How the Changing Rules on Recalls Affect You: Inform or Repair?
by Sara Eisenberg
The Federal Trade Commission is putting dealerships that promote
rigorous multi-point inspections under the microscope. Recently,
General Motors and two large dealership groups were the target of
FTC actions alleging that they are misleading consumers with
claims that their vehicles are “certified” and “safe”. Some of
these “safe” vehicles were sold with unrepaired safety recalls.
The companies have agreed to pay substantial fines and to repair
and clear all safety recalls before claiming vehicles are “safe”
or “certified” unless they clearly disclose open recall
Last year, U.S. Senator Richard Blumenthal (D-CT) attempted to
add an amendment to the National Transportation Highway Bill
aimed at stopping sales of all vehicles with outstanding safety
recalls until repairs can be made. Noting some potential
side-effects, the National Independent Automotive Dealers
Association (NIADA) has played an essential role in getting the
bill voted down and has pushed for solutions that will increase
consumer safety while minimizing the negative impact on all
parties. One of the pitfalls with the proposed legislation
includes a substantial loss of value for vehicles pending recall
repair. Vehicles subject to open recalls would sit on the lot and
depreciate until the recalls are repaired, driving up overall
costs for the dealer that get passed to the consumer. This in
turn would make it more difficult for consumers to afford a
newer, potentially safer, vehicle.
The effects of this attention are trickling down throughout the
industry and are a hot topic among consumer advocacy groups like
Consumers for Auto Reliability and Safety. CARS has been
extremely vocal in the media and has vilified multiple
dealerships while creating awareness about the dangers of open
safety recalls. This group is actively fighting to force
dealerships to repair all recalls before a vehicle can be sold.
In addition to federal groups (FTC, CFPB and the Justice
Department), individual states have started down their own paths
of consumer protection. Several states are considering
legislation that would mandate the clearance of any open recalls
against any vehicle being sold by an automotive retailer, and in
some cases, between private parties.
The increased regulatory action is a result of back-to-back years
of record vehicle recall numbers across North America. The
record-high of 2015 exceeded the combined total of recalls from
2007 to 2012, and it’s getting worse. As of June, the number of
recalls in the U.S. for 2016 already exceeds the total for 2015
and is on track to double last year’s all-time high.
A California bill that would have required vehicles to undergo
regular 30-day recall checks, and would stop sales of vehicles
with open recalls, met severe opposition that eventually caused
the bill to be pulled by its originator.
Proposed legislation in New York has moved from a stance of
simply requiring recalls to be fixed prior to sale to also
including a provision to mandate written notification to the
purchaser if a recall cannot be repaired.
New Jersey, on the other hand, is currently deliberating
between two separate bills. One calls for additional disclosure
by requiring dealers to offer the NHTSA database records at the
time of sale, and the other would prohibit sales of recalled
vehicles all together.
All of this proposed legislation follows a decision made late
last year by AutoNation (the largest OE dealer in the US) to
cease the resale of any vehicles with open recalls.
AutoNation’s decision to take a leading role caused the
retailer to park over 10,000 vehicles in their inventory until
the open recalls were repaired.
Challenges for Independent Dealers
What most consumers don’t realize is that independent dealers
must go through the same recall process as private parties.
Both groups receive notification of a recall from the
manufacturer with instructions to deliver the vehicle to an
authorized repair facility. Independent dealers do not get
special treatment or fast-tracks to get these issues repaired.
It may even be possible that their vehicles could have a lower
priority than the vehicles in the authorized repair facilities’
fleet because they are seen as competition. To make matters
worse, due to the increasing number of recalls as of late, it
is now taking even longer to obtain the necessary parts and is
putting additional pressure on authorized dealerships to
complete repairs in a timely manner.
Current federal law leaves the responsibility of fixing recalls
up to the consumer, but the regulations vary. Consumers
naturally expect they will be sold a safe vehicle. Some
companies (such as AutoNation) promote that they will not sell
vehicles with open safety recalls. As more companies start
taking the same stance, consumers may be turned off by those
who do not follow the same practices.
Early this year, NHTSA (National Highway Transportation Safety
Administration) launched a campaign to increase consumer
awareness of open recalls and is advising vehicle owners to
check for recalls at least twice per year. A heightened public
awareness of vehicle recalls is shifting the types of questions
that consumers are asking – and more importantly, changing
their purchasing decisions. These questions, if not answered
correctly, can quickly turn an otherwise confident buyer into
someone with severe apprehension about the vehicle, not to
mention your company. If a consumer knows they are potentially
stepping into a vehicle with a known safety issue, they could
be hesitant to make a purchase or might decide to go somewhere
else. The consequences increase dramatically if a customer only
finds out after the sale that they were sold a potentially
unsafe vehicle and become catastrophic if the recalled part
Identifying Open Recalls
There are several options for checking for open recalls by VIN
one vehicle at a time, such as the NHTSA VIN search tool,
available at safecar.org. You can also find recall information
on vehicle manufacturers’ websites, on vehicle history sites
like CARFAX or AutoCheck, and through many vehicle repair
information services. Reporting inefficiencies can result in
differing information on open recalls between multiple sources
so you may want to check your inventory against multiple data
To save time, many dealerships elect to use ALLDATA Service
Drive or ALLDATA Service Drive Pro, which allow them to check
up to 250 VINs at one time for all OEM recall information,
associated OEM-authored customer recall letters, and TSBs
(Technical Service Bulletins). This allows dealers to quickly
check all cars available for bulk sale at auction and avoid
purchasing vehicles with open recalls. It also makes it easy
for dealers to check all vehicles on their lot so they can
accurately advise customers about recalls, provide printed
copies of the original OEM recall letters, and become a trusted
source to buy from. The ability to check 250 VINs at one time
reduces administrative costs, increases profits by eliminating
poor investments, and helps dealerships build a reputation as a
trustworthy place of business. Not to mention, if laws go into
effect that require all open recalls to be identified or
repaired, you’ll be one step ahead of your competition.
Suggested Best Practices
NIADA is advising dealers to use all available resources to
check for – and repair – any open recalls within their
inventory prior to sale. If a recall cannot be repaired, it
highly recommends that this information be disclosed to the
customer at the time of sale. The certified pre-owned vehicle
program offered by NIADA requires that dealers clear all open
safety recalls before a vehicle can be certified.
Protect your customers’ safety, and your business’ reputation
and bottom line, by proactively repairing open safety recalls.
Here are a few things to keep you ahead of the game when it
comes to potential future legislation:
Before investing in vehicles to resell, check the VINs for
open safety recalls.
Cross-check against repairs that may have been performed.
Sources for this include NHTSA, CARFAX, and OE websites.
Establish a policy of repairing all open safety recalls or
advising customers of all pending recalls.
During your sales process, build trust by sharing printed
information with your customers about any recalls that may
apply to the vehicle they are considering and explain that your
business exceeds the notification regulations that are
currently in place.
As safety concerns continue to increase, along with the potential
for legal liability, so do the chances that new laws will be
enacted. If legislation does pass, you will be one step ahead.
Take this opportunity to check out what ALLDATA has for you in
terms of direct manufacturing information. Requesting a demo of
ALLDATA Repair is easy, simply call (888) 853-7309 or click
here to get started.