• That used car advertised as “safe” may have unrepaired safety recalls — and the FTC is okay with that? Friday, February 26, 2016

    FTCThe Federal Trade Commission recently announced a proposed settlement with General Motors and two used car dealers that advertise they have rigorously inspected their vehicles for sale and claim they are safe…even if the vehicles have unrepaired safety recalls. Unfortunately, the proposed settlement doesn’t go far enough to protect consumer safety.

    From the FTC’s press release:

    The FTC’s complaint against General Motors cites the company’s representations for “Certified Pre-Owned Vehicles,” such as:

    Our 172-Point Vehicle Inspection and Reconditioning Process is conducted only by highly trained technicians and adheres to strict, factory-set standards to ensure that every vehicle’s engine, chassis, and body are in excellent condition. The technicians ensure that everything from the drivetrain to the windshield wipers is in good working order, or they recondition it to our exacting standards.

    The FTC alleges that GM advertised numerous Certified Pre-Owned vehicles at its local dealerships using these claims without disclosing that certain used cars offered for sale were subject to previously announced open (unrepaired) recalls for safety issues.

    According to the FTC’s complaint, those cars subject to recalls had defects that can cause serious injury, including a key ignition switch defect that can affect engine power, power steering, braking and airbag deployment, problems in the body control module connection system that can affect braking, and chassis electronic module defects that can cause engine stalls.

    Similar complaints were filed against Jim Koons Management Company and Lithia Motors.

    It seems reasonable that a vehicle promoted as being “in excellent condition” and “in good working order” shouldn’t have “defects that can cause serious injury.” So the FTC’s proposed agreement would prohibit the companies involved from “claiming that their used vehicles are safe or have been subject to a rigorous inspection unless they are free of unrepaired safety recalls…”

    That sounds great. Only there’s more to that sentence:

    …unless they are free of unrepaired safety recalls, or unless the companies clearly disclose the existence of the recalls in close proximity to the inspection claims. [emphasis added]

    So the companies involved could still advertise vehicles as being “safe” and having gone through a “rigorous inspection,” despite the fact that there are significant unrepaired safety recalls. It would then be up to the prospective buyer to either refuse to buy the vehicle or buy it knowing work would need to be done to bring the car up to safety standards…if the buyer indeed noticed the disclosure of the recall.

    Rosemary Shahan

    Rosemary Shahan

    That’s not sitting well with a number of consumer advocacy groups, led by Consumers for Auto Reliability and Safety (CARS), based in Sacramento. “The actual proposed consent orders would allow dealers to merely disclose the possibility of a recall and tell consumers how they can investigate the possibility,” said CARS president Rosemary Shahan. “Even worse, this language could just be added to every advertisement and certification without checking whether the car was subject to recall or not, or providing any information specific to an individual vehicle. The consumer on the car lot, being pressured to sign a purchase contract, might not have the technology to even research if there is an unrepaired recall, on the spot. The dealer does – yet the proposed settlement agreement does not even require the dealer to take that simple step.

    “By allowing dealers the option of selling unsafe vehicles advertised as passing a rigorous inspection and qualifying to be sold as ‘certified’ with a contradictory ‘disclosure,’ the proposed settlements would protect unscrupulous, reckless auto dealers instead of consumers. The settlements may also give unscrupulous dealers a new defense, in the case of injury or death, potentially shifting liability onto their victims, and allowing dealers to claim the used car buyers had ‘assumed the risk.'”

    Safety recalls are the result of the vehicle manufacturer openly acknowledging the unsafe, defective condition of the vehicle. Shahan says issues that have led to safety recalls include:

    • Faulty brakes
    • Loss of steering
    • Axles that break
    • Wheels that fall off
    • Transmissions that slip out of “park,” so cars slide downhill
    • Hoods that fly up and obscure vision
    • Windshield wipers that fail and cause a loss of visibility
    • Ignition switches that cause a loss of power steering and brakes
    • Sticking accelerator pedals
    • Failures to protect against hacking and remote control of steering or braking
    • Drive shafts that separate from the axles
    • Catching on fire
    • Fuel leaks that cause carbon monoxide poisoning

    These are defects that don’t endanger just the driver who may have known about the recall but also passengers, drivers of other vehicles, pedestrians and bicyclists who share the road.

    “There is no other consumer product where a federal agency explicitly allows retailers to sell the product subsequent to the issuance of a safety recall unless the product has been repaired to make it safe,” Shahan said. “To the contrary, under the Consumer Product Safety Act, sales of used goods that have been recalled, such as cribs, toys with lead paint, lawnmowers, and other consumer products are strictly prohibited.”

    Drivers of rental cars have already been protected from unsafe vehicles, with the passage of the Raechel and Jacqueline Houck Safe Rental Car Act, which will take effect in June 2016. The Houck sisters died when the Chrysler PT Cruiser they had rented crashed into a big rig and burst into flames, a month after a recall order had been issued for a faulty power steering hose that could cause a fire and lead to loss of steering. The repair had not been made to their vehicle. The legislation named for the Houcks prohibits rental car companies (including car dealers) with fleets of 35 or more rental/loaner vehicles from renting or selling recalled cars unless outstanding safety recall repairs have been performed.

    Shahan thinks buyers of used cars deserve the same protection from safety defects. “The FTC consent orders should be amended to prohibit dealers from selling any ‘certified’ vehicle to a consumer if it has unperformed safety recalls,” she said. “Beyond these individual agreements, the FTC should prohibit the sale by a dealer of any car with an unperformed safety recall as unfair.”

    — J.G. Preston

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