Lemon Law Arbitration and Dispute Programs

Lemon law arbitration is a way to get a decision on your claim without filing a lawsuit, and in some cases you have to try it first. There are two main kinds. Manufacturers sponsor programs that follow federal rules, and some states run or certify their own. They differ on cost, speed and, most of all, on whether the decision is final.

This page explains both kinds, the federal ground rules, and the trade-offs. State examples are drawn from the statute text we reviewed. They aren't a full list.

What is a lemon law dispute program?

A dispute program is a process outside of court where a neutral person or panel reviews your vehicle's repair history and decides what the manufacturer owes. Federal law calls a manufacturer's version an "informal dispute settlement mechanism." Congress declared a policy "to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled" this way (15 U.S.C. §2310(a)(1)).

Most programs work in a similar order:

1. You file a claim with the program, usually on its form.
2. The program tells the manufacturer and gathers records from both sides.
3. Some programs try mediation first, to see if you and the manufacturer can settle.
4. If not, an arbitrator or panel reviews the evidence, sometimes at a hearing, and issues a written decision.

Manufacturer programs: BBB AUTO LINE and NCDS

Many manufacturers send warranty disputes to an outside program they fund. Two that run current programs are:

• BBB AUTO LINE, run by BBB National Programs. It offers mediation and arbitration for warranty and lemon law disputes and says it "does not charge any fee to vehicle owners." It lists its participating manufacturers on its site, and notes that some take part only in some states.
• National Center for Dispute Settlement (NCDS), which says it has "administered automobile manufacturers' warranty mediation and arbitration programs since 1995" and lets owners file a vehicle warranty claim at no cost.

Which program applies to you depends on your brand, and lists change. Your warranty booklet is the place to check. If a manufacturer requires you to use its program, federal rules make it disclose the program on the face of the written warranty, including its name and address and that you must use it before suing under Magnuson-Moss (16 CFR §703.2(b)).

Federal rules for manufacturer programs (16 CFR Part 703)

A manufacturer program that you can be required to use must follow the FTC's Part 703 rules. The main ones:

When you must use a program first

You may have to try a program before you can sue, under federal law, state law or both.

Federal rule. If a manufacturer sets up a program that meets Part 703 and the written warranty requires you to use it first, you "may not commence a civil action" under Magnuson-Moss until you do (15 U.S.C. §2310(a)(3)). That requirement is met 40 days after you notify the program, or when it finishes its duties, whichever is sooner, unless an allowed delay applies (16 CFR §703.5(i)).

State rules. Many state lemon laws have their own version. Three examples:

• New York. If a manufacturer has a qualifying program, the refund and replacement remedies "shall not apply to any consumer who has not first resorted to such mechanism" (N.Y. Gen. Bus. Law §198-a(g)).
• Florida. If the state has certified a manufacturer's procedure and the manufacturer told you how to use it, Florida's refund and replacement remedy applies to you "only if the consumer has first resorted to such procedure" (Fla. Stat. §681.108(1)). Before filing a lawsuit, you must also submit the dispute to the state and, if it's eligible, to the state board (§681.1095(4)).
• California runs an Arbitration Certification Program that "certifies and monitors arbitration programs" for warranty disputes, and notes that not every manufacturer has a state-certified process.

Skipping a required step can delay or derail a claim, so check your warranty and your state's page before you file anything.

State-run arbitration programs

Some states run their own lemon law arbitration, separate from the manufacturers' programs. Four examples from the statutes:

In states without their own program, owners rely on manufacturer programs and the courts.

Binding or non-binding: what the decision means for you

Whether a decision binds you depends on the program, so find out before the hearing.

• Manufacturer programs under Part 703. Not legally binding on anyone (16 CFR §703.5(j)). After the decision, the program must tell you that you may still pursue legal remedies, including small claims court (§703.5(g)(1)).
• Washington. The consumer may accept or reject the decision. "Upon acceptance by the consumer, the arbitration board decision shall become final" (RCW 19.118.090(7)). A consumer who rejects it may appeal to superior court within 120 days (§19.118.090(8)).
• Florida. "A decision is final unless appealed by either party." The appeal must be filed in circuit court within 30 days and is heard as a trial de novo (Fla. Stat. §681.1095(10), (12)).
• Massachusetts. If the arbitrator finds the car qualifies, the manufacturer must deliver the refund or replacement within 21 days or appeal to superior court, and an appeal requires a bond (G.L. c. 90, §7N½(6)).

In every case, the decision can follow you to court. Federal law makes a program decision "admissible in evidence" (15 U.S.C. §2310(a)(3)). Massachusetts treats the arbitrator's findings of fact as "prima facie evidence" in a later case (G.L. c. 90, §7N½(6)).

Questions about your vehicle's repair history?

Tell us what has happened with your vehicle. A member of our team will look at your dates and repair orders with you. Reaching out does not create an attorney-client relationship.

Check my vehicleCall (888) 884-8551

Pros and cons of lemon law arbitration

Arbitration suits some cases and not others. Here is a neutral look at the trade-offs.

Possible advantages

• Manufacturer programs under Part 703 can't charge you a fee.
• Deadlines are short, often 40 to 60 days to a decision.
• The process is less formal than court.
• Under Part 703, a decision for you doesn't bind you, so you can still go to court if you're not satisfied.

Possible drawbacks

• The decision can be used as evidence later, even if it goes against you.
• Remedies may be limited to what the program awards, and a program's view of the law may differ from a court's.
• Some state programs charge a filing fee or have short appeal windows.
• Arbitration takes time, and states treat that time differently when counting filing deadlines. Florida, for example, lets you sue within one year after the final action of the program or board (Fla. Stat. §681.112(2)). Check your state's rule.

How to prepare for lemon law arbitration

Treat arbitration as a hearing on the evidence. Before you file:

• Gather every repair order, with dates, mileage and the problem as written by the service advisor.
• Write a short timeline of each repair visit and each day the vehicle was out of service.
• Collect the purchase or lease contract, warranty booklet and any letters to the manufacturer. Our page on notice to the manufacturer explains why written notice matters.
• Note any safety issues, warning lights or videos of the problem.
• Decide what remedy you want, such as a buyback or replacement.

Once the decision arrives, check the deadline to accept, reject or appeal right away.