FTC Gets Involved in Recallmania

The Federal Trade Commission, zealous about protecting its turf in regulating retail vehicle sales, has shown that it wants to be involved in the rapidly escalating recall problems. In announcing three consent orders in January 2016, the FTC took action on sales of used vehicles with open recalls it claims were unfairly and deceptively marketed as safe or certified.ftc-clr

The consent orders involved General Motors and two large dealer groups. The FTC claims it took action under its authority to prevent the unfair and deceptive practice of marketing used vehicles with open recalls as safe. The complaints accompanying the consent orders charge that General Motors did not effectively prevent sales of used vehicles with open recalls under its certified pre-owned program, and the dealers deceived the public by contending used vehicles with open recalls were safe when marketed as “certified” or having passed multi-point inspections.

A dealer subject to the FTC consent order may not represent that a used vehicles it offers for sale is safe, has been repaired for safety issues or has been subjected to a safety-related inspection unless all recalls have been performed. The dealers agreed they would clearly and conspicuously disclose that used vehicles may be subject to unrepaired recalls for safety issues, and how consumers can determine whether a motor vehicle subject to a safety recall can be repaired.

The order also requires a dealer who receives a written notice of an open recall from a manufacturer on a vehicle it is selling to provide that to a buyer, and it prevents a dealer from misrepresenting a vehicle’s safety recall status.

We have previously recommended that a franchised dealer have a policy on selling used vehicles.

  • Remedy an open recall for which there is a fix and parts on a vehicle of the line make for which it is franchised; and
  • When it cannot remedy an open recall because the vehicle is not of its line make or a fix or parts are not available, the dealer should give a written disclosure to a buyer of the recall status of a vehicle.

Because of the consent orders, dealers should add some additional cautions.

  • Many manufacturer CPO programs already prevent certification of a used vehicle with an open recall. Observe those prohibitions.
  • Every vehicle must go through the mandated CPO inspection before it is advertised as “certified”.
  • Do not “certify” a used vehicle with an open recall.