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Automobile Fraud: 5.4 Repair or Replacement of an Odometer

The Act authorizes service, repair, or replacement of an odometer as long as the odometer reading remains the same as before.72 If the mileage cannot remain the same, the repair person must adjust the odometer to read zero, and the car’s owner or the owner’s agent (for example, the repair person) must attach a written notice to the vehicle’s left door frame,73 which specifies the mileage before the service, repair, or replacement, and the date of the service, repair, or replacement.

Automobile Fraud: 5.5 False Statements Made Outside the Disclosure Form

A false statement on a required disclosure form violates the Act’s disclosure requirements.79 In addition, the Act states that a person who transfers ownership of a vehicle may not “give a false statement to the transferee in making the disclosure required by [NHTSA’s odometer disclosure] regulation.”80 This language covers not just false statements made on the disclosure form, but false statements made in connection with making the disclosure.

Automobile Fraud: 5.6.1 Introduction

The Act’s disclosure requirements are central to the Act’s effectiveness. Even if a transferor has not tampered with an odometer (in fact, even if an odometer was never rolled back), a transferor may violate the Act by violating the disclosure requirements.88 Disclosures are important because they create a paper trail of the odometer reading at each transfer, facilitating investigation of odometer fraud. Disclosures also provide the transferee with important information, such as that the odometer reading is not accurate.

Automobile Fraud: 5.6.2.1 In General

Unlike other Act provisions that apply to any person, the disclosure provisions create legal duties solely for transferors of a car’s ownership,91 for lessors and lessees when a leased car is transferred to a third party,92 and for dealers, distributors, and auction companies concerning the retention of certain records.93 In addition, transferees acquiring a motor vehicle for resale also have obligations under the disclosure requirements.

Automobile Fraud: 5.6.2.2 Transferor and Transferee

The NHTSA regulations define transferor and transferee broadly to include not only the persons transferring and receiving the car’s title, but also “any person who, as agent, signs an odometer disclosure statement” for the transferor or for the transferee.96 This definition recognizes the role that auction houses and dealer’s employees have in transmitting and receiving odometer statements.

Automobile Fraud: 5.6.2.3 Lessees

The regulations place certain disclosure requirements on lessees (not just on the lessor).103 The regulations define lessee as “any person, or the agent for any person, to whom a motor vehicle has been leased for a term of at least 4 months.”104

Automobile Fraud: 5.6.3.1 Transfers Broadly Defined

By using the terms “transferor” and “transferee,” the Act and regulations make clear that disclosures must be made each time a car’s title changes hands, even if the transfer is from dealer to dealer. Unlike many consumer statutes that require disclosures only to consumers, odometer disclosures are required for any change of title, no matter the nature of the parties involved in the transfer.

Automobile Fraud: 5.6.3.3 When Vehicle Sold at Auction

An auction company does not typically take title to cars sold through its auction. Instead, title passes directly from the seller who provides the vehicle to the auction to the buyer who purchases the vehicle at the auction. In that case, the auction makes no odometer disclosures because it is not a transferor.118 For administrative convenience the auction company may act as agent for the transferor or transferee in making and signing the disclosures on the old title or reassignment form.

Automobile Fraud: 5.6.3.4 Transfer of Component Parts

Disclosures must be made when ownership of a “motor vehicle” is transferred. If a vehicle comes in component parts, the component part manufacturers do not have to make disclosures when they transfer ownership of the parts, because they are not transferring a motor vehicle.122

Automobile Fraud: 5.6.4.1 General

National Highway Traffic Safety Administration (NHTSA) regulations exempt certain transfers from its disclosure regulations (but not other Act requirements, such as the prohibition on odometer tampering125). The regulations are found at 49 C.F.R. § 580.17,126 but were first codified in section 580.6, and pre-1998 case law consequently cites them as section 580.6.

Automobile Fraud: 5.6.4.2 Relation of NHTSA Exemptions to State Law

States issue titles which conform with the Federal Act, that is, that contain on the title space allowing assignment of the title, with preprinted language, boxes, and blank spaces to facilitate compliance with the federal odometer disclosures. If state title law requires all vehicle transfers to fill out the title assignment information completely, then this requirement would apply to transfers that NHTSA otherwise exempts.

