By Catharine S. Andricos*
As we wade deeper into the digital age and sellers are conducting more and more transactions electronically, dealers have begun asking if they can provide vehicle warranty disclosures electronically. Effective October 17, 2016, the answer is clear: Yes! The FTC recently adopted final rule amendments implementing the 2015 E-Warranty Act that provide requirements for disclosing warranty terms electronically.
To understand the new requirements, it is important to consider the context. Since 1975, the federal Magnuson-Moss Warranty Act has required warrantors to disclose certain warranty terms and limitations in simple, easily understandable, and concise language in a single document. Any limitation on the duration of implied warranties must appear “on the face of the warranty,” which is defined by rule to mean the page on which the warranty text begins. Additionally, any dealer offering a written warranty is required to make the warranty terms available to the consumer prior to sale. The Pre-Sale Availability Rule generally requires dealers to make warranties available either by: (1) displaying the warranty in close proximity to the vehicle; or (2) posting signs in prominent locations advising consumers that warranties are available and furnishing the warranty upon request.
The FTC’s final rule amendments clarify how a warrantor or seller can comply with these requirements when the warrantor or seller provides a warranty electronically. Pursuant to the final rule amendments, if a warrantor opts to post warranty terms electronically, the warrantor or seller must
- provide consumers the Internet address of the website where the warranty terms can be reviewed;
- provide a non-Internet-based method, such as a phone number or mailing address, for consumers to request the warranty terms. Upon request, the warrantor must provide the warranty terms promptly and free of charge;
- ensure that all required warranty terms are posted in a clear and conspicuous manner and that any limitation on implied warranties appears in close proximity to the location where the text of the warranty terms begin; and
- ensure that warranty terms remain accessible to the consumer on the warrantor’s website.
These requirements seem straightforward enough. However, as with any change in the law, the devil is in the details. Therefore, before you toss your paper warranty documents, we recommend consulting with legal counsel to ensure compliance with the new Mag-Moss electronic warranty disclosure requirements.
*Catharine S. Andricos is a partner in the Washington, D.C., office of Hudson Cook, LLP. She can be reached at 202.327.9706 or by email at email@example.com.