Legal News/Legislation

A New York dealer group that operates two franchised stores and an independent lot in the Big Apple filed a civil lawsuit against Autotrader, seeking more than $1.5 million in restitution.

According to the complaint obtained by Auto Remarketing on Friday, B&Z Auto Enterprises made allegations of false advertising, fraud, negligent misrepresentation, unjust enrichment, unfair and deceptive trade practices under federal and state law, and violations of the RICO Act — claims that Autotrader called  “meritless.”

(Passed in 1970, the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO, is a federal law designed to combat organized crime in the United States).

B&Z Auto Enterprises includes Riverdale Chrysler Jeep and Eastchester Chrysler Jeep Dodge in the Bronx as well as New York Cars Direct in Larchmont, N.Y. B&Z Auto Enterprises legal representative, Bellavia Blatt & Crossett, filed the suit in U.S. District Court within the Eastern District of New York this past Wednesday.

The 32-page complaint alleges the group’s volume of search results pages (SRPs) and vehicle detail pages (VDPs) was inflated by 50 percent to 100 percent between the time B&Z Auto Enterprises first began using Autotrader in June 2010 and when it terminated the relationship on Sept. 1.

What B&Z Auto Enterprises claimed to be a noticeable decline in SRPs and VDPs beginning this summer triggered what germinated into the what the dealer group’s hopes to be a jury trial.

“In particular, Autotrader’s marketing and advertising communications emphasize, as their main selling point to dealers, a number of statistical metrics that are designed to convey the purported efficacy and benefits of the online advertising that Autotrader offers,” the complaint said.

“However, the ‘advertising reach’ statistics that Autotrader used to induce plaintiff B&Z and other dealers to purchase its online advertising services were in fact inaccurate and misleading,” the complaint went on to say.

Auto Remarketing reached out to Autotrader on Friday and a spokesperson said, “At Autotrader, we’re committed to growing our clients' businesses by connecting car buyers, sellers and owners and creating exceptional experiences. The allegations in this lawsuit are meritless, and we intend to defend ourselves vigorously.”

News of the suit appears to have first been reported in Automotive News. 

Editor Joe Overby contributed to this report.

New analysis from the Mercatus Center at George Mason University reviewed the law and economics of consumer debt collection and its regulation. The expert who compiled the report insisted that the Consumer Financial Protection Bureau should consider all the potential consequences of new regulation — both intended and unintended — to ensure that it will benefit consumers.

Mercatus senior research fellow Todd Zywicki emphasized how it is important for policymakers to understand the six potential consequences in light of an announcement by the CFPB that it is considering new regulation for consumer debt collection.

“Effective legal rules governing debt collection are essential to the efficient operation of the consumer credit economy,” Zywicki said in the paper titled, “The Law and Economics of Consumer Debt Collection and Its Regulation.”

Zywicki continued with, “If creditors are unable to effectively collect debts, they will be reluctant to lend. If borrowers feel oppressed by unfair debt collection practices, they will be reluctant to borrow.

“Maintaining a modern, flexible system of rules for debt collection is essential in order for both borrowers and lenders to have confidence that contracts will be enforced and that the terms of those contracts will be fair and transparent,” he went to say.

Before imposing new regulations, Zywicki pinpointed six factors that can adversely affect consumers of credit that he believes the CFPB should consider, including:

1. Consumer debt collection is already subject to extensive regulation

Since the 1970s, Zywicki noted consumer debt collection has been subject to extensive regulation at both the federal and state levels.

“Most questionable debt collection practices have previously been outlawed or restricted. Concerning existing practices, it is challenging to discern whether further restrictions would create any new benefits for borrowers that would exceed their additional costs,” he said.

2. While good regulation can improve economic welfare, bad regulation can injure consumers and the economy

Zywicki pointed out that restricting creditor remedies raises the risk of loss and the loss rate for lenders, leading to higher prices for loans and a reduction in supply.

On the other hand, he acknowledged restricting creditor remedies reduces the total cost of borrowing for consumers, producing an increase in the demand for loans.

