A SMALL BUT ESSENTIAL SERVICE FOR VEHICLE ARBITRARY DISPUTES
Recently J.D. Power and Canadian Black Book put on a day-long conference at the Toronto Congress Centre entitled “TalkAuto Canada”. I was pleased to be involved as one of the speakers at this event and I hope attendees found some value in what I had to say. From my perspective however, there were a number of other speakers whose presentations provided some real insight on the different aspects of the automotive sector and the challenges and risks the industry is facing.
One presentation I found particularly interesting was entitled “The Changing Nature of Quality” which was presented by Dave Sargent, the Vice President, Global Automotive for J.D. Power and Associates. This presentation was appealing to me because of another “hat” I wear as part of my job with the international automakers. In the mid-1990s I was involved in setting up a program that was designed to be Canada’s solution to addressing an issue that had risen to public policy prominence on both sides of the border — the issue of vehicle manufacturer defects that could not be repaired after repeated visits by the consumer to the dealership.
IMPROVEMENTS IN QUALITY
At the time, in the late-1980s and early-1990s I think it is fair to say that both vehicle build quality and vehicle manufacturers’ after sales customer service efforts were nowhere near the levels that they are today. Some of Sargent’s charts in his presentation bear witness to this. J.D. Power’s Initial Quality Study (first 90 days of ownership) shows the indexed average of reported problems has fallen from 70 problems per 100 vehicles in 1994 and just 25.
Likewise his Vehicle Durability Study (past 12 months experience of owners of three year old vehicles) chart reflected a drop from 100 problems in 1997 to 36 in 2012. Clearly vehicle manufacturers have come a long way since the 1990s, as have their customer service efforts in this highly competitive automotive marketplace where the easiest customer to get is the one that you already have.
Historically, while the United States addressed this consumer issue via individual state legislatures enacting so-called “lemon laws” at the time, Canada took a different approach to addressing the same public policy concerns through the creation, in 1994, of a national, industry-funded arbitration program called the Canadian Motor Vehicle Arbitration Plan or CAMVAP for short.
ACCESSIBILITY
The program was designed to provide consumers with a fast, free, friendly, fair and final means of dealing with their allegations of a current defect in vehicle assembly or materials and is also available to address issues consumers have with the implementation of their new vehicle warranty. While some journalists and critics have been technically accurate over the years since CAMVAP’s inception in making the assertion that Canada has no “lemon law,” a closer investigation of CAMVAP will reveal that in many ways this program stands up admirably in comparison to U.S. style “lemon laws”.
Most U.S. lemon laws provide coverage for the first one or two years or 12,000 to 24,000 miles (approximately 19,300 to 38,600 km) whereas under CAMVAP vehicles of the current and previous four model years are eligible for the program as long as they have not exceeded 160,000 kms (100,000 miles). CAMVAP is also a national program with the same rules applicable in every province and territory as opposed to the U.S. where each state has its own lemon law meaning that to take advantage of the program you need to do so in the state in which the vehicle was purchased and registered.
While there is no prescribed number of repair attempts or out of service provisions for CAMVAP eligibility, as there are under lemon laws, the consumer has to give the manufacturer and the dealer a reasonable opportunity to repair the vehicle prior to being able to access CAMVAP. Eligibility for the CAMVAP program is generally assessed at a basic level by seven provincial administrators that are third party contractors to CAMVAP and act as the face of the CAMVAP program in the various provinces and regions. The provincial administrators also act to schedule the arbitration hearing with eligible consumers and the manufacturer.
As a general rule, neither consumers nor manufacturers bring lawyers to the CAMVAP arbitration hearing which is normally held in the community where the consumer lives or as close as possible. A third party arbitrator contracted to CAMVAP will conduct the hearing and weigh the evidence provided by both the consumer and the manufacturer regarding the problem and will subsequently make a final and binding decision.
If a consumer is successful in pleading their case the arbitrator has a range of awards available including ordering the vehicle bought back by the manufacturer, ordering repairs on the vehicle, ordering reimbursement for repairs, ordering reimbursement for diagnostic and documented out of pocket expenses. Alternatively, if the arbitrator is persuaded by the manufacturers’ evidence and arguments, the arbitrator will decide that the manufacturer has no liability.
FINAL RESORT
The goal of every manufacturer and their dealer body is to ensure that consumers’ problems with their vehicles are resolved as quickly as possible the first time, so as to never be in a situation where the consumer has to consider going to CAMVAP or to small claims court to have their problem resolved. As such, when manufacturers do go to CAMVAP they generally believe that they have done all that they can to address a consumer’s concern and feel reasonably confident that they should win most, if not all, of the cases that go to CAMVAP which is essentially a court of last resort for both the manufacturer and the consumer. However, even in these circumstances CAMVAP data shows that consumers prevail approximately 60 per cent of the time.
The improved quality of new vehicles, as noted earlier, combined with significantly more after sales attention being provided by manufacturers to consumers concerns has seen CAMVAP remain a relatively small program. CAMVAP has generally handled about 300 arbitration hearings a year for the last few years with roughly 5,000 customer contacts with the program on an annual basis.
While the program is not perfect, it is does provide consumers with a free and relatively quick way to have their vehicle problems addressed by an impartial third party when all else fails. For manufacturers and dealers CAMVAP is a final option to try and have the consumer’s issue addressed when the manufacturer feels it has reached an impasse with the consumer.
