Congress moves to bar mandatory dealer-consumer arbitration

Each year 1-800-MY-LEMON represents consumers for claims against dealerships for fraud, such as non disclosed prior sale damage. Unfortunately many consumers are not able to pursue these claims in court due to binding arbitration agreements. Specifically, at the time of purchase of the car, the dealership has the consumer sign away his or her rights to pursue any and all claims in court. Many times the consumer is not aware that he or she is signing away rights. As a result of the binding arbitration agreement, the consumer is compelled to litigate his or her claim in a private arbitration favoring the dealerships.

Fortunately Congress has recognized this problem and is taking steps to correct the misuse of binding arbitration agreements by dealerships. According to the Automotive News, a congressional panel today approved a bill that would prohibit auto dealers from forcing customers into binding arbitration to settle disputes. The chief sponsor of the bill is Rep. Linda Sanchez, D-Calif., who chairs the subcommittee on commercial and administrative law.

The voice vote by a subcommittee of the House Judiciary Committee appeared to be along party lines, with Democrats in favor and Republicans opposed. Based on the partisan split, the bill will most likely not become law this year. However, the subcommittee action could prepare a path toward enactment next year, should the Democrats win the White House and increase their majorities in Congress in the November elections, as many forecasts suggest.

The measure is part of a broader push in Congress to eliminate requirements for mandatory binding arbitration from all kinds of business transactions.

1-800-MY-LEMON, Pennsylvania and New Jersey’s Lemon Law attorneys, supports this bill and congratulates Rep. Linda Sanchez for sponsoring the legislation, and protecting consumers rights.

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