The Lemon Law Blog

Sudden acceleration complaints continue to plague Ford and now it looks like NHTSA may expand its probe of the problem. Initially the investigation focused on the 2005 and 2006 model years. However, The Detroit Bureau and other sources are suggesting that more models and model years could come under scrutiny, as the Mercury Sable joins the Taurus as a target of inquiry. The two sedans are similar, so this is not a surprise to many. But the move would expand the investigation from a few hundred thousand to over a million cars on the road.

Sudden acceleration continues to be an enigma in many instances. In the Ford cases, NHTSA experts are investigating a potential problem with the throttle getting stuck in open position, cruise control, other electronic components, and even the brakes. No one is suggesting this is a floor mat issue, as Toyota infamously claimed with respect to its sudden acceleration problems a couple of years ago. Ford says it is eager to cooperate with the investigation, but like other manufacturers, it refuses to rule out driver error. This is insulting to drivers who said they could only stop the vehicle by shifting into neutral or turning it off.

Until now, the main complaint against the Ford Taurus was that it had insufficient power in accelerating mode. In some parts, it even suffered the nickname "Ford Tortoise." The victims of sudden acceleration whose terrified accounts prompted the current investigation are not calling it a tortoise anymore.

Carbon monoxide poisoning is a high price to pay for a little convenience. Incessant idling, however, can lead to injury or death in circumstances where a car's ignition does not turn itself off. There have been reported deaths related to vehicles that were inadvertently left running in closed garages, leading to build-up of the notorious odorless gas. This is particularly true since cars now run so much more quietly than before. Experts say drivers forget to press the "off" button, when they eliminate the habit of removing the key.

Consumer advocates including the American Association for Justice have urged the National Highway Traffic Safety Association to adopt a rule requiring keyless ignition engines in cars and trucks to shut themselves off after 30 minutes of idling. Even this request seems to allow excessive idling duration, due to the serious danger involved.

Gas poisoning is not the only problem with keyless ignition systems. It is one thing to forget to turn off a car, but it is scary to think of being unable to do so. Difficulties with engine shut-off arose in NHTSA hearings concerning sudden acceleration problems as well.

Meanwhile, the market continues to grow for keyless ignition options, as well as keyless entry systems. Who has not had the frustrating experience of losing one's keys? Unfortunately, the technology is struggling to meet the demand.

Last week, the Federal Trade Commission strengthened an important aspect of consumer protection, which we often use to prosecute cases of car dealer fraud. Formally referred to as The FTC Rule on the Preservation of Consumers' Claims and Defenses (16 CFR § 433), it is commonly referred to as “The FTC Holder Rule.”

The rule allows a defrauded purchaser to sue the lender, who has funded the fraudulent transaction, when the dealer arranged financing at the point of sale. Basically, when a car dealer sells a defective vehicle or otherwise commits fraud, the consumer may raise that claim as a reason not to repay a car loan, rather than have to sue the dealer separately while continuing to make car payments. The FTC Holder Rule makes it easier to resolve the matter and unwind the deal.

Actually an exception to the “holder in due course" rule, the FTC Holder Rule makes it far more practical for consumers to raise claims against sellers, even when the car dealer goes bust or bankrupt. This scenario is very common in the recent economic downturn, and we have seen many dealers commit egregious fraud in the desperation that prevails just before they go out of business. This might include selling rebuilt wrecks, failing to pay off trade-ins, finance fraud, loan-packing, forgery, selling flood-damaged cars, undisclosed resale of prior daily rentals, and all sorts of other deceptive practices. The FTC Holder Rule benefits the consumer public by encouraging lenders to scrutinize the car dealers with whom they form business relations and to insure that they are not just financing fraud.

The Rule is not new, but banks and their lawyers have long sought to limit its reach and effect. That will be a lot harder for them to do now. On May 10, 2012, the Federal Trade Commission (FTC) issued an advisory opinion affirming that consumers retain important rights under the FTC Rule. This does not change the law, but the formal clarification is welcome news for consumers. The opinion was requested by the National Consumer Law Center (NCLC), and joined by Public Citizen, U.S. PIRG, the Center for Responsible Lending, and the National Association of Consumer Advocates.

