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Automobile Fraud: 7.2.1.7 Buyer’s Waiver of Statutory Protections

The protections of the state salvage vehicle statute are not waivable, whether by an “as is” clause or by the buyer’s actions.60 For example, an “as is” clause in the sales contract does not obviate a statutory requirement to disclose that a vehicle is a rebuilt salvage vehicle.61

Automobile Fraud: 7.2.1.8 State Vehicle Identification Number Laws

State vehicle identification number (VIN) laws should also be consulted in cases involving the sale of salvage vehicles.64 These laws prohibit alteration, removal, falsification, or defacement of VINs. They also may prohibit the sale of a vehicle with a VIN discrepancy.65 State VIN laws typically require a legitimate VIN before the vehicle can be titled or registered and allow the police to seize any vehicle that has a VIN discrepancy.

Automobile Fraud: 7.2.1.10 Remedies

The typical salvage vehicle statute is silent on the issue of civil remedies, but most states should imply a damages remedy80 or recognize a violation of the statute as a UDAP violation.81

Automobile Fraud: 7.2.2.1 Overview

Colorado, the District of Columbia, Hawaii, Iowa, Kentucky, Maine, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, and Wisconsin have enacted damage disclosure statutes or regulations that apply to used vehicles.98 In addition, Louisiana requires used vehicle sellers to disclose water damage from flooding, Massachusetts requires private sellers to disclose significant damage, and a Pennsylvania UDAP regulation requires disclosure of certain types of damage.99 Under an Alaska st

Automobile Fraud: 7.2.2.2 Requirements and Interpretations

Alaska requires a motor vehicle dealer that purchases a used motor vehicle from an individual consumer to make reasonable inquiry of the seller as to the condition of the vehicle, including its accident and repair history. The dealer must put this information in writing and have the seller sign it, and must provide this information to prospective purchasers. When the dealer has purchased the vehicle from another dealer, an auction, or a wholesaler, it must disclose this fact to a prospective purchaser.102

Automobile Fraud: 7.2.2.4 Used Vehicles Such As Demonstrators Covered by New Car Damage Disclosure Laws

New car damage disclosure laws, discussed in the next subsection, are more common than used car damage disclosure laws. A new car damage disclosure law may, however, apply to certain used cars: demonstrators, factory executive vehicles, and other vehicles that have not previously been titled to a buyer. As a result, even in states that do not have a used car damage disclosure law, some used cars are subject to damage disclosure requirements.

Automobile Fraud: 7.2.3.1 Practices Covered

About half the states have enacted damage disclosure laws specifying that damage to new cars over a certain dollar amount must be disclosed.176 Demonstrator vehicles may be included in the definition of new car.177

Automobile Fraud: 7.2.3.2 Threshold Amounts of Damage Requiring Disclosure

New car damage disclosure statutes typically require that dealers disclose a new vehicle’s prior damage to consumers, but only if the cost to repair the damage exceeds a specified threshold amount. The thresholds vary by state, but the amount is usually three, four, five, or six percent of the car’s sticker price. For example, using a six percent threshold on a $25,000 car, damage need not be disclosed if the damage costs less than $1500 to repair.

Automobile Fraud: 7.2.3.5 Actual Knowledge Precondition

A state’s new car damage disclosure law may require disclosure only when the dealer has actual knowledge of the damage. Even when the damage occurred prior to the dealer’s receipt of the vehicle, however, it may be possible to show actual knowledge through documents that the manufacturer or transporter provided to the dealer. The manufacturer may also require that the dealer inspect the vehicle for transit damage promptly upon delivery.

Automobile Fraud: 7.2.3.7 Statutes Shield Dealers from Consumer Remedies When Threshold Damage Amount Is Not Reached

Although new car damage disclosure laws are generally useful for consumers when the damage amount to their cars exceeds the threshold disclosure amount, the laws can have the effect of insulating dealers and manufacturers from liability when the threshold is not met. The question is whether cars that are damaged in an amount less than the statutory threshold can still be sold as “new” without disclosure of the damage.

Automobile Fraud: 7.2.5 Dealer Responsibility to Inspect Vehicles

Even if a state does not have a damage disclosure law, if it requires dealers to inspect vehicles there is likely a duty under common law or the state UDAP statute to disclose damage that an inspection revealed or should have revealed. Connecticut,217 Michigan,218 Rhode Island,219 and Wisconsin220 require dealers to inspect used cars before selling them.

Automobile Fraud: 7.4 State Laws Requiring Disclosure of Gray Market Origin

Gray market vehicles are vehicles that are sold in the United States even though they were manufactured for sale elsewhere. They may not meet federal emissions and safety standards.255 As a result, it may be difficult or impossible to title the vehicle in the United States.256 Odometer issues also arise because the odometer must be converted from kilometers to miles when the vehicle is brought into the United States.257

Automobile Fraud: 7.5 State Airbag Laws

Sale of cars without functioning airbags is a growing problem in light of the expense of replacement airbags and their attractiveness to thieves.265 A number of states have enacted laws addressing this problem.

Truth in Lending: 4.2.4.5.1 Overview

Contradictions on the TILA disclosure itself or between the TILA disclosure and other loan documents may also render the disclosures not clear and conspicuous. Lenders or their agents may also provide other information that contradicts or overshadows the TILA disclosures, rendering the TILA disclosures not “clear and conspicuous.”

Federal Deception Law: CALIFORNIA

Cal. Gov’t Code §§ 12650 to 12656 (West) (False Claims Act)

Claims covered by the statute: Include knowingly false statements regarding a claim for payment presented to a state or political subdivision or the state’s grantee or contractor, conspiracy to commit such a violation, failure to return public property or money, and inadvertently submitting a false claim and failing to disclose the false claim after discovery. § 12651(a).

Federal Deception Law: COLORADO

Colo. Rev. Stat. §§ 25.5-4-303.5 to 25.5-4-310 (Medicaid False Claims Act)

Claims covered by the statute: Include knowingly false statements regarding a claim for payment under the “Colorado Medical Assistance Act” presented to a state or state’s grantee or contractor, failure to return public property or money, knowing purchase of public property from state officer or employee in connection with the “Colorado Medical Assistance Act” who lawfully may not sell the property, and conspiracy to commit a violation. § 25.5-4-305(1)(a)–(g).