INFORMAL DISPUTE SETTLEMENT PROCEDURES


16 C.F.R. PART
703-INFORMAL DISPUTE SETTLEMENT PROCEDURES

Sec.
703.1 Definitions.
703.2 Duties of warrantor.
MINIMUM REQUIREMENTS OF THE MECHANISM
703.3 Mechanism organization.
703.4 Qualification of members.
703.5 Operation of the Mechanism.
703.6 Recordkeeping.
703.7 Audits.
703.8 Openness of records and proceedings.
AUTHORITY: 15 USC 2309-10
SOURCE: 40 FR 60215 (Dec. 31, 1975).

§ 703.1 Definitions.
(a) The Act means the Magnuson-Moss Warranty-Federal Trade Commission
Improvement Act, 15 U.S.C. 2301, et seq.
(b) Consumer product means any tangible personal property which is distributed
in commerce and which is normally used for personal, family, or household
purposes (including any such property intended to be attached to or installed
in any real property without regard to whether it is so attached or installed).
(c) Written warranty means:
(1) Any written affirmation of fact or written promise made in connection
with sale of a consumer product by a supplier to a buyer which relates
to the nature of the material or workmanship and affirms or promises that
such material or workmanship is defect free or will meet a specified level
of performance over a specified period of time, or
(2) Any undertaking in writing in connection with the sale by a supplier
of a consumer product to refund, repair, replace, or take other remedial
action with respect to such product in the event that such product fails
to meet the specifications set forth in the undertaking, which written
affirmation, promise or undertaking becomes part of the basis of the bargain
between a supplier and a buyer for purposes other than resale of such
product.
(d) Warrantor means any person who gives or offers to give a written warranty
which incorporates an informal dispute settlement mechanism.
(e) Mechanism means an informal dispute settlement procedure which is
incorporated into the terms of a written warranty to which any provision
of Title I of the Act applies, as provided in section 110 of the Act.
(f) Members means the person or persons within a Mechanism actually deciding
disputes.
(g) Consumer means a buyer (other than for purposes of resale) of any
consumer product, any person to whom such product is transferred during
the duration of a written warranty applicable to the product, and any
other person who is entitled by the terms of such warranty or under applicable
state law to enforce against the warrantor the obligations of the warranty.
(h) On the face of the warranty means:
(1) If the warranty is a single sheet with printing on both sides of the
sheet, or if the warranty is comprised of more than one sheet, the page
on which the warranty text begins;
(2) If the warranty is included as part of a longer document, such as
a use and care manual, the page in such document on which the warranty
text begins.

§ 703.2 Duties of warrantor.
(a) The warrantor shall not incorporate into the terms of a written warranty
a Mechanism that fails to comply with the requirements contained in §§
703.3 through 703.8 of this part. This paragraph shall not prohibit a
warrantor from incorporating into the terms of a written warranty the
step-by-step procedure which the consumer should take in order to obtain
performance of any obligation under the warranty as described in section
102(a) (7) of the Act and required by Part 701 of this subchapter.
(b) The warrantor shall disclose clearly and conspicuously at least the
following information on the face of the written warranty:
(1) A statement of the availability of the informal dispute settlement
mechanism;
(2) The name and address of the Mechanism, or the name and a telephone
number of the Mechanism which consumers may use without charge;
(3) A statement of any requirement that the consumer resort to the Mechanism
before exercising rights or seeking remedies created by Title I of the
Act; together with the disclosure that if a consumer chooses to seek redress
by pursuing rights and remedies not created by Title I of the Act, resort
to the Mechanism would not be required by any provision of the Act; and
(4) A statement, if applicable, indicating where further information on
the Mechanism can be found in materials accompanying the product, as provided
in § 703.2(c) of this section.
(c) The warrantor shall include in the written warranty or in a separate
section of materials accompanying the product, the following information:
(1) Either (i) a form addressed to the Mechanism containing spaces requesting
the information which the Mechanism may require for prompt resolution
of warranty disputes; or (ii) a telephone number of the Mechanism which
consumers may use without charge;
(2) The name and address of the Mechanism;
(3) A brief description of Mechanism procedures;
(4) The time limits adhered to by the Mechanism; and (5) The types of
information which the Mechanism may require for prompt resolution of warranty
disputes.
(d) The warrantor shall take steps reasonably calculated to make consumers
aware of the Mechan-ism’s existence at the time consumers experience warranty
disputes. Nothing contained in paragraphs (b), (c), or (d) of this section
shall limit the warrantor’s option to encourage consumers to seek redress
directly from the warrantor as long as the warrantor does not expressly
require consumers to seek redress directly from the warrantor. The warrantor
shall proceed fairly and expeditiously to attempt to resolve all disputes
submitted directly to the warrantor.
(e) Whenever a dispute is submitted directly to the warrantor, the warrantor
shall, within reasonable time, decide whether, and to what extent, it
will satisfy the consumer, and inform the consumer of its decision. In
its notification to the consumer of its decision, the warrantor shall
include the information required in § 703.2 (b) and (c) of this section.
(f) The warrantor shall: (1) Respond fully and promptly to reasonable
requests by the Mechanism for information relating to disputes;
(2) Upon notification of any decision of the Mechanism that would require
action on the part of the warrantor, immediately notify the Mechanism
whether, and to what extent, warrantor will abide by the decision; and