“As a result, restrictions on collections simultaneously reduce supply and increase demand,” he said. “It is unclear whether restrictions would actually increase or decrease quantity.”

3. Riskier consumers tend to be injured the most by restrictions on debt collection practices

The George Mason expert explained restrictions on debt collection may benefit consumers who are actually subject to the collection process, but this will come at the expense of other consumers who have to pay more for credit and gain less access to credit.

“Because riskier borrowers are predicted to be the most likely to default, they will also bear a greater proportion of the cost of regulation than other borrowers, even though in most cases they repay their debts,” Zywicki said.

Zywicki pointed out that restrictions on collections tend to adversely affect credit card lending relative to other types of lending. He added higher-income consumers will be able to avoid some of these negative effects by making greater use of secured debt (such as home equity lines of credit), whereas lower-income users will be forced to turn to products such as payday lending and auto title loans.

4. Third-party debt collectors and debt buyers play a unique role in the consumer collections system

Zywicki insisted third-party collection agencies provide liquidity and expertise in collection practices that reduce losses and increase efficiency for consumer lenders.

“This reduction in losses may be particularly valuable to some types of creditors compared to others and may be useful for creditors that otherwise might be overly lenient in their collection efforts and pass on the costs to their other customers,” he said.

5. Regulation of particular collection practices can have unintended consequences

Zywicki explained debt-collection practices tend to follow a sliding scale of intensity, beginning with low-expense practices such as letters and phone calls and escalating to higher-intensity practices such as lawsuits.

“Restricting the use of less-intense practices can interrupt this important economic calculation, leading to swifter invocation of more-intensive practices, such as lawsuits,” he said.

6. Regulation should not disproportionately burden small debt collection firms and stifle competition

Zywicki went on to mention compliance with Dodd-Frank and other regulations enacted since the financial crisis is disproportionately costly for smaller firms in the financial services industry, including the debt collection and debt buying industries.

“Smaller firms, however, have traditionally played an important role in the debt collection industry by providing knowledge of local economic conditions and promoting competition that can benefit consumers,” Zywicki said.

“Regulation that disproportionately burdens small businesses with unnecessary regulatory compliance costs will promote unnecessary consolidation of the debt collection industry,” he went on to say.

2 more suggestions for CFPB

Zywicki closed his analysis by making a pair of other recommendations for the CFPB to consider.

He reiterated that many restrictions on collections do not benefit consumers

“Even if restrictions on collection practices raise prices, consumers will still benefit if they value the ability to avoid those practices more than the creditor values the ability to exercise them,” Zywicki said.

“In practice, however, many restrictions fail cost-benefit analysis, because consumers place less value on avoiding particular remedies in the case of default than the increase in price they would have to pay the lender to offset the loss of the remedy,” he continued.

Zywicki also suggested that regulations should be based on careful cost-benefit analysis and consideration of changing consumer lifestyles and communications technology

“Given the likelihood of unintended consequences arising from new collections regulations, the CFPB should conduct careful cost-benefit analysis before it imposes new regulations on debt collection,” Zywicki said.

“The CFPB should consider consumers’ growing reliance on technologies such as cell phones, email, and text messaging, and modernize its rules to allow more flexible contact using those technologies while at the same time protecting consumers from intrusions on their privacy,” he went on to say.

Zywicki closed by making one final point about the bureau’s potential moves regarding debt collection.

“From its inception, the CFPB has described itself as a ‘data-driven agency’ that applies sound economic and empirical analysis to craft consumer protection policies,” he said.

“The CFPB should seek to follow this goal for consumer debt collection rules and consider rules that can be shown to protect consumers from overreaching creditor behavior, ensure access to credit at competitive prices, and avoid burdening consumers with unnecessary restrictions and compliance costs,” Zywicki concluded in the document that can be downloaded here.

Dealers: do you have customers you would like to notify about their vehicle’s recall status, but you’re apprehensive to contact them due to being on the National Do Not Call Registry?

