Safety groups and a prominent politician are taking aim at CarMax, the country's largest used car chain, over allegedly deceptive advertising, and they're hoping to prompt a major shift in the way that pre-owned vehicles are sold in the US, as well. In two letters filed with the Federal Trade Commission this week, a coalition of consumer groups and Senator Charles Schumer (D-NY) urge the regulator to investigate CarMax and force all used car dealers to fix any pending recalls on a model before it can be sold.

Currently, the law only insures that new cars are up to date on recalls. Senator Schumer's letter to the FTC asks that the regulator pass new rules covering used cars in the same way. He claims, "I am also actively exploring with my colleagues ways to enhance the agency's power to take action on this matter via legislation."

The senator also puts his support behind the consumer groups' petition, which is being spearheaded by an organization called Consumers for Auto Reliability and Safety. Schumer goes so far as to ask the FTC to launch "full-fledged investigation" into the their claims.

The advocates' major concern lies in CarMax's "CarMax Quality Certified" label that promises that its used cars are inspected, repaired and checked for water damage. However, the company doesn't check to see if all pending recall repairs are complete on the vehicle. The petition alleges that the advertising could "mislead even sophisticated car buyers" into thinking the cars are safe. It believes that the company should easily be able to check the recall status and supply that information to consumers. The group's goal is to end this type of advertising from the business.

CarMax appears at least partially on board with the idea – with a catch. A company spokesperson told The Detroit News that it supports added regulation, if it also forces manufacturers to supply "all recall notices, the same diagnostic and repair information, and the tools and parts that manufacturers make available to their franchise dealers." That doesn't seem too likely.

Scroll down to read Senator Schumer's letter to the FTC and the advocates' petition submitted to the regulator.
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SCHUMER URGES FTC TO CRACK DOWN ON USED-CAR DEALERS WHO CAN SELL CARS UNDER SAFETY RECALL TO UNWITTING CUSTOMERS

Schumer Letter Comes as Consumer Group Submits Petition to FTC Alleging CarMax is Engaged in Deceptive Advertising and Sales Practices

Motor Vehicle Safety Act Prohibits Car Dealers Selling New Cars from Selling Vehicles without First Fixing the Safety Defects -- Schumer Urges Used-Car Dealers be Held to Same Standard

Schumer: Used Cars with a Safety Recall Shouldn't Roll One Inch Off the Lot


In a letter to the Federal Trade Commission, Senator Charles E. Schumer today called on the agency to immediately direct car dealers that sell used-cars to change any policy which may potentially allow the sale of recalled vehicles without first fixing safety defects, putting used-car buyers in harm's way. The letter comes in response to reports that used-car dealers are selling cars subject to recall for safety-related defects while at the same time, advertising the used vehicles as having passed rigorous safety inspections. Currently, the Motor Vehicle Safety Act prohibits new car dealers from selling recalled vehicles without first fixing the safety defects but does not hold dealers selling used-cars to the same standard. Schumer added that if the FTC does not act to prevent used car dealers from selling defective vehicles, he will take legislative action to address this issue.

"Used cars that have a safety recall shouldn't be sold to anyone until the recall is fixed, period," said Schumer. "Far too many times we have seen the tragic and often fatal consequences when deficient cars are allowed on the road, and it's time for the FTC to do everything it can to put a stop to it."

Schumer's letter comes as Consumers for Auto Reliability and Safety and other consumer groups have petitioned the FTC to investigate and take appropriate legal action regarding the advertising and sales practices of CarMax, the largest retailer of used vehicles, in selling vehicles that have been recalled for repair of safety defects without having fixed those safety defects.

A copy of Senator Schumer's letter to the FTC is attached and pasted below, and the consumer groups' petition to the FTC can be found here.

June 24, 2014

The Honorable Edith Ramirez
Chairwoman, Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairwoman Ramirez:

I write today to express my grave concern over reports that used-car dealers are selling cars subject to recall for safety-related defects, while at the same time representing to consumers that those used vehicles have passed rigorous safety inspection. It is bad enough that used-car dealers are not required by law to fix a safety recall problem prior to selling the recalled vehicle to a consumer. Compounding the safety risks with misleading and deceptive advertising and sales practices only further endangers the safety of used-car customers and everyone who shares the roads. I ask that the Federal Trade Commission immediately investigate whether car dealers that sell used cars are implementing policies that mislead consumers about safety-related recalls. If the investigation reveals that used-car dealers have implemented these policies, the Commission should suggest steps that regulators or Congress should take to end these policies.

