Car Dealers seek to legalize sales of unsafe recalled used cars

Faced with record numbers of recalled cars and lengthy shortages of repair parts, car dealers are pushing aggressively to weaken state laws that prohibit them from deceiving their customers into buying used cars with lethal safety defects.

Car dealers are eager to foist the unsafe cars off onto their customers, knowing that there is no way they will be able to get the serious safety defects repaired, for months on end. In one horrific case, a father, mother, 13-year-old daughter and brother-in-law were all killed within hours after the dealer handed them the keys to an unsafe car. The publicity surrounding that case led to Toyota’s issuing a massive safety recall, and eventually paying a record fine. However, the dealers do not seem capable of learning from that tragic incident and its aftermath.

Federal law prohibits car dealers from selling recalled NEW cars to consumers until they have been repaired.  There is no similar, specific federal law that prohibits dealers from selling recalled USED cars to consumers. However, broader, more generic state laws in every state, and some federal laws, prohibit merchants, including car dealers, from engaging in fraud, false advertising, unfair and deceptive acts and practices, anti-competitive behavior, reckless endangerment, negligence, and other shady practices. In addition, a whole body of case law exists that prohibits such illicit conduct.

The National Highway Traffic Safety Administration has charged some dealers with violating the federal law against selling recalled new cars to consumers. What’s next? Dealers trying to make that legal too?

KPIX-TV, the CBS affiliate in San Francisco, broadcast this news report about the car dealers’ highly controversial, anti-consumer, anti-safety bill in California. Be sure to watch for the reaction at the end, by the news anchors:

KPIX-TV: Car dealers fight back over recall disclosures

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New York’s Julie Menin: Tackling Predatory Car Lenders

New York’s Commissioner of Consumer Affairs, Julie Menin, is determined to protect New Yorkers from predatory auto lending practices. Desperate used car buyers have been complaining to the agency, after they were cheated by unscrupulous car dealers who charged exorbitant interest rates for cars that often broke down soon after purchase, leaving them with ruined credit, deeper in debt, and without wheels.

According to the New York Times, auto loan debts sink many New Yorkers financially, averaging more than $12,000 — a burden that can prove impossible on an average annual income of just $36,000. Plus dealers commonly tack on high-priced add-ons that inflate the loans, without adding any value.

In response, the Department of Consumer Affairs is developing a “municipal auto loan initiative,” to allow troubled borrowers to get auto loans directly from a number of lenders on more consumer-friendly terms. This innovative approach promises to provide New Yorkers with lower-cost, less risky access to the cars they need to get to work.

The Department is insisting that interest rates on the loans be fixed, at 16% or less, and that any application fees may not exceed $25.

CARS wishes New York and its courageous pro-consumer Commissioner Julie Menin great success. We hope that this innovative new program thrives and helps lift up thousands of New Yorkers who would otherwise fall prey to dealers itching to exploit them.

Read more:

New York Times: New York City Starts Car Loan Program to Curb Abusive Practices

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Buy a car – surrender your rights?

One more reason not to buy a car from a car dealer:  when you do, they force you to give up your right to sue them if they cheat you.  So say good-bye to being able to take advantage of consumer protection laws.

Think a dealer wouldn’t dare roll back the odometer? Think again. They just slip a clause in your contract that says you can’t sue. Then when you find out your low-mileage car actually has over 100,000 extra miles that “disappeared” from the odometer — good luck trying to sue them under the Federal Odometer Act.

Car dealers used to face tough sanctions, including punitive damages, for ripping off consumers. But with rare exceptions, those days are gone.  That’s because car dealers insert “arbitration” clauses into their contracts. Then, after you’ve been shopping, test-driving cars, and negotiating for an average of 4 hours, they shove a stack of documents across a desk and tell you to “sign here, here and here.”

What they don’t tell you is that when you sign, you are giving up your rights under state and federal consumer protection laws. So forget hauling them before a judge or jury, who can throw the book at them. Instead, if you get any hearing at all, it’s before an “arbitrator” whose company just happens to be paid by — you guessed it — the dealer.

Under rulings by the Republican majority on the U.S. Supreme Court, this is perfectly legal.

Ironically, the dealers got a special exemption from Congress that allows them to sue anyone they please. They’re free to use the courts. But you can’t.