Rest assured: NADA Regulatory Affairs reminds dealers that the “do-not-call” rules do not prohibit dealers from calling consumers about vehicle recalls. As long as the defect repair work involves no cost to the customer, at least.

According to NADA, itself citing the Federal Communications Commission’s ruling from 2005, “calls that encourage the purchase of other goods and service ‘will be deemed a prohibited telephone solicitation.’”  

NADA noted that this specific clarification only applies to the National Do-Not-Call rules and is not applicable to the separate restrictions of the Telephone Consumer Protection Act (TCPA) for text messages, pre-recorded calls, calls made to cellphones, or calls made using auto-dialers.

The association urges dealers to consult their legal counsel before making a decision regarding a recall-notification telephone strategy for its affected customers.

Strong dealer-consumer relationships increase recall repair rates

Anita Lienert, a correspondent for Edmunds.com, also shared in a post on the Edmunds site the results of a recent survey conducted by Public Opinion Strategies, on behalf of Auto Alliance and the Association of Global Automakers, suggesting that consumers who have established a relationship with a dealer participate in recalls more often than those who have not established that type of relationship.

Even though time is the only cost to the consumer for most recall repairs, the research sought to find out why roughly 25 percent of owners of recalled vehicles never complete the free repair of their vehicles.

According to the Edmunds post, one key finding from the survey found that many consumers are doing their own “risk assessments” when they receive a recall notice, deciding whether or not it’s worth their time to take their vehicle in for the remedies.

A statement from the Auto Alliance last week said that, “Many survey respondents showed a reduced likelihood to repair a recalled vehicle if they perceived the recall to be ‘low’ or ‘moderate’ risk, saying it seemed to be ‘no big deal.’ Used vehicle owners are less likely to be motivated to respond to recall communications, even when they are aware of a recall on their vehicle.”

According to the survey, consumers are more likely to heed recall repair notifications if the severity of the recall is high, if they are especially reminded that it is free, or if a reminder of open recalls is provided in their insurance renewal notices.

Dealers: Have you found any particularly potent way to convince your customers to bring their vehicles in for recall repairs? Let us know in the comments below or gives us a shout via social media via the links on the left of this page.

In light of the Consumer Financial Protection Bureau handing out a $44 million enforcement action against Westlake Financial Services for its debt collection practices, BellesLink founder Paul Kulas offered five reasons why these methods that regulators find to be non-compliant aren’t that successful anyway.

In a blog post published three days ahead of the CFPB announcing its action against Westlake, Kulas pointed out that cell phone pinging and caller ID spoofing — practices he acknowledged were once common in skip-tracing and investigations — are not only drawing the attention of the CFPB but also the Federal Communications Commission.

Besides the possibility of landing in severe regulatory trouble, Kulas noted five other reasons why these practices don’t serve collectors well, including the following:

— When spoofing, you have to keep calling until somebody answers the phone. It wastes your time.

— If you’re on the phone call and the call is dropped, the person can’t call you back.

— If the call is dropped, you can’t call them back. At least not without explaining, one more time, why you’re calling from their Mom’s phone number. So, the lead is burned.

— You can’t leave messages to get a call-back. The caller ID they see on the call-back won’t match the original call, making it suspicious and burning your lead.

— You can’t easily keep track your calls and the work you’ve done. You have to manually track your calls.

Kulas closed by stressing that BellesLink apps offer more “effective” tools for finding people, contacting targets and tracking work.

For more details, visit www.belleslink.com.

Martin Winterkorn stepped down from the position of chief executive officer at the Volkswagen Auto Group on Wednesday, stating in an official announcement that he is “shocked by the events of the past few days” and that he is “stunned that misconduct on such a scale was possible in the Volkswagen Group.”

Saying that VW needs a “fresh start,” especially in terms of personnel, he also stated that he is “clearing the way for this fresh start” with his resignation.

“As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the supervisory Board to agree on terminating my function as CEO of the Volkswagen Group,” Winterkorn said. “I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.”

