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Class Action Lawsuits Against CARFAX

By Lisa Wade McCormick
ConsumerAffairs.com

October 10, 2006

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Tennessee Attorney David A. McLaughlin filed a class action lawsuit against CARFAX, Inc. in 2003, alleging the company failed to disclose that it does not access records from more than 20 states, and the information consumers buy is often "incomplete, inaccurate and unreliable."

Other attorneys filed similar class action lawsuits against CARFAX, an Internet company that provides vehicle history information for consumers. But McLaughlin says none of the lawsuits has settled.

When he filed his lawsuit, McLaughlin says his investigation revealed that CARFAX overstated what it could do for consumers.

"The problem I had with CARFAX from the very beginning was that it claimed it could tell consumers if a vehicle had been in a major accident," he says. "But CARFAX doesn't say what a major accident is, and few accidents result in titling events (changing or branding the title).

He adds: "If you think of every policing agency, in every county in America, and all the municipalities in the country, and then add them up, how many of those agencies track accidents by vehicle identification numbers (VIN) numbers? How many enter that data into a computer or report it to CARFAX? Some police agencies are still writing reports by hand."

CARFAX acknowledges it only receives police reports from "selected states."

McLaughlin also says CARFAX doesn't receive accident information from insurance companies -- perhaps the biggest data pool of wrecked vehicles.

CARFAX, however, has taken some steps in recent years to address the allegations raised in his lawsuit, McLaughlin says.

"CARFAX is not the same thing it was," he says, adding he's no longer the lead attorney on the case. "They've changed their disclosures and guarantees and updated some things since we started our action. I don't know how good CARFAX is now, but I'm sure it's far from perfect."

Would he rely on CARFAX when buying a used car?

"I would never close a deal based on a CARFAX report," he says. "Unless there's been a huge shift in how it gathers its data nationwide, I'd presume it has the same shortcomings it did when we started all this."

Chris Basso, media relations manager for CARFAX, said he couldn't comment on the class action lawsuits filed against the company.

McLaughlin's 2003 suit charged that auto dealer Mid-South Motors purchased a 1995 BMW 525i from another wholesaler in 2002 after buying a CARFAX report that showed no "salvage" brands and no police accident or damage disclosure records.

A subsequent check of a database maintained by the National Insurance Crime Bureau (NICB) revealed that the BMW had been declared a "total loss" three separate times after accidents in New York, Florida and Georgia that were reflected in police accident records, according to court documents.

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