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States do their own thing with some kind of effective grievance process.

I think the treble damages, the Consumer Protection Act that we have, has given, I think, quite a bit of protection in the field of advertising. We don't get the advertising complaints. We get them but not like we used to.

Most of our complaints either go to the warranties or they go to repairs where the consumers are claiming that they paid x number of dollars for the repairs and the repairs simply were not done or were done shoddily or they were done and they didn't hold up or whatever the case may be.

And so they could, under the treble-well, it's hard to get an application, I think, of the treble damage act, particularly on a small item, and to have to go into a court of law and hire a lawyer and that type of thing when often a person comes in, they have spent $75 to repair their transmission and 3 days later it breaks, and, obviously, you can look at it and an attempt was made to repair it but it was an incompetent type of job. That is the kind of thing you really need an expert to look at and look at it objectively and then have some kind of procedure without going through the courthouse to try to arbitrate those matters.

Mr. ECKHARDT. We are attempting to move in that direction at the Federal level, too. There presently is a bill before this subcommittee for this investigation, that is, for minor dispute settlement.

It does not necessarily create a tribunal in the sense of a real trial tribunal, but it would afford some grant money to States, communities, or even nonprofit private agencies to establish centers where complaints may be filed with complaints being handled by persons with the kind of expertise you describe. In a lot of cases, these things probably can be settled without judicatory process.

The Better Business Bureau said that they have had favorable experience, particularly with large mercantile establishments, through these dispute settlement centers, in obtaining prior agreement to arbitrate and then submitting the cases to the voluntary arbitration process. We probably will enact a law either this year or early next year in that area because it is supported on a bipartisan basis.

I certainly agree with you, and I think our studies have indicated, that people really are afraid or feel it is futile or too much redtape involved in going to a regular court procedure for many of these decisions. What we seek to do is whittle out from the court process a good amount of dispute grounds which can be settled on this basis.

Yet, it does seem to me that your suggestion of some kind of registration system, which would generate some money at a State level, could result in the withdrawal of the license to continue in the trade because of repeated offenses. It would not try to establish in advance certain conditions, but rather, it would set standards which, if not met, would result in the withdrawal of the license which would be a good thing.

I think you are recommending that as a State initiative primarily, are you not?

Mr. VANCE. Yes; although I do think that perhaps some type ofthe State should keep some type of national register of people that had been given permits, because I think that you could have somebody who was kicked out of doing business here and they go to another State, and I think in issuing a permit that, or a license to do business, that you should have whatever background, because somebody who is incompetent or dishonest could have been kicked out of another State.

I would like to comment just very briefly on the arbitration thing you mentioned. I think that is a good idea. I think it is a step in the right direction.

The thing that worries me a little bit about the consumer who is in the position of coming before someone, is that maybe he paid several hundred dollars for some fairly complex repairs to his automobile and, then, he goes before an arbitration commission or one of these committees and he says, “Here is what I did.” I still think for him to present any proof, because most of us don't know a darn thing about an automobile except how to get it started, that may be unfortunate too. Maybe we need the manuals and people encouraged to take some of their own initiative, but the consumer that comes before such a committee-let's say you were a committee meeting here and I was a consumer and I came before you and I said, “Well, I paid $400 to have this fixed and it won't work.” And then sitting over there is a mechanic that worked on it and he goes through a long and elaborate explanation.

It may be that he is absolutely right and he charged me a fair fee but he just couldn't get it fixed. He charged for his hour like a lawyer charges for his hour and loses the lawsuit.

But, then, on the other hand, you know, I pay to have it fixed but I am at a loss to know, to explain or give to the committee any evidence other than my canceled check as to what I did. This is why I think that the States, and obviously I think they should do this on their own, but should set up some process.

It is just like I look for the grievance processes among lawyers to change somewhat and I think if you complain about a bank or if you complain about an insurance company or you complain about a lawyer or you complain about a doctor or whatever it may be, where there is a justifiable public interest, there is a central somewhere, a central State committee, and people can keep records on how many complaints have been filed against so and so and that sort of thing.

I think the central statewide recordkeeping part of how many compliants, that is very helpful in our office.

We don't purposefully go after and try to make a fraud case until we would get several complaints of actual fraud that would bear fruit from a particular individual.

And if we felt like somebody is running a crooked shop we would be very aggressive to pursue the matter.

But, again, we are not mechanics down there either and I don't know that it is the right thing to do to have a district attorney's office as your law enforcement agency or even a police department to be hiring mechanics.

Then, on the other hand, our TV repair experts that handle TV repair-that could go on ad infinitum.

I just think if you have an industry that you do have a serious, serious problem with about compliants, that some type of mechanism should be set up where an expert can look at the matter and say, "Well, the consumer is wrong. That is unfounded." Or,

The consumer is right. We are going to carry this and we will go before this arbitration committee and we will say what we have found and why we think this complaint is founded and why this consumer did get the bad side of this thing.

So, I really think the stamping of whatever is done as to how technical and proficient it could be would be the real key factor to whether you had a government agency or complaint or grievance agency that really worked or did not work.

Mr. ECKHARDT Are you suggesting a State judicatory process that would constitute compulsory arbitration for settlement of such disputes with experts attached to that process?

Mr. VANCE. I am suggesting experts attached by regional basis, whether it be a metropolitan area like Houston or Dallas or whatever, but on some kind of regional basis, experts that would be sort of like the district attorney. They would be like maybe the bank examiner that takes all his findings to the banking commission.

But you would have some people with some competence in the car area.

Mr. ECKHARDT. But you would have an arbitration process that would be compulsory, and it would be an adjudicatory process under State law?

