07.08.18

SCHUMER REVEALS: MANY USED CARS—DAMAGED IN LAST SUMMER'S HURRICANES—ARE NOW BEING SOLD WITH NO NOTIFICATION TO CONSUMERS THAT CARS HAVE BEEN DAMAGED BY FLOODING; BUYERS MUST BE NOTIFIED OF OTHER DAMAGES—BUT NOT HURRICANE FLOODING; SENATOR URGES FEDS TO EXPOSE ‘HURRICANE CARS’ USING LAW ON BOOKS

Hundreds-Of-Thousands Of Last Summer’s Hurricane-Damaged Cars Are Now ‘Cleaned Up’ For This Summer & Could Be Driving A Used Car Sales Surge At Lots Across Country; National Insurance Crime Bureau Recently Issued New Warning 

But Fed “Used Car Rule” Already On Books Could Better Protect Consumers If FTC Would Mandate A ‘Flood Check’ To Buyer’s Guide Sticker On Every Used Car Window 

Schumer: Feds Should Take Wheel On Disclosing ‘Hurricane Cars’ To Buyers; Problem Has Long-Plagued Consumers

Amidst an all-out surge in used car sales across the country and a new consumer warning from the National Insurance Crime Bureau (NICB) on the reality of customers unknowingly purchasing used cars that were badly damaged by last summer’s hurricane waters, U.S. Senate Minority Leader Charles Schumer, today, called on the Federal Trade Commission (FTC) to step in and consider expanding a rule already on the books to better protect consumers from the financial losses that ensues once a ‘hurricane car’ is purchased from a used car dealer, who may or may not know a vehicle’s murky past.

“While the FTC has been sounding the alarm on ‘hurricane cars,’ consumers are still at risk of being duped and burdened by a financial road of ruin if they unknowingly buy one,” said U.S. Senator Charles Schumer. “That’s why the FTC needs to drive forward with more than a consumer warning and hit the gas on a plan that uses the ‘Used Car Rule’ already on the books to ensure that the sticker slapped on every used car in a lot details a robust ‘flood check.’ In many cases, ethical used car dealers are already performing this kind of check anyway, as part of the inspection process, and all we are saying today is that disclosure of this information should be one of the rules before these cars are able to hit the road. Whether you’re a New Yorker looking to buy in New York, or a New Yorker looking on the internet for a car parked in another state, the risk of winding up in the driver’s seat of a ‘hurricane car’ is a headache at the least, but a real danger, too.”

‘Hurricane cars’ have flooded the used car market because of recent hurricanes. More than 600,000 of these ‘hurricane cars’ cars were damaged in last summer’s hurricane season and hundreds-of-thousands of those cars wound up in flooded car graveyards where they awaited purchase within the used car market. A recent Edmunds Report shows that in the first three quarters of this year, the demand for used cars has surged to over 10.6 million used cars sold—the most sales in the last five years. Schumer says this sales surge coupled with continued FTC warnings and the NICB’s own detailing of consumers duped into purchasing flood-damaged cars demands the feds do more to prevent these ‘hurricane cars’ from being sold across the country to oblivious consumers who only see a clean title and a shiny car at the time of purchase.

Schumer said that in many cases a ‘hurricane car’ can be ‘cleaned up’ for as little as $2,000 and then sold to an unsuspecting consumer. Soon after the purchase, the buyer of a ‘hurricane car’ starts to experience a slew of mechanical and electrical failures, which in some cases, can be dangerous. The problem of flood-damaged used cars became so prevalent after Hurricane Katrina that the National Insurance Crime Bureau (NICB) created VINCheck, a free database that makes it possible for prospective automobile buyers to verify a vehicle identification number for flood or accident damage but this check only works for vehicles that have been turned into insurance companies, not the ones that may undergo undercover touchups so they can be sold for big profits in car lots across the country as ‘like new’.