I understand that Consumers for Auto Reliability and Safety and other consumer groups have petitioned the Federal Trade Commission to investigate and take appropriate legal action regarding the advertising and sales practices of the largest retailer of used vehicles CarMax, because they allege this operation is selling vehicles that have been recalled for repair of safety defects without having fixed those safety defects. I respectfully request that the Commission address the allegations in the petition, launch a full-fledged investigation to determine whether other used-car dealers engage in similar practices, and move to prevent these practices from occurring in the future.

As you know, in accordance with the Motor Vehicle Safety Act, car dealers selling new cars are not permitted to sell recalled vehicles without first fixing the safety defects. Dealers selling used cars should be held to the same standard. I believe the Federal Trade Commission has the regulatory power to take appropriate action to protect the safety of used-car buyers. However, I am also actively exploring with my colleagues ways to enhance the agency's power to take action on this matter via legislation.

The Commission has a long and distinguished history of cracking down on deceptive sales practices and protecting consumers. If the allegations by Consumers for Auto Reliability and Safety prove to be true, I believe the Commission should take swift and decisive action to rectify the inherently deceptive and dangerous practice of selling safety-compromised used cars that are under recall to unsuspecting consumers.

Thank you for your prompt attention to this important matter. I look forward to hearing from you on this issue.

Sincerely,
Charles E. Schumer
United States Senator

###

June 23, 2014

Consumers for Auto Reliability and Safety
Center for Auto Safety
Consumers Union
Consumer Action
Consumer Federation of America
Courage Campaign
National Association of Consumer Advocates
National Consumer Law Center 1
National Consumers League
Trauma Foundation
U.S. Public Interest Research Group

1 On behalf of its low-income clients.

Edith Ramirez, Chairwoman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Re: PETITION Seeking FTC Enforcement Action vs. CarMax, Inc.

Dear Chairwoman Ramirez:
The non-profit consumer organizations listed above submit this petition, seeking enforcement action by the Federal Trade Commission, to curb CarMax's deceptive advertising and sales practices, which endanger the lives of their customers, their families, other passengers, and everyone who shares the roads.

CarMax is the nation's largest retailer of used vehicles. According to CarMax, it has sold more than 4 million cars. CarMax advertises on its website, on television, in newspapers, and at its dealerships that each of the used vehicles it offers for sale are "CarMax Quality Certified" and has undergone a rigorous, "125+ point inspection."

However, CarMax fails to ensure that safety recalls are performed prior to selling used cars to consumers. The New York Times recently reported that "CarMax, the nation's largest seller of used cars, offers a "Certified Quality Inspection," which does not include fixing [safety] recalls."2

2 "Recalled Used Cars Roam Roads as Legislation Stalls," New York Times, front page, May 9, 2014, by
Rachel Adams and Christopher Jensen. (Emphasis added.)

It is inherently deceptive for an auto dealer to represent that its vehicles have passed a rigorous inspection, while failing to take even the most basic step of checking the vehicle's safety recall status in order to identify known safety defects that have triggered a federal safety recall, and ensuring that the safety recall repairs have been performed, prior to selling the vehicle to a consumer.

CarMax's claims clearly go beyond mere puffery, and would very likely mislead even sophisticated car buyers into believing that they do not need to have the vehicles inspected by an independent automotive technician of their choice, or check them out themselves. The company even lists dozens of specific vehicle components that it supposedly checks prior to offering vehicles for sale, without revealing that they may be so defective, they are subject to a safety recall. It also claims that each car has been "renewed" prior to sale.

For example, CarMax advertises on its Website:
125+ point inspection
Experienced technicians put every vehicle through a rigorous Certified Quality Inspection-over 125 points must check out before it meets our high standards.

