The Federal Trade Commission and a Washington-based consumer group clashed yesterday over the effectiveness of a private program that arbitrates consumer complaints against General Motors Corp.
The program, which handles complaints about defective auto parts, "has worked well," the FTC's bureau of consumer protection said. The agency cited reports showing that GM paid almost $28 million to 75,458 consumers over the first 13 months of the program, which began in January 1984.
"The program is providing a substantial number of consumers a considerable amount of money in a timely and efficient manner," the FTC said in a summary of the results gathered by 142 affiliates of the national Council of Better Business Bureaus, which administer the program.
The Center for Auto Safety, a nonprofit consumer group, said yesterday that the program is "a disaster for consumers" and that the new FTC figures do not show that the program is working.
"They have no idea what's going on," said Evan Johnson, a staff attorney with the center, which has criticized the program for reaching too few consumers and taking too much time to produce results.
The FTC's results include only cases that have reached completion through the process. The center says this method ignores consumers who have given up because of frustration or consumers whose cases have not yet been resolved due to delays by GM and the BBB.
GM agrees that the program is "successful," said James E. Farmer, a company spokesman. GM believes consumers are aware of the program and noted the FTC's findings that the average complaint is resolved within 39 days.
About 84 percent of the cases resolved were settled within 60 days, the FTC said.
The arbitration program was developed to settle an FTC complaint filed against GM in 1980, charging that GM failed to notify consumers about serious problems with certain GM cars and light trucks. The complaint cited as examples three specific components that were common in a variety of makes in various model years: the THM 200 transmission, used in more than 5 million cars since the 1976 model year; camshafts or lifters in 15 million Chevrolet V-8 engines since 1974; and diesel fuel pumps and fuel injectors in 1 million Oldsmobile diesel engines produced since 1977.
GM agreed to settle the case by allowing GM car owners to seek refunds, buybacks or repairs for defective engines or transmissions through a third-party mediator or arbitrator. The settlement covers owners of all GM cars and light duty trucks from model years 1974 to 1991 and covers any engine or transmission problem.
The Center for Auto Safety and the National Association of Attorneys General have criticized the settlement for not requiring GM to notify individual car owners of the availability of the program, just as automakers are required to provide notice of car recalls. Instead, GM notifies consumers of the program only if they complain directly to GM. Many auto dealers and mechanics are aware of the program, but are not required to notify car owners. GM said it trusts that car owners will hear about the program through their BBB or news reports.
The FTC results include only cases involving the three components specified in the original FTC complaint. GM said that it has participated in about 200,000 cases settled through BBB mediation and arbitration.
To participate in the program, a GM car owner must first contact the company with a complaint. If unsatisfied with GM's response, the car owner can ask the local BBB to act as a mediator. If that approach fails to satisfy the consumer, an independent arbitrator is appointed to determine a settlement. GM must accept such a settlement, but the consumer does not have to and can take the dispute to court if necessary.
In the Washington metropolitan area, 841 consumers have completed the program and won a total of $347,000 in awards. Local cash awards have ranged from a low of $71 to a high of $1,800.
In the mediation stage, consumers nationally have won average settlements of $375, or about 70 percent of the average $581 amount requested in complaints. In the arbitration stage, which is used to resolve the more contentious disputes, consumers have won average awards of $326, or 43 percent of the average $847 amount sought.
Washington-area consumers have won average awards of $406 through mediation, or 66 percent of the average $658 sought, and have won average awards of $407 through arbitration, or 58 percent of the average $645 sought.
FTC Acting Chairman Terry Calvani said "the data confirm our belief that using arbitration to arrive at a payment to consumers, tailored to their actual harm is a fair and effective remedy."