The Industry's Leading Source For F&I, Sales And Technology

Article

Is Arbitration Right for Your Dealership?

September 2006, F&I and Showroom - Feature

by Charles F. Arrambide - Also by this author

Binding arbitration is a very good alternative to the publicity, costs and delays associated with the court system. When properly implemented, binding arbitration provides a fair, fast and efficient forum for resolving legal disputes.

It can be “your equivalent of a bullet-proof vest”

Binding arbitration is a way to resolve a legal dispute outside the court system. It is considered binding when people agree in a contract (such as a buyer’s order or retail installment agreement) to waive their right to traditional litigation and instead arbitrate future disputes.

Should such a dispute arise, the parties involved present their side to an arbitrator. That arbitrator is a neutral third party, usually a retired judge or attorney. He or she weighs the evidence, makes a decision and issues an arbitration award based on substantive law.

One of the most compelling reasons for considering arbitration to resolve disputes is that in arbitration, you are less likely to see an extreme award, because decisions are made by legal professionals and not by a jury.

Here’s another reason: privacy. In fact, it is probably the most important benefit. The arbitration process is private in all jurisdictions.

Arbitration also is typically less expensive and faster than resolving a dispute through the court system. The average binding arbitration case can be resolved in less than nine months, whereas the average civil case takes more than two years to resolve.

The key is having a fair agreement. A properly drafted binding arbitration agreement can help protect dealers from unwanted publicity and the uncertain fate of a jury verdict.

“Plaintiffs’ lawyers have discovered how attractive auto dealers can be as defendants — especially in class-action lawsuits,” says Tom Hudson, managing partner of Hudson Cook, LLP, a firm that specializes in consumer financial services law. “Even the most conscientious and compliant dealers are not immune to these allegations. The plaintiffs’ lawyer’s strategy is to file a lawsuit, putting the dealer in the gun sights of a hostile jury, and press for a settlement. A properly drafted arbitration agreement can be your equivalent of a bullet-proof vest.”

A properly drafted agreement is imperative

Binding arbitration has its critics, and some of the criticism is warranted. This typically focuses on agreements that are not fair to consumers or employees. If you are considering binding arbitration, be aware of the surrounding issues and know how to avoid them.

It is imperative to have a properly drafted and implemented arbitration agreement. Without that, you will most likely encounter problems, and the agreement may not withstand challenges in court.

Courts across the United States have placed various tests on arbitration agreements to determine their validity. Typically, a court will look at five general areas when determining enforceability:

Affordability: The agreement should not impose unreasonable fees that prohibit a consumer from filing a claim.

Accessibility: The agreement should not impose undue burdens such as lengthy or unreasonable travel on the consumer.

Ease of use: The agreement should be written in plain language that consumers can understand.

Balance of fairness: The agreement should not require the consumer to arbitrate more claims than the dealer/finance company.

Obvious presentation of the agreement: The arbitration provision should be obvious in the agreement and not written in a smaller font than other important provisions in the same or any accompanying document.

Your legal counsel can work with you to ensure that any agreement you decide to use will withstand courtroom challenges.

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

So Here's the Deal

Ronald J. Reahard
Addressing F&I’s Internet Problem

By Ronald J. Reahard
A frustrated F&I manager poses an increasingly common question: How do you sell protection products to customers who demand the final price by phone and then show up with a bank check?

(Video) Selling Eight Products Without Losing the Customer

By Ronald J. Reahard
Is offering eight products a bad idea? The magazine’s resident F&I pro says it depends on the producer and the presentation.

He Had a Goal: Remembering David Ressler

By Ronald J. Reahard

[Video] Selling to Short-Term Owners

By Ronald J. Reahard

Done Deal

Gregory Arroyo
Change Is Happening

By Gregory Arroyo
Saddened by the potential loss of another piece of his childhood, the editor tries to put the pieces together when he realizes there’s a good lesson to be learned in a toy retailer’s likely demise.

Who Will Take Up the CFPB's Torch?

By Gregory Arroyo
The CFPB’s acting director tells state regulators there will no longer be ‘regulation by enforcement,” but the editor believes there’s a long list of regulators waiting to take up the torch.

Military Lending Act Guidance: The Gift That Keeps On Giving

By Gregory Arroyo

Resolution Needed

By Gregory Arroyo

Mad Marv

Marv Eleazer
Overcome Your F&I Weaknesses

By Marv Eleazer
His Madness issues a challenge to every F&I professional: Eradicate your bad work habits, diversify your lender spread, and check your God complex at the door.

Proper Deal Structure Moves Mountains

By Marv Eleazer
His Madness has a simple but powerful piece of advice for newbie F&I managers and those struggling to adapt to the way finance sources are rating credit-challenged car buyers.

Show Us Some Love

By Marv Eleazer

Chargeback Prevention

By Marv Eleazer

On the Point

Jim Ziegler
Sharpen Your Survival Skills

By Jim Ziegler
‘Da Man’ has a plan you can use to survive the collapse of the car business and remain profitable through the dealer apocalypse.

Sales Rock Stars Still Exist

By Jim Ziegler
Da Man says $40,000-a-month sales rock stars still exist. He says you’ll find them on YouTube and Facebook Live.

The New Stooges

By Jim Ziegler

Is Your Quick Lube Driving Away Business?

By Jim Ziegler