In some cases, car buyers have been unable to get problems solved or to get an arbitration proceeding scheduled for years after a dispute began, Shahan says. She also contends that arbitrators are biased in favor of dealerships, which typically pick up the bill for arbitration.
"Mandatory predispute binding arbitration is really bad for consumers," Shahan said. "So we are hoping that the Consumer Financial Protection Bureau will prohibit it."
Many dealers, on the other hand, contend that arbitration agreements benefit consumers as well as dealers.
"It gives each party a lot of legal rights, but it controls some legal expenses and controls the process," said Scott Smith, president of Sonic Automotive Inc., the nation's third-largest retailer. "It still provides protection for the consumer, and it provides protection for the dealer."
Minimizing the risk of a costly class action is the key benefit, many dealers and industry experts agree.
Though the agreements are used widely, arbitration rarely happens. Only three of 79 respondents to the recent Automotive News survey said they've participated in arbitration with a customer in the past two years.
Smith said Sonic tries to resolve consumer complaints before a problem gets to arbitration. A very small number of complaints reach that point. "It might not even be a single-digit" percentage, he says.
As with many retailers, signing an arbitration agreement is mandatory at Sonic. Almost half of the respondents to the Automotive News survey said they won't complete a sale if the customer refuses to sign an arbitration agreement.
"A customer doesn't have to buy a car from us, but if they want to buy a car from us, they have to agree to the arbitration agreement," Smith says.
Asbury Automotive Group Inc., the nation's seventh-largest dealership group, also asks customers to sign arbitration agreements.
"We take compliance very seriously," says Asbury CEO Craig Monaghan, stressing the training and oversight that goes on in Asbury's F&I offices. "One of the advantages of the arbitration agreements is they help defend against frivolous lawsuits."
Monaghan said he will watch the scrutiny of arbitration closely.