Pub. 19 2020-2021 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 4 | 2 0 2 0 14 new jersey auto retailer Manufacturers Are, AGAIN, Pursuing Warranty and Incentive Claim Audits Dealers Should Know Their Rights Under the New Jersey Franchise Practices Act BY RICHARD SOX, ESQ. During the early months of the COVID-19 pandemic , motor vehicle manufacturers all but ceased conducting regularly scheduled dealership sales incentive and warranty audits. Almost a year into the pandemic, manufacturers have started scheduling new audits, and some are rumored to have a plan to audit every dealer in the United States. We have heard from several Nissan dealers who have already been audited and are in the pro- cess of receiving the results of those audits, including claim chargebacks. With this backdrop, New Jersey dealers should remember that they have very strong franchise protections when it comes to a manufacturer audit and any resulting proposed chargebacks. First, a manufacturer may not audit warranty or incentive claims beyond 12 months from the date the claim is paid. Most manufacturers are aware of the “look-back period” for audits in each state. It is prudent to ensure that the auditor is asking to review only claims within this 12-month statutory peri- od. The only exception to the 12-month look-back period is if the manufacturer can show that it reasonably expects fraud in the dealership’s claims submission process. In that rare case, the manufacturer can review claims which have passed the 12-month mark. With regard to warranty claims, a manufacturer can only pro- pose to chargeback claims for the following reasons: • the claim was false or fraudulent; • the services were not properly performed; • the parts or services were unnecessary to correct the defec- tive condition; or • the claim was not reasonably substantiated per the manu- facturer’s reasonable written requirements. Similarly, a manufacturer can only propose to chargeback an incentive claim for the following reasons: • the claim was false or fraudulent; or • the claim was not reasonably substantiated per the manu- facturer’s reasonable written requirements. Breaking down each of these permissible reasons for a charge- back, dealers will see that they have a strong argument for rejecting most of the manufacturers’ proposed warranty and incentive claim chargebacks.