On December 1, 2022, nationwide used car dealer CarMax Auto Superstores, Inc. (“CarMax”) and 36 state attorneys general announced a $1 million multistate settlement that will require CarMax to disclose open recalls related to the safety of its used vehicles before consumers purchase them.  The settlement resolves an investigation into CarMax’s advertising and sales practices related to vehicle recalls since 2014. 

The attorneys general allege that CarMax failed to disclose repairs that were necessary on vehicles with open safety recalls, and it represented that those vehicles were safe despite open recalls for airbags, brakes, fuel pumps, and other critical parts and safety features.  Under the agreement, CarMax is enjoined from engaging in any act or practice in violation of the consumer protections acts of the states that are party to the settlement, which include Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin. 

In addition to the injunctive relief, the settlement requires CarMax to help consumers access information about open safety recalls by including hyperlinks for vehicles advertised online and QR codes for vehicles advertised in brick-and-mortar locations that link directly to open recalls through the National Highway Traffic Safety Administration VIN Look-up or an acceptable commercial provider with recall information.  CarMax must also present consumers with copies of open recalls and obtain the consumer’s signature on a standalone disclosure document before presenting any other sales paperwork. 

Any vehicles sold online, including through www.carmax.com or the CarMax mobile app, must also clearly and conspicuously disclose on the first page of the overall description of the vehicle or vehicle history report that the vehicle may be subject to an open recall for safety issues that have not been repaired.  This information must also be displayed on the window sticker for vehicles sold in stores.  Additionally, CarMax is prohibited from directly or indirectly stating in marketing, advertising, or during sale (including vehicle labeling) that a vehicle is “safe” or has been repaired for “safety issues.” 

CarMax has 180 days to implement these practices, and has agreed to compliance monitoring for a period of five years.  The $1 million penalty will be distributed among the states that are party to the settlement.  The states have released CarMax from further civil liability for the conduct covered by the settlement agreement.

In 2016, CarMax settled related allegations with the Federal Trade Commission (“FTC”).  In that action, the FTC alleged that CarMax and two other auto dealers failed to mention or downplayed open safety recalls even though they prominently highlighted their inspection process and safety concerns in advertisements.

Pennsylvania Attorney General (and Governor-Elect) Josh Shapiro released a statement on the settlement, stating “Consumers deserve to have all the relevant information about a car so they can make an informed choice whether or not to buy, especially if there are open and unrepaired recalls.  This settlement will ensure dealerships like CarMax shift gears to ensure Pennsylvanians’ safety comes before profits.”

In a statement about the settlement, CarMax indicated that the settlement terms are consistent with its longstanding practices.  Joe Wilson, Chief Operating Officer, stated:

CarMax led the industry in recall transparency by sharing vehicle specific recall information in-store and online to ensure our customers know about open recalls prior to purchase.  In fact, as soon as NHTSA made available vehicle specific recall information in 2014, we began providing the information to customers nationwide and we continue to do so today.  As CarMax is not authorized by manufacturers to complete recall repairs and close out recalls, we work hard to ensure our customers have the information they need to take action and have recalls repaired at a manufacturer-authorized facility.

In New York Attorney General Letitia James’ press release announcing the settlement, the agreement was described as “the new industry standard for used car dealers to disclose open safety recalls to customers before they make a purchase.” 

Other used car dealers should take notice of the requirements of this settlement and accompanying expectations of most attorneys general across the country.

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