Lemon Law / HB1725
Good afternoon. Chairman Wogan and Members of the Committee, my name is Craig Thor Kimmel and I thank you for the honor of allowing me to speak before you today.
As a consumer law attorney practicing in Pennsylvania for eleven years, my firm, Kimmel & Silverman has developed a practice in automobile Lemon Law and breach of warranty litigation. That's all we do.
Because I was employed as an automobile mechanic while in law school, during which time I had my own unfortunate experience with a leased lemon car, it is my hope that my opinion regarding House Bill 1725 will be of some benefit. I also offer whatever assistance I can provide to further the intentions of this Committee in improving Pennsylvania's Automobile Lemon Law.
House Bill 1725 is an excellent amendment to the PA Lemon Law. It addresses the needs of 1 in 3 new car consumers in Pennsylvania. The Bill is substantially effective in eliminating the disparity in treatment received by lessees, who currently have no protection under the Lemon Law.
The addition of leased cars will also bring Pennsylvania within the realm of protections currently enjoyed by citizens of the majority of other states.
I do, however, believe HB 1725 would benefit by a few tweaks and changes which would effectuate the best intentions of its authors and so I offer my suggestions and explanations to accomplish these in a practical sense. A brief list is follows. I will then comment on them in order:
1. Section 2, definition of "motor vehicle" and Section 4 Definition of "repair obligation". It is suggested that the Bill be changed to substitute the word "or" for "and" in these sections. The operative phrase would therefore be changed to read: "vehicles which are purchased, leased or registered in the Commonwealth" are entitled to Lemon Law protections. (Emphasis added)
2. Section 2, definition of "new motor vehicle". It is suggested that the Bill be changed to remove the words "off road vehicles" from the exclusion language of Section 2. The Bill is it stands could be read to exclude pick-up trucks and sport utility vehicles from Lemon Law protection. As pick-up trucks and sport utility vehicles are the largest markets in the automobile industry today, avoidance of any ambiguous language is of paramount importance.
3. Section 4 (a), Coverage period. It is suggested that the Bill be changed to expand the term of protection from only 12 months/12,000 miles, to "the longer of 24 months or the term of the manufacturers warranty."
4. Section 5, Rights not Affected by Lease Termination. Is strongly suggested that the Bill specify in no uncertain terms that a consumer is not required to retain possession of the vehicle in order to obtain a refund.
5. Section 5, Comparable New Car. It is suggested that the Bill be changed to require that any consumer electing a comparable new vehicle, is entitled to the same model and year as the subject vehicle, or newer, and with the same or greater equipment as the one being returned, within 30 days.
6. Section 5, Charges to be Paid by the Consumer for Comparable New Car. It is suggested that the Bill indicate that if a comparable vehicle is elected, the consumer be required to contribute only an amount of money equal to the amount of the mileage charge as if he elected a refund.
7. Section 7, Itemized Statement of Repairs. It is suggested that the Bill be changed to specify that the itemized statement of repairs received from the dealer include all mechanics notes, including time expended for repairs and service bulletins performed on the car. Such information is currently withheld from the consumer.
8. Section 7, Proof of Notice of Second Repair Attempt. It is suggested that the Bill specify that if the manufacturer cannot establish that it has received notice of the second repair attempt from its dealer, by certified mail in accordance with the Lemon Law, a presumption of a reasonable opportunity to repair attaches.
9. Section 9, Informal Dispute Resolution Procedure: it is strongly suggested that the Bill specify that any informal dispute resolution program must give the consumer the same rights and remedies as specified in this Act as a condition precedent to requiring the consumer to go through such procedure.
Section 2, Definition of "motor vehicle" and Section 4 Definition of "repair obligation". It is strongly suggested that the word "or" be inserted in place of the word "and" in Section 2's definition of "New Motor Vehicle", and in Section 4's, definition of "Repair obligation". This slight change would eliminate a substantial gap in the current law, which affects thousands of Pennsylvanians by depriving them of Lemon Law protection even though they otherwise meet the parameters.
A large class of Pennsylvanians fall between the cracks of protection because they do not both "purchase and register" their vehicles in the Commonwealth. This can be either by choice or totally beyond the control of the consumer. Every day we see people who bought or leased their car out of state and have been re-located by their employment, schooling, or other reasons to Pennsylvania. Others bought or leased their cars from their dealer, located just down the road or across the river, but across state lines.
I recall in my practice a judge who excluded a Lemon Law claim because the vehicle was not both purchased and registered in the Commonwealth. Yet that same judge, in a subsequent case only months later, asked me for advice about his daughter, a student living out of state. Apparently she was getting nowhere with the manufacturer for problems related to an unreliable transmission. I pointed out that by his own ruling in the earlier case, his daughter had no Lemon Law claim because the vehicle that was purchased in Pennsylvania, was now registered in the state where she was attending school and therefore she could not meet the "purchased and registered" requirement.