In a separate statement from VW, the company reiterated that, “The Executive Committee notes that Professor Dr. Winterkorn had no knowledge of the manipulation of emissions data.”

While the Environmental Protection Agency initially took aim at 482,000 diesel passenger cars sold by VW and Audi in the U.S. since 2008, requesting the recall of the affected vehicles, VW admitted on Tuesday that it had used the same software in 11 million diesel engines worldwide.

According to a Reuters report on Tuesday, Sen. Bill Nelson, D-Fla., sent a letter to FTC Chairwoman Edith Ramirez urging the agency to explore remedies for car buyers who he said rely on VW’s claims of having “clean diesel” cars.

“I am outraged that VW would cheat its customers by deceiving them into buying a car that wasn’t what was advertised,” Nelson wrote, according to the report.

Karl Brauer, senior analyst for Kelley Blue Book, commented on Winterkorn’s departure.

"With more than 20 years at Volkswagen AG, during which he rapidly rose through the ranks to lead the automaker, Winterkorn appeared ready to bask in the glory of seeing VW become the world's largest automaker,” Brauer said. “But VW's intentional, widespread efforts to deceive regulators across the globe suggests a dark side to the company's growth. This activity has been going on for years, meaning Winterkorn either had full knowledge of the deception, and approved it, or he was negligent in uncovering and stopping it. Either situation reflects poorly on Winterkorn and his leadership skills, and given the tragic impact this scandal will have on VW, his resignation wasn't just likely, but necessary."

House Energy and Commerce Committee chairman Fred Upton, R-Mich., and Oversight and Investigations Subcommittee chairman Tim Murphy, R-Penn., also announced on Monday that the Oversight and Investigations Subcommittee will hold a hearing in the coming weeks to discuss the recent VW diesel engine issues.

“Strong emissions standards are in place for the benefit of public health. Manufacturers throughout the United States, and across the world, have developed leading technologies to reduce airborne emissions within the limits set by EPA and state environmental agencies. However, reported EPA allegations that certain Volkswagen models contained software to defeat auto emissions tests raise serious questions,” said Upton and Murphy. “We will follow the facts. We are also concerned that auto consumers may have been deceived – that what they were purchasing did not come as advertised. The American people deserve answers and assurances that this will not happen again. We intend to get those answers.”

In other related news, Bloomberg News also reported on Tuesday that VW has hired Kirkland & Ellis LLP to help handle the situation. If that name rings a bell, the latter is the U.S. law firm that led the defense of BP Plc during its criminal investigation of the Deepwater Horizon offshore oil spill in 2010.

Stay tuned to Auto Remarketing as we continue to track the situation with VW and its possible future repercussions on the used-vehicle industry. 

Fitch Ratings doesn’t expect Volkswagen to pay the highest possible fine — $18 billion — stemming from the U.S. Environmental Protection Agency and the California Air Resources Board revealing findings that allege five of the OEM’s diesel-powered vehicles include “defeat device” software that circumvents emissions standards for certain air pollutants.

However, the automaker is already experiencing a major impact in a variety of ways, and Black Book indicated that it’s keeping an eye on three elements in order to evaluate how this issue will impact vehicle values. Anil Goyal, vice president of automotive valuation and analytics for Black Book and one of the experts coming to Used Car Week gave Auto Remarketing the rundown on Monday, highlighting:

1. How will EPA force consumers to implement recall changes? Will the regulator stop such vehicles from passing emissions and thus not being able to update vehicle registration? If so, which vehicles will be impacted by EPA: new only, used trading hands, or existing vehicles as well?

2. How easy is it for the dealers to update the software? And, how does VW incentivize its customers to get an update? How do they manage “Clean Diesel” brand image?

3. What impact does the fix have? Will it worsen the car's fuel economy or will it introduce performance issues? Given the low gas and diesel prices, fuel economy impact to vehicle values will be minimal.

“Recalls are common in the auto industry,” Goyal said. “Looking at precious recalls, we don’t see a long lasting negative impact to values in general. What suffers the most are the brand and the sales of new vehicles.

