Consumer Law

The Manufacturer Is Insisting On Mediation Before Going to Court. Can They Do This?

By Amy Loftsgordon, Attorney
A warranty can include a clause that requires consumers to try to resolve disputes informally before going to court.

Yes. Under the Magnuson-Moss Warranty Act (the federal law that governs consumer product warranties), the person or company making the warranty can include a provision (a clause) that requires you to try to resolve the dispute informally—such as through mediation—before you go to court. Mediation involves a neutral third person (the mediator) who meets with you and the party that made the warranty to help you reach a mutually acceptable resolution to the dispute. Using an informal dispute resolution process like mediation works best when the parties want another person to decide the outcome of their dispute—but don’t want the formality, time, and cost of a trial.

Mediation is successful (it ends the dispute) when both parties agree to the solution or settlement. The mediator does not have the power to impose a judgment. If the parties can’t agree, they can escalate the dispute to court (or use arbitration). Arbitration is slightly less formal than going to court, but it’s more expensive than mediation and importantly, the arbitrator may have the power to impose a resolution, even when one side opposes it. Whether the disappointed loser can then take the case to court will depend on the wording of the arbitration clause in the warranty agreement, and on any limitations imposed by law.

The warranty might require you to try to resolve the matter through a private company-based program or a neutral third party, like the Better Business Bureau (BBB), a private, nonprofit organization that helps settle disputes that involve products.

If the warranty requires an informal dispute settlement procedure, that process must comply with certain requirements. The Federal Trade Commission (FTC) Rule on Informal Dispute Settlement Procedures lays out these requirements. (When passing the Magnuson-Moss Warranty Act, Congress directed the FTC to create rules covering certain requirements of the Act.)

Under the FTC Rule, the dispute settlement process must:

  • be adequately funded and staffed
  • not charge a fee
  • have written procedures (and follow them)
  • inform both parties when it receives notice about the dispute
  • give each party a chance to present its case, submit supporting materials, and to dispute points made by the other party (the process can be oral rather than written, but only if both parties agree)
  • investigate, gather, and organize all information needed to resolve the dispute fairly and quickly
  • settle the dispute independently, without influence from any of the parties involved
  • make the decision and give supporting reasons to the parties within 40 days
  • issue a non-binding decision (either party can file a lawsuit later if unhappy with the result), and
  • keep a complete record about the dispute.

If you have a complaint about a company’s informal dispute resolution process, you can file an online complaint at the FTC website. The FTC won’t work out your particular complaint, but it might use the information to help detect patterns of noncompliance with its requirements.

Also, the FTC offers tips for getting your money back if you’re disappointed with a product you bought.

Go to the main warranty FAQ page.

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