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Statement of Craig Thor Kimmel Regarding House Bill 2284

“PA Computer Lemon Law” House of Representatives Consumer Affairs Committee, May 21, 2004

Good morning. Mr. Chairman, members of the Committee, my name is Craig Thor Kimmel. As some of you may recall, I have appeared before the body before to discuss the Computer Lemon Law and the Automobile Lemon Law. I thank you for the opportunity to do so once again.

My practice is solely consumer protection, predominantly breach of warranty and lemon law claims. Because my firm has offices across three states, two in Pennsylvania, one each in New Jersey and Delaware, it is my hope to offer the panel a practical perspective of computer problems and reasons why these problems can be adequately addressed by passage of HB 2284.

The need for House Bill 2284 cannot be overstated. Certainly, you have all heard that before, but consider how vital the role of computers is in the daily lives of all of us. These functions range from communicative, internet, email; data, word processing, photo archives; and perhaps most important, financial, when used with banking, investment and household accounting services. We retain so much information on our computers that they can fairly be characterized as the window to our world. Without them, we cannot conduct our daily affairs without great inconvenience.

How many of us can honestly say that we function as well without our computer? How many could function at all? What if we were without our computer and all that it holds, for 30 days and without knowing when it was to be returned and in what state of operation? What if the same problems caused the computer to substantially malfunction without a resolution under warranty? What if to get our computers repaired, we had to supply a credit card number for billing of items that should be covered under warranty, before the manufacturer agrees to repair it? Is that fair or right?

These are the dilemmas faced by Pennsylvania consumers.

I believe HB 2284 meets the needs of the consumer because it will cut through current warranty quagmires and set standards for all to be aware of before delivery of the computer.

Like the automobile industry of thirty years ago, a large contingent of computer manufacturers has adopted the view that the more-broad Federal and state consumer warranty laws simply do not apply to them. Identifying these companies is not easy for the consumer until after the sale when problems arise.

HB 2284 proposes to clearly state a reasonable period of time when a computer must function and tailors standards for repairs. It mandates timely, fair and equitable repairs and if not effective, requires a refund or replacement at the option of the consumer.

What we now call the Pennsylvania Automobile Lemon Law was born from the same rationale. The greater demands of software file size, processor speeds, data communication and energy requirements, all require consumers to replace computers every few years or less, just to keep up. This, despite the high cost of purchasing a new computer. The built-in obsolescence render computers effectively worthless after as little as three years, which makes this legislation at least as deserving of passage as our Automobile Lemon Law, because the shelf life of a computer is so much shorter that a consumer should be entitled to expect it to function for a reasonable time.

Computer warranties promise in writing to provide defect-free operation and free repairs if problems arise, yet consumers rarely see the process work as smoothly as it is supposed to. Industry practices often frustrate those seeking help and are unsuccessful. There simply is no accountability to compel good faith performance of warranty service. In my experience with several companies, nothing short of the filing of a lawsuit for breach of warranty gets a response and often it is uneven, unpredictable, and maddening when read in light of the warranty.

Complaints among purchasers fall into five general categories: (1) inability to obtain timely and successful warranty repairs, (2) frustration in communicating with the manufacturer; (3) extended “down time” of weeks and months when repairs are needed; (4) perceived inability to hold the manufacturer accountable; and (5) frustration at being unable to secure a timely resolution to the concern.

In response to these, House Bill 2284 specifies that the purchaser shall be provided with written notice at the time of sale, of his or her rights under the Computer Lemon Law as a reference source, to secure repairs during the coverage period of two years from the date of purchase.

The Bill also provides for timely and effective warranty repairs by the manufacturer within 5 days of notice of a problem. If not effective after two repair attempts for any one concern, or one repair attempt for any two concerns, the computer device must be repurchased or replaced at no cost and at the purchaser’s option.

By specifying the time within which repairs must be made and the location and terms under which the manufacturer must make such repairs, the Bill leaves no opportunity for the manufacturer to displace the consumer and his or her complaints by utilization of ineffective customer service procedures currently in use.

The Bill further provides for mandatory penalties of $6,000 if the manufacturer unsuccessfully defends a claim in Court, discouraging the manufacturer from defending meritorious claims.

