FTC rulings give consumers stronger warranty protections

The U.S. FTC recently shot down rules that required consumers to take products to authorized dealers for service or risk voided warranties.

voided warranty
Credit: Regal Roofing

You likely believe you've always had the right to sue a company that sells you a defective product, or to take your device anywhere you want to get it repaired without voiding the warranty. In theory, you're correct, but today many companies bully consumers out of asserting their rights. Fortunately, that's about to change.

If your laptop, smartphone or car, for example, is under warranty, and you take it somewhere other than a so-called "authorized dealer" for repair or maintenance, the manufacturer can claim that you voided the product guarantee. If your complaint is serious and you want to sue the manufacturer, there's a good chance that fine print in the sales contract attempts to block you — compulsory arbitration is the only remedy.

However, two Federal Trade Commission (FTC) rulings this month claim such bullying tactics violate the law and need to stop.

Let's start with the warranty issue and a practice called "implied tying." This term refers to language that implies consumer warranty coverage is conditional and dependent on the use of select (and usually expensive) parts or services.

Say you purchased a smartphone with a one-year warranty that doesn't include drop-damage protection. If you break the screen and replace it yourself, you void the warranty. If your phone then overheats and dies because the processor is defective, some companies will claim it's your problem, not theirs, because the warranty is longer valid.

"Gotchas" like this one are even more common when it comes to cars. A typical automobile warranty requires that owners perform routine maintenance at specified intervals and replace defective parts with new ones from the car manufacturer. In the past, if you got a spark plug changed at a neighborhood garage, or replaced brake pads that weren't under warranty with aftermarket parts, you voided the existing warranty.

But not any more. The FTC recently completed a review of related regulations, and it made a point to say that "implied typing" violates the law and is not enforceable. 

The FTC also addressed the issue of compulsory arbitration. In the unlikely event that you actually read the fine print that comes with many products, you'll see that you gave up the right to sue the manufacturer or service provider, no matter how serious your complaint. Once you sign a sales contract with this type of fine print, you have to go through arbitration and then be satisfied with whatever ruling you get.

The FTC says this practice violates the Magnuson-Moss Warranty Act and must stop. Companies can still require that you submit to arbitration before filing suit, but after that you're free to take them to court.

Now that you know you have those rights, you should seriously consider using them. If more people take action against shady companies, those organizations might be less inclined to stick it to consumers.

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