“In the end, if the manufacturer can effectively manage damage control of the brand and the operations to implement recalled changes, the vehicle values are typically not impacted in the long term,” he continued.

“This recall situation could be different,” Goyal added. “Most recalls are safety related and could actually improve goodwill with the customer when the car is fixed. It is not clear what was the intent of this software meant to skirt emissions testing.”

And reportedly the U.S. Department of Justice is asking questions, too. Bloomberg reported on Monday afternoon, citing two officials familiar with the situation, that the Justice Department is conducting a criminal investigation of VW.

All of this uncertainty significantly impacted VW’s value with investors. Reuters reported that VW’s stock tumbled more than 20 percent on Monday, a day after the OEM’s chief executive officer said he was “deeply sorry” about the entire incident.

“The board of management at Volkswagen AG takes these findings very seriously,” VW’s Martin Winterkorn said. “I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.

“We do not and will not tolerate violations of any kind of our internal rules or of the law,” Winterkorn continued.

“The trust of our customers and the public is and continues to be our most important asset,” he went on to say. “We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire board of management.”

Meanwhile, Fitch analysts based in London and Madrid assessed the potential penalty federal regulators could assess stemming from the vehicles associated in the investigation. “We believe the fine is unlikely to amount to the theoretical maximum amount,” they said about the calculation of a $37,500 penalty for each unit involved. Covering roughly 482,000 diesel passenger car sold by VW and Audi in the U.S. since 2008, the affected diesel models include the following:

• Jetta (Model Years 2009 – 2015)                                               

• Beetle (Model Years 2009 – 2015)

• Audi A3 (Model Years 2009 – 2015)

• Golf (Model Years 2009 – 2015)

• Passat (Model Years 2014-2015)

“Owners of affected Volkswagen and Audi vehicles understandably have a lot of questions about what's next,” Edmunds.com director of industry analysis Jessica Caldwell said. “The good news for these owners is that there is no imminent safety threat in driving these vehicles.

“Of course, owners who bought these diesel vehicles in part because of any environmental benefits may have moral objections to driving them, and they may feel they have no other option but to keep their cars parked for the time being,” Caldwell said. “And then there are owners who just feel flat-out deceived and will want their money back.

“But until Volkswagen reveals a plan for how they will either buy back the cars or fix them so that they truly meet emissions standards, all affected owners will have to wait and see,” Caldwell went on to say. “It is in Volkswagen's best interest to publicly address steps to fix this mess as soon as possible before it loses its customer base for good."

Even if the OEM doesn’t have to wire $18 billion to federal regulators, Fitch, like Caldwell from Edmunds.com, emphasized the notice of violation of the Clean Air Act could “seriously undermine” the automaker’s brand image, particularly in the U.S., where Volkswagen is “already struggling to increase its market share.”

Fitch added, “The consequences of this crisis for the group’s brand image and reputation with regulators and consumers worldwide is difficult to assess. Potential class actions typical of such situations in the U.S. could also result and increase total cash outflows in the next two years.”

Those potential lawsuits already are beginning to form.

Block & Leviton — a national law firm based in Boston and San Francisco focused on complex litigation affecting investors, municipalities, and consumers — said on Monday it is investigating whether Volkswagen “misled its investors by failing to disclose its intent to avoid compliance with emission controls by installing ‘defeat devices’ in certain diesel models.”

Furthermore, Seattle-based Keller Rohrback filed a nationwide class action complaint against Volkswagen alleging that the automaker “deliberately deceived well-meaning, environmentally-conscious consumers and regulators.” Keller Rohrback indicated that it filed the complaint in federal court in the Central District of California on Sunday on behalf of seven named plaintiffs from three states: California, Washington and Connecticut.

“Volkswagen’s decision to prey on environmentally-conscious consumers who paid a premium of thousands of dollars for a supposedly cleaner-running car, and who received a polluting vehicle instead, is despicable,” Keller Rohrback managing partner Lynn Lincoln Sarko said. “Consumers nationwide are justifiably outraged, and Volkswagen will have to answer to them.”

