Fine Print Binds Car Buyers

Feb. 23, 2005 — -- Kelly Lloyd, of Spotsylvania, Va., thought she and her husband were asking all the right questions when buying a used car. They test-drove the 2000 Honda Accord they had their eye on, asked about the car's history and, she says, were assured by the dealership that it was like new. Only later, she says, did she learn that the car had been totaled in an accident by a previous owner.

But there was another surprise. Contained in the tiny print on the back of the sales contract she signed was a binding arbitration clause, which meant she had given up her right to ever sue the dealer in court if anything went wrong with the car.

And she says nearly everything did: The car doors locked on their own, the horn went off without warning, the sun roof didn't work, the air bag malfunctioned and the vehicle often shook uncontrollably when she backed out of the driveway.

"I thought I'd run over the dog," Lloyd said. "The whole car was vibrating, it was just jumping up and down, and I did not have a clue what was going on."

Lloyd is one of thousands of consumers whose disputes with car dealers or manufacturers will not be settled in a court of law, but instead by a growing number of private arbitration companies, to the dismay of consumer activists and plaintiffs' lawyers.

"It is just simply unfair that people who have legitimate grievances are not able to go to court because of an arbitration clause they unknowingly have signed," said John Gayle, Lloyd's attorney.

Lloyd's case will be handled by the National Arbitration Forum of suburban Minneapolis. The NAF hires its own judges and advertises to companies, including car dealers, that the arbitration proceedings will be "kept private," will be "predictable" and will "put a stop to million-dollar lawsuits."

Ed Anderson, managing director of NAF, said there was an increasing need for its services.

"Arbitration provides customers, employees, all of us, an opportunity to have their day in court," he said. "To have access to justice."