On July 2, 2024 the Federal Trade Commission announced that it initiated action against online used car dealer Vroom for allegedly misrepresenting that it thoroughly examined all vehicles before listing them for sale and failing to obtain consumers’ consent to shipment delays or provide prompt refunds when cars were not delivered in the time promised.
According to the agency’s announcement, Vroom agreed to a proposed settlement that would require the company to pay $1 million to refund consumers allegedly harmed by the company’s purported conduct and prohibit the company from misleading consumers and failing to provide required disclosures.
“Vroom promised the fast deliveries of thoroughly inspected cars, but sped right past compliance,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Online car dealers and other Internet sellers must provide required disclosures just like any brick-and-mortar businesses that comply with the law.”
In its complaint against Vroom, the FTC alleges that the company failed to follow the Used Car Rule, the Pre-Sale Availability Rule and the Mail, Internet, and Telephone Order Rule.
The FTC alleges that since 2019, Vroom has sold more than 170,000 vehicles to consumers through its website. In its advertising, Vroom said that its cars underwent “multiple inspections” to ensure they were in good condition in an effort to alleviate consumers’ concerns about buying a used car without being able to inspect it before purchasing, according to FTC attorneys. Vroom’s website even listed 184 points of inspection that were checked on every car they sold, says the agency.
Consumer complaints about the company told a different story, according to the FTC’s complaint. Numerous consumers purportedly complained about the condition of the cars they received from Vroom, with everything from loud grinding noises, bald tires, and worn brakes being reported.
The complaint further notes that Vroom represented to consumers that cars purchased from the company would be delivered in 14 days or less in its advertising and on its website. Despite making this statement, when it could not meet that delivery timeline, Vroom allegedly regularly failed to give consumers the chance to either consent to a longer delivery timeline or cancel their purchase and receive a prompt refund, as required by MITOR. The complaint cites purported instances where consumers have had to wait as much as three months or longer before their car arrived.
As a used car dealer, the FTC attorneys state that Vroom also is required to follow the FTC’s Used Car Rule, which includes a requirement that the dealer properly complete and display a “Buyers Guide” on each used car it offers for sale. The Buyers Guide gives consumers important information about whether the used car comes with a warranty or it is being sold “as is.”
If the car is sold with a dealer’s warranty, the Used Car Rule requires the Buyers Guide to list its basic terms and conditions, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty. The complaint alleges that Vroom failed to provide the Buyers Guide until late in the purchase process, and that the Guides were often missing required information.
Lastly, the complaint alleges that Vroom violated the Pre-Sale Availability Rule because it did not post the terms of its warranty on its website in close proximity to the warranted used vehicle. Nor did Vroom inform customers how they could obtain the warranty’s terms prior to the receipt of the sale documents, according to the agency.
Under the terms of the proposed settlement, Vroom will be required to pay $1 million to the FTC to be used to provide refunds to consumers who were allegedly harmed by the company’s unlawful practices. The settlement also prohibits the company from making misleading claims to consumers about inspections or shipping, and requires Vroom to document all claims about promises it makes about shipping times to consumers, as well as requiring Vroom to follow the requirements of MITOR, the Used Car Rule, and Pre-Sale Availability Rule.
Note, the effective date of the CARS Rule has been stayed pending resolution of an administrative challenge filed with the U.S. Court of Appeals for the Fifth Circuit by the National Automobile Dealers Association and another industry trade association. The challenge is based, in part, upon assertions that the FTC failed to issue advanced notice of proposed rulemaking and the belief by some that it will impose undue burdens and costs upon the car buying process.