Whether Winterkorn still is in position to answer those questions might be unclear as well. Christian Stadler, who is a professor of strategic management and researches the auto industry at Warwick Business School in Coventry, England, considered the possibility Winterkorn might be ousted from this post as Volkswagen’s CEO.

“No question that this is a big problem for Volkswagen and could lead to CEO Martin Winterkorn losing his job after all,” Stadler said.

“Five months ago, Ferdinand Piech, the former chairman, tried to oust him but in the end resigned himself,” Stadler continued. “This Friday, the board decides on whether to renew Mr. Winterkorn’s contract until 2018. After this a question mark now hangs over that decision. Maybe they will defer the decision to wait and see what happens.”

The United States Environmental Protection Agency today issued a notice of violation of the Clean Air Act to Volkswagen AG, Audi AG and Volkswagen Group of America, alleging that five of its diesel-powered vehicles include “defeat device” software that circumvents EPA emissions standards for certain air pollutants.

Separately, the California Air Resources Board issued an in-use compliance letter to VW. Both the EPA and CARB have initiated investigations based on VW’s alleged actions.

Covering roughly 482,000 diesel passenger cars sold by VW and Audi in the U.S. since 2008, the affected diesel models include the following:

• Jetta (Model Years 2009 – 2015)                                               
• Beetle (Model Years 2009 – 2015)
• Audi A3 (Model Years 2009 – 2015)
• Golf (Model Years 2009 – 2015)
• Passat (Model Years 2014-2015) 

“Using a defeat device in cars to evade clean air standards is illegal and a threat to public health,” said Cynthia Giles, assistant administrator for the EPA’s Office of Enforcement and Compliance Assurance. “Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules. EPA will continue to investigate these very serious matters.”

According to the EPA, a “sophisticated software algorithm” on certain VW vehicles detects when the car is undergoing official emissions testing and then activates full emissions controls only during the test. Otherwise, the effectiveness of the affected vehicles’ pollution emissions control devices is greatly reduced during all “normal driving situations,” resulting in the emission of nitrogen oxides, or NOx, at up to 40 times the standard legally allowed.

The discrepancy was discovered after independent analysis by researchers at West Virginia University, working with the International Council on Clean Transportation. In early September, the EPA and CARB asked for an explanation for the identified emission problems, which both organizations say that VW admitted that the cars contained “defeat devices.”

When reaching out to VW, the company responded to Auto Remarketing with the following official statement.

“Volkswagen Group of America, Inc., Volkswagen AG and Audi AG received today notice from the U.S. Environmental Protection Agency, U.S. Department of Justice and the California Air Resources Board of an investigation related to certain emissions compliance matters. VW is cooperating with the investigation; we are unable to comment further at this time. This is a notice of non-compliance that needs to be addressed. Volkswagen will develop a remedy in coordination with EPA and CARB. Owners of the affected vehicles should be aware that this is not a safety related issue. Owners of these vehicles do not need to take any action at this time.”

The folks at Edmunds.com offer a couple of key points for dealers to think about when judging the situation. Below is part of a note the company shared:

1. In recent high-profile recalls, there has been very little — if any — impact on sales. With so many recalls in the news, they easily become white noise for a lot of consumers, and they don't appear to have much of an influence on shopping decisions. Nevertheless, Edmunds encourages all car owners to take any recall notices seriously and follow the instructions provided by their dealers.
    
2. Edmunds counts 44 models that offer diesel-powered engines in the 2015 model year . VW and Audi combine to produce 17 models -- or 39 percent—of those 44 total models.

Matt DeLorenzo, Kelley Blue Book's managing editor of KBB.com, also chimed in on the subject, saying this may result in a major hit for diesels in the U.S.

