People in California who are concerned about the quality of the products they purchase should be familiar with the 1975 Magnuson-Moss Warranty Act. It is a federal law intended to protect consumers from misleading warranty practices, to make sure warranties are not difficult to comprehend and to allow violations to be legally enforced. While the law is meant to benefit consumers, it also unexpectedly benefits dealers as well.
Consumers are able to benefit from the law because of the accountability and transparency it requires. In the majority of cases, the law makes it illegal to have implied warranties, a tie-in sales provision or misleading warranty terms. The law is considered beneficial to dealers because as it helps to increase customer satisfaction rates, it also provides a supplemental stream of revenue for dealerships. However, there is a question as to who is responsible for honoring the warranty.
Extended warranties are determined by which party, either the dealership or the outside vendor, is responsible. Under administrator obligor, the warranty administrator, which is a company that functions independently of the dealership, has the responsibility of fulfilling the terms of the service contract. With dealer obligor, it is the dealer who has to meet the service contact terms.
With dealer obligor service agreements, dealerships have higher liability and risk, in addition to new problems. Dealers also have to assume complete responsibility for not alone all existing claims, but also future contingent liability.
An attorney who handles cases pertaining to Federal Lemon Law may explain to clients how the Magnusson Moss Warranty Act applies to their particular case. The attorney might litigate to hold dealerships liable for violations of the law, such as providing deceptive warranties. Financial compensation may be pursued on behalf of clients who purchased products with warranties whose terms appear to be purposely misleading and confusing.