(3) Perform any obligations it has agreed to.
(g) The warrantor shall act in food faith in determining whether, and
to what extent, it will abide by a Mechanism decision.
(h) The warrantor shall comply with any reasonable requirements imposed
by the Mechanism to fairly and expeditiously resolve warranty disputes.

MINIMUM REQUIREMENTS OF THE MECHANISM
§ 703.3 Mechanism organization.
(a) The Mechanism shall be funded and competently staffed at a level sufficient
to ensure fair and expeditious resolution of all disputes, and shall not
charge consumers any fee for use of the Mechanism.
(b) The warrantor and the sponsor of the Mechanism (if other than the
warrantor) shall take all steps necessary to ensure that the Mechanism,
and its members and staff, are sufficiently insulated from the warrantor
and the sponsor, so that the decisions of the members and performance
of the staff are not influenced by either the warrantor or the sponsor.
Necessary steps shall include, at a minimum committing funds in advance,
basing personnel decisions solely on merit, and not assigning conflicting
warrantor or sponsor duties to Mechanism staff persons.
(c) The Mechanism shall impose any other reasonable requirements necessary
to ensure that the members and staff act fairly and expeditiously in each
dispute.

§ 703.4 Qualification of members.
(a) No member deciding a dispute shall be: (1) A party to the dispute,
or an employee or agent of a party other than for purposes of deciding
disputes; or
(2) A person who is or may become a party in any legal action, including
but not limited to class actions, relating to the product or complaint
in dispute, or an employee or agent of such person other than for purposes
of deciding disputes. For purposes of this paragraph (a) a person shall
not be considered a "party" solely because he or she acquires
or owns an interest in a party solely for investment, and the acquisition
or ownership of an interest which is offered to the general public shall
be prima facie evidence of its acquisition or ownership solely for investment.
(b) When one or two members are deciding a dispute, all shall be persons
having no direct involvement in the manufacture, distribution, sale or
service of any product. When three or more members are deciding a dispute,
at least two-thirds shall be persons having no direct involvement in the
manufacture, distribution, sale or service of any product. "Direct
involvement" shall not include acquiring or owning an interest solely
for investment, and the acquisition or ownership of an interest which
is offered to the general public shall be prima facie evidence of its
acquisition or ownership solely for investment. Nothing contained in this
section shall prevent the members from consulting with nay persons knowledgeable
in the technical, commercial or other areas relating to the product which
is the subject of the dispute.
(c) Members shall be persons interested in the fair and expeditious settlement
of consumer disputes.

