The Magnuson-Moss Warranty Act (“MMWA”) is a federal law that protects consumers by making those who make a written affirmation of fact or promise as part of a warranty and any state rights arising thereunder.15 U.S.C. § 2310(f). The MMWA regulates the enforcement of written warranties, implied warranties, and service contracts in consumer transactions.
What does “any rights arising thereunder” mean? The “rights arising thereunder” refers to rights with regard to a written warranty as well as any rights a consumer may have under state warranty laws, such as those provided under the Uniform Commercial Code (UCC). Here in Arizona, we find UCC codified under Arizona Revised Statutes, Title 47, which can be found online at https://www.azleg.gov/arsDetail/?title=47. To find your state’s Uniform Commercial Code, visit this link: https://www.law.cornell.edu/wex/table_ucc.
Where a consumer has financed the purchase of the warrantied product, a consumer may hold the finance company responsible if the warrantor refuses to honor the warranty. The FTC Holder Rule allows consumers to raise seller warranty-related claims against the financial institution that holds the consumer’s loan used to purchase the warrantied product.
So that means if the used car dealer or a solar company goes belly up, you may be able to hold the finance company responsible for the bad acts made by the dealer or company who refused to honor the warranty or committed some other deceptive acts.
The FTC Holder Rule was created so that consumers would not be left without a remedy and to avoid the injustice where consumers would owe on the credit obligation even though they cannot recover from the bad-acting seller.
Where a consumer stops paying because a warrantied product fails, the FTC Holder Rule may allow a consumer to defend a collection action by raising the consumer’s claims and defenses that the consumer has against the seller should the finance company file a lawsuit to collect under the loan.
Making related creditors liable for the acts of the original seller serves the other objective of establishing a market-based incentive for creditors to inquire into the merchants for whom they finance sales. After learning of the seller’s bad acts, such as refusing to honor warranties, a responsible creditor may stop working with those merchants whose conduct would subject the creditor to potential claims and defenses, forcing the market to police itself to reduce harms committed against consumers.
It goes without saying a finance company is in a much better position than the consumer to recover money from the seller since consumers are not able to police the market, exert leverage over sellers, or vindicate their legal rights in cases of clear abuse. Redress via the legal system is seldom a viable alternative for consumers when problems occur. Practically speaking, a creditor is always in a better position than the consumer to redirect the warrantor misconduct back to the bad-acting business.
If you have questions about enforcing a warranty, contact a consumer attorney who focuses on helping consumers in this area. You can search for such an advocate in each state at the National Association of Consumer Advocates at https://www.consumeradvocates.org/.
The information provided does not, and is not intended to, constitute legal advice; all information is for general informational purposes only. This information may not constitute the most up-to-date information. The links provided are only for the convenience of the reader. A. Ferraris Law, PLLC, and its members do not endorse the contents of third-party references.
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