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Consumer groups ask FTC to investigate CarMax

First Published      Last Updated Jun 24 2014 06:09 pm

Saying that advertisements by CarMax, the nation's largest used-car retailer, are deceptive, a coalition of 11 consumer groups has asked the Federal Trade Commission to investigate. The groups say CarMax does not fix vehicles that have been recalled before it sells them, even though the retailer's ads promise that the vehicles have undergone a rigorous quality inspection.

"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," said the petition filed Monday by the consumer groups, including the Consumers for Auto Reliability and Safety, Consumers Union, the Consumer Federation of America, the Center for Auto Safety, the National Consumer Law Center and the U.S. Public Interest Research Group.

"Consumers may think they're buying a safe used car, but if CarMax isn't making sure that recalled cars are fixed, consumers are being misled," Ami Gadhia, senior policy counsel for Consumers Union, wrote in an email. "That's a problem, and one we hope the FTC and CarMax can rectify."

The action comes amid increased focus and dismay on the part of consumer advocates and legislators over the adequacy of the recall process intended to protect motorists. The issue was magnified by the disclosure that General Motors delayed by more than a decade its recall of millions of cars in which a defective ignition switch could result in the engine inadvertently shutting off, in turn cutting the power assist to the steering and brakes, and preventing the air bags from deploying in a crash.

The CarMax-related petition being sent to the FTC also has the support of Sen. Charles E. Schumer, D-N.Y.

"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," Schumer wrote in a supporting letter sent to the FTC on Monday. "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."

He said that if the allegations in the petition were correct, the FTC "should take swift and decisive action to rectify the inherently deceptive and dangerous practice."

CarMax, which has stores nationwide, says it sold about 527,000 used cars in the 12-month period that ended Feb. 28. The company's ads say its used cars undergo a "rigorous 125-point" inspection.

In response to the filing of the petition, a CarMax spokesman, Casey Werderman, wrote in an email that "CarMax provides the necessary information for customers to register their vehicle with the manufacturer to determine if it has an open recall and be notified about future recalls." Werderman also said that automakers did not give retailers like CarMax the authority to carry out recalls at their facilities, but that CarMax would like to see legislation that would make that possible.

A used-car dealer can, however, take a recalled vehicle to a franchised dealer and have the recall performed there without charge, several automakers said.

Rosemary Shahan, the president of Consumers for Auto Reliability and Safety, said the groups would like the FTC to stop CarMax from selling used vehicles without fixing recalls. She said telling buyers how to check for a recall put the burden on the consumer.

"They are trying to say they are not responsible for making sure the recall work is done at the time you buy the car," she said.

Major automakers — including Toyota, Honda, General Motors, Chrysler, Ford and Nissan — each said the vehicles they sold as special "certified" used cars are checked for recalls and repaired before they are sold. The National Highway Traffic Safety Administration requires new car dealers to fix recalled new vehicles before they can be sold. But the safety agency lacks the authority to require that recall repairs be carried out on used vehicles. The agency is seeking such authority from Congress.

The lack of a law requiring recall repairs to be performed on used vehicles surprised Angela Davidson, who bought a 2010 Ram 1500 pickup from a CarMax dealer in Irvine, Calif., last month. She contacted Chrysler to see about using Bluetooth to connect her cellphone. After providing the vehicle identification number, she was told that her Ram had been recalled in February 2013 because the rear axle might seize up.

Chrysler had told federal safety regulators that such a development could "cause a loss of vehicle control and/or a vehicle crash with little warning."

Davidson said Chrysler fixed her truck without charge, but said she had chosen CarMax because it advertises thorough testing of its vehicles before they're sold. Because the truck would be used for family transportation, she said safety was an important concern.

"If I had known that there was an open recall like that there is no way on this Earth that I would have driven off with that truck," she said.