Many dealer Buyer’s Orders and RISCs contain a provision indicating any customer dispute will be subject to arbitration. The thought behind including this disputed arbitration wording revolves around the belief that it is faster and cheaper to handle customer disputes through arbitration than getting bogged down in the court system and its slower moving process. Many Buyer’s Order forms provide for the arbitration of disputes in boiler plate wording on the back of a Buyer’s Order, or deep in the disclosure terms of a multi-section RISC. For example, in some of this arbitration process wording used by the form drafter/provider, the wording could reference that the arbitration is to be conducted under the American Arbitration Association’s (“AAA”) rules, processes and procedures. However, having this specific use of AAA listing in the form wording could add new expense and pre-approval activities to the arbitration process.
On September 1, 2014, AAA announced its new procedures regarding its Business Notification and Publicly-Accessible Consumer Clause Registry. The new procedure requires a business, such as a dealership, that uses the AAA process in a consumer contract to meet several procedural and financial requirements before the dealer can utilize the AAA process to arbitrate a dispute. A “consumer agreement” is defined by AAA as an agreement between a customer and business for a product or service for personal or household use, where the business has standardized application of arbitration clauses with customers, and where the terms and conditions of the purchase are primarily non-negotiable. Most dealers’ Buyer’s Orders and RISC agreements fall into this type of consumer agreement category.
Additionally, at the same time, AAA created a registry of businesses, which submitted their arbitration clauses to the AAA, and that AAA has determined substantially and materially comply with the standards of AAA’s new consumer arbitration procedures and protocol. The intent of the registry is to provide a searchable database of a business’s name, address, its consumer arbitration clause, and other related documents, for a consumer to determine if AAA has reviewed a consumer arbitration clause and will administer an arbitration.
New Fees Assessed by AAA for Review and Registering
However, AAA’s new change does not come cheap. Each submission requires a nonrefundable fee of $500, which is due when a business, such as a dealer, submits a contract’s arbitration clause to AAA to review for compliance, and to maintain the clause on the registry in the 2015 calendar year. Then an annual fee of $500 will be charged to maintain a previously approved and included clause in the registry. If after review, AAA determines there is a protocol violation, the business will have an opportunity to revise the clause, but such a revision does not require any additional fee. Also, where the AAA process is invoked, but the business failed to register the clause, AAA will still administer the arbitration, but the business must pay a $250 expedited review fee in addition to the standard $500 fee. AAA will refuse to administer a consumer arbitration where the business fails to pay either fees due.
Registering an Arbitration Clause in a Form Agreement
As noted above, many dealers use arbitration clauses in standardized forms. For example, many finance companies use the same RISC. To the extent the form clause will apply to any customer transaction, each dealership must register the provision with AAA, even if the form provider already had the arbitration provision approved by AAA. A dealer will need to identify which contract contains a dispute resolution provision designating the AAA process. If different arbitration wording exists in various agreements, consider using one arbitration wording version to streamline the registration process and reduce costs. Also note (either in the cover sheet to the clause or on the clause itself ) to which contracts the clause applies. If registered in this manner, only one fee and registration would be required.
Review of AAA Wording in Clause Recommended
Historically, some dealers have noted dissatisfaction with the AAA process. The primary concern has been the perceived excessive cost versus other arbitration services. These new changes do not make the AAA process any less costly. A dealer must individually determine whether to register a AAA arbitration clause. Even if the review and revision of an arbitration clause in a Buyer’s Order, RISC or other contracts results in a selection of a different arbitration provider, including referencing a generic, or state or local arbitration offerings, the use of such an arbitration clause can help to ensure the process is fair and quicker to resolve an issue between a dealer and a customer.
