Proposed Carfax Settlement Draws Criticism

For diligent used-car buyers, Carfax had for years been viewed as an essential ally. The Virginia-based company, which specializes in auto-history reports, offered consumers access to accident and insurance records that would otherwise not be available to them. However, after it was revealed that Carfax’s reporting did not include data from 22 states plus the District of Columbia, the one-time consumer aide was slapped with a huge class-action lawsuit.

Now, the proposed settlement of that class action, which affects 10 million customers, has come under fire from a variety of consumer watchdogs and legal experts. “It’s like advertising for Carfax,” consumer attorney Bernard Brown told the Kansas City Star, calling the settlement little more than a “Carfax promotional piece.” “These consumers get a coupon for the very Carfaxes that the lawsuit said do not have any real value.”

Watchdog Public Citizen has spearheaded the fight against the settlement. In its objections filed in Ohio court last month, lawyers for the group said that the settlement “would leave a majority of the class with no meaningful relief.” As currently written, the settlement offers consumers who purchased a Carfax report before October, 27, 2006, “a voucher good for $20 off a vehicle inspection by a designated third party within six months of final approval of the settlement, a voucher good for two free Carfax Vehicle History Reports from Carfax within one year of final approval of the settlement, a voucher for one free Carfax Vehicle History Report from Carfax within two years of final approval of the settlement, or a Voucher for 50 percent off an unlimited number of Carfax Vehicle History Reports (for personal, not commercial use) over 30 consecutive days within three years of final approval of the settlement.”

“To begin with,” Public Citizen’s objection reads, “the relief offered is worthless to any class member who is not interested in buying a used car in the next three years. Even for class members who do want to buy a used car within that time period, the predominant relief is only Carfax Vehicle History Reports (“Carfax reports”) the same reports that the complaint portrays as being of limited usefulness to consumers because of limitations in the Carfax database.”

The settlement also calls for a court order that would force “Carfax to make certain changes in its disclosures and contracting process with customers.” However, critics have said that the proposed disclosure practices are woefully inadequate. According to the proposed injunction, the company’s website must reveal in two separate locations that “Carfax may not have the complete history of every vehicle.”

However, in its objection, Public Citizen points out, “In fact, far from remedying the misrepresentations, the statements themselves are misleading. By saying that Carfax ‘may’ not have the complete history for every vehicle, the statements suggest that Carfax will have the complete history of many vehicles. In fact, Carfax knows for certain that it does not have the complete history of a large number, perhaps even most, of the vehicles for which Carfax provides vehicle history reports. Further, the statements give purchasers no idea in what way a Carfax report ‘may’ not be ‘complete.’”

Public Citizen also criticized the way that information about the settlement has been disseminated. “Furthermore,” their objection reads, “the notice to the class is not calculated to reach the great majority of class members. The settling parties provided no mailed notice at all.”

In the original complaint filed in Ohio in the case of Edward B. West v. Carfax, Inc., plaintiffs called Carfax’s sales practices “unfair, misleading, and/or deceptive” and asked for monetary compensation “in excess of $1,000,000” along with “injunctive relief” that would force Carfax “to disclose the limitations of their database services.” To many observers, however, the proposed settlement falls well short of achieving the suit’s desired results.