Every used car is renewed
CarMax cars undergo (on average) 12 hours of renewing-sandwiched between two meticulous inspections-for a car that doesn't look or feel used.

No cars with flood or frame damage
Not every car that looks good is good. We're confident in the safety and reliability of our vehicles because our technicians are trained to detect those with hidden damage.

Such claims are dangerously deceptive, since they tend to lull car buyers into a false sense of security regarding the safety of used vehicles CarMax is offering for sale to consumers.

It is all the more important for the FTC to act, and exercise its authority under the FTC Act to address false or deceptive advertising, since the National Highway Traffic Safety Administration (NHTSA) currently lacks authority over new and used car dealers, regarding sales of used cars that are subject to auto safety recalls. According to the U.S. Government Accountability Office (GAO), in its 2011 report to Congress:

"NHTSA cannot require used-car dealers, or franchised dealerships that sell used vehicles, to..get the defect remedied prior to sale....With over 35 million used cars sold by used and franchised dealerships in the United States in 2009 alone, this could pose a significant risk to the safety of millions of vehicle drivers, and may have a negative impact on recall completion rates." 3

3 United States Government Accountability Office: Auto Safety: NHTSA Has Options to Improve the Safety Defect Recall Process, Issued June 2011, page 40 (emphasis added).

While the U.S. Department of Transportation recently recommended to Congress, as part of its proposal regarding the GROW America Act, that Congress include a provision to prohibit dealers from selling recalled used cars to the public without fixing them first, that provision is likely to face stiff auto dealer opposition. In addition, CarMax, the California New Car Dealers Association, and independent auto dealers are opposing first-in-the-nation legislation currently pending in California, SB 686, authored by California State Senator Hannah-Beth Jackson, that would prohibit auto dealers from selling used vehicles with unrepaired safety recalls to consumers.

Under the National Traffic and Motor Vehicle Safety Act, auto manufacturers are mandated to recall vehicles that either 1) fail to meet a Federal Motor Vehicle Safety Standard, or 2) otherwise pose an "unreasonable risk" to safety. Most safety recalls fall within the second category. According to NHTSA, examples of defects that lead to safety recalls include faulty steering, brakes that fail, components that catch on fire, air bags that fail to inflate when needed in a crash, accelerators that stick, stalling in traffic, wheels that fall off, or axles that break.

Federal safety recalls are aimed at addressing serious safety defects, not defects unrelated to safety, "service campaigns," or emissions recalls. If a manufacturer believes that a recall is not justified, it can petition NHTSA not to require a recall or contest the issue in court. Typically, the manufacturers agree with NHTSA that the vehicles are unsafe and should be recalled, and "voluntarily" comply with the federal mandate.

According to the National Highway Traffic Safety Administration, which oversees vehicle safety recalls:
"All safety recalls resulting from defects present an unreasonable risk to safety and we believe it is inappropriate to suggest that some defects are not risky enough to require repair. For the safety of the motoring public, all recalled vehicles should be fixed promptly." -- NHTSA Official Statement, issued April 4, 2011.

Therefore, we urge the FTC to investigate CarMax's advertising and sales practices and take all appropriate and necessary action in order to curb CarMax from selling unsafe, recalled used cars to the public. In addition to any other remedies or penalties that may be appropriate, we also urge the FTC to:

 Obtain VIN-specific information regarding the safety recall status of vehicles CarMax has already sold to the public, and release that information to the public
 Notify the owners of vehicles sold by CarMax that had safety recalls pending at the time of sale
 Enjoin CarMax from engaging in such irresponsible and reckless practices in the future

It is also important to note that under the National Traffic and Motor Vehicle Safety Act, auto manufacturers are required to provide safety recall repairs for FREE. It is also easy for dealers such as CarMax to check the safety recall status of used vehicles online, simply by checking the manufacturer's website, calling the manufacturer's toll-free number, or contacting a local dealer and providing the Vehicle Identification Number.

Last August 14, the National Highway Traffic Safety Administration issued a final rule that requires all auto manufacturers who produce more than 25,000 vehicles a year to provide safety recall data on their own Websites, searchable by VIN and updated at least every 7 days. That rule takes full effect this August 14, 2014.

