Feds criticized for allowing GM to sell recalled cars

Washington – – Consumer groups are criticizing federal regulators for allowing General Motors Co. to potentially sell unrepaired used cars that have been recalled.

The Center for Auto Safety said Friday a loophole in a recent decision by the Federal Trade Commission could allow GM to sell cars that have safety defects if drivers are notified about open recalls.

The auto safety group said the FTC’s decision “emasculates” a $900 million settlement GM reached with federal regulators last year to settle lawsuits over its handling of vehicles with a dangerous ignition switch flaw that were subject to a high-profile recall in 2014.

“There is no place in a [certified pre-owned] program for vehicles with open recalls which endangers the life of anyone who buys such a vehicle,” CAS Executive Director Clarence Ditlow wrote in a letter to the U.S. Attorney for the Southern District of New York Preet Bharara, who helped negotiate the ignition switch settlement with GM.

Consumer groups had complained to the FTC that GM had violated provisions of the Federal Trade Commission Act by selling used cars that were subject to open recalls, including cars that have the faulty ignition switches that led to the company’s massive settlement with regulators. GM labeled the cars with known defects as “certified pre-owned” vehicles, even though they had not been fixed yet, according to the complaint filed with the FTC.

The complaint alleged GM has also advertised certified pre-owned vehicles with open safety recalls for defective body control module connection systems, which can result in a variety of issues with braking. The automaker also was accused of advertising certified pre-owned vehicles with open safety recalls for defective chassis electronic module, which can cause engine stalls, thereby increasing the risk of a crash.”

But the FTC ruled, to the chagrin of consumer groups, that GM could sell used cars that are subject to recall as long as it “discloses, clearly and conspicuously, and in close proximity to such representation, any qualifying information related to open recalls.”

The agency is proposing an order that would require GM to ensure that drivers are aware of “the fact that used motor vehicles that it advertises may be subject to recalls for safety issues that have not been repaired.” The company is also being required to notify drivers “how consumers can determine whether an individual used motor vehicle has been subject to a recall for safety issues that has not been repaired.”

GM said Friday that it “currently prohibits the certification or delivery of certified pre-owned vehicles if they are subject to a GM recall until they have been repaired.”

Ditlow, the Center for Auto Safety chief, said the requirement that GM notify potential buyers of used cars about recalled parts that have not yet been repaired does not go far enough to honor the spirit of the Detroit company’s large settlement agreement with federal regulators in 2015.

klaing@detroitnews.com

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