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Hyundai Drops Arbitration Clause

December 17, 2013

By Brittany-Marie Swanson

LOS ANGELES — On Dec. 6, Hyundai dropped a clause in its warranty that required some warranty disputes to be settled through binding arbitration. The change came a week before the Consumer Financial Protection Bureau (CFPB) issued its preliminary research on arbitration agreements, although Hyundai officials said the change was unrelated to the bureau’s release of its report.

Jim Trainor, company spokesperson, issued a statement to the New York Times that said, “We're dropping the arbitration clause because we don't want people to be misled and think we don't stand behind America's Best Warranty."

Trainor added that the company has “only used arbitration about 10 times since 2006, to protect the company from unscrupulous mills.”

The decision to eliminate the policy came after the New York Times published a story which claimed it would disqualify car buyers from joining class-action lawsuits and make it harder to receive a refund if they purchased a lemon. Car buyers were able to opt out of the arbitration agreement, but only if they notified the company within 90 days of purchasing the vehicle.

“Under Hyundai's plan as outlined for 2013 models, an owner would pay up to $275 to help cover the cost of the arbitration proceeding. Hyundai said the policy helps consumers by making it simpler to resolve disputes without the expense of going to court,” read the New York Times report. “Critics of binding arbitration said it limits consumer choices and puts final decisions in the hands of someone working on behalf of the automaker.”

On Dec. 12, the CFPB released its first report on arbitration agreements. It indicated that arbitration clauses were often confusing and that very few consumers use arbitration. The research focused on credit cards and bank cards. The auto industry has long anticipated the bureau would go after arbitration agreements in auto transactions.

Trainer told F&I and Showroom magazine that the removal of the arbitration clause from its warranty was in response to the New York Times’ article, and that the decision was unrelated to the CFPB’s report.

“The way you've characterized the situation you make it seem like we don't care about our customers,” Trainor told the Times. “Nothing could be further from the truth.”

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