Bottom line: there is absolutely no excuse for CarMax or other auto dealers not to ensure that the used vehicles they sell to consumers are not ticking time-bomb cars with unrepaired safety recalls.

Thank you for your consideration of this petition. We hope that the FTC will act expeditiously, considering the serious threat CarMax's practices pose to public safety. Should you or the FTC's staff have any questions regarding this petition, please contact:

Rosemary Shahan, President
Consumers for Auto Reliability and Safety 1303 J Street, Suite 270
Sacramento, CA 95814

Respectfully submitted,
Consumers for Auto Reliability and Safety
Center for Auto Safety
Consumers Union
Consumer Action
Consumer Federation of America
Courage Campaign
National Association of Consumer Advocates
National Consumer Law Center 4
National Consumers League
Trauma Foundation
U.S. Public Interest Research Group

4 On behalf of its low-income clients.


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    • 1 Second Ago
  • 31 Comments
      jesscott
      • 5 Months Ago
      I don't have any problem with this even if Chuckie proposed it. However it has to apply to New car dealers that sell pre-owned as well. You can't write law that only applies to a portion of the market.......that would be crony capitalism....oh wait.......
        david.bergman1
        • 5 Months Ago
        @jesscott
        "You can't write law that only applies to a portion of the market.......that would be crony capitalism....oh wait......." Hysterical!
      Cruising
      • 5 Months Ago
      At least be honest and let the consumer know of any recalls on the car, then give them options as to who to contact or where they can take the vehicle for recall work like a Chevrolet, Toyota dealer etc....
      IfIWereObama
      • 5 Months Ago
      So they're gonna "force all used car dealers to fix any pending recalls on a model before it can be sold". That'll be great. Instead of getting $15k for your truck at trade in..you'll get $11k.
        Larry Litmanen
        • 5 Months Ago
        @IfIWereObama
        How is it different from you buying the car and taking it for recalls on your own. In the end car needs to be fixed.
      brandon
      • 5 Months Ago
      No, Schumer saying it will fight to give the government more power. I'm shocked. Just shocked I tell you.
      rbnhd1144
      • 5 Months Ago
      Getting the car in roadworthy condition is the least you should expect when buying a new or used car, Recalled Cars are fixed for free by dealers, dealers also have drivers to drop them off, its not expensive just unfortunate for the dealer, just part of the cost of doing business these days. Decent dealers want its customers to be toally satisfied with their purchase and only sell cars that dont need repairs.
        apeck
        • 5 Months Ago
        @rbnhd1144
        Its not unfortunate for the dealer, they are reimbursed for the time and costs for warranty repairs by the manufacturer.
        Dump
        • 5 Months Ago
        @rbnhd1144
        Right, not "unfortunate" & it's not "just part of the cost of doing business". New car dealers are fixing cars they probably never sold in many cases where a Vehicle Recall includes vehicles more that 5-6 years old. The long line of recall-fixes takes time & staff away from maintaining/fixing newer vehicles that were sold on their own lots. And the cost of doing business - does have a cost. Whatever money a dealer puts into a used car to be able to list & sell it, will undoubtedly be added to the bottom-line cost of the vehicle; which is directly passed on to the consumer.
        david.bergman1
        • 5 Months Ago
        @rbnhd1144
        Since it's no inconvenience, consumers should just take responsibility for themselves and do it rather than jacking up the costs of used cars because they will be sitting at a manufacturer authorized retailers waiting for parts i.e. tying up capital for longer periods of time.
      N.O.
      • 5 Months Ago
      It makes sense. But some idiots will still find it IDK, unconstitutional or even un-American.
      detox440
      • 5 Months Ago
      Do you work for free? Of course you don't Why should carmax? It's easy enough to look up recalls on the vehicle and if CarMax wants to sell a vehicle that needs recalls performed, just have all the information ready for the customer and tell them (and have them sign) they need to take their car over to a service center and get it fixed for free (and you get a free loaner) Other alternative - they have full service centers at their places, have GM/Ford/whoever contract out a repair guy for a couple of weeks to them to perform the work on site. That way CarMax doesn't have to float the bill (as they shouldn't), cars get fixed, and retard joe-six-pack is left out of the equation. CarMax has it's place - I actually (just 2 days ago) bought a 2014 Ram1500 from them with only 19K on the clock for a pretty fair price. They weren't pushy, and got the deal done fast. Cash buyer so no sneaky tricks on the back end either :)
