Hyundai Motor America has dropped a policy requiring that some warranty coverage disputes between customers and the factory be settled through arbitration. In other words the carmaker is taking arbitration clauses out of the contracts. Until last month, Hyundai included the clause in its new-vehicle warranty contract, which also gave customers the ability to opt out of the arbitration clause within 90 days of a new-vehicle purchase. A report about the unfairness of arbitration clauses appeared in the Dec. 6 issue of The New York Times. Shortly after that article was published, Hyundai issued a statement saying the policy would be dropped. So both the Times for writing the article and Hyundai for responding to it in the right manner are to be commended for the result, which is good for Hyundai customers.
The Hyundai arbitration policy had been in place since 2006. In a statement to the Times in response to its article, Hyundai said it was dropping the policy “because we don’t want people to be misled and think we don’t stand behind America’s best warranty.” Proponents of binding arbitration clauses in contracts – common fixtures in everything from mobile phone plans to credit card agreements to medical insurance policies – claim arbitration is a faster, less expensive alternative to litigation for settling disputes. That’s as far from the truth as anything you can imagine. Forced arbitration favors Corporate America, hurts consumers and is totally anti-consumer in every respect.
In fact, arbitration, forced on a consumer, limits that person’s options in pursuing a grievance with a company. The clauses typically require consumers to waive their right to take a company to court – give up their constitutional right to a jury trial – and instead settle grievances through a process overseen by private firms hired by the company. Hyundai says it has used arbitration to settle warranty disputes about 10 times since 2006. A spokesperson says that arbitration has never been used by Hyundai to handle disputes involving product liability or personal-injury claims. Hopefully, both statements are factually correct. In any event, Hyundai – for whatever reason – did the right thing when it removed the arbitration clauses in this instance.
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