§ 703.5 Operation of the Mechanism.
(a) The Mechanism shall establish written operating procedures which shall
include at least those items specified in paragraphs (b) through (j) of
this section. Copies of the written procedures shall be made available
to any person upon request.
(b) Upon notification of a dispute, the Mechanism shall immediately inform
both the warrantor and the consumer of receipt of the dispute.
(c) The Mechanism shall investigate, gather and organize all information
necessary for a fair and expeditious decision in each dispute. When any
evidence gathered by or submitted to the Mechanism raises issues relating
to the number of repair attempts, the length of repair periods, the possibility
of unreasonable use of the product, or any other issues relevant in light
of Title I of the Act (or rules thereunder), including issues relating
to consequential damages, or any other remedy under the Act (or rules
thereunder), the Mechanism shall investigate these issues. When information
which will or may be used in the decision, submitted by one party, or
a consultant under § 703.4(b) of this part, or any other source tends
to contradict facts submitted by the other party, the Mechanism shall
clearly, accurately, and completely disclose to both parties the contradictory
information (and its source) and shall provide both parties an oppor-tunity
to explain or rebut the information and to submit additional materials.
The Mechanism shall not require any information not reasonably necessary
to decide the dispute.
(d) If the dispute has not been settled, the Mechanism shall, as expeditiously
as possible but at least within 40 days of notification of the dispute,
except as provided in paragraph (e) of this section:
(1) Render a fair decision based on the information gathered as described
in paragraph (c) of this section, and on any information submitted at
an oral presentation which conforms to the requirements of paragraph (f)
of this section (A decision shall include any remedies appropriate under
the circumstances, including repair, replacement, refund, reimbursement
for expenses, compensation for damage, and any other remedies available
under the written warranty or the Act (or rules thereunder); and a decision
shall state a specified reasonable time for performance);
(2) Disclose to the warrantor its decision and the reasons therefor;
(3) If the decision would require action on the part of the warrantor,
determine whether, and to what extent, warrantor will abide by its decision;
and
(4) Disclose to the consumer its decision, the reasons therefor, warrantor’s
intended actions (if the decision would require action on the part of
the warrantor) and the information described in paragraph (g) of this
section. For purposes of paragraph (d) of this section a dispute shall
be deemed settled when the Mechanism has ascertained from the consumer
that:
(i) The dispute has been settled to the consumer’s satisfaction; and (ii)
the settlement contains a specified reasonable time for performance.
(e) The Mechanism may delay the performance of its duties under paragraph
(d) of this section beyond the 40 day time limit:
(1) Where the period of delay is due solely to failure of a consumer to
provide promptly his or her name and address, brand names and model number
of the product involved, and a statement as to the nature of the defect
or other complaint; or
(2) For a 7 day period in those cases where the consumer has made no attempt
to seek redress directly from the warrantor.
(f) The Mechanism may allow an oral presentation by a party to a dispute
(or a party’s representative) only if: (1) Both warrantor and consumer
expressly agree to the presentation;
(2) Prior to agreement the Mechanism fully discloses to the consumer the
following information:
(i) That the presentation by either party will take place only if both
parties so agree, but that if they agree, and one party fails to appear
at the agreed upon time and place, the presentation by the other party
may still be allowed;
(ii) That the members will decide the dispute whether or not an oral presentation
is made;
(iii) The proposed date, time and place for the presentation; and
(iv) A brief description of what will occur at the presentation including,
if applicable, parties rights to bring witnesses and/or counsel; and
(3) Each party has the right to be present during the other party’s oral
presentation. Nothing contained in this paragraph (b) of this section
shall preclude the Mechanism from allowing an oral presentation by one
party, if the other party fails to appear at the agreed upon time and
place, as long as all of the requirements of this paragraph have been
satisfied.
(g) The Mechanism shall inform the consumer, at the time of disclosure
required in paragraph (d) of this section that:
(1) If he or she is dissatisfied with its decision or warrantor’s intended
actions, or eventual performance, legal remedies, including use of small
claims court, may be pursued;
(2) The Mechanism’s decision is admissible in evidence as provided in
section 110(a)(3) of the Act; and
(3) The consumer may obtain, at reasonable cost, copies of all Mechanism
records relating to the consumer’s dispute.
(h) If the warrantor has agreed to perform any obligations, either as
part of a settlement agreed to after notification to the Mechanism of
the dispute or as a result of a decision under paragraph (d) of this section,
the Mechanism shall ascertain from the consumer within 10 working days
of the date for performance whether performance has occurred.
(i) A requirement that a consumer resort to the Mechanism prior to commencement
of an action under section 110(d) of the Act shall be satisfied 40 days
after notification to the Mechanism of the dispute or when the Mechanism
completes all of its duties under paragraph (d) of this section, whichever
occurs sooner. Except that, if the Mechanism delays performance of its
paragraph (d) of this section duties as allowed by paragraph (e) of this
section, the requirement that the consumer initially resort to the Mechanism
shall not be satisfied until the period of delay allowed by paragraph
(e) of this section has ended.
(j) Decisions of the Mechanism shall not be legally binding on any person.
However, the warrantor shall act in good faith, as provided in §
703.2(g) of this part. In any civil action arising out of a warranty obligation
and relating to a matter considered by the Mechanism, any decision of
the Mechanism shall be admissible in evidence, as provided in section
110(a) (3) of the Act.