“Not only is this a black eye and a huge problem for Volkswagen, from an industry perspective it may set back diesel technology as a means for automakers to reach the requirements for high fuel economy," DeLorenzo said. "Manufacturers were counting on diesels to deliver fuel economy comparable to hybrids without the expense of having an engine plus electric motors and a battery pack. We may have reached a tipping point where now diesels will become more expensive to make than hybrids. That coupled with European cities looking to ban or limit diesels, there will be a shift away from that technology to hybrids and electrification through pure battery EVs and fuel cells.”

To check out the full statement from the EPA, click here.

Sen. Richard Blumenthal, a Democrat from Connecticut, continued his efforts against the retail sale of vehicles with open recalls by taking aim at CarMax on Monday, urging the Federal Trade Commission to “take immediate action to halt CarMax’s dangerously deceptive marketing of used cars with lethal safety defects.”

Blumenthal says he took these steps  in light of a recent investigation by the Consumers for Auto Reliability and Safety (CARS) Foundation and M&R Strategic Services, which claims to have found 74 vehicles for sale by CarMax dealerships in Hartford and East Haven within two 24-hour periods in July, both in the senator’s home state of Connecticut, that reportedly have open safety related recalls.

According to Blumenthal, these vehicles were advertised as “CarMax Quality Certified” via the company’s 125-point inspection but “had not taken even basic measures to get known safety recalls repaired,” according to the senator’s release.

“CarMax’s practices endanger the lives of their customers, their customers’ families, and everyone who shares the roads,” Blumenthal said. “CarMax advertises that all its vehicles must pass a rigorous ‘125-point inspection,’ but no inspection that routinely ignores outstanding safety recalls can be called ‘rigorous.’ Regardless of whether they are buying a new or used car, all consumers deserve to know they are buying a safe car.”

In what she described as “playing recalled roulette with its customers’ lives,” Rosemary Shahan, president of the CARS Foundation, agreed that the sale of vehicles with open recalls, “is also putting their families, other passengers, and everyone who shares the roads at risk.”

Blumenthal continues to sponsor legislation that would make it a federal violation, enforceable by the National Highway Traffic Safety Administration, for dealers to sell or lease a used vehicle with outstanding safety recalls. The current iteration to make this a federal law is currently titled the Used Car Safety Recall Repair Act.

CarMax also issued a statement on Monday, outlining its “commitment to recall transparency,” stating that it provides consumers with information about open recalls prior to sale, as currently required by law.

According to CarMax, it provides every customer with VIN-specific recall information in the following ways, as it listed in a statement:

• Every online listing of a vehicle on the CarMax website includes a link to the NHTSA VIN lookup website.
• In store, before any customer purchases a used-vehicle, a CarMax associate reviews the vehicle’s NHTSA VIN-specific recall report with the customer prior to sale, with the latter signing a form acknowledging the receipt of the recall report.  

CarMax also pointed out that, under the current law, independent used-auto retailers, like CarMax, are not authorized to complete recall repairs and close out recalls.

“Our experience shows us customers are in the best position to act on recall information directly with a manufacturer-authorized dealer,” the CarMax statement said. “We have found that dealers are often more likely to provide timely recall repair to customers rather than to a competitor, like CarMax, so we encourage customers to have recalls repaired at a manufacturer-authorized facility.”

For a video on how CarMax notifies customers about recalls, click here. For an infographic, click here.

Two members of the U.S. Senate Committee on Commerce, Science, and Transportation continued their quest for automotive safety by sending a letter to a Takata executive  requesting that the company “voluntarily recall all vehicles containing Takata airbags.”

This request was made by Sen. Richard Blumenthal of Connecticut and Sen. Edward Markey of Massachusetts, citing a recent National Highway Traffic Safety Administration investigation into an apparent Takata side airbag explosion in a 2015 Volkswagen Tiguan in St. Louis in June.

At the time of this writing, VW Group of America and Tesla Motors are the only two automakers in the U.S. utilizing Takata airbags that have not announced any Takata airbag-related recalls.

