FTC warns against warranty-voiding policies

Hyundai Motor America was one of six companies that received warning letters from the Federal Trade Commission, which outline concerns about illegal warranty-voiding practices.

Company statements requiring the consumer to use only approved parts to keep coverage intact, or which insist that coverage will be rendered invalid if the consumer fails to use "specified parts or service providers," are illegal, the FTC warned in a news release this week.

"Unless warrantors provide the parts or services for free or receive a waiver from the FTC, such statements generally are prohibited by the Magnuson-Moss Warranty Act," the FTC said.

The federal regulator did not disclose the name of the companies, only that they sell cars, cellphones or video gaming systems. However, an example of a "questionable provision" provided by the FTC is identical to the wording in a statement on Hyundai's website.

"The use of Hyundai Genuine Parts is required to keep your Hyundai manufacturer's warranties and any extended warranties intact," Hyundai says on its FAQ page in response to the question "Why is it important to insist on Hyundai Genuine Parts?"

A Hyundai Motor America spokesman said the company received the letter on Tuesday and is "currently revising the language" on hyundaiusa.com.

The language on the website stems from a consumer awareness campaign intended to "inform Hyundai vehicle owners of their rights after a collision to ensure that their vehicle is restored to its pre-collision condition," a Hyundai spokesman said in a statement emailed to Automotive News on Friday.

The language is not included in Hyundai's written warranty terms or anywhere else on the website, the spokesman said.

"The [service] marketing team took a little liberty with the language on the website...and this was really deep in the website," the Hyundai spokesman said. "It wasn't like a big national campaign or something."

The companies have 30 days to revise its warranty practices, the FTC said, and review promotional and warranty materials. After that, "failure to correct any potential violations may result in law enforcement action," the FTC release said.

"Provisions that tie warranty coverage to the use of particular products or services harm both consumers who pay more for them as well as the small businesses who offer competing products and services," Thomas Pahl, acting director of the FTC's Bureau of Consumer Protection, said in the release.