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Safety Recalls: Think You’re Covered?

They Are Out to Get You: How to Get Covered!

In addition to the National Highway Traffic Safety Administration (NHTSA), which is responsible for managing safety recall information and holding manufacturers accountable for designing and building safe vehicles, there are other federal agencies and myriad state laws, rules and regulations having to do with vehicle safety, such as the Federal Trade Commission (FTC), the Federal Motor Vehicle Safety Standard (FMVSS) and individual state motor vehicle codes.

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It is illegal to sell a new vehicle with an unrepaired (or “open”) safety recall. However, there is no federal law prohibiting dealers from selling used vehicles with open safety recalls.

The FAST Act restricts companies (including dealerships) renting or loaning vehicles with open safety recalls. And, states are also passing laws to prohibit dealers from selling vehicles with an open safety recall without disclosing this fact to consumers.

Dealers are also at risk of selling used vehicles, even without a “used vehicle recall” law, through FTC actions. (If your state has no disclosure law, it doesn’t exempt you from disclosing used vehicles with open safety recalls.)

For example, in 2016, General Motors, Jim Koons Management and Lithia Motors Inc. agreed to settle FTC administrative complaint allegations that each touted how rigorously they inspect cars yet failed to disclose that some of the used cars they were selling were subject to unrepaired safety recalls.

Instead of a disclosure issue, the FTC made it a deceptive advertising issue.

The FTC has brought dozens of actions against dealers in the past few years.

What makes all of this even more problematic is, the sources of safety recall information can be error-ridden and delayed.

If you don’t know, you can’t disclose.

If you don’t know a vehicle has an open safety recall, then you can’t disclose it to customers or notify drivers.


What is the point?

Dealers are either unaware of the rules and regulations, as well as the errors and delays in recall information, or they feel they are covered — even though they are not. They’re doing things manually, using flawed information and hoping for the best.

Remember that old saying, “Hope is not a strategy”? If you are sincere in your desire to protect your customers and your dealership, then it makes sense to implement a systemic approach to safety recall management that can help you not only avoid risks but benefit from safety recalls.

This systematic approach should include:

  • Written Safety Recall Policy
  • Point Person
  • Obtain the Actual Liability Impacts
  • Obtain the Actual Financial Impacts
  • Disclose Safety Recalls

Specific actions you can take to help protect your dealership and your customers are provided in the January issue of AutoSuccess.

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