Automobile manufacturers are keenly aware of the "purchased and registered" language and quite frankly, address consumer problems differently than people who meet the standard. Over the years, I have seen hundreds of cases where the manufacturer refuses to reacquire a vehicle based solely upon this provision, whether they acknowledge the car is a lemon or not.
A majority of states, including New Jersey, are mindful of the implications of this problem and chose to use the word "or" to ensure protection.
Removing the word "and" in HB 1725, in favor of the word "or", prevents manufacturers from treating people with valid vehicle problems differently based upon statutory construction and will result in greater, more even-handed protections.
Section 2. Definition of "new motor vehicle" The second suggestion would again apply to Section 2, pertaining to the definition of "new motor vehicle". It is suggested that the Bill be changed to remove the words "off road vehicles" as an excluded class of cars. The wording implies that pick-up trucks, sport utilities and the like are not covered. Considering that the legislature meant to address All terrain vehicles by this exclusion, any ambiguity which could be interpreted as excluding what are the two largest segments of new car sales and leases, creates a possible loophole which should be closed.
Section 4 (a). Coverage Period. Third, under Section 4(a), it is suggested that the Bill expand the Lemon Law coverage period from an outdated 12 months / 12,000 miles, to a more modern "24 months or the term of the manufacturers warranty, whichever is greater." Nearly every manufacturer issues a new car warranty of at least 3 years /36,000 miles. The current 12/12 period undermines the terms of these longer warranties by making it appear as if concerns occurring after the 12/12 period are somehow second class claims, for which consumers should not be entitled to obtain effective repairs in Pennsylvania.
Currently, if a defect arises after the 12/12 period, even slightly after, under the Lemon Law a consumer cannot compel the manufacturer to reacquire a defective car. This is at odds with the warranty obligation, in which the manufacturer guarantees the consumer in writing that the vehicle will be free of defects in materials and workmanship for a substantially longer period than 12/12.
Expanding the Lemon Law coverage to the basic warranty term does not expose manufacturers to any greater obligation than what has already been promised in the warranty manual. The only impact would be to give the consumer a remedy if repairs made under warranty, are unsuccessful.
Before these basic warranties appeared, most states, including New Jersey, enacted a Lemon Law which provided an 18,000 mile / 24 month coverage period. Expanding the term in Pennsylvania is a fair and reasonable updating of a 16 year old statute and will bring Pennsylvania in line with other contemporary Lemon Law statutes.
Section 5, Rights not Affected by Lease Termination. Fourth, under Section 5, it is strongly suggested that the Bill specify that a consumer is not required to retain possession of the vehicle to prevail under a Lemon Law claim. Amending the Act to include leased vehicles without such a provision fails to take into account that a lease is for a term of months or years and will expire. At the termination, the vehicle is normally returned to the lesser. If the change is not made, a manufacturer can simply wait out the consumer in litigation or otherwise, and then have the claim dismissed from consideration after the car is returned under the lease. Thus, a consumer can experience 2, 3, 5, or more years of car problems, paying lease charges dutifully throughout, in the shop or not, and then be faced with no recourse because the lease ended.
Again, New Jersey and other states have Lemon Law provisions and case law which address this problem. When challenged in court, the holdings have been that in a lease scenario, the consumer need not retain possession of the car to prevail.
Section 5: Charges to be Paid by the Consumer for Comparable New Car. Fifth, under Section 5, pertaining to the consumers choice of a new car or refund, it is suggested that the Bill be changed to require a comparable replacement vehicle be new and unused, of the same model year as the subject vehicle, or newer and having the same or greater equipment as the vehicle which is being returned to the manufacturer, all within 30 days.
In over 12,000 cases I have studied in the last 10 years, the consumer frequently desires a replacement car rather than a refund, until faced with the manufacturers' definition of what that means. Because the Lemon Law does not define what a "comparable vehicle of equal value" is, it appears to mean a vehicle just like the model and type which the consumer first purchased. But because many cases do not arise until one or more model years after the purchase, it is nearly impossible for manufacturers to provide the same year car. Instead, they demand that the consumer pay "upgrade charges" or the like for the new vehicle. Lost in the logic is the fact that many consumers don't have the money to pay the upgrade charge and will actually lose money if they elect a refund and have to go out in the market to buy a new, more expensive car at a higher finance rate.
Apart from that, what is lost in the comparable new vehicle election process is that the consumer did not bring upon himself the problems which his car has exhibited. Most vehicles are obtained under an expectation of a 4-7 year term of use. Loans are typically paid off in year 3 or 4, meaning the consumer expects to make no payments for years 4, 5, 6 and 7. A Lemon Law refund forces the consumer back into the marketplace prematurely, in the normal Lemon Law claims process, after 1-3 years of use. This places an unexpected financial burden on consumers and requires choices to be made. Does the consumer and his family decide to pay more for a comparable new car as the manufacturer demands, or shall it be a refund, knowing that the consumer must re-enter the market and buy another car, at prices which are higher than the refund received.
In short, requiring the manufacturer to replace the car with a new unused vehicle of the same model year or later, with at least the same equipment, ensures that the consumer is not placed in a position of having to choose between a stripped down replacement car for the same money, a comparably equipped car for much more money, or a refund and even more money for another vehicle.