Evidence is mounting about how biased and unfair arbitration is. Check out this new report, issued by the Consumer Financial Protection Bureau. No wonder car dealers HATE this consumer watchdog agency. It shows how rigged the game is, when you buy a car from a dealer:

Consumer Financial Protection Bureau report

Don’t end up like Jon Perz, who has been waiting over 7 years for justice, after a car dealer in San Diego sold him an unsafe car.

YouTube Video of used car nightmare — over 1.3 million views

Be a smart shopper. Check out CARS’ car-buying tips for how to get a safe, reliable used car — without having the hassle or risk of buying from a dealer:

CARS Used Car Buying Tips

Happy, safe car shopping!

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Used car buyers have friends in the White House in auto safety battle

America’s used car buyers and our nation’s roads will be a lot safer if the Obama Administration wins the battle against shady car dealers who sell unsafe, recalled cars to used car buyers.

U.S. Secretary of Transportation Anthony Foxx and the Administrator of the National Highway Traffic Safety Administration, Dr. Mark Rosekind, are urging Congress to make it illegal for car dealers to sell unsafe, recalled used cars to consumers.

They joined the President of Consumers for Auto Reliability and Safety at a press conference in Richmond, VA, along with representatives of Hertz, Enterprise, and Avis, and the American Car Rental Association, who have been working together with CARS to enact federal rental car safety legislation. Auto manufacturers (except GM) and car dealers are blocking the rental car safety bill, and lobbying Congress to weaken protections for America’s car buyers.

It is historic for a President and his safety team to call for people who rent cars, or purchase used cars, to have the same level of protection as new car buyers. Under federal law, it is illegal for car dealers to sell recalled cars with lethal safety defects to NEW car buyers. That has been the law since the 1960′s. But there is no similar federal law to protect people who rent cars or purchase used cars.

“What we need now is for Congress to step up, and to make renting or selling a recalled vehicle [to a consumer] illegal,” said Secretary Foxx.

Read more: US DOT safety recall news

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Are car dealers providing unsafe loaner cars to owners of recalled cars?

U.S. Senators, like Sen. Bill Nelson of Florida, have been urging Honda and Toyota and their dealers to provide loaner cars to customers with faulty Takata air bags, while they wait for repair parts to become available. Sounds like a good idea, right?

But — new car dealers have been vehemently opposing attempts to stop them from loaning out cars that have the exact same safety defects, or different defects, that have triggered a federal safety recall.

So — if you turn in your recalled Honda or Toyota at a Honda or Toyota dealership, and they hand you the keys to a loaner car, is it guaranteed to be any safer? NO!!!!

Here’s video of lobbyists for the new car dealers and CarMax opposing legislation in California that would have prohibited them from renting, selling or loaning unsafe, recalled used cars to consumers:

Car dealer lobbyists oppose safety bill in California

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NHTSA fines Honda the Max — But Honda Should Be Paying More

Under pressure from the National Highway Traffic Safety Administration, Honda has agreed to pay $70 million in fines for concealing vital information about 1,729  fatalities and injuries in its cars, as well as important warranty information,  in violation of federal auto safety laws.

To its credit, NHTSA is assessing Honda the maximum allowed by law — $35 million, for two separate violations, for a fine totaling $70 million. Plus NHTSA now has more ability to monitor Honda’s compliance with the laws in the future.

But — Honda should be paying more. For a huge multi-national, multi-billion-dollar company like Honda, and such repeated serious offenses, $70 million is not enough to act as a real deterrent.

Why isn’t Honda paying more? Because Congress has failed to act, to give NHTSA the authority to levy higher fines. The Obama Administration has been asking Congress to raise the cap on fines for egregious violations of auto safety laws to $300 million. But so far, only Democrats in Congress have introduced bills to raise or outright eliminate the cap. Despite all the hearings and all the hoopla, no Republican has stood up to the auto industry on behalf of the motoring public and proposed giving NHTSA the authority to levy higher fines.

It’s particularly troubling that U.S. Rep. Fred Upton (R-MI), Chair of the House Commerce Committee, keeps blasting NHTSA for not doing more, but has been totally AWOL when it comes to doing anything to give the agency the authority and resources it needs to do the job. So far, he’s failed to propose a single bill.  He talks a good fight, and can play the tough guy when the cameras are rolling, but when it comes to improving auto safety protections for American families, he has delivered exactly zilch.