§ 703.6 Recordkeeping.
(a) The Mechanism shall maintain records on each dispute referred to it
which shall include:
(1) Name, address and telephone number of the consumer;
(2) Name, address, telephone number and contact person of warrantor;
(3) Brand name and model number of the product involved;
(4) The date of receipt of the dispute and the date of disclosure to the
consumer of the decision;
(5) All letters or other written documents submitted by either party;
(6) All other evidence collected by the Mechanism relating to the dispute,
including summaries of relevant and material portions of telephone calls
and meetings between the Mechanism and any other person (including consultants
described in § 703.4(b) of this part);
(7) A summary of any relevant and material information presented by either
party at an oral presentation;
(8) The decision of the members including infor-mation as to date, time
and place of meeting, and the identity of members voting; or information
on any other resolution;
(9) A copy of the disclosure to the parties of the decision;
(10) A statement of the warrantor’s intended action(s);
(11) Copies of the follow-up letters (or summaries of relevant and material
portions of follow-up telephone calls) to the consumer, and responses
thereto; and
(12) Any other documents and communications (or summaries of relevant
and material portions of oral communications) relating to the dispute.
(b) The Mechanism shall maintain an index of each warrantor’s disputes
grouped under brand name and subgrouped under product model.
(c) The Mechanism shall maintain an index for each warrantor as will show:
(1) All disputes in which the warrantor has promised some performance
(either by settlement or in response to a Mechanism decision) and has
failed to comply; and
(2) All disputes in which the warrantor has refused to abide by a Mechanism
decision.
(d) The Mechanism shall maintain an index as will show all disputes delayed
beyond 40 days.
(e) The Mechanism shall compile semi-annually and maintain statistics
which show the number and percent of disputes in each of the following
categories:
(1) Resolved by staff of the Mechanism and warrantor has complied;
(2) Resolved by staff of the Mechanism, time for compliance has occurred,
and warrantor has not complied;
(3) Resolved by staff of the Mechanism and time for compliance has not
yet occurred;
(4) Decided by members and warrantor has complied;
(5) Decided by members, time for compliance has occurred, and warrantor
has not complied;
(6) Decided by members and time for compliance has not yet occurred;
(7) Decided by members adverse to the consumer;
(8) No jurisdiction;
(9) Decision delayed beyond 40 days under § 703.5(e)(1) of this part;
(10) Decision delayed beyond 40 days under § 703.5(e)(2) of this
part;
(11) Decision delayed beyond 40 days of any other reason; and
(12) Pending decision.
(f) The Mechanism shall retain all records specified in paragraphs (a)
through (e) of this section for at least 4 years after final disposition
of the dispute.

§ 703.7 Audits.
(a) The Mechanism shall have an audit conducted at least annually, to
determine whether the Mechanism and its implementation are in compliance
with this part. All records of the Mechanism required to be kept under
§ 703.6 of this part shall be available for audit.
(b) Each audit provided for in paragraph (a) of this section shall include
at a minimum the following:
(1) Evaluation of warrantor’s efforts to make consumers aware of the Mechanism’s
existence as required in § 703.2(d) of this part;
(2) Review of the indexes maintained pursuant to § 703.6(b), (c)
and (d) of this part; and
(3) Analysis of a random sample of disputes handled by the Mechanism to
determine the following:
(i) Adequacy of the Mechanism’s complaint and other forms, investigation,
mediation and follow-up efforts, and other aspects of complaint handling;
and
(ii) Accuracy of the Mechanism’s statistical compilations under §
703.6(e) of this part. (For purposes of this subparagraph "analysis"
shall include oral or written contact with the consumers involved in each
of the disputes in the random sample.)
(c) A report of each audit under this section shall be submitted to the
Federal Trade Commission, and shall be mad available to any person at
reasonable cost. The Mechanism may direct its auditor to delete names
of parties to disputes, and identity of products involved with the Mechanism
as a warrantor, sponsor or member, or employee or agent thereof, other
than for purposes of the audit.
(d) Auditors shall be selected by the Mechanism. No auditor may be involved
with the Mechanism as a warrantor, sponsor or member, or employee or agent
thereof, other than for purposes of the audit.

§ 703.8 Openness of records and proceedings.
(a) The statistical summaries specified in § 703.6(e) of this part
shall be available to any person for inspection and copying.
(b) Except as provided under paragraphs (a) and (e) of this section, and
paragraph (c) of § 703.7 of this part, all records of the Mechanism
may be kept confidential, or made available only on such terms and conditions,
or in such form, as the Mechanism shall permit.
(c) The policy of the Mechanism with respect to records made available
at the Mechanism’s option shall be set out in the procedures under §703.5(a)
of this part; the policy shall be applied uniformly to all requests for
access to or copies of such records.
(d) Meetings of the members to hear and decide disputes shall be open
to observers on reasonable and nondiscriminatory terms. The identity of
the parties and products involved in disputes need not be disclosed at
meetings.
(e) Upon request the Mechanism shall provide to either party to a dispute:
(1) Access to all records relating to the disputes; and
(2) Copies of any records relating to the dispute, at reasonable cost.
(f) The Mechanism shall make available to any person upon request, information
relating to the qualifications of Mechanism staff and members.

 

grey Line