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FTC Settlements Leave Consumers at Risk of Buying Unsafe, Unrepaired Recalled Vehicles

December 16, 2016

WASHINGTON, D.C. – Consumers Union, the policy and mobilization arm of Consumer Reports, today called out the FTC for not going far enough to protect consumers in settlements with auto dealership chains that will allow dealers to continue to advertise cars with unrepaired recalls as “safe” or having passed some sort of safety inspection — as long they disclose that the cars still have an open recall.

The FTC today approved final consent orders in complaints against General Motors Company, Jim Koons Management, and Lithia Motors Inc., following a January settlement of charges that they touted how rigorously they inspect their cars, including claims like “certified,” yet failed to disclose that some of the used cars they were selling were subject to unrepaired safety recalls.

In comments to the FTC, Consumers Union and several public interest groups strongly urged the agency to amend the settlements to ensure recall repairs are made before offering a car for sale to consumers — and that simply disclosing the defect isn’t enough.

“We are deeply disappointed that the FTC has decided to finalize these misguided settlements,” said William Wallace, policy analyst for Consumers Union. “The FTC has a critical role to play in cracking down on deceptive advertising in the auto marketplace, including when a company makes misleading claims about a car’s safety. But the settlements with GM, Koons, and Lithia may set a dangerous precedent. All used car dealers – especially those who advertise their vehicles as ‘certified’ – should be prohibited from selling cars with unperformed safety recalls. And they shouldn’t be let off the hook simply by disclosing the defect.”

In addition, the FTC today announced a settlement with CarMax Inc. and two other major used auto retailers over marketing claims that their “Quality Certified” cars had undergone a “125+ point inspection,” despite still potentially having unrepaired recalls. More than two years ago, Consumers Union and other public interest groups petitioned the FTC to investigate and take action against this deceptive practice that could trick consumers into a false sense of safety and send them home with an unsafe vehicle.

Consumers Union welcomed the action, but again criticized the weak standard set by today’s proposed settlements.

Wallace said, “Though we’re glad that the FTC has taken this long-awaited action against CarMax for their deceptive marketing, it’s not enough to protect consumers. Like the finalized settlements, these new proposed consent orders are deeply flawed. If a used car has an unrepaired safety defect, the dealer shouldn’t offer it for sale until it’s fixed. Mere disclosure is not enough.”