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Public Citizen Objects to Carfax Settlement

March 27, 2007

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Public Citizen today filed objections to a proposed nationwide settlement of a class-action lawsuit against Carfax, a company that sells history reports for used cars.

The lawsuit, filed in Ohio, alleges that consumers are being deceived by Carfax's claim that its vehicle history reports are based on searches of its nationwide database, when in fact the database does not include police accident data from 22 states and the District of Columbia.

The objections to the settlement were filed on behalf of 17 individual class members and the nonprofit Center for Auto Safety.

Although the complaint asked the court to award damages to Carfax customers and to require Carfax to disclose the specific limitations of its database, the proposed settlement would do neither.

Instead, it would primarily benefit Carfax, which would obtain a release from all similar claims by all former customers nationwide, and the plaintiff's lawyers, who would receive $556,000 in fees.

"Carfax should be held accountable for misleading its customers -- it should not benefit from this settlement that adds insult to injury," said Public Citizen President Joan Claybrook.

The settlement defines the class of consumers bound by its terms to include anyone who purchased a Carfax vehicle history report prior to Oct. 27, 2006.

However, individual notice of the proposed settlement was sent only by e-mail and only to customers who bought Carfax reports during the one year preceding the settlement. As a result, the majority of class members got no notice of the settlement.

"Not only will the notice fail to reach most of the class, but even those consumers who hear about the settlement will receive almost no benefit for releasing their claims," said Deepak Gupta, an attorney at Public Citizen who runs the organization's Consumer Justice Project. "If the settlement is approved, class members who know about the settlement will receive coupons that are worthless to most of them."

The settlement allows class members to choose between a coupon for another Carfax report or a coupon for $20 off a car inspection by the company SGS SA. The report coupons expire in two or three years, while the inspection coupons expire in six months, rendering them useless to any class member who is not buying a used car during those time periods.

"The settlement would do nothing to force Carfax to inform consumers of the deficiencies of its reports," said Clarence Ditlow, executive director of the Center for Auto Safety

Instead, the settlement would require Carfax to state on its Web site that it "may" not have the complete history for every vehicle, when, according to the complaint in the case, the company knows for certain that it does not have a complete history for a large number, perhaps even most, of its vehicles.

Although the complaint specifies 23 jurisdictions from which Carfax does not get police accident data, the settlement would not require Carfax to identify which ones are missing from its database.

"When I bought a subscription to Carfax reports in 2005, I had no way of knowing that the reports did not have accident information from neighboring places like Delaware, Washington, D.C., Pennsylvania and Virginia," said Gwynneth Anderson, a Maryland resident and an objector to the settlement who bought a 2005 Nissan Sentra after researching the car through Carfax.

"The proposal for coupons and an inspection voucher are worthless to me now. But for future buyers, Carfax should be required to let them know exactly what's missing from its reports."

A hearing on the motion for approval of the settlement is scheduled for May 11 in Warren, Ohio.

Public Citizen lawyers Gupta, Allison Zieve and Brian Wolfman filed the objections, with Ronald Frederick as local counsel in Ohio.

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