WASHINGTON-What's the chief cause of automotive service fraud? Apparently, the answer depends upon whom you ask.
The Federal Trade Commission (FTC) sank its teeth into that issue after a request from the U.S. Senate in July 1992 to study the nation's auto repair practices to help the federal government and states combat repair fraud.
While the FTC's efforts almost mirrored the scope of a similar lengthy probe recently issued by the National Association of Attorneys General (NAAG), the two reached different conclusions on what-or whom-to blame.
But both said there is a problem.
The FTC's diagnosis was blunt: ``Mechanic incompetency,'' linked with ``questionable repair practices,'' causes ``the majority of consumers' auto repair problems.''
It said ``lack of consumer knowledge'' is a contributing factor.
On the other hand, the NAAG cited use of incentive wage plans as a primary reason for what it said is widespread service fraud. The 43-member association called for the elimination of contests, bonus programs and product- specific sales quotas, and suggested mechanics be rewarded for the quality of their work, not the quantity.
Automobile repair is the top concern of consumers nationwide, the NAAG stated in claiming that ``many of the dollars consumers spend on auto repair'' are for unnecessary repairs and services.
But the FTC's investigation-on which it said it worked ``closely'' with the NAAG, various federal officials, and industry representatives-found that, ``while questionable auto repair practices exist, the level of actual deception or fraud'' in the industry ``appears to be less than commonly perceived.
``Therefore, in deciding how to use limited law enforcement resources to reduce the level of consumers' auto repair problems, law enforcement agencies must keep in mind that fraud may be a cause of only a small proportion of all consumer repair problems.''
The 54-page FTC report said ``faulty or inadequate repairs performed in good faith appear to be the cause'' of most repair problems. Furthermore, ``it may be difficult to draw a bright line to identify clearly deceptive or fraudulent repair work from those repair problems rooted in mechanic incompetence or honest differences in professional judgment.''
Lawmakers intending to protect the public must develop regulatory strategies flexible enough to allow mechanics to ``exercise their professional judgment, and to allow risk-averse consumers the freedom to choose to have maintenance or repairs performed in advance of the time they are actually needed,'' the FTC advised.
The NAAG and FTC are at loggerheads, however, about the practices most often impugned by consumer protection watchdogs.
The FTC said it investigated:
the use of sales-based incentive compensation systems, ``to which the sale of unneeded repairs has been attributed'';
the use of flat-rate manuals for billing, ``which has been seen to result in unfair overcharging for labor costs''; and
the use of accelerated maintenance schedules, ``said to result in the fraudulent sale of unneeded maintenance services.''
The NAAG came down hard on those practices, demanding ``explicit disclosure of repair work and charges before and after repairs.'' It also insisted repair shops declare their use of flat-rate manuals and inform consumers that flat-rate times may not coincide with actual repair times.
But ``based on the available evidence,'' the FTC concluded that none of those practices ``is inherently deceptive or unfair under the Federal Trade Commission Act, although each practice may be abused in ways that might violate the statute.''
Mechanic incompetence ``has become more pervasive as vehicle components and systems have become more sophisticated and complex,'' the FTC said, calling this design trend a ``quiet revolution'' in auto repair that is making the ``*`shade-tree mechanic' a thing of the past.''
Problems arise, the commission noted, ``from the lack of skilled entry-level mechanics who have the requisite knowledge of electronics, mathematics and computers, in addition to satisfactory reading and comprehension skills. The lack of competently-trained mechanics is further compounded by a shortage of adequate training programs.''
Without full access to service in-formation from vehicle manufacturers, the FTC added, ``even the best-trained technician will be un-able to effectively diagnose and re-pair vehicles.''
The FTC agreed with the attorneys general about the importance of consumer education in the fight to reduce auto repair problems. The commission said ``many consumers fail to maintain their cars properly or delay routine repairs until the problem becomes aggravated, resulting in more complex and expensive repairs later.''
It also contended consumers are often ignorant about their basic legal rights under state law-such as receiving a written estimate-``making them more susceptible to unanticipated repair costs.''
To reduce the level of fraud, the commission made recommendations in the following areas:
Law enforcement-It supported use of undercover ``sting'' operations at state and local levels, but warned they produce limited benefits at a high cost.
The FTC said ``carefully designed and adequately funded law enforcement efforts can uncover and deter fraud and, through the publicity they generate, educate the public'' about repair issues.
However, its resources might be better focused on probes of nat-ional or regional repair chains, the FTC stated, ``particularly targeting franchised auto repair systems.''
It expressed concern that some franchisors may ``misrepresent the availability of training and assistance that will be provided to franchisees, or the degree to which technical expertise is required to operate a franchise.''
``When auto repair franchisors sell franchises to inexperienced franchisees,'' the FTC continued, ``consumers may ultimately suffer if the franchisees are ill-equipped, ill-trained, or otherwise ill- prepared to perform the necessary repair services.''
Regulatory activities-State regulatory approaches include disclosure laws compelling shops to provide written estimates; shop licensing and registration laws; and mechanic licensing and certification laws.
But the FTC said it found ``scant evidence regarding the impact of these regulations,'' and thus cannot assess accurately whether they increase costs to small businesses or whether they have the unintended effect of increasing consumer costs. So it does not recommend widespread enactment of such laws at this time.
Industry initiatives and coordination of public and private efforts-The FTC applauded the goals of private organizations such as the Motorist Assurance Program (MAP) on behalf of consumers and repair shops, and urged increased coordination between both sectors.
Consumer education-The FTC said it supports joint efforts by government and private industry to increase consumer awareness of their vehicles, suggesting the use of innovative methods including the Internet, electronic bulletin boards, and other on-line computer services.
Alternative dispute resolution-The FTC sanctioned expanded use of programs to mediate disputes between consumers and repair shops-such as those operated by MAP in conjunction with the Better Business Bureau-and encouraged development of educational materials to help consumers navigate the dispute resolution process.