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Lemon Laundering

 

When a manufacturer buys back a lemon vehicle, what happens to it? Many consumers assume that the vehicle is scrapped and destroyed, but the truth is that an estimated 95 percent of lemon cars, lemon trucks, lemon RVs, and lemon motorcycles are resold. Sometimes potential buyers are given full access to information about the vehicle's history, and knowingly buy a returned lemon. In other instances, though, the high demand for late-model used vehicles lays the foundation for consumers to be duped into unknowingly buying a returned lemon. Misrepresenting or concealing the history of a lemon vehicle is known as "lemon laundering."

Lemon Laundering Laws and Regulations

Laws regarding lemon laundering vary widely from state to state; indeed, only 19 states mandate that a lemon's title carry a warning. Even states that have lemon laundering laws can differ in their definition of a lemon; some limit affected vehicles to those repurchased as a result of a Lemon Law claim, while others also include vehicles voluntary repurchased by manufacturers. Some consumer advocates have accused manufacturers of rerouting lemon vehicles and selling them in states that have more lenient laws about consumer notifications. Others say that manufacturers sell lemon vehicles at auction, and that unscrupulous people who purchase the lemons then resell them to unsuspecting buyers at retail prices. The result? A doubly sour experience.

In 1995, consumer groups filed a petition with the Federal Trade Commission, urging the FTC to address the problem of lemon laundering. The FTC launched the Vehicle Buyback Disclosure Project, and held a public conference where a variety of lemon laundering proposals were discussed, including one that would require manufacturers to re-register lemons that were repurchased (either voluntarily or as the result of a lemon law claim), and to make a notation that the vehicle was returned. Because consumer groups were concerned that a federal regulation would override stronger state laws and a consensus could not be reached about a strong federal regulation, the FTC did not take action on the matter.

Check Before You Buy

If you're considering buying a used car, there are a few steps you can take to protect yourself against lemon laundering. First, you can check the vehicle's history using AutoCheck or CARFAX. Both services provide a title check, odometer check, problem check, and registration check. While both services endeavor to keep up-to-date records, consumer advocates express concern that some information can still slip through the cracks. Second, you can take the VIN to a dealer and request a copy of the vehicle's repair history. Third, you can arrange for a vehicle inspection before you commit to buying it. Finally, keep in mind that, if the price of the low mileage used vehicle seems too good to be true, it probably is.

If You Have a Laundered Lemon

If you suspect that you own a laundered lemon, there are a number of avenues of legal recourse you can explore. Because different federal and state laws come into play, it's in your best interest to retain the services of a Lemon Law attorney to fight for redress on your behalf.

If the vehicle you purchased is relatively new, it may still be covered under the original manufacturer's warranty. Your purchase is also covered under the federal Magnuson-Moss Warranty Act. If you live in a state where there is a law regulating the resale of lemon vehicles, and you were never notified that the vehicle you bought was a lemon, you have cause of action on that front. If the title or other documentation didn't say the vehicle was a buyback, an express warranty exists that the vehicle was not repurchased by the manufacturer. Similarly, not disclosing a vehicle's repair or buyback history can be a violation of state Unfair and Deceptive Acts and Practices (UDAP) laws. If there are problems with the vehicle's title, they may be covered under state laws relating to the Uniform Commercial Code (UCC).

It takes a considerable amount of research to determine if a vehicle is a laundered lemon, and extensive knowledge to ascertain which legal avenue will give you the best chances of success. A Lemon Law attorney will be able to perform the necessary research and build a case that will enable you to get justice.