In what could be a wake-up call for dealerships and F&I managers when explaining how warranties work according to federal mandates, BMW of North America agreed to settle Federal Trade Commission charges this week that its Mini division violated the Magnuson-Moss Warranty Act by telling consumers that BMW would void their warranty unless they used Mini parts and Mini dealers to perform maintenance and repair work.

In an administrative complaint, the FTC alleged that BMW, through its Mini division, violated a provision in the Warranty Act that prohibits companies from requiring that consumers — in order to maintain their warranties — use specific brands of parts or specified service centers (unless the part or service is provided to the consumer without charge).

“It’s against the law for a dealer to refuse to honor a warranty just because someone else did maintenance or repairs on the car,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “As a result of this order, BMW will change its practices and give MINI owners information about their rights.”

The proposed order settling the FTC’s complaint prohibits BMW from violating the Warranty Act and the FTC Act in connection with any MINI division good or service.

The settlement also has two other requirements, including:

— Barring BMW, in connection with the sale of any MINI Division good or service, from representing that, to ensure a vehicle’s safe operation or maintain its value, owners must have routine maintenance performed only by MINI dealers or MINI centers, unless the representation is true and BMW can substantiate it with reliable scientific evidence

— Requiring BMW to provide affected MINI owners with information about their right to use third-party parts and service without voiding warranty coverage, unless BMW provides such parts or services for free.

The commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0.

In material the agency released in conjunction with the settlement, the FTC reiterated that it's illegal for a dealer to deny warranty coverage simply because a vehicle owner had routine maintenance or repairs performed by someone else. Routine maintenance often includes oil changes, tire rotations, belt replacement, fluid checks and flushes, new brake pads and inspections.

The FTC defined a warranty as “a promise, often made by a manufacturer, to stand behind its product or to fix certain defects or malfunctions over a period of time. The warranty pays for any covered repairs or part replacements during the warranty period.”

Agency officials maintained that an independent mechanic, a retail chain shop, or even the vehicle owner can do routine maintenance and repairs on a vehicle. The Magnuson-Moss Warranty Act, which is enforced by the FTC, makes it illegal for manufacturers or dealers to claim that a warranty is void or to deny coverage under a warranty simply because someone other than the dealer did the work.

“That said, there may be certain situations where a repair may not be covered,” FTC officials said. “For example, if you or your mechanic replaced a belt improperly and your engine is damaged as a result, your manufacturer or dealer may deny responsibility for fixing the engine under the warranty.”

 However, according to the FTC, the manufacturer or dealer must be able to demonstrate that it was the improper belt replacement — rather than some other defect — that caused the damage.

“The warranty would still be in effect for other parts of the vehicle,” the FTC added.