Consumer advocates call it “lemon laundering.” It is the resale without proper disclosure of cars with a history of chronic problems which required the manufacturer to buy it back under the lemon law. This occurs all too frequently in Georgia. We have had success in pursuing Georgia automobile dealers for this conduct. We have handled cases involving Nissan, GM and Hyundai vehicles.
We have all heard of the Lemon Law. This law, applicable to new cars, provides that if the consumer has recurring problem, or if the car is out of service for 30 days or more in a specified time, then the consumer may make the manufacturer buy the car back. When the car is bought back, what happens? These cars will typically be less valuable than other non lemon cars. Most consumers would steer away from a car that is known to have a history of problems.
Manufacturers typically administer repairs to the car then resell the car at large “closed” auctions where only dealers of that type of car may buy them. These cars are typically low miles, recent model cars. Most states require that the manufacturer put a brand on the title of the car and provide notice to the first consumer purchaser of the car after the repurchase. Texas requires that a “hanger” be placed on the car advising it was a lemon law buyback. Texas and Georgia require that the new purchaser sign a form mandated by law advising them the car was a lemon.
One way to launder a lemon is to take it to a dealer-only auction out of state, says Rosemary Shahan, president of Sacramento-based Consumers for Auto Reliability and Safety (CARS). Frequently, vehicles repurchased in states that have “title branding” laws are auctioned in states that don’t have those laws (Illinois does not), where they get “clean” titles, Shahan said. Other methods include hiding the “disclosure” in a stack of documents to be signed or calling the customer to return after the purchase to sign documents, claiming there was an error, or “we missed one document”, then having the customer sign the disclosure without the customer ever realizing it. We have seen a pattern of this occurring at a specific South Atlanta dealership.
The Georgia Lemon Law, OCGA 10-1-790 provides:
(a) No manufacturer, its authorized agent, new motor vehicle dealer, or other transferor shall knowingly resell, either at wholesale or retail, lease, transfer a title, or otherwise transfer a reacquired vehicle, including a vehicle reacquired under a similar statute of any other state, unless the vehicle is being sold for scrap and the manufacturer has notified the administrator of the proposed sale or:
(1) The fact of the reacquisition and nature of any alleged nonconformity are clearly and conspicuously disclosed in writing to the prospective transferee, lessee, or buyer; and
(2) The manufacturer warrants to correct such nonconformity for a term of one year or 12,000 miles, whichever occurs first.
GA. COMP. R. & REGS. §122-23-.02. Return, Transfer and Resale of a Reacquired Vehicle provides:
(1) A reacquired vehicle shall not be transferred, leased, or sold, either at wholesale or retail, unless the following conditions are met:
(a) At the time of each transfer of the reacquired vehicle, the transferor shall provide the transferee the form required by Rule 122-23.01.
(b) The ultimate consumer must be provided the opportunity to read the form in its entirety before purchasing or leasing the reacquired vehicle.
(c) Both the transferor of the reacquired vehicle and the ultimate consumer must sign the form at the time of the sale or lease to the ultimate consumer. The original of the form shall be provided to the ultimate consumer. The transferor of the reacquired vehicle must send a copy of the completed and dated form to the Administrator within thirty (30) days from the date of the sale or lease.
(2) The manufacturer shall activate the warranty required pursuant to O.C.G.A. § 10-1-790(a)(2) at the time of the sale or lease of the reacquired vehicle to the ultimate consumer. The manufacturer shall also notify the Administrator that the warranty has been activated within ninety (90) days of the sale or lease.
Authority O.C.G.A. §§ 10-1-790 and 10-1-795
An example of our work is set out below.