Are Rental Car Companies Renting Recalled Cars?

The Center for Auto Safety is the nation’s premier independent, member driven, non-profit consumer advocacy organization dedicated to improving vehicle safety, quality, and fuel economy on behalf of all drivers, passengers, and pedestrians.

By WKBW News
May 30, 2011

WASHINGTON, DC ( release ) U. S. Senator Charles E. Schumer Monday announced legislation that would prohibit car rental companies from renting vehicles under safety recall to unsuspecting customers. The legislation would put car rental companies under the same restrictions car dealership operate under and make it illegal to rent a recalled vehicle to a consumer. Schumer’s legislation comes after the industry recently announced a plan to put in place a two-tiered recall system that would allow individual rental car companies themselves determine the seriousness of a recall before deciding whether they will take a car out of their fleet until fixed. The American Car Rental Association, made up of 94 rental-car companies, including all major operators such as Avis, Budget, Enterprise, Thrifty, Dollar, National, and Alamo, proposed the two-tiered recall system last month. Under current law, car dealerships are prohibited from selling cars subject to a recall, yet car rental companies are not subject to a parallel constraint. Additionally, car rental companies are not required to notify consumers that the car being rented is subject to recall because of a safety defect. Schumer’s legislation would put car rental companies under the same restrictions as car dealership and he urged the Association and its member companies to abandon their plan and refrain from renting any cars under recall, until they have been fixed.

“Rental car agencies appear more interested in reaping profit by keeping recalled vehicles on the road then they do with ensuring the safety of the individuals and families who are driving their cars,” said Schumer. “The latest proposal by car rental companies to create a vague double-standard that defines some recalled cars as safe and others as dangerous allows these companies to shirk their responsibility to consumers’ safety. The bottom line is, we need to make sure all recalled vehicles, no matter the type of defect at issue, are pulled off the road until they’re fixed.”

Under current law, any car under a recall notice cannot be sold by an auto dealer until the safety issue has been resolved, but that same restriction does not apply to rental car companies, which are currently allowed to rent cars under recall before the relevant safety issue has been addressed.

Last month, the American Car Rental Association proposed that the government adopt a new two-tiered system for vehicle recalls. The system would require car rental companies to only take cars they designate “serious” off of the lot, while allowing other cars to continue to be rented. When asked how rental car companies would determine which cars should continue to be rented, and which should be grounded, the President of the American Car Rental Association said that “every company will set their own policy, but ultimately the repair will get done, but maybe not immediately.” Schumer said that such a vague double-standard would undoubtedly mean many dangerous cars would be rented, and today announced his opposition to that proposal.

Schumer’s legislation would subject rental car companies to the same strict regulations that prevent car dealers from selling automobiles under recall, because the current lack of federal standards puts New York families who rent cars or share the road with rental car drivers at serious risk. Schumer’s bill will address serious concerns brought to light by a recent study conducted by the National Highway Traffic Safety Administration (NHTSA) that shows that major rental car companies are failing to address safety recall issues for a significant percentage of cars in their rental car fleets before renting their vehicles.

According to an audit by the National Highway Traffic Safety Administration that examined ten different recalls of Chrysler and GM vehicles, the Hertz rental company – which accounts for more than half of all rental cars in New York – only fixed 34% of their defective vehicles in 90 days of the recall notice. The car manufacturers themselves have told regulators that rental companies fix less than a third of vehicles within a month of recall, and within a year of recall, only 50% are fixed. Rental companies claim the manufacturers’ data is incomplete and does not account for rental cars sold to third parties before the official launch date of a safety recall.

The car rental industry is major growth industry in the United States earning an estimated $20 billion in profit in 2010. According to the American Car Rental Association, there are currently 1.6 million cars available for rent in the United States.

Unfortunately, the consequences of renting vehicles under safety recall have already proven tragic. Raechel and Jacquie Houck, sisters from California, rented a Chrysler PT Cruiser from Enterprise. One month before it was rented to the Houcks, the car had been recalled because a possible leakage of power steering fluid could result in a fire under the hood of the car. Enterprise failed to address the safety recall, and the Houck sisters were killed when their rental car caught fire and slammed into an oncoming semi-tractor trailer. The victim’s mother, Cally Houck, sued Enterprise and was eventually awarded $15 million when the company admitted negligence.

“Under the proposal by the major rental car companies, we sadly could see more easily avoidable tragedies. We cannot let that happen,” continued Schumer. “Since these companies seem reluctant to ensure the common-sense proposition that only vehicles without safety defects be operated in their fleets, I am introducing legislation that would require rental car companies to fix recalled cars before they allow anyone to get behind the wheel.”