U.S. Senator Barbara Boxer (D-CA) announced today that she has sent formal letters to the four leading rental car companies - Hertz, Enterprise, Avis and Dollar/Thrifty - (representing 92% of the daily rental car market) asking them to commit to protecting consumers from unsafe vehicles. She wants each company to go on record with the following pledge: “Effective immediately, our company is making a permanent commitment to not rent out or sell any vehicles under safety recall until the defect has been remedied.”

According to the National Highway Traffic Safety Administration (NHTSA) records, Hertz contends it has already adopted a policy consistent with this pledge. Senator Boxer’s letters urged the other companies to follow the example set by Hertz within the next 30 days. After that, Senator Boxer intends to publicize which companies have joined Hertz in this regard. “I will announce at that time which companies have agreed to make this pledge and which companies have instead chosen to continue putting their customers’ lives at risk,” she says.

Meanwhile, Senator Boxer has taken the matter a step further. She, along with Senator Chuck Schumer (D-NY), have introduced new legislation, S. 1445, entitled the "Raechel and Jacqueline Houck Safe Rental Car Act," that would bar rental car companies from renting vehicles under safety recall that have not been fixed. The bill is named after Raechel and Jacqueline Houck, two sisters, ages 24 and 20, who were killed when a recalled car they had rented from Enterprise caught fire and crashed into a truck.

We previously reported on similar California state legislative efforts here.

One thing is clear: individual consumers have no power to challenge illegal corporate behavior if they go it alone. Yet, one year ago, conservative members of the U.S. Supreme Court teamed up to issue a decision that required just that. In AT&T Mobility LLC v Concepcion, the Court majority upheld a class action ban in an arbitration clause imbedded in the small print of a cellphone contract.

Today, two influential groups issued a report taking a hard look at the effects of that court opinion. Public Citizen and the National Association of Consumer Advocates issued the seminal report, entitled "Justice Denied - One Year Later: The Harms to Consumers from the Supreme Court’s Concepcion Decision Are Plainly Evident" which you can read here. The consequences for consumers have been brutal; throughout the country the impact of Concepcion has left the civil justice system battered and bruised.

In a press release accompanying the report, co-author Christine Hines had this to say: “Class actions are indispensable for allowing consumers to seek redress when a company’s practices harm thousands of consumers, particularly when the harm results in a small-dollar loss for each consumer." The problem, she explained, is that, “Under Concepcion, those cases can’t go forward, leaving millions of consumers without a remedy for corporate wrongdoing.”

The new federal Consumer Financial Protection Bureau has begun studying the problem of forced arbitration in the consumer context, including the effect of arbitration class action bans. We will post information soon on how you can comment to the CFPB directly and have your views heard. Meanwhile, this report is the best way to become informed. Read it! Forced arbitration slams the courthouse door in the consumer's face. But when class actions are banned as well, that harms all consumers, not just those whose claims can't be heard in court. If corporations can use an arbitration clause as a "get-out-of-jail-free" card, there is no deterrent to illegal business practices that are highly profitable for the 1% at the expense of the other 99% - the consumer public.

California requires all vehicles to be insured. You cannot register your car without it. If the insurance on a leased or financed car lapses, you may have trouble with the lessor or the lender as well. You have to keep proof of insurance, along with the registration, inside the car.

In 2006, the law (California Vehicle Code §16058) changed the way the DMV verifies insurance for private vehicles. Insurance companies are now required to electronically report private-use vehicle insurance information to the DMV. The 2006 amendments were meant to ensure that vehicles driven on California roads have liability insurance that provides financial responsibility for any damage caused by a collision regardless of fault. It has gone a long way toward removing uninsured vehicles from the highways.

The required minimum coverage is sometimes referred to as "15/30/5." The first two numbers in 15/30/5 mean that in an accident each person injured can receive a maximum of up to $15,000 with $30,000 total allowed per accident to all parties involved. The last number refers to the total coverage per accident for property damage to the car itself; in this case $5,000. Of course, you can purchase insurance above these minimum amounts.

