— A CarMax settlement with 36 states over the sale of recalled but unrepaired vehicles has provoked the ire of auto safety groups which complain the settlement is a sham.
According to the $1 million settlement, the 36 state attorneys general alleged CarMax told buyers that some of the vehicles for sale with unrepaired safety recall defects were “safe.”
The consumer groups say CarMax brought in $33 billion in 2021 from selling dangerous recalled vehicles. And instead of punishing CarMax for advertising unrepaired recalled vehicles as safe though a “125-point inspection,” the states agreed to a "paltry, pathetic $1 million fine."
The money will be divided among the 36 states with none of it going to consumers who were harmed.
Federal law prohibits dealerships from selling unrepaired recalled vehicles that are new, but it doesn't apply to the sale of used vehicles.
According to the safety groups, car dealers and certain members of Congress have been blocking passage of federal legislation S.1835, the Used Car Safety Recall Repair Act, sponsored by Senators Blumenthal, Markey, and Warren.
If it's ever passed, the Act would give the National Highway Traffic Safety Administration the right to force CarMax and dealerships to fix open safety recalls before selling used vehicles.
"This bill prohibits a dealer from selling, leasing, or loaning a used motor vehicle until a defect of the motor vehicle or motor vehicle equipment or noncompliance with a federal motor vehicle safety standard has been remedied, with specified exceptions." — S.1835
However, the prohibition does not apply if:
- The recall information regarding the used vehicle was not available at the time of sale or lease and was not on the manufacturer's website.
- Notification of the defect or noncompliance is required, but enforcement of an order to notify of and remedy the defect or noncompliance is set aside in a civil action on a motion for change of venue.
- The used vehicle is sold at wholesale.
- The used vehicle is a junk automobile with all required information reported to the National Motor Vehicle Title Information System.
The details of the Used Car Safety Recall Repair Act say if an automaker fails to provide the dealer with a repair for a used vehicle's safety defect within 60 days, the manufacture must pay the dealer an amount that is not less than 1% of the fair-market value of the vehicle per month.
But the total payment amount may not exceed the fair-market value of the vehicle.
2014 Petition Against CarMax
In 2014, safety groups filed a petition with the Federal Trade Commission regarding CarMax advertising and selling used vehicles as "safe" even though the cars had been recalled but never repaired.
It's true CarMax cannot make recall repairs, but the consumer groups which filed the petition said CarMax could take the recalled vehicle to an authorized dealership for repairs.
The FTC said CarMax couldn't advertise a vehicle as safe unless consumers were told the car has been recalled but not repaired.
CarMax TV commercials did include a message in small print at the bottom of the screen that said, “Some CarMax vehicles are subject to open safety recalls.” However, the FTC said the tiny print appeared for only three seconds while the rest of the screen was full of the benefits of buying a used car from CarMax.
The government concluded the CarMax small print wasn't enough to adequately warn consumers about vehicles with unrepaired recalls.
The auto safety groups and individuals complaining about the CarMax settlement with the 36 states include:
