FTC May Make it Easier for Used Car Dealers to Sell Recalled Cars

The Huffington Post
Sunday, October 23, 2016

By Joanne Doroshow, Center for Justice & Democracy at New York Law School
With the nation so focused on polls these days, I thought this one might be of interest if you drive a car, drive in a car, are ever on the road with a car, i.e., pretty much everyone. The poll says 9 out of 10 Americans believe that car dealers shouldn’t sell used cars with safety defects. Nine out of 10 also believe that if a dealer says a car has passed a “125-point inspection,” the car should be safe and without safety defects.

My question is - who on earth are the 1 in 10 who disagree with that? Turns out, they probably work for Federal Trade Commission. 

The FTC, whose tag line is “Protecting America’s Consumers,” has decided to side with the corporate lawyers and executives at General Motors and two used car chains, agreeing to a legal settlement regarding the sale of cars under safety recall. Specifically, the proposed settlement would not only allow them to sell used cars under safety recall, but also allow them to say these cars are “safe” and “repaired for safety” and passed a “rigorous inspection.” (Sort of like permitting skydiving companies to assure customers that the parachute rig is safe even though there’s no parachute.) Perhaps the FTC needs a new tag line.

All the car dealer has to do is “disclose” that the car has been recalled somewhere near language stating the cars are “certified” and “repaired” and “safe.” But obviously, the whole idea is to allow used car dealers to confuse customers into thinking they are buying a safe car when in fact the car is completely unsafe and could kill them. What’s more, this would be binding for the next 20 years, setting the de facto standard for the industry.

It seemed like the FTC started out on the right track. The agency filed a complaint against GM for misleading its customers, noting, 

In some instances, these open safety recalls have included recalls for defects that can cause serious injury. For example, [GM] has advertised Certified Pre-Owned vehicles that have an open safety recall for a key ignition switch defect, which can affect engine power, power steering, braking, and airbag deployment, thereby increasing the risk of a crash and occupant injury. 

Indeed, GM’s years-long cover-up of its lethal ignition switch defect is one of the most sordid chapters in auto safety history, resulting in hundreds if not thousands of deaths and serious injuries. And dealers continued to sell these dangerous cars. 

So what happened? 

A lot of people would like to know, including five U.S. Senators. In a recent letter to the FTC and the National Highway Traffic Safety Administration, the senators made clear that allowing dealers “to sell used cars subject to open safety recalls ...is a threat to public safety.” But aside from that, the proposed settlement “would establish an anti­-consumer, anti-safety precedent with far-reaching policy implications.” More specifically, they say,

Car dealers would still be able to represent that a pre­owned vehicle is “safe,” has been “repaired for safety issues,” and has passed a “rigorous safety inspection” or to label a pre-owned car as being certified even when it is being sold with an unrepaired safety recall. A certified used vehicle with an unrepaired safety recall is inherently misleading. Perhaps more alarming, the proposed settlements would only require dealers to make a blanket statement that their rigorously inspected and certified used vehicles “may be subject to unrepaired recalls.” Consequently, this “disclosure” arguably amounts to nothing more than a legal disclaimer that could absolve dealers from their responsibilities and would likely do little, if anything, to meaningfully convey to consumers the existence of an open recall and dissuade them from purchasing such vehicles due to their safety risks.

The senators asked the agencies to “cooperate and work together to amend the proposed settlements and ensure that car dealers cannot mislead and deceive consumers about the safety of their prospective purchases.” So far, no word that any of that has happened.

Meanwhile, leading safety advocates are appalled. Rosemary Shahan, president of Consumers for Auto Reliability and Safety (CARS), notes

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....

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.

The FTC has not yet finalized this horrific proposed settlement and we are hoping they don’t, but it seems like they are headed down a very treacherous road. CARS, the national, award-winning, non-profit auto safety and consumer advocacy organization, has a lot more information about this. Go here to learn more.

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