        Henry
        • 5 Months Ago
        @detox440
        How will they be working for free? They can send the car to the dealer for any realized recall issue if they choose or have a list of all recalls related to the vehicle with the sale to have the customer take it into the dealer for the needed repairs. I doubt that they will like their cars seating at any dealership other than theirs for any inordinate length of time for the obvious lost showing and possible sales opportunities. I do agree with them that it will make for better business for the manufacturers to include them in the recall bulletins as they do the dealers. It will help clear the backlog where there is any and a better customer experience in my view.
      reattadudes
      • 5 Months Ago
      I can't imagine buying a vehicle here. have to laugh at their prices on used pickups. I just bought a new 2014 RAM 1500 with an MSRP of over $36,000 for $25,680. Carmax had 2012 pickups with less equipment for a lot more than that. I've had friends drag me here, and it feels like I've just gone into Stepford. when I can't take anymore, I'll tell my friend, "would you like that exact same car, but for thousands less, and NEW?" case in point; a 2013 Nissan Maxima S. the one at Carmax was an old rental, and priced at $27,900. an Autonation Nissan dealer here in the Phoenix area had a BRAND NEW 2014 priced at $24,299. both cars had a list price of around $33,000. Autonation keeps marking down their "old" new inventory until it sells. which one would you rather have; a year old rental with 30,000 miles, or a brand new one? and let's not forget if you want an extended warranty, the Nissan dealer can sell you a real Nissan extended warranty, while Carmax will sell you an aftermarket, Mickey Mouse, not-worth-the-paper-its-printed-on warranty. it has a million clauses and exclusions, including giving the warranty company TWO WEEKS to decide if they will pay a claim. how would that be if it happened on your vacation? and many of them authorize USED PARTS to be installed. READ the fine print in one of these aftermarket warranties; they all have this exclusions. a factory extended warranty (regardless of manufacturer) will cover a lot of non-covered items, too, as they want you back again to buy another. and the aftermarket company? they could not care less. it seems many of the brain dead folks who bought new Saturns for full MSRP and thought that was just ducky have found a new, "no haggle" home at Carmax.
        detox440
        • 5 Months Ago
        @reattadudes
        funny enough I got my 2014 Ram 1500 from CarMax. 4X4 model too! for 26k only had 19K miles on it as well. Still had bumper to bumper factory and 100K mile powertrain. Couldn't find a better deal anywhere else used. (it's a work truck that requires 4X4, so warranty and reliability were top needs) I do agree -- the 'extra' warrany from CarMax is BS -- there are tons of horror stories online I read. Luckily they didn't try to push me at all to buy it. (Hard to sell someone on paying an extra couple thousand when i already have 100% coverage from the manufacturer) with a zero deductible :) Hell, it still has new car smell, and all the papers/booklets were factory sealed. Got it up on the rack at home, and the whole car was flawless as well. Not bad for 3K under what any other *dealer* would have charged me. I came away very impressed with my CarMax experience, it was fast/easy/good price. Yes if you have 6 months and love to haggle you can get a better deal but when you need a new/used car "right now" for business purposes, it worked out great for me.
        Ryan Glass
        • 5 Months Ago
        @reattadudes
        Thank you Reattadudes! I have felt the same way for years about CarMax. There's a branch about two miles from my home and I go there sometimes just to laugh at their ridiculous prices. They are just a rip-off, and the no-haggle, no-hassle pricing only benefits them, not the consumer. Some of their cars aren't even in good condition either. I had an incident with them about four months ago when I was considering a secondary car to scoot around in, and found a 2003 Ford Focus ZX3 with low miles. KBB Retail Price from a dealer was about $6000. CarMax was asking $10,999!!!! That base model ZX3 was only $14,000 when it was new and had only depreciated 16% in 12 years according to them! I brought all of the KBB, Edmunds, and NADA pricing at around $5-6k and examples of similar Focii for sale that were in that range, and they refused to budge. The salesperson and eventually a manager, all came back with a well-rehearsed and scripted response that they don't follow KBB and use their own research, yada, yada, yada. Needless to say, I was disappointed to not buy that car. But the car sold pretty quickly, and so do all of the other overpriced ones they offer. I feel CarMax is a place for people who do absolutely zero research and just come wanting to buy a car, any car, that day. They don't care what it is, and have no idea what it's really worth. The only benefit of CarMax I see is that they have a huge selection and it's a perfect starting point if you have no idea what you want and just to compare a lot of different models side-by-side. As long as you don't buy there
