Pub. 6 2016 Issue 3

20 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com Example 3: Recall Incomplete, Remedy Not Available Example 4: Recall Information Not Available Disclosing Recall Status One of the more common recall policies that has been adopted by dealers is to sell some recalled used vehicles designated by the service department to be low risk, but to disclose the recall to a consumer prior to sale. A dealer who adopts this approach seeks to protect itself from increasingly-common consumer claims that the dealer failed to disclose a material fact that it knew or should have known at the point of sale, and thereby defrauded the con- sumer by concealing this fact (that the vehicle has been recalled and not yet repaired). In light of such potential liability, as well as increased gov- ernment enforcement activity relating to recalls, we recommend that dealers disclose the recall status of vehicles to customers. We have developed two sample forms that a dealer may use to do so—depending upon the policy chosen by the dealership. In any event, we strongly recommend that dealers consult with their own counsel to discuss the manner in which safety recalls are disclosed, and be sure that any form used is modified to reflect the individual dealership’s recall policies. Sample Used Vehicle Recall Status Disclosure Form 1: The first sample recall form is found on page 21. This form was designed to allow dealership personnel to disclose any po- tential result from the NHTSA Recall VIN Portal, with spaces to disclose: • Franchise vehicles subject to recall with a remedy avail- able; • Franchise vehicles subject to recall with no available remedy; • Non-franchise vehicles subject to recall with a remedy available; • Non-franchise vehicles subject to recall with no avail- able remedy; • Vehicles not subject to an open safety recall; and • Vehicles where the recall status is unavailable. Sample Used Vehicle Recall Status Disclosure Form 2: The second sample recall form is found on page 21. This form is used to reflect a fairly common policy of new car dealers: they will not sell a franchised used vehicle subject to an open safety recall when a remedy is available—instead electing to remedy the problem in advance of any sale. Accordingly, unlike the first form we discussed, this form does not provide a space to disclose such circumstances. This form provides spaces to disclose: • Franchise vehicles subject to recall with no available remedy; • Non-franchise vehicles subject to recall with a remedy available; and • Non-franchise vehicles subject to recall with no avail- able remedy. A dealer using this formwould follow the same instructions as with Form 1, but only for customers purchasing a non-franchise vehicle subject to recall or a franchise vehicle subject to recall for which no remedy is available. This form would not be used in circumstances where an open recall does not apply or where the recall status is unavailable. Nor would it be used when a franchise vehicle is identified as being subject to recall where a remedy is available, since the dealership would not sell the vehicle in such circumstances. Note: Providing a disclosure is no guarantee that a dealer is shielded from liability from a third party lawsuit or potential product liability claims (which will look all-the-uglier if the defect leading to the recall caused an injury or accident), underscoring the importance of setting an internal policy identifying which recalled vehicles should not be sold. Conclusion While dealer responsibilities relating to new vehicle inven- tory are clear, the legal requirements relating to used vehicles are n The Rocky Recall Road — continued from page 18