FTC To Extend Comment Period on Rule 703

The Federal Trade Commission has extended until August 1, 1997, the public comment period on whether to modify, rescind or retain Rule 703, which sets out its requirements governing informal dispute settlement mechanisms ("IDSMs") designed to resolve disputes between warrantors and consumers. The request for public comment is part of the Commission's periodic review of its rules and guides.

The FTC issued its initial request for public comment on April 2. The comment period has been extended at the request of the American Automobile Manufacturers Association and the National Association of Attorneys General both of which requested the extension of time in order to compile cost and other data relating to the Rule's impact.

IDSMs allow consumers to attempt to resolve warranty complaints through informal mediation or arbitration programs before going to court. Rule 703 outlines the minimum standards for those IDSMs that are included as part of a consumer warranty -- i.e., those IDSMs that the warranty requires the consumer to use before going to court. In enacting the Magnuson-Moss Warranty Act, Congress permitted warrantors to require, as part of their written warranty, that consumers try to resolve warranty disputes through an IDSM before going to court. However, if warrantors were to include this requirement in their written consumer warrantees, the Act requires that the IDSM meet certain minimum standards and directed the FTC to establish those standards. Rule 703 fulfilled this Congressional mandate. The Rule sets forth the minimum requirements for IDSMs in such areas as funding, staffing, qualifications, notification, time limits for decisions, record keeping, and annual audits. The Rule applies only to those firms that choose to be bound by it by including a provision in their written warranties that requires the consumer to use an IDSM before filing a lawsuit.

The FTC is seeking comment about:

• Whether there is a continuing need for the Rule;
• What costs or benefits it has provided to consumers;
• What changes, if any, should be made in the Rule to enhance consumer benefits;
• What changes, if any, should be made to the Rule to reduce the cost of compliance;
• Whether new technology, such as the Internet, could be used to further the purposes of the Rule;
• The aggregate costs and benefits of the Rule;
• What changes, if any could be made to the Rule that might minimize burdens and maximize benefits to litigants in state lemon law disputes.

The Commission vote to extend the public comment period was 5-0. Notice of the extension will appear in the Federal Register shortly.

Copies of Rule 703 and the Federal Register notices are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov

(FTC File No. P974408)