Bottom line: thanks to behind-the-scenes special-interest lobbying in Congress against desperately needed, reasonable, effective auto safety reforms, Honda just saved itself a cool $530 million.

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CarMax – Too Risky for Wise Investors?

Thinking of investing in CarMax? You may want to take a close look at their breathtakingly risky practice of selling unsafe, recalled cars to consumers.

CarMax is already under fire from consumer groups,  faces potential action by the Federal Trade Commission, and has been repeatedly exposed in undercover investigations by TV news organizations, including ABC’s 20/20, over its sales of unsafe, recalled cars to consumers.

Here’s the rub:  CarMax advertises that all their cars must pass a “rigorous 125+ point inspection” before they can be sold as “CarMax Quality Certified” cars.  But how can a car with a killer defect possibly pass a rigorous inspection and meet their standards?

Despite the mounting scrutiny, CarMax recklessly persists in selling “CarMax Quality Certified” unsafe, recalled cars at retail to consumers. Case in point:  Even when competitors like AutoNation have wisely announced their decision to cease selling used cars with unrepaired Takata air bags, CarMax continues to sell them anyway.

Defying common sense and responsible business practices, CarMax somehow seems unable to bring itself to stop selling consumers cars with the notoriously defective air bags, which can explode on impact, hurling shrapnel at the driver and front-seat passenger’s face and neck..  In cases that are making global headlines, the defective air bags have caused  serious injuries, including blindness, while other hapless victims have bled to death.

This particular defect  remains the focus of Congressional investigations in the U.S. Senate and House of Representatives. Takata also faces possible legal action by the National Highway Traffic Safety Administration, and by the US Department of Justice.

So — what does AutoNation know and take into account that CarMax doesn’t seem to grasp?

Is CarMax waiting for a total PR catastrophe, before they stop making that added bit of profit by selling lots of unsafe, defective, recalled cars to consumers, instead of having them repaired or selling them for a somewhat lower price, at wholesale?

Whatever CarMax’s motivation, wise investors may wish to rethink the company’s self-inflicted level of exposure.

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ABC 20/20 exposes CarMax’s sales of damaged cars and unsafe, recalled cars

CarMax Admits It Sells Unsafe, Recalled Cars
So — how can a car that’s so unsafe pass their so-called  “rigorous 125+ point inspection”? No one seems to know…and CarMax refuses to go on camera…

From ABC NEWS RADIO:

” CarMax says it has transformed the used car buying experience with no haggling pricing and financing and its “125+ point” inspection process to make sure drivers don’t end up with a lemon. But consumer advocates say CarMax sales reps don’t always disclose the complete history and condition of the vehicles they sell.

A 20/20 investigation found instances on two CarMax lots where vehicles were being sold with reportedly significant accident histories or unrepaired safety recall issues….

When it came to outstanding safety recalls, the Hartford dealership salesman was recorded on hidden camera telling Benitez that CarMax is unable to sell a car with a major safety recall. “We can’t even sell it until that’s taken care of,” he said. “We take care of any kind of safety concern prior to the car even being out here.”

However, a check of a federal government website revealed that the Toyota Camry at the Hartford CarMax dealership had three outstanding safety recalls on it at the time of our visit, including one for a power switch that could overheat and melt, possibly resulting in a fire. Five other vehicles sitting on the lot also had unfixed safety recalls, according to the government website.

CarMax declined an interview but told 20/20 in a statement that it doesn’t automatically fix recall vehicles before selling them and only does so if a customer requests it. CarMax says it does inform consumers about any open recalls and recently upgraded its website so customers can look up open recalls online through the government database. CarMax also says it retrained its staff on its recall policy.

A coalition of consumer and safety groups filed a petition with the Federal Trade Commission this June, urging the agency to investigate CarMax’s safety recall policy. Rosemary Shahan, head of Consumers for Auto Reliability and Safety (CARS), is calling on the FTC to require CarMax to have all safety recall vehicles repaired before selling them to consumers. “CarMax sells vehicles that are under safety recall without bothering to fix them,” said Shahan. “If they wanted to do it right, it would be very easy for them to do it right.” (Emphasis added)

Read more: ABC 20/20:  What Do Some CarMax Sales Reps Tell  Consumers?

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