As to the basic minimum, you have no choice. At the same time, you have a lot of choice in what company to use.

Low premiums should not be the only factor. Check out the reputation of the insurer for claims handling. This is important, because, in the event of an accident in which you may be even partially at fault, you want an insurer which deals in good faith with you and anyone else who is injured. Your insurance company should protect you against getting involved needlessly in litigation or having to go to trial because the insurer won't pay a fair claim. Thus a quick trip to the consumer complaint site www.consumeraffairs.com/insurance/ shows a great difference in customer service and claims. State Farm registered the most criticism, 487 complaints in all.

You would think that if the National Highway Traffic Safety Administration issues a safety recall for something as serious as seatbelts, the manufacturer would repair or replace ALL the defective seatbelts, not just some of them. But not Hyundai.

NHTSA announced that Sonata Hybrid models produced between December 2, 2010 and shipped to dealers through March 7, 2012 are being recalled, because they are equipped with a center rear seat belt fail to meet federal safety standards. About 14,728 cars are covered under the recall. Astonishingly, Hyundai balked at replacing the defective belts on approximately 13,095 cars already sold and on the road. It wants to get off cheaply by replacing only the belts in approximately 1,633 new cars still sitting in dealer inventory.

Hyundai Motor Company announced that it intends to file a petition for exemption from the recall on the basis that “the noncompliance described is inconsequential as it relates to motor vehicle safety." Meanwhile, Hyundai is not obligated to conduct an owner notification campaign until the petition is resolved. Whoever wins in this dispute, we wish manufacturers would err on the side of safety, not minimum compliance.

In a case involving the sale of new motorcycles, Kemnitzer Barron & Krieg has achieved a major victory for consumers in the Second District Court of Appeals in Los Angeles. In a decision filed March 27, 2012 and certified for publication this week, a three-judge appellate panel unanimously overturned the erroneous decision by a L.A. trial court judge who had denied the Plaintiff and a class of 4,100 other motorcycle buyers relief for unlawful sales practices. The dealer in the case, Honda of North Hollywood, was selling motorcycles without proper notice of charges added onto the price of the motorcycle.

The California Vehicle Code requires that motorcycles can only be sold with what is called a “hang tag” attached to the vehicle on the sales lot. The buyer is entitled to see all of the dealer charges, including freight or destination fees and other “add-ons” before they have a contract written up. This has been a huge problem in the motorcycle sales industry where dealers add charges to the advertised or agreed upon price of a new motorcycle. California law requires that a dealer who sells a new motorcycle must disclose the total price (excluding tax and license) up front on the vehicle, when it is displayed for sale on the lot.

The purpose of the law is to prohibit deceptive advertising and sales practices such as "bait-and-switch" pricing– increasing the price by adding dealer charges which are not disclosed up front on a label or "hang tag" on the bike. This kind of bait-and-switch was exactly what happened here.

Plaintiff and class representative Audrey Medrazo bought a new Honda motorcycle from Honda of North Hollywood for an agreed price of $8,700. The dealer then added $2,284 of dealer "freight and prep" which were not disclosed to Medrazo until she sat down to sign her final purchase papers. That upcharge increased the cost by more than 25%.

Medrazo filed a class action lawsuit seeking a refund (restitution) for about 4,100 buyers of Honda of North Hollywood’s new motorcycles. After achieving another significant victory for class members in 2008 in the Court of Appeals at the class certification stage (see, Medrazo v. Honda of North Hollywood (2008) 166 Cal.App.4th 89) the case proceeded to trial in October 2010. The trial court ruled for the dealer even before the defense had put on its case. The Court of Appeals reversed, holding that "Medrazo was not required to show actual reliance on Honda of North Hollywood's alleged non-disclosure — by herself or by the class members — to be entitled to restitution under the ‘unlawful’ prong of the [Unfair Competition Law]," and that by purchasing the motorcycle, she had suffered injury in fact.