In my experience, the first victim of cost-cutting is customer service, as it generates little or no money for the company; it being an after-the-sale expenditure. One example of this is through the implementation of complex warranty policies (“hoops”) that make warranty service an undesirable experience for consumers. It is quite common in the industry for example, to require the consumer to first call a phone number (occasionally at an extra cost), wait an inordinate amount of time, then speak to a series of uninformed and less-than-helpful personnel, forcing the consumer to engage in self-help to fix the problem. Industry practices now require consumers to obtain an authorization number to send their computers in for repairs, at the customer’s cost of shipping, and provide a credit card number. Without both items, no repairs are performed. The manufacturer then unilaterally determines whether repairs will be honored under warranty and if not, repairs the unit and charges the credit card. Imagine if the Automobile industry worked this way how outraged we all would be. It is no less an unfair practice for the computer industry to engage in such practices when the consumer holding a valid warranty is at the mercy of some anonymous technician located somewhere across the country and needs their computer repaired immediately

These practices derive from many causes, and often can originate from inevitable product defects and glitches in new technology, supplier problems and quality control, regardless of how well the manufacturer tries to put out a good product. But the point is that the warranty always promises a defect-free computer, and these problems of industry must be born by the manufacturers, not the customers who purchase the product in good faith and are entitled to cost-free warranty repairs.

Few in the industry would dispute, and many would loudly agree, that reliability and warranty service among companies varies considerably, ranging from excellent, to very poor. Unfortunately, it is becoming apparent that that the incidence of poor customer service in light of competitive and corporate realities, is becoming more and more problematic and will not go away on its own. When reliability issues are accounted for, there is a need for minimum standards of performance.

While benefiting consumers is its first aim, HB 2284 is effective in another way: it levels the playing field within the industry between all manufacturers, by ensuring the same level of warranty service for all citizens of the Commonwealth regardless of brand purchased.

How does this help the industry? We must be reminded that manufacturers selling to the consumer market all compete for the same dollars. The demands of stockholders for dividends and return on investment are ever-present, the stating of profits and revenues are under greater scrutiny from recent financial debacles, and market forces more now than ever, encourage cost-cutting. Companies that do not currently have adequate warranty services will by the provisions of HB2284, change their practices to comply, while those that devote substantial funding to quality service, such as Hewlett Packard to name one, will not be at a competitive disadvantage by dealing with customer issues with greater care. Put another way, there will be no profit motive to companies cutting corners with customer service, as the law will ensure that such practices will result in consumers obtaining refunds for not performed in accordance with the new provisions of law. The industry as a whole benefits from this fairness in support of customers because all will have to meet the same standards.

While there is no shortage of money for manufacturers to have better warranty practices and meet or exceed the standards of HB2284, there is no profit in it either and that, in and of itself, explains much of the problem.

Twenty years ago, when the industry was in its infancy, only a few of the dominant manufacturers of today even existed. Theirs is a history of explosive sales and revenue, while customer service and warranty obligations were regarded as afterthoughts. I am sure industry representatives would disagree, but the evidence is clear.

What HB2284 aims to accomplish is a minimum expectation of computer performance, a reasonable 24 months. This is a third less than the 3 years found in warranties most manufacturers include with their products and/or offer at extra cost, but which often fail in practice, to meet the standards provided in writing.

HB2284 brings the industry into line with all other manufacturers of consumer products sold with a warranty. While Federal law does this through the Magnuson-Moss Warranty Improvement Act of the 1970s, HB2284 addresses issues particular to computer products. The law would police the prevailing practices of warrantors, advise consumers of their rights at the time of sale, and give steps to follow in the event of problems. Notice and fairness to both sides is the hallmark of this legislation.

Over the last 5 years, I have devoted a substantial amount of time to understanding computer industry practices and problems as they relate to consumers. Since testifying in support of earlier proposals back in 1999, I have also been quite active in promoting this type of updated consumer protection. I was requested to work informally with the Connecticut and Illinois legislatures and did so in aid of similar laws modeled on our earlier proposals. During that time, I have been interviewed by national media outlets, television and print, in Pennsylvania, California, Illinois, Connecticut, New York and New Jersey, calling attention to this subject. Over that time, I have seen no improvement in how the industry has met consumer complaints and warranty services. The need for this legislation remains strong.

HB 2284 contains in sum, a series of protections substantially the same as those our legislature enacted in 1983 involving Automobiles. In the time since, nobody has questioned the validity or effectiveness of the Automobile Lemon Law in assuring the rights of Pennsylvanians, nor can they be. The time and circumstances were right for that consumer protection back in 1983 and Pennsylvania was a pioneer then. So too must we step forward today and pass a fair, proactive and reasonable series of measures to protect Pennsylvanians from prevalent computer warranty abuses.

I thank you for the opportunity to speak with you and am willing to entertain any questions you may have.

Craig Thor Kimmel - May 21st, 2004

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