In the letter sent on Thursday and addressed directly to TK Holdings’ executive vice president of North America Kevin Kennedy, Blumenthal and Markey point out the specific nature of the incident as one of the major reasons they believe Takata should recall all of its airbags.

“This is the first incident reported in a VW, the first incident reported in a side airbag, and – most importantly, the first involving the newest models of Takata airbags,” the signed letter states. “This directly undercuts Takata’s continued insistence – despite growing evidence to the contrary – that the flaws in its airbag inflators are limited to prior designs in older model cars and only present when the airbags have prolonged exposure to extremely humid conditions.”

The senators request that they receive a response from Takata by Sept. 3. You can read the letter in its entirety here.

Karl Brauer, senior analyst for Kelley Blue Book, provided Auto Remarketing with the following comment on the situation.

“The senators’ suggestion that every Takata airbag should be recalled may ultimately prove wise, but it’s a bit premature to take that position right now,” Brauer said. “The malfunction of the Volkswagen Tiguan’s side airbag could indicate a larger problem, or it could have been a one-off circumstance that doesn’t represent a systemic defect across all side airbags. The problem for Takata is a history of defective airbags, which can leave even the most optimistic person wondering how wide the company’s flawed designs stretch.”

That bit of doubt in the minds of automakers is certainly apparent. In a recent report from Reuters, it was announced that Toyota Motor Corp. has plans to purchase 13 million airbag inflators from Nippon Kayaku Co., a smaller parts manufacturer in Japan. According to the report, Toyota is utilizing the second-tier source as an attempt to reduce its risk from the inflators supplied by Takata.

Akshay Anand, an analyst with KBB, also says that it’s getting to the point where these types of measures have to be taken if the problems are reoccurring.

“While recalling every vehicle with Takata components may seem like a tall task, the reality is that as the recalls expand in volume, we’re at the point where these issues need to be corrected as soon as possible,” Anand said. “Takata has been more cooperative recently than they were for months and months when the investigations started, but lives are potentially at stake. As a result, governing bodies may feel they need to be harsh or over-the-top in order to get the issue fully resolved, and it’s tough to blame them for that.”

The National Automobile Dealers Association announced today its fierce opposition of an amendment potentially headed for the Senate floor this week that would prohibit the retail sale of used vehicles with an open recall.

The NADA as well as the American International Automobile Dealers Association and the National Association of Minority Automobile Dealers sent a joint letter to their senators on Monday to urge them to vote against the proposed amendment.

According to the NADA, the amendment in question was officially filed by Sen. Richard Blumenthal (D-Conn.) and may come to the Senate floor for a vote as part of the transportation bill being voted on this Thursday.

In the letter, the three organizations argued that the proposed legislation would “instantly diminish the value of millions of customer trade-ins while not guaranteeing that a single recalled vehicle gets fixed.”

The organizations speculate that dealers would be less likely to accept trade-in offers due to the knowledge that they would have to sit around until a recall remedy could be found, thus causing many trade-ins to be declined and forcing consumers to sell their vehicles in the private market and further perpetuate the putting off of recall repairs.

The organizations estimate that between 250,000 and 500,000 sales of new vehicles would be lost per year due to consumers being unable to trade in their vehicle.

In a previous discussion with Auto Remarketing, vAuto founder Dale Pollak echoed this opinion.

“The responsibility of checking and remedying open recalls for all used vehicles prior to sale is an excessive and unreasonable burden to dealers,” Pollak said. “This is because dealers frequently do not possess the resources, expertise and/or parts to make the necessary repairs. Moreover, this situation is exacerbated in light of the fact that dealers cannot practically refuse trade-ins on the purchase of new vehicles.

“These trades represent a significant portion of the customer’s payment, and therefore, the receiving dealer must have the ability to turn the trade quickly in order to convert the asset to cash,” Pollak continued. “The inability to do so as a result of the proposed legislation will likely deny all dealers the necessary capital to sustain operations.”

To check out the full letter submitted by NADA, AIADA and NAMAD to their senators, click here. To check out commentary on the topic from NADA Chairman Bill Fox, click here.