Section 7, Itemized Statement of Repairs Under Section 7, it is suggested that the Bill include a provision requiring the consumer to receive an itemized statement of repairs, including mechanics notes, time expended and any and all service bulletins performed.
Such information is currently generated for each repair and is a part of the dealer records but not provided to consumers in the normal course of business. The mechanic's notes show actual work performed, the time spent on each concern, and what, if any service actions were performed.
Frequently, a consumer will complain of a problem which the repair invoice states as being "normal" or "not duplicated" and the like, when in fact the mechanics notes show no time was spent diagnosing the problem. The reasons for this varies from the volume of cars that a dealership repairs each day, minimizing time spent to diagnose every concern, to an understanding that the problem does in fact exist, but the manufacturer has no repair procedure to correct it. Rather than disclose these facts to the consumer in an honest and forthright manner, consumers receive an invoice which appears to show there is no problem.
By requiring copies of all repair documents each time, the consumer can see what work was done or not done, question it at the time services are rendered and will encourage dealers to spend more time repairing cars under warranty as promised in the manual.
Technical bulletin disclosure is also important. Consumer complaints about a model are frequently common to a specific car. Manufacturers publish bulletins distributed solely to dealers, discussing such problems and repair procedures, if any. Technical bulletins may indicate that a problem has yet to be corrected, that the dealer must take action in a specific way, or advise the dealer not to do anything. Where parts are required by a technical bulletin, they are frequently not in stock or on back order. Rather than advise the consumer, the dealer will order the parts, make no notation on the customer copy of the invoice, and when the car is in again, usually for the same problem, the dealer will replace the parts in accordance with the technical bulletin, but without the consumer advised.
These changes to the Bill will ensure that all relevant repair information is disclosed to the consumer as part of the itemized statement of Section 7, as was intended by this provision in the 1984 Act.
Section 7, Proof of Notice of Second Repair Attempt. Under Section 7, the current Lemon Law and HB 1725 require the manufacturer to receive written notice of the second repair attempt from its dealer, which is to be transmitted by certified mail only. In practice, this requirement is routinely ignored and in fact, in 10 years of Lemon Law practice, I have seen only one such notice tendered, in 1994.
The importance of the certified mail notice provision cannot be overstated, as it is the mechanism the Legislature included to ensure the manufacturer was advised of potential Lemon Law concerns before the car was back for the third time.
It is suggested that HB 1725 be changed to specify that IF the manufacturer cannot establish that it has received certified written notice of the second repair attempt from its dealer, in accordance with the Lemon Law, the consumer shall be entitled to the a presumption that he has provided a reasonable opportunity to repair the vehicle. Doing so will encourage the notice to be sent and for action to be taken by the manufacturer before the situation gets worse.
Section 9, Informal Dispute Resolution Procedure: Under Section 9, pertaining to the Informal Dispute Resolution Procedure: it is strongly suggested that the Bill mandate that a consumer must go through the informal program only if the program provides the same rights and remedies as specified in the Lemon Law. As it currently stands, consumers are told by their dealers or by the manufacturer, that they must go through a program that provides few rights and fewer remedies, which fall far short of those specified in the Lemon Law. This is not an occasional event. I have litigated and observed numerous cases where 4, 5, 9, 10 or more repair attempts were made for the problem, and the informal program ruled that the consumer must allow the manufacturer yet another, ineffective, repair.
Often consumers are pressured by the company personnel or arbitrators to sign away their rights with little practical benefit. These programs have, for the last 16 years in Pennsylvania, allowed consumers to be duped, cajoled and harassed to such a degree that they do not believe they are entitled to anything other than what the manufacturer or arbitrator tells them they must accept. Believing what they are told, or being frustrated beyond reasonability, the consumer gives up or accepts what he is told he must.
By adding the suggested provision, a manufacturer must provide a consumer what the Lemon Law specifies, and nothing less, without need of litigation. If such changes are not made, manufacturers will continue to contract with dispute resolution programs which are contractually beholden only to the manufacturer and award no more than what they are permitted to award. Consumers looking to such a program for a fair and adequate solution, will continue to be disappointed.
In a 1995 case I handled, which the manufacturer appealed to the United States Third Circuit Court of Appeals, twice, Chief Judge Becker agreed that these programs are neither fair nor realistic when compared to what they are supposed to be under the Federal Trade Commission regulations of 16 CFR Part 703.
These changes further the protections of lessees under HB 1725 and ensure that the loopholes of our current Lemon Law are closed in a fair and meaningful way, for the benefit of all Pennsylvanians.
I have brought an outline with these suggestions and wish to hand copies up to the panel.
With that, Members of the Committee, I have completed my statement, thank you for the honor to speak before you today and welcome any questions you may have.
Craig Thor Kimmel, Esquire
Consumer Advocate Kimmel & Silverman, P.C.
30 East Butler Pike Ambler, PA 19002