KBKlegal partner William Krieg, along with attorney Steve Simons, represented Medrazo and the class in the lawsuit.

The automotive world lost an icon of luxury design and performance this week with the death of auto legend Ferdinand Porsche. The Los Angeles Times reports that the designer of models such as the eponymous Porsche 911, Carrera and others, died in Salzburg, Austria, at the age of 76.

Porsche grew up in an automotive family - his grandfather designed the original VW Bug. The Volkswagen may have been dubbed "The People's Car," but there was nothing folksy about the grandson's intentions. A graduate of the prestigious Ulm School of Design in southern Germany, he sketched and modeled designs that would attract the rich and famous, as well as those who envisioned themselves as rich and famous, for a very long time. From the moment the Porsche 911 debuted in 1963 at the Frankfurt Motor Show right up to the present, its form and silhouette have remained remarkably the same, coming to define the classic sports car.

Don't let the yellow color in this photo fool you. In more than 25 years litigating thousands of lemon law cases, we could not recall litigating a case of a "lemon" Porsche. One might think that the wealthy simply pay for perfection, but that is not necessarily true. We have seen plenty of defective Jaguars, Mercedes-Benz, and occasionally high-priced BMWs, over the years. Ferdinand Porsche could be rightly proud.

After driving 576,000 miles, one immaculate vintage car is about to retire. Rachel Veitch, a 93-year-old grandmother, has driven the same 1964 Ford Mercury Comet since she bought it new nearly 50 years ago. She fondly refers to it as "Chariot."

Asked what the fastest speed is that she ever clocked the car, Mrs. Veitch replies it once registered 120 mph, during a spin on the Daytona Speedway. “That’s as far as it goes,” she chuckles, referring to the highest number on the ancient analog gauge.

The delightful and lucid nonagenarian can point to meticulous records that she kept over the years: repair orders, gas mileage diary, purchase receipts for 17 batteries, and other details. “I’ve just taken care of everything,” she muses, “except my husbands.” Noting how reliable the car has been, she mentions that among other things, her well-preserved "Chariot" has outlived three marriages.

The California Lemon Law uses 120,000 miles as the lifetime of a vehicle when providing the statutory calculation offset for use. We have always thought that a car should last longer than that. Rachael Veitch has definitely raised the bar.

The Federal Trade Commission took strong action today against companies offering deceptive California auto loan modification schemes. The FTC charges that several companies, " NAFST VLM, Inc.," "Kore Services dba Auto Debt Consulting" and "Hope for Car Owners" are basically scams.

Following its success in going after fraud artists who took advantage of consumers' confusion about home foreclosures, the FTC is zeroing in on similar deceptive practices in connection with auto repossessions. It alleges that the named companies falsely promised auto loan modficiations in exchange for hefty up front fees. You can read the government press release here.

The FTC charges that companies promise to lower monthly car payments in exchange for up-front fees of $350-700, or more. In the case of these scams, the FTC says that false testimonials and deceptive advertisements bait and hook desperate borrowers. In general, it is a bad idea to give any company fees up from for refinancing a consumer loan or obtaining credit relief. That is usually an example of throwing good money after bad.

Judge David Cohn of the San Bernardino County Superior Court granted final approval of the settlement in a class action on March 5, 2012. That order paves the way for distribution of benefits to a class of about 260 California consumers who, collectively, have been assessed $2,397,463 in debt. The defendants have agreed to waive and extinguish the entire amount and instruct the three major credit unions -- Transunion, Experian and Equifax -- to delete the negative trade line for each class member. In addition, Alta Vista will refund 100% of the amount it collected from the class members who had tried to pay off the alleged deficiency.

The class is defined as California consumers who had purchased vehicles on credit, whose accounts were assigned to Alta Vista Credit Union, and whose vehicles were then repossessed. The plaintiffs alleged that certain notice sent by Alta Vista between July 9, 2006 and October 31, 2010 in connection with the repossessions violated California consumer protection laws. Class members should check their credit report to verify that the account information has been corrected. More information is available here.