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Can You Sell A Vehicle with an Open Safety Recall?

REPOST - in light of the large numbers of inquiries we have been getting on this topic lately, we wanted to repost this article on recalls:

The Takata airbag recall is causing many dealers to wonder about the advisability and legality of selling a vehicle with an open safety recall. The following is TIADA Deputy Director Danny Langfield's Regulation Matters column from the July 2015 issue of the Texas Dealer magazine, addressing vehicles with an open safety recall and how dealers should proceed.
Unfortunately, there is nothing like the threat of death or disfigurement from airborne airbag inflator shrapnel to get the attention of folks on vehicle safety recalls. With the massive Takata airbag inflator recall now affecting roughly 34 million vehicles in the U.S. alone, recalls are, once again, front and center in the media. We are getting calls from members wondering whether they are allowed to sell a vehicle subject to an open recall, and, if so, under what conditions.

Let's start by recognizing that not all recalls are created equal. There are safety and non-safety recalls; we will focus exclusively here on safety recalls. Until very recently it was difficult for an independent dealer to obtain VIN-specific information as to whether a vehicle had an “open” safety recall (i.e., whether a specific vehicle had been repaired or not). However, in late 2014 the National Highway Traffic and Safety Administration (NHTSA) established a VIN-specific lookup tool at the website www.safercar.gov. This tool, featured in an article in the November 2014 issue of the Texas Dealer magazine, allows the user to enter a VIN and get the government's most recent information about that specific vehicle's open safety recall record.

As of this writing there is no federal or Texas state law that explicitly prohibits a dealer from selling a vehicle with an open safety recall. But that doesn't mean a dealer has no exposure in such a sale, according to NIADA regulatory counsel Shaun Petersen. "We encourage dealers to only make representations about vehicles they know to be accurate, whether regarding the recall status of a vehicle, the vehicle's condition or otherwise,' Petersen said. "Any misrepresentation may be actionable under the Texas Deceptive Trade Practices Act (DTPA)."

So, if there is no explicit prohibition on the sale of vehicles with an open safety recall, how should an independent dealer proceed? As usual, the mantra is disclose, disclose, disclose. To knowingly make a false or misleading statement of fact concerning the need for parts, replacement, or repair service is also actionable under the DTPA, according to Karen Phillips, general counsel for the Texas franchise auto dealers association. Obviously the most prudent course of action is to identify any inventory vehicles with open safety recalls and arrange to have repairs made accordingly. However, as we all know, there are any number of reasons this is not always possible, the most obvious being that the fix has not yet been identified or the necessary parts are not available.

After consulting with TIADA general counsel Mike Dunagan, the association is recommending that the dealer run each VIN through the safercar.gov lookup tool at closing, print out the results and have the customer sign and date the document. A copy of this signed document should be retained in the deal jacket. Considering that recall results may change literally from day to day, it is important to make sure the most up-to-date information is being provided to the customer, regardless of the vehicle's open recall status.

This practice ensures that you are making a good faith effort to disclose the best, most accurate recall information available to every customer on each transaction.