As we shared earlier this year, former online used car retailer Vroom officially went out of business in January. Vroom is a company Car Pro Show host Jerry Reynolds warned consumers about on more than one occasion prior to its demise - warnings that were certainly warranted.
Now comes word that Vroom has agreed to pay a one million dollar fine proposed by the Federal Trade Commission (FTC) for deceptive practices and unfair acts. In a statement, the FTC details its action taken against Vroom for "deceiving customers, failing to deliver on time and provide required disclosures." More specifically, the FTC says Vroom misrepresented that it thoroughly examined all vehicles before listing them for sale and failed to obtain consumers’ consent to shipment delays or provide prompt refunds when cars weren’t delivered in the time Vroom promised.
The FTC says that Texas-based Vroom has agreed to a proposed settlement that would require the company to pay $1 million to refund consumers harmed by the company’s conduct and prohibit the company from further misleading consumers and failing to provide required disclosures.
The FTC press release continues as follows:
“Vroom promised the fast deliveries of thoroughly inspected cars, but sped right past compliance,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Online car dealers and other Internet sellers must provide required disclosures just as any brick-and-mortar businesses that comply with the law.”
In its complaint against Vroom, the FTC alleges that the company failed to follow the Used Car Rule, the Pre-Sale Availability Rule and the Mail, Internet, and Telephone Order Rule (MITOR).
Since 2019, Vroom has sold more than 170,000 vehicles to consumers through its website. In its advertising, Vroom said that its cars underwent “multiple inspections” to ensure they were in good condition in an effort to alleviate consumers’ concerns about buying a used car without being able to inspect it before purchasing. Vroom’s website even listed 184 points of inspection that were checked on every car they sold.
Consumer complaints about the company told a different story, according to the FTC’s complaint. Numerous consumers complained about the condition of the cars they received from Vroom, with everything from loud grinding noises, bald tires, and worn brakes being reported.
The complaint also notes that Vroom told consumers that cars purchased from the company would be delivered in 14 days or less in its advertising and on its website. Despite making this clear statement, when it couldn’t meet that delivery timeline, Vroom regularly failed to give consumers the chance to either consent to a longer delivery timeline or cancel their purchase and receive a prompt refund, as required by MITOR. The complaint cites instances where consumers have had to wait as much as three months or longer before their car arrived.
As a used car dealer, Vroom also is required to follow the FTC’s Used Car Rule, which includes a requirement that the dealer properly complete and display a “Buyers Guide” on each used car it offers for sale. The Buyers Guide gives consumers important information about whether the used car comes with a warranty or it is being sold “as is.”
If the car is sold with a dealer’s warranty, the Used Car Rule requires the Buyers Guide to list its basic terms and conditions, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty. The complaint alleges that Vroom failed to provide the Buyers Guide until late in the purchase process, and that the Guides were often missing required information.
Finally, the complaint alleges that Vroom violated the Pre-Sale Availability Rule because it did not post the terms of its warranty on its website in close proximity to the warranted used vehicle. Nor did Vroom inform customers how they could obtain the warranty’s terms prior to the receipt of the sale documents.
Under the terms of the proposed settlement, Vroom will be required to pay $1 million to the FTC to be used to provide refunds to consumers who were harmed by the company’s unlawful practices.
The settlement also prohibits the company from making misleading claims to consumers about inspections or shipping, and requires Vroom to document all claims about promises it makes about shipping times to consumers, as well as requiring Vroom to follow the requirements of MITOR, the Used Car Rule, and Pre-Sale Availability Rule.
The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The FTC filed the complaint and final order in the U.S. District Court for the Southern District of Texas.
To visit the FTC website click here.
Photo Credit: MIND AND I/Shutterstock.com.