        Ryan Glass
        • 5 Months Ago
        @reattadudes
        Thank you Reattadudes! I have felt the same way for years about CarMax. There's a branch about two miles from my home and I go there sometimes just to laugh at their ridiculous prices. They are just a rip-off, and the no-haggle, no-hassle pricing only benefits them, not the consumer. Some of their cars aren't even in good condition either. I had an incident with them about four months ago when I was considering a secondary car to scoot around in, and found a 2003 Ford Focus ZX3 with low miles. KBB Retail Price from a dealer was about $6000. CarMax was asking $10,999!!!! That base model ZX3 was only $14,000 when it was new and had only depreciated 16% in 12 years according to them! I brought all of the KBB, Edmunds, and NADA pricing at around $5-6k and examples of similar Focii for sale that were in that range, and they refused to budge. The salesperson and eventually a manager, all came back with a well-rehearsed and scripted response that they don't follow KBB and use their own research, yada, yada, yada. Needless to say, I was disappointed to not buy that car. But the car sold pretty quickly, and so do all of the other overpriced ones they offer. I feel CarMax is a place for people who do absolutely zero research and just come wanting to buy a car, any car, that day. They don't care what it is, and have no idea what it's really worth. The only benefit of CarMax I see is that they have a huge selection and it's a perfect starting point if you have no idea what you want and just to compare a lot of different models side-by-side. As long as you don't buy there
        jessesrq
        • 5 Months Ago
        @reattadudes
        On the flip side, CarMax paid me thousands more for my last car than any dealer would pay on a trade-in. I kept wondering what sucker would pay whatever price they put on my old TSX wagon to make a profit. And then strangely enough, I found out a friend of a friend bought it.
      SloopJohnB
      • 5 Months Ago
      I don't think CarMax should be required to accomplish all recalls before putting a vehicle up for sale…BUT they should be required to accomplish all recalls before transfer to the customer. The customer usually has the responsibility for getting the car in for recalls, but CarMax has the power and motivation to get the recalls accomplished before the customer takes possession. In practice, many people want to take the car NOW at CarMax and probably won't wait for any needed recalls to be accomplished..which is why many recalls aren't done.
        Dump
        • 5 Months Ago
        @SloopJohnB
        Agreed. Years ago, when purchasing one of my 1st cars that was used, the dealer would agree to a lower sale price & agree to fix all issues (including recalls) if you definitely was going to purchase the vehicle. I do understand CarMax's perspective. They sell most all cars & would need a huge tool box full of specialized tools for every vehicle recall. That's silly. If a vehicle does have known recalls, it should be clearly disclosed to the consumer prior to the purchase & definite appointments with the appropriate dealer should be made to address the recalls at the time of sale.
        rbnhd1144
        • 5 Months Ago
        @SloopJohnB
        I totally agree, you have it Right!
      chest rockwell
      • 5 Months Ago
      Not all recalls are created equal. Some (ignition switch) are much more important than others (was it Mazda that had that spider issue?). I believe that it's the responsibility of the dealership to help a buyer VERIFY what recalls are outstanding, but not necessarily fix them. Any known vehicle issue, like a recall or claimed accident, that would affect a consumers decision to purchase a vehicle should be disclosed.
      • 5 Months Ago
      Once again the liberals are trying to force us to drive safe cars. They are worse than Hitler.
      • 5 Months Ago
      These are the same liberals who will not let us bring guns into bars. If we do not have guns in bars, how are we to deal with bar tenders who do not make the drinks the way we like them?
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