Jim Tolkan, president of the Automotive Dealers Association and a former General Motors dealer has publicly stated that flood-damaged cars are for sale across the country. “They [used car dealers] will buy them, they will make them look okay, and sooner or later some unsuspecting party is going to buy one and it will end up being a nightmare,” Tolkan stated in media reports.

To help solve this problem, Schumer is proposing the FTC reevaluate the federal ‘Used Car Rule,’ and specifically what information is included in the vehicle’s ‘Buyers Guide.’  The ‘Used Car Rule’ has been in effect since 1985. It requires car dealers to provide consumers with information, known as a ‘Buyers Guide,’ on the used cars they offer for sale. The Buyers Guide discloses whether the dealer offers a warranty and, if so, its terms and conditions, including the duration of the coverage, the percentage of total repair costs the dealer will pay, and which vehicle systems the warranty covers. Schumer is urging the FTC to consider expanding this rule and the information provided in the ‘Buyers Guide’ to include the results of a flood check as well.

Schumer says that because the FTC’s Buyer’s Guide does not mandate information on potential flood damage, consumers are oftentimes unaware of whether a vehicles was negatively impacted by last summer’s—or any—hurricane season. Schumer pointed out that the FTC’s own commission even warned of this danger in January of 2018 when it published a buyer’s notice on flood-damaged cars and the associated warning signs. 

Given the uncertainty surrounding the quality of these so-called ‘hurricane cars,’ and the surge in used car sales, Schumer is urging the FTC to consider incorporating a ‘flood check’ into the Buyers Guide offered on used cars so that consumers know up-front when cars have been impacted by serious weather elements. Incorporating a flood check is the right type of sound policy that could help consumers make educated vehicle purchases and possibly save lives, Schumer says.

A copy of Schumer’s letter to Federal Trade Commission Chairman Joseph Simmons appears below:

Dear Chairman Simons:

I write today to urge you to consider a review of the Federal Trade Commission’s (FTC) Used Motor Vehicle Trade Regulation Rule, also known as the Used Car Rule, with an eye towards adjusting the rule to require the disclosure of potential flood-damage. It is imperative that consumers have access to the critical information needed to make an educated buying decision, and that certainly includes information that could inform consumers of irreparable past damage.

As you know, the FTC’s Used Car Rule has been in effect since 1985. Since that time, the rule has ensured that used car dealers provide a Buyer’s Guide with each of the used cars they offer for sale. Some of the items incorporated in the Buyers Guide include whether a dealer offers a warranty, its terms and conditions, the duration of the coverage, the percentage of the repair costs, among other key details for consumers to consider before making a used car purchase. This information has contributed to the protection of countless consumers from used car scams.

Last year, more than 600,000 cars were damaged from floodwaters during hurricane season, some of which were without insurance. Many of these vehicles have since ended up in used car lots.  Because these cars did not have insurance, there is a high likelihood that potential buyers are purchasing flood-damaged cars without a full knowledge of their operating history. Furthermore, because the FTC’s Buyers Guide does not mandate information on storm damage, there is no way for consumers to know whether the vehicles were negatively impacted by the hurricane season, including those that underwent major flooding. Your own commission warned of this danger in January of 2018 when it published a buyers notice on flood-damaged cars and the associated warning signs.  

Given the uncertainty surrounding the quality of so many of these vehicles ravaged by flooding during past storms and new industry data showing used car sales are surging to their highest levels in five years, I respectively urge you to reevaluate the Used Car Rule and consider incorporating a flood check as part of the required disclosures included in the Buyers Guide offered on used cars, so that consumers know up-front when cars may have been impact by serious weather elements. Incorporating a flood check is the right type of sound policy that could help consumers make educated vehicle purchases, and possibly save lives.

I appreciate your consideration of this proposal to ensure consumers can make educated purchasing decisions. I look forward to hearing from you on this issue and to continuing to work with you to protect America’s consumers.

Sincerely,

U.S. Senator Charles E. Schumer

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