Mr. VANCE. Yes.
Mr. ECKHARDT. Just for example?
Mr. VANCE. Yes.

The way I would see this working would be like the consumer now goes to the lawyers grievance committee, for example, and then someone on that staff investigates it and if they think it is founded they bring it to the committee.

I think there is a problem where the committee is doing both the judging and the investigating anytime you have a situation--but I can see them coming to some small center where you did have a mechanic and explaining the problem, bringing in the warranty, whatever it may be, the mechanic, the lay legal expert or what ever, the paralegal, mechanic looking at it and saying, “Look, fellow, you really don't have anything. We have looked at it and here is what has happened. Here is what is wrong.'

Or, they look at it and say, “Look, we think you do have a cause here and we are going to submit this to the judicial type, the grievance committee process,” if you will, submit this to them and give them the power to suspend permits or to arbitrate these matters at least to a particular amount where you would not have to go through the courthouse.

There are thousands of complaints and some are completely unfounded and some are very well founded, then some are big misunderstandings between everyone involved. And I think this would go further than anything I can think of to get to the truth of the matter, which is the difficult area in this field.

If somebody writes a hot check and brings it to us and there is no money in the bank, it is pretty easy to ascertain that he wrote a hot check, but if somebody comes in and says he paid to have this fixed and they didn't fix it, he knows it is not running but that does not means the work—this is a highly technical area is what I am saying

Mr. ECKHARDT. Well, if the State of Texas chose to adopt a program that you are describing, the Consumer Controversies Resolution Act that we now are working on could well embrace that a function which would be within that act's scope.

That act would encourage such types of settlement that need not necessarily go as far as you have described. Certainly, the type of proposal that you are indicating would satisfy the requirements of that act.

Frankly, the act is pretty experimental and, to begin with, will not include a great deal of money; but, it will provide certain seed money-grants—to States which are willing to move in the area.

The type of procedure that you have described should give the State of Texas a front place in the line for consideration under that act. I think these suggestions sound very interesting and very innovative.

I certainly do thank you for your testimony here.
Mr. VANCE. Thank you, Congressman.

I have the head of our consumer fraud unit here, Spencer Gardner. Spencer is on the second row there and he is certainly available, and I know your time is limited, but Spencer is available to answer inquiries, if you need any figures or statistics or if the committee needs anything, well, he is certainly available to the committee to furnish any factual data that we may have in our office.

Mr. ECKHARDT. Well, we are very glad to have that information. We understand that you do make inspections for fraud operations where you bring in an automobile for repair-

Mr. VANCE. Yes.

Mr. ECKHARDT (continuing). More or less anonymously under the name of some individual, and then you examine it as to whether or not the repairs were fraudulent.

Of course, we are dealing with a much broader thing than just fraud.

Mr. VANCE. That is true.

Mr. ECKHARDT. But, this is one element of it and, with your permission, I should like to leave the record open for certain specific factual information that you may develop in this program, and also for any other statistical and technical expertise that your staff might give us.

We very greatly appreciate your help.
Mr. VANCE. Well, thank you so much.

Mr. ECKHARDT. Mr. William James, director of approved auto repair services, American Automobile Association.

STATEMENT OF WILLIAM JAMES, DIRECTOR, APPROVED AUTO

REPAIR SERVICES, AMERICAN AUTOMOBILE ASSOCIATION Mr. James. Good afternoon, Mr. Chairman.

Mr. Chairman, my name is Bill James. I am director of the approved auto repair services program for the American Automobile Association's Texas division.

We now have 20 million members in the United States and Canada served by about 209 clubs and 955 offices across the country, including Texas.

It has been vividly pointed out here today that the carowner is not a satisfied customer, particularly when it comes to repairs.

Despite elaborate industry programs and State laws requiring full disclosure and mechanic licensing, the automobile continues to be the No. 1 source of consumer complaints. And it is becoming evident to us and I am sure very evident to you through these hearings that the consumer cannot fight this problem alone.

In June of 1977 the Texas division initiated a plan to tackle this consumer problem by developing and implementing the approved auto repair services program. The program was initiated:

First, to locate competent repair facilities which stand behind the work they perform and which agree to abide by AAA's decision in the event of disputes; and

Second, to develop a program which would upgrade the overall repair industry in a positive manner.

A few days ago, James McDowell, managing director of our program in national headquarters, testified before your committee in Washington and gave some details of the national program. I ask your patience as I reiterate some of those details now as there are probably some in this room who was not familiar with them. Following this I will give you some specifics on our experience here in Houston.

In all of our programs, including Houston, we have been able to locate repair facilities capable of turning out consistently good work. We have done this by establishing stringent criteria which facilities must meet in order to qualify for the program. We have set criteria for manpower, qualifications and training, shop equipment, customer service, facility appearance, and community reputation.

An essential factor in service excellence is qualified and welltrained staff. AAA requires that approved shops employ mechanics certified by the National Institute of Automotive Service Excellence for each area of service offered.

Further, because of rapid changes in the automobile, the AAA requires that shops either conduct in-house training programs or make adequate provisions to send personnel to outside sources for update training.

In addition, we have established a minimum list of shop equipment which we believe is necessary to service today's automobile. While we did not want to set equipment standards so high that only the largest shops would be eligible, at the same time the position was taken that shops must have the equipment to do the job right, not just to get by.

Community reputation is also important to us. An investigation is made of the shop's community and financial reputation, during which we check the facility's records with the Better Business Bureau and any local consumer protection agency and we also receive Dun & Bradstreet reports.

One significant factor in determining community reputation is a rating by recent customers. Names and addresses are collected by us from a sample of recent repair orders and mailed directly to the customers. Based on these things we can then make the decision as to the shop's community reputation.

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