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Electronic Warranty Disclosures Now Permitted

Shawn D. Mercer, Esq.

New Federal Trade Commission product warranty disclosure rules became effective in October that serve to amend both the Disclosure of Written Consumer Product Warranty Terms and Conditions (“Disclosure Rule”) and Sale Availability of Written Warranty Terms (“Presale Availability Rule”) rules.  These new rules changes give effect to the E-Warranty Act, which now allows a retailer to provide a warranty to the customer online if certain conditions are satisfied.

The Pre-Sale Availability Rule requires the warrantor to make warranties available either by displaying the warranty in close proximity to the vehicle, or by posting signs in prominent locations advising customers that warranties are available on request.  The changes to the Pre-Sale Availability Rule allow the warrantor to post warranty terms on websites. It also requires a non-internet based method for consumers to obtain the warranty terms.

The Disclosure Rule imposes disclosure requirements for written warranties on consumer products that cost more than $15.00.  It sets out what must be disclosed in the warranty and also the language and format of the warranty disclosures.  The new changes to the Disclosure Rule specify that, for a warranty posted on a website or displayed electronically, disclosures that are required to appear “on the face of the warranty” must be in close proximity to where the warranty term text begins.

The new rule changes allow certain sellers to display warranty terms prior to sale in an electronic format if the warrantor has chosen to display its warranty terms online. Examples of non-internet-based disclosure include a phone number or mailing address for consumers to obtain the warranty terms, which must be promptly provided to the customer upon request, and at no charge.

There are additional conditions which must be met in order to provide product warranties electronically.  Please consult with your dealer lawyer prior to making changes to your warranty disclosure processes.