Manufacturer Audit Chargebacks And Stay Ability Enhanced


[author: Peter Bauer]

Manufacturer audits are still going on in sales and service departments. Dealers should remember the Act limits the manufacturer’s ability to chargeback. Manufacturers are limited to a two year look back, and can only chargeback for sales incentives or warranty repairs that are not substantiated. In essence this is limiting chargebacks from being made if the paperwork “i”s and “t”s are not dotted and crossed. Dealers should make sure these Board case law decisions are shared with the auditors and their managers to try to limit the amount of chargeback that might occur on the front side. If not, these restrictions can be presented during an internal appeal process, or once a protest is filed with the Dealer Board to remind the manufacturer of the chargeback limitations under the Act.

Additionally, the Act was revised last year to require a 30 day stay window after the audit is finalized in which the manufacturer cannot debit a dealer’s account for any chargeback amount being assessed. This was enacted as manufacturers were assessing the chargebacks in a prompt fashion and debiting dealer accounts before the dealer could address the issue. Once the manufacturer debited the dealer’s account, there was little incentive for the manufacturer to try to resolve the issue in a reasonable fashion with the debited dealer. This 30 day waiting period gives the dealer the opportunity to try to work out a resolution with the manufacturer, or to file a protest with the Board. Dealers should recognize they have significant audit chargeback protections under the Act and should make the manufacturer aware of these strengths in an effort to help limit chargebacks in an audit situation.

McNees Wallace & Nurick assists dealers with the host of legal challenges found in today’s highly regulated business environment. From buys and sells to franchise terminations; from environmental to employee relations; from consumer complaints to problems with PennDOT; from formation of a new dealership to successor planning; from taxes to tags. For almost 25 years McNees has provided effective representation and assistance to Pennsylvania dealerships. Call (717) 232-8000 or visit

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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