Car Rental Firms in Drive to Polish Tarnished Image

Jeffrey Bloom’s California vacation was ruined because he rented a car.

Bloom rented a car when he arrived in San Francisco and even purchased a collision damage waiver, which he believed would make him responsible for only the first $500 in damage from an accident, and then only if the wreck was his fault.

Bloom, of Binghampton, N.Y., was involved in an accident--he hit a car that ran a red light--and thus began his troubles. Bloom testified in court that the only damage to his rental car was a broken radiator fan blade. But when he returned his replacement car at the end of his trip, the agent at Dollar Rent-A-Car Systems demanded $1,200 on the spot and insisted that Bloom also authorize a $500 charge on his credit card.

Incident Was ‘Nightmare’

Never mind that the agent did not provide any proof of the repair costs. She also said Bloom could not leave the state until he paid to have the car fixed. Bloom left anyway, telling the agent she was crazy as he walked out the door. He later received a demand from a Dollar lawyer for $1,686.25. When Bloom wrote to ask for substantiation of the claim, the lawyer never responded, and that was the last Bloom ever heard of the matter.

But “it was a nightmare,” Bloom said. “There wasn’t even any visible damage” to the car.

Bloom’s travail, which dates to 1980, is just one of several cases mentioned in a California Court of Appeals decision handed down against Dollar last month in which the company was fined $100,000 for its misdeeds. In its decision, the court detailed how Dollar had ripped off customers with false and misleading statements, as well as by charging vastly inflated prices for repair work.

The ruling further described how Dollar had issued more than 500,000 contracts between 1979 and 1983 that were “deceitful, misleading and ambiguous.” California Deputy Atty. Gen. Chris Ames said the examples cited by the appeals court were only a few of many brought out in the original trial.

Senior Assistant Atty. Gen. Herschel Elkins described the case as “a whole parade of the horribles.”

But Dollar--which did not respond to a reporter’s repeated requests for comment--is not the only car rental company that has been caught gouging customers.

Only last year, Hertz Corp., the largest auto rental company in the world, was fined a record $6.85 million and agreed to pay bilked customers and insurance companies an additional $16 million. Hertz employees were found to be inflating damage repair costs and producing phony appraisals. (Top-level Hertz executives said they knew nothing of the deceptive practices.)

The auto rental industry is no stranger to a shoddy reputation. Legion are the vacationers who have rented cars for what appeared to be a bargain only to find their bill doubled because of unexpected surcharges and hidden fees.

“The industry overall has a terrible reputation,” said Meloyde Scott, director of corporate communications for the Thrifty car rental company. “Some of it is deserved, some of it isn’t.”

But now the car rental industry is being pushed to clean up its act. The principal source of the pressure is a report issued in March by a National Assn. of Attorneys General task force on car rental industry advertising and practices, which was a veritable litany of abuse by car rental companies.

It concluded that the most critical problem in the industry “was that, in an effort to compete, they had through various, deceptive, false, misleading and unfair advertising and business practices created lead (advertised) prices that were substantially less than the actual prices consumers pay for rental vehicles.”

In the report, the attorneys general said car rental companies routinely subtract fuel charges, surcharges and airport fees from the advertised price and then add them to the contract price. The report also said car rental companies have hidden fees for such things as adding another driver to a contract and that high-pressure sales tactics are used to persuade customers to rent more expensive vehicles and purchase the highly controversial collision damage waiver.

Following Recommendations

The task force recommended, among other things, that the collision damage waiver be eliminated, that mandatory charges be included in the base rental rate and that unfair or deceptive business practices be eliminated.

Many of the companies in the industry now seem to be following the recommendations, some more carefully than others.

Meanwhile, a number of states are taking action of their own. Two, Illinois and New York, have recently passed laws that eliminate the collision damage waiver, which ostensibly relieves the renter of repair responsibility in case of an accident but often is severely qualified by the fine print.

Critics of the waiver contend that it is merely a money-making scheme by the rental firms and that most people are covered through their auto insurance.

A California law that went into effect this year greatly restricts hidden costs in renting a car, although it did not eliminate the collision damage waiver.

Thrifty’s Scott said 28 state legislatures are either considering or have passed bills regulating one or more car rental practices.

Two such bills are also before Congress. One, by Rep. Mervyn M. Dymally (D-Compton), calls for all charges to be noted in car rental advertising. The other would eliminate the collision damage waiver.

Taken together, the legislation and the effect of recently recommended guidelines have caused the industry to put its best foot forward. Elkins said complaints against car rental companies have diminished to a trickle in the last several months.

“I think that for the moment, things are in much better shape,” Elkins said. “You’re not going to find the gimmicks and fine print that you used to see.”

Emerging is trench warfare among the car rental firms themselves, and the collision damage waiver is at the center of the fracas.

The Big Four in the business--Hertz, Avis, Budget and National--as well as Thrifty, have all come out in favor of banning the waiver entirely. But all of those deal primarily with business travelers who routinely refuse the waiver.

At the other end of the spectrum are companies like Ft. Lauderdale-based Alamo, which cater mostly to vacationers, who are much more inclined to accept it.

Hertz, in fact, has gone so far as to make the elimination of the waiver--and cleaning up the business--one of its major marketing strategies. Hertz Chairman Frank A. Olson has painted the elimination of the damage waiver as being one step closer to honest pricing in the car rental business.

(Ironically, it was largely Hertz’s practices that were responsible for the beginning of the investigation by the attorneys general.)

Olson, in a recent interview, said the car rental industry is suffering most in leisure travel, where a car advertised at $79 a week can end up being more than double that after waivers, surcharges and hidden costs are added. “I think we all get a black eye,” he said.

But smaller companies that favor the waiver say eliminating it will force them to raise their rates, thus robbing them of their best marketing tool--lower advertised rental costs that have been successfully used to siphon off business from the larger corporations.

Philip Shailer, an Alamo senior vice president, charged that Hertz was intent on eliminating the waiver because it would give the industry leader a pricing advantage. He called the move Hertz’s “grand design.”

Olson denied any such scheme. “It’s just not true,” he said.

But Thrifty’s Scott, who said her company is reexamining its commitment to the elimination of the waiver, is not so sure.

“There’s a bunch of hidden agendas on this,” she said. “People are maneuvering this to their own competitive advantage.”

Fighting Legislation

Shailer also said eliminating the waiver would be “like throwing out the baby with the bathwater” because there are those who want it.

Whatever the case, Alamo is spending “a very substantial amount of money” to defeat legislation that would eliminate the collision damage waiver. The latest victory came in Florida last month, when a state legislative committee junked a bill that would have eliminated the waiver.

The issue is certain not to die soon. Meanwhile, even those in the industry say the consumer’s best protection is to know exactly what is covered with personal insurance so that an intelligent decision can be made, even in the face of high-pressure sales tactics.

“The bottom line is that it (the waiver) can be useful in some circumstances,” Scott said. “But consumers should also understand that they don’t need it if they are covered by insurance. The (car rental) counter is not the place to learn about it.”