contract may no longer apply. Changes may be made orally, in writing, or simply by accepting a late payment. The creditor can’t agree to accept a payment and not to repossess and then go ahead and repossess. These determinations are extremely fact specific and will depend on exactly what was said by the bank and the consumer.

There are three types of repossessions: (1) Voluntary; (2) Self-Help; (3) Court Ordered.

Voluntary repossessions are self-explanatory. The consumer gives the car back by either bringing the car back to the dealer or handing the keys to the repossessor. It’s important to know that a voluntary repossession is just as damaging to your credit rating as any other type of repossession.

Self-Help repossessions are a little different. This is where the repossessor takes the car, often in the dead of night. They may not “breach the peace.” They may not enter a home, building or enclosed property without prior consent. They may enter non-enclosed private property, but if asked to leave, then they must go. They cannot argue, insult, or use force or threats of force. They cannot threaten to call the police. If a consumer objects, they cannot continue to take the car — even if it is parked on the street. They cannot bring the police as an implied use of force.

If the repossessor breaches the peace, then the repossessor loses its right to take the car. The repossessor may have to pay the consumer statutorily required compensation. If the repossessor still takes the vehicle, then it is an unlawful repossession and a form of theft entitling the consumer to additional compensation.

Court Ordered repossessions are where the repossessor goes to court and gets an Order requiring the consumer to give the car back. With a court order, the repossessor can enter private property, even if the property owner objects, and take the car. If a repossessor has to get a court order, it may charge the consumer for the time and effort.

Consumers often have questions about notice. Prior notice is not required to repossess a car in Pennsylvania. Twenty-one day prior written notice is required to repossess a mobile home.

A repossessor must provide immediate notice to the consumer after the repossession. The notice must be delivered in person or by registered mail.

The notice must be sent no less than 15 days before the car is sold. The notice must provide the following information:
(1) identify the consumer (debtor), the car, and the location of the car.
(2) provide the time, place and manner that the car will be sold.
(3) provide an itemized statement of amounts owed, including any repossession charges.
(4) provide a list and the location of any personal property contained in the car –which must be kept for 30 days.
(5) explain how to redeem the contract — pay the full outstanding debt to get the car back.
(6) explain whether the opportunity to reinstate the contract is being offered — pay the overdue amounts to get the car back.

Creditors must give notice of the repossession to the local or state police within 24 hours
Creditors usually will resell the car. The sale price will be applied to reduce the amount of money still claimed owed. The consumer will be responsible for balance plus reasonable repossession and reselling charges.

The sale may be public or private, but must be conducted in a commercially reasonable manner. If public, the consumer can and should attend and take photos of the car. If the car was not prepared for sale appropriately, then the sale may not have been commercially reasonable. If the sale is not done in a commercially reasonable manner, then the creditor may not be entitled to any further payment.

It bears repeating that any repossession victim should seek competent legal counsel. Violations are common. Banks, dealers, debt collectors and repossessors will only follow the law, if they are forced.

The 2009 Top 10 Most Fuel Efficient Cars

At 1-800-MY-LEMON, Pennsylvania and New Jersey’s Lemon Law Attorneys, we are constantly asked for advice regarding the best cars to purchase. In order to assist both our NJ and PA Lemon Law clients, as well as many of our lemon law blog readers, we are providing The Enviromental Protection Agency’s 2009 EPA Fuel Economy Guide. Leading the list is the Toyota Prius, with a combined 48 city and highway performance. Below is the list of the The 2009 Top 10 Most Fuel Efficient Cars

By City:

1.) Toyota Prius: 48
2.) Honda Civic Hybrid: 40
3.) Nissan Altima Hybrid: 35
4.) Ford Escape/Mariner Hybrid 2WD: 34
5.) Smart Fortwo: 33
Toyota Camry Hybrid: 33
7.) Volkswagen Jetta/SportWagen Diesel: 30
8.) Toyota Yaris: 29
9.) Mini Cooper: 28
Honda FIt: 28

By Highway

1.) Toyota Prius: 45
Honda Civic Hybrid: 45
3.) Volkswagen Jetta/SportWagen Diesel: 41
Smart Fortwo: 41
5.) Chevy Cobalt/Pontiac G5 XFE: 37
Mini Cooper: 37
7.) Toyota Yaris: 36
Honda Civic/Civic CNG: 36
9.) Chevy Cobalt/Pontiac G5: 35
Toyota Corolla/Honda Fit: 35
Ford Focus: 35

The Most Fuel Efficient Cars By Category
This list covers the most fuel efficient cars by EPA category.

Two-Seater Cars
Smart ForTwo: 33/41

Minicompact Cars
Mini Cooper: 28/37

Compact Cars
Honda Civic Hybrid: 40/45

Midsize Cars
Toyota Prius Hybrid: 48/45

Small Station Wagons
Volkswagen Jetta SportWagen Diesel: 30/41

Midsize Station Wagons
Kia Rondo: 20/27

Small Pickup Trucks
Ford Ranger 2WD: 21/26

Standard Pickup Trucks
Chevrolet C15 Silverado/GMC Sierra Hybrid: 21/22

Cargo Vans
Chevrolet/GMC G1500: 15/20

Mazda Mazda5: 22/28

Sport Utility Vehicles
Ford Escape/Mercury Mariner/Mazda Tribute Hybrid 2WD: 34/31