Car buyers who purchased a CarFax vehicle-history report before Oct. 27, 2006, would be entitled to additional, free reports or other benefits under a proposed settlement of a nationwide class-action lawsuit against the company. The suit accuses CarFax of misleading consumers into believing that its reports contain complete information about vehicle histories. In agreeing to settle the case, CarFax denies any wrongdoing.
The proposal, filed in the Court of Common Pleas in Warren, Ohio, also would require CarFax to make prominent disclosures that its vehicle-history reports might not contain complete information.
Vehicle-history reports have become a popular tool for consumers who want to know whether the used vehicle they're buying has been wrecked, flooded, stolen, repurchased under a state Lemon Law program, or had another significant problem that could affect its reliability, safety, or value. Car dealers often offer prospective buyers free reports as evidence that a used vehicle has a clean history. CarFax reports are heavily promoted online and available through a wide range of Web sites.
The proposal would settle allegations contained in nine separate legal actions that the Fairfax, Va., company violated states' consumer-protection laws “by not properly disclosing terms and conditions for, and limitations of, CarFax Vehicle History Reports,” says a notice sent to former CarFax customers.
PROS AND CONS OF THE SETTLEMENT
Under the terms, former CarFax customers could choose among free or reduced-price CarFax reports or having CarFax pay part of the cost of having cars inspected for signs of past problems.
But participants also would lose their right to sue CarFax in connection with any past claims or facts covered in the agreement. All former customers automatically would be bound by the agreement unless they opt out in writing by March 13.
The proposed settlement is “worse than no settlement at all,” said a prominent Kansas lawyer, Bernard E. Brown, who represents clients that unsuspectingly bought previously wrecked vehicles, many of which, he says, had “clean” CarFax reports.
Brown said the settlement, which received preliminary court approval on Oct. 27, is little more than a way for CarFax to avoid liability for potentially millions of unreliable history reports. He said the settlement should be offering participants cash instead of vouchers for additional CarFax reports.
“The very idea that the settlement gives people free reports is basically a marketing tool,” he said.
But the lead consumer lawyer in the case, William B. Federman, said the settlement was the best he could do in an environment in which courts are becoming increasing hostile to class-action lawsuits, especially in Virginia–and that state's laws govern CarFax purchases.
“This I think is an excellent settlement considering the current status of the law,” said Federman, who has offices in Oklahoma and Texas. He noted that the proposal requires CarFax to change its disclosures to ensure that customers aren't misled into believing that its history reports are more reliable than they actually are.
But Brown said the additional disclosures only further protect CarFax. He noted that the settlement would only require them for two years. He also noted that the settlement does not require CarFax to change its print or television advertising, which he said are also misleading.
CarFax spokesman Larry Gamache said CarFax reports always have carried a statement that the company does not have complete information on every vehicle.
He called the company's vehicle-history reports “the most comprehensive look at a car's past that consumers have ever had access to.” But he said used-car buyers should always test drive the vehicle and have it examined by a mechanic.
SETTLEMENT TERMS
Under the settlement terms, participants would be eligible to choose one of the following:
* Two free CarFax reports within one year of the final settlement
* A free report within two years
* Unlimited number of CarFax reports for 30 days at half the regular price of $24.99
* A voucher for $20 off an inspection by SGS SA, a nationwide inspection company that provides automotive inspections at the buyer's location, in most cases for about $100
The settlement applies to anyone who purchased a CarFax before Oct. 27, 2006, directly from CarFax, including those referred by Web sites such as www.ConsumerReports.org, which carried a promotional CarFax link from early 2002 through 2005.
Participants would have to have their voucher requests postmarked by May 27.
CarFax, which is owned by the automotive research and marketing company R.L. Polk, also is agreeing to pay up to $566,000 in lawyers' fees.
CR'S TAKE
While car-history reports are useful if they reveal a problem in the vehicle's past, a “clean” report should not be considered a guarantee that a vehicle has had no major problems, advises Consumer Reports. Damage, theft and other problems are not always reported to authorities, and even when they are, many jurisdictions do not report their information to CarFax or Experian.
Before buying a used car, consumers should have the vehicle inspected by a mechanic with expertise in collision repair. For further information on the proposed settlement and how to opt out or file a claim, visit www.westcarsettlement.com.