Automobile Fraud: 5.6.4.3 Can the Transferor Waive the Exemption?

Because transferors must complete the odometer disclosures for most transfers, and because the odometer disclosures are preprinted on the title’s assignment section, many transferors complete the odometer disclosures even when NHTSA exempts the transferor from having to make these disclosures.

Automobile Fraud: 5.6.4.4 Exemption for Older Vehicles

Effective January 1, 2021, NHTSA has narrowed the vehicle age exemption from the odometer disclosure requirements to apply only to transfers in which the vehicle being transferred is twenty years old or older.146 Before this amendment the exemption applied to vehicles ten years old or older.147 However, the amendment grandfathers 2010 and older model year vehicles as exempt.

Automobile Fraud: 2.5.2.2.5 Communications with finance entities, finance reserves, credit application, and business manager’s summary

Most communication with potential assignees is now done electronically. In the past a dealer would send a copy of the purchase order and credit application to the lender by facsimile or email and await a response. Today these communications largely take place through internet-based software. These may or may not be included in a printed form in the deal file, but may be stored at the dealer, at the finance company, or on the dealer management system platform in electronic form.

Automobile Fraud: 2.5.2.2.6 Log books, cash draw files, and business manager’s penetration and performance reports

There is generally at least one daily log or ledger maintained by dealerships. The daily ledger is usually maintained by the business manager, though the sales manager may maintain it, or keep a separate record. These logs generally record every transaction entered into during a day, in chronological order. The log will contain the consumer’s name, vehicle, salespeople’s names, and the financial aspects of the transaction.

Automobile Fraud: 2.5.2.2.8 Dealer contracts with third parties; association files

The dealership will have contractual relationships with a number of different entities related to sales and finance. The dealer will be an agent of the provider of the credit insurance and will have a contractual relationship with the provider or administrator of add-ons such as service contract policies, rust protection, window etching, and other third-party add-ons sold by the dealership. These contracts, particularly as they reflect the financial incentives to the dealer to move policies, may be of significant value.

Automobile Fraud: 2.5.2.2.9 Repair records

A vehicle’s repair records are important documents in a case involving vehicle history and indicate what the dealership knew about the car’s condition and mechanical performance. Repair records are sometimes filed chronologically, with a repair order number being assigned to each record in sequence. If on critical dates the dealership’s repair orders suddenly skip a number, this gap is an indication the dealership may have pulled the record. Be sure to ask to see the original repair record, including any notes, which may have enlightening comments from the dealership’s own mechanics.

Automobile Fraud: 2.5.2.3 The Dealer’s Communications with the Consumer

Sometimes how a dealer handles a customer’s complaints or requests after the sale may be important. Recording a conversation between the consumer and the dealer is a way to substantiate the consumer’s version of the events. In most states it is legal for one party to a phone conversation to tape the conversation secretly. Even in those states, however, an attorney should not secretly tape record a conversation, and in some states there are ethical issues about whether an attorney can advise a client to do so.

Automobile Fraud: 2.5.2.4 Who to Depose at the Dealership; Who Does What

Information may be gathered from dealer employees as part of the formal discovery process. While various individuals connected with the dealership might be deposed, a typical case will involve depositions of only a few of these individuals, and care must be utilized in deciding which individuals to depose.

Automobile Fraud: 2.5.2.5 Former Dealer Employees

For many car dealership positions turnover is high, particularly for sales positions.199 Former dealer employees can be a treasure trove of information. Sometimes they can reveal information about the particular transaction at issue. More often they may be able to shed light on a dealer’s typical way of doing business. Such pattern and practice evidence can be useful even in individual cases to show that the harm suffered by the consumer was not merely the result of a mistake but part of a larger problem at the dealership.

Automobile Fraud: 2.5.2.7 Contacting the Selling Dealer and Prior Servicing Dealers Concerning Mechanical Problems

When a vehicle’s problems are largely mechanical, which may indicate lemon laundering or some other nondisclosure of a car’s adverse mechanical history, one approach is to send the client to the selling dealer to state the client’s dissatisfaction with the car. The client should ask the dealer what it is willing to do to fix the problem and ask for all information of any kind that the dealer will provide concerning the vehicle, including purchase and sale documents and repair records.