O.R.C. 1345.11 provides a “bono fide error defense” when a supplier can show by a preponderance of the evidence that it has established procedures reasonably adopted to avoid the error and, notwithstanding those procedures an error occurs. 

So what is the benefit of establishing a bono fide error defense?  Well it can mean a lot.  Normally if a dealer is found to have violated an administrative rule or the suit is based upon an act or practice previously determined to be a court to be unfair, deceptive, or unconscionable, the consumer is entitled to one of two remedies.  The consumer may rescind the transaction or receive three times the amount of the actual economic damages, receive up to $5,000 in non-economic damages, and pay the consumer’s attorney fees.

However, if a dealer can establish a bono fide error defense the remedies are limited to rescission or the consumer’s actual damages and no attorney fees will be awarded. 

By eliminating the trebled damages and attorney fees, the dealership effectively takes the consumer attorney out of the equation, thereby increasing the chances for a swift equitable settlement.

So why don’t dealers always raise the bono fide error defense in every case?  To raise a bono fide error defense the dealership must maintain procedures reasonably designed to prevent errors from occurring.  This requires establishing a policy and then training employees to follow the policy.  Remember the key for this defense is that we have identified ways to avoid violating the law, and we have done our best to ensure that the violation does not take place, but it does anyway. 

Many times dealers fall short in implementing procedures or if procedures are implemented we do a poor job of ensuring that the procedures are regularly followed.

For example, the CSPA requires that dealers disclose a vehicle has been a rental vehicle when the dealer has knowledge of this prior use.  Failure to make such a disclosure is an unfair and deceptive act or practice.  Let’s say our dealership implements a system that is reasonably designed to identify each and every rental vehicle we may sell so that our sales staff may make the proper disclosures.  We train the sales staff accordingly.  If we sell 200 rental vehicles a year and one is sold without disclosure, our dealership is in a good position to argue bono fide error; we have a procedure to avoid this mistake yet it happened anyway.  Contrast these results with the dealership that believes they have a system but when the deals are audited, we find that 85 of the 200 rentals sold are not disclosed.  It is fair to say that either we really don’t have a system or if we have one it’s not particularly effective in preventing the violation.

Some Examples for establishing a Bono Fide Error Defense

• Color code prior rentals, factory official, and demonstrators

• Have an internal checklist of paperwork to be included in each deal

• Have procedures to verify internet prices are accurate and are the same as vehicles advertised elsewhere

• Train!  Have polices in writing, periodically train current employees and all new hires

Remember, the key to a bono fide error defense is implementing the procedures and making sure the procedures are followed.  If the system implemented does not get good results it is not a good defense.