Activists Seek FTC Action on ‘Lemon Laundering’
The trouble began soon after Vicki and Joe Parisi bought their used car in 1994. The radio would go out. The power windows stopped working. The gas gauge incorrectly read empty.
Soon, the 1993 sedan needed a brake job, transmission repairs and major front end work. Then came the last straw: The car died while the Parisis traveled in the fast lane of a busy Ohio freeway.
When the Uniontown, Ohio, couple investigated, they discovered the car was a lemon that the manufacturer had bought back from an owner who had similar problems in New Jersey, a state that required the vehicle’s title be stamped as a lemon.
The auto maker did repair work and shipped it to Ohio, which at the time did not require title stamping but does now. The dealer got a new title in its name, effectively erasing the lemon stamp.
Consumer advocates say this “lemon laundering” is widespread, a claim the auto industry denies, and want the Federal Trade Commission to require that auto makers tell consumers about their duds.
“If you are going to put your family in this car and travel at 70 mph down the road you want to know if there is a history of problems,” said Rosemary Shahan, founder of Consumers for Auto Reliability and Safety, a Sacramento, Calif.-based group working to improve lemon laws.
The FTC will wait to review the proposal before commenting, agency spokesman Mitch Katz said. “It’s possible that this could be in our jurisdiction, but you are talking about a major resource investment,” Katz said.
The FTC held hearings on lemons four years ago at the request of consumer groups, but it has not taken any action.
No one knows how many repurchases all the manufactures make, in part because different state laws make it hard to track buybacks. States have different definitions for a lemon, require varying levels of disclosure when the vehicle is resold, and offer different ways for consumers to seek compensation.
In the Parisis’ case, they successfully sued the auto maker and the dealer, which has since gone out of business, after they refused to take the car back.
Phil Nowicki, a consultant on lemon laws who used to head Florida’s Lemon Law Arbitration Program, estimates that about 75,000 of the roughly 45 million used vehicles sold every year in the United States have been repurchased by the manufacturer under a lemon law decision or settlement.
Under the system proposed by the consumer groups, a used car buyer could check the vehicle’s identification number on an Internet database to find out if the manufacturer had bought back the vehicle from an unsatisfied customer. The groups would like each search to be free or cost no more than perhaps $2.
The groups, including CARS, Consumer Action, the Consumer Federation of America, Public Citizen, and the U.S. Public Interest Research Group, also want a permanent label affixed to the car identifying it as a “lemon law buyback.”
Auto industry groups say that while they support full disclosure of a vehicle’s history, they object to labeling every buyback as a lemon.
John Whately, a lawyer for the Alliance of Automobile Manufacturers, said auto makers sometimes repurchase vehicles to make unsatisfied customers happy, not because there is a defect.
“Those shouldn’t be branded as lemons,” he said. “I won’t pretend that those are the majority of vehicles bought back, but they shouldn’t all be branded as a lemon.”
In some states, the industry has convinced lawmakers that a more accurate label should read “manufacturer buyback.” That is the new law in the Parisis’ home state of Ohio, but they and consumer advocates believe that can confuse car buyers and does not clearly state the problem.
When Atishna Goodman of Temecula bought a 1997 sport-utility vehicle last year and signed a document that said it was a warranty buyback, she said she thought that meant it was a lease return. When she got home, she found a window sticker, removed and put in the glove box, that said the car had a “fuel gauge inaccuracy.”
Repeated service visits did not correct the problem, and one night, she ran out of gas on a dark road even though the gauge indicated plenty of gas in the tank. She had to hire a lawyer before the manufacturer would take the vehicle back as part of an out-of-court settlement.
“I didn’t like driving it when I had my kids,” she said. “It was unsafe and I never would have bought it had I known that.”
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On the Net:
Lemon laws by state: www.car
talk.cars.com/Got-A-Car/Lemon/
index.html
Consumers for Auto Reliability and Safety: carconsumers.com
Alliance of Automobile Manufacturers: www.autoalliance.org
Federal Trade Commission: www.ftc.gov
