Watchdog rips deal in Carfax lawsuit

Watchdog rips deal in Carfax lawsuit

Time-limited discounts won't make up for faulty title searches, group says.

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- An auto safety advocacy group is objecting to the proposed settlement of a class-action lawsuit against Carfax Inc. that claimed the company's title searches for used cars were misleading.

Public Citizen argues the settlement doesn't go far enough to reimburse customers who got faulty searches and that a lot of people won't benefit at all from the deal because of its time limits.

Virginia-based Carfax Inc., a unit of Southfield-based R.L. Polk & Co., is a privately held auto information and marketing company that conducts millions of title searches yearly using a vehicle's 17-character Vehicle Identification Number.

Customers pay $25 for the searches before they buy a used car so they can find out a vehicle's history, including previous serious accidents or major insurance claims. The information can provide evidence of past severe damage that could signal lingering mechanical and other problems.

Some Carfax customers sued the company in 2004 after discovering Carfax wasn't searching the complete police accident records from 22 states and the District of Columbia. The lawsuit claimed Carfax started misleading customers in 1998, after the company lost access to accident records from all 50 states through the National Crime Insurance Bureau database. Without that data, Carfax reports weren't showing some serious crashes, the lawsuit said.

Under the settlement tentatively approved in October by Judge Andrew D. Logan of Trumbull County Common Pleas Court in Warren, Ohio, people who used Carfax before Oct. 27, 2006, would get $20 off an inspection of their vehicle, a voucher for two free Carfax Vehicle History Reports within one year of final approval of the settlement, one free report within two years of the settlement and a voucher for 50 percent off car reports within three years of the settlement.

More than 10 million consumers are affected, said Carfax spokesman Larry Gamache, who said notice of the settlement has been e-mailed to 1.8 million people who used the service in the past year.

Gamache said the company takes Public Citizen's objections seriously and will review them. He acknowledged that the database doesn't contain every accident.

"We are working fast and furious to gather municipal accident information," he said, noting the company also seeks information from repair shops, state and local authorities and others.

Among Public Citizen's objections to the settlement:

The time limits on benefits. For people not planning to use Carfax services within three years of the settlement's approval, the deal "would be essentially worthless," said Deepak Gupta, a lawyer for Public Citizen.

Inadequate compensation. Affected Carfax customers would get free or discounted title searches -- depending on when they used them -- or could get $20 off a vehicle inspection. But Public Citizen notes inspections cost about $100.

Weak disclaimer on the limits of the title searches. Under the settlement, Carfax must disclose that it "may not" have the complete history for every vehicle. That is misleading, Public Citizen says, because Carfax knows it doesn't have all records.

No letters sent to former customers detailing the settlement. Instead, notice of the settlement appeared once in USA TODAY and once in Investor's Business Daily. Also, Carfax sent e-mails only to customers from the previous year, and the e-mail sender was shown as settlement@tgcgi.com" -- not Carfax -- so some people may have assumed it was junk mail.

"Carfax should be held accountable for misleading its customers," said Public Citizen President Joan Claybrook.

A court hearing on Public Citizens' objections and final approval of the settlement is set for May 11. For information and a claim form, go to westcarsettlement.com.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.