Chrysler bankruptcy affecting lemon-law payments

Some consumers who have lemon-law claims are being left on the side of the road during Chrysler’s bankruptcy.

As reported in the Los Angeles Times, some checks that Chrysler sent to consumers as reimbursement for lemon-law claims have bounced.

“There is no excuse for consumers getting bounced checks,” says Rosemary Shahan, founder of the Consumers for Auto Reliability and Safety, in Sacramento, CA.

Chrysler has said that it will back warranty claims on its cars while in bankruptcy. But Shahan says, "Lemon claims and warranties are one and the same. A warranty is worthless if all [consumers] get are unlimited repairs and no refunds.”

Sergei Lemberg, of Lemberg & Associates, LLC, Stamford, CT, is an attorney who represents eight people who had agreed to settle their claims and received lemon-law payment checks prior to the April 29, 2009 bankruptcy filing. So far, two found their checks bounced after the filing. “Hardly any other industry has lemon laws,” he said, making these “uncharted waters.”

He says that Chrysler’s initial response to his cases was that, because of the bankruptcy, existing settlement checks would not be mailed or honored by Chrysler’s bank, and all checks that have bounced would not be replaced or honored.

On the 13th of May, Lemberg sent a letter to the U.S. Trustee and on May 15, Lemberg said that Chrysler notified him that it would now pay pending settlements and honor pre-bankruptcy claims.

When we contacted Chrysler later that day, Michael Palese, a Chrysler spokesperson said, "All aspects of business relating to distributing checks were affected - payroll, suppliers, vehicle, and consumer claims - by the matter of bankruptcy closing accounts payable.” He added that “Funds were not granted to pay obligations until the bankruptcy court approved Chrysler to pay the obligations. All paper checks were impacted, but EFT (electronic fund transfers) were not affected.”

Chrysler is in the process of reissuing checks, he says, adding that Chrysler would reimburse consumer’s bank fees for bounced checks on a case-by-case basis. He adds that consumers should talk with their banks to see if they will waive the fee. If not, they should contact Chrysler Customer Care at 800-992-1997.

All payments that have already been sent will be honored, he said. However, any claims that have not had a check sent are now in limbo. "Lemon claims,” he said, “are currently stayed by the bankruptcy court."

When Shahan recently met with the government’s Auto Task Force, she says that the group was unaware of this issue. Hopefully, consumer protection will be given more prominence in Chrysler’s bankruptcy proceedings, and in GM’s should it also pursue a Chapter 11 filing.

We will continue to monitor this fast-moving story, reporting here in the Cars blog and also updating advice and news on the Auto Crisis hub.

—Jon Linkov and Rik Paul

Comments

[Cale]

It's my opinion that Chrysler will make good on all payments to consumers for rebates, settlements, warranty claims, etc. The new Fiat/Chrysler company needs all the good will available and can't afford to alienate good customers.

But Chrysler owners that are owed payments need to be patient. Payments made by the company while it is in bankruptcy proceedings require a judge's approval. So it's likely to take time to sort out.

[Lemonaid_nt]

It's really a sad thing for the consumers. Most people dealing with defective cars are already stuck between a rock and a hard place as it is, having to wait longer for a payout certainly doesn't make things easier. Still it is better than nothing.

[Jay]

Any updates on whether or not Chrysler is looking at claims again?