The Wrong Fix for the Broken Recall System

March 31, 2015

Last month, Senators Ed Markey and Richard Blumenthal proposed new legislation that would link car registrations to completing recall repairs. The Repairing Every Car to Avoid Lost Lives (RECALL) Act threatens state DMVs with the loss of five percent of its federal highway funds if they don’t add to their duties checking open recalls for every new and renewed auto registration, and adds to the responsibilities of consumers getting recall repairs done to be properly registered.

The bill requires states to exempt a motorist if the recall notice comes after registration is completed; or, if the manufacturer “has not provided the motor vehicle owner with a reasonable opportunity to complete any applicable safety recall remedy due to a shortage of a necessary part or qualified labor.” The state must also exempt a motorist who demonstrates to the state’s satisfaction that they had no “reasonable opportunity” to complete the recalls, in which case, the state can grant a 60-day temporary registration to give a consumer time to complete the repairs.

U.S. Sens. Markey and Blumenthal have been the Senate’s auto safety-tag team, and we applaud many of their efforts to raise the bar – via proposed legislation or asking pointed questions of federal agencies and manufacturers. For instance, the two have introduced a bill to improve the collection of Early Warning Reporting data. Last week, they also introduced the Used Car Safety Recall Repair Act, which closes a loophole in the current regulations by requiring “used car dealers to repair any outstanding safety recalls in used automobiles prior to selling or leasing.”  But the RECALL bill has serious flaws, and you don’t have to scratch too far below the surface to find them.

“My biggest worries are that it would penalize consumers and shift the burden onto them for the illegal activity of the manufacturers and dealers – and possibly undermine the entire auto safety recall system,” says Rosemary Shahan, president of Consumers for Auto Reliability and Safety. “The timing on this could not be worse, when there are tens of millions of recalled cars on the roads, huge long-term shortages of repair parts, and dealers have not hired nearly enough auto technicians to perform the repairs.”

The American Association of Motor Vehicle Administrators and the Governor’s Highway Safety Association have also come out in opposition to the bill. The AAMVA observed that the act “makes motor vehicle agencies responsible for rectifying the shortcomings of private industry by conditioning customers’ vehicle registration renewal on fixing defective or noncompliant automobiles. This bill shifts the burden and the costs of correcting vehicle defects from the direct responsible party, the manufacturer, to the taxpayers of the individual states, and threatens to withhold federal highway funds from states that do not implement the requirements. States would have to spend significant sums to comply, outlays that will strain already-limited transportation funding and divert highway safety funds from other priority safety programs. Furthermore, the bill assumes the existence of a national, real-time safety recall data base that states could interact with for the most current recall information. No such system exists today.”

Indeed. Complaints to NHTSA gathered on one week in March regarding one manufacturer – Toyota – gives a good snapshot of the typical problems and the high level of frustration among consumers who would like to get their vehicles remedied:

Here’s a cranky 2009 Sienna owner from Kensington, Maryland on March 13:  

Sometime around August 2014, I received a safety recall notice from Toyota.  It mentioned a new safety recall … which supersedes the prior notice ….  This involves the spare tire carrier cable which may corrode due to road salt in cold climate areas, which I understand includes Maryland where I live.  I have called Toyota dealers near me and they keep saying that Toyota has not provided them with the part to repair this.  I tried again today, March 13, 2015, but the answer is the same.  Therefore, I am registering my complaint today and would like to know how soon this safety defect might be taken care of.   (ODI 10694172)      

Or this 2004 Toyota Corolla driver from Dayton, Ohio, who complained to NHTSA on March 17 about the difficulty in completing the July airbag inflators recall:

After contacting the dealer and the manufacturer on multiple occasions, the contact was informed that the parts needed to repair the vehicle were still not available and no estimated time for receiving the parts could be provided. (ODI 10694881)
 

Now imagine you have to get your vehicle registered next week.

The U.S. is not Germany

The bill’s dictates have been compared to the German system, where the Kraftfahrt-Bundesamt, the Federal Motor Transport Authority, operates the Central Vehicle Register.  Like a state department of motor vehicles, the CVR – according to its website – “stores vehicle and owner data on vehicles with number plates. The local vehicle registration authorities and the insurers record and submit data to the Central Vehicle Register in the case of new registrations, changes of ownership, de-registrations, and (technical) modifications” of the nation’s 51.7 million motor vehicles and 6.2 million trailers. It can, and does revoke the registrations of vehicle owners who do not complete recall repairs.

Unlike Germany, the U.S. has more than 50 departments of motor vehicles registering about 254 million vehicles. And unlike Germany, our DMVs are completely separate from safety enforcement of manufacturers. The Central Vehicle Register is under the Kraftfahrt-Bundesamt – National Highway Traffic Safety Administration’s German counterpart, which counts among its recall duties:

• provides the manufacturer with the data of the relevant vehicle holders stored in the Central Vehicle Register.
• undertakes to inform the vehicle holders; this service has to be paid for by the manufacturer.

In Germany, vehicle registration and recall enforcement operate out of one shop with a completion target of 100 percent.  The KBA also monitors recalls if the defect presents a serious safety risk:  “The purpose of this monitoring activity is to ensure the notification of all the relevant vehicle holders and a complete elimination of the defects.”

U.S. regulations hold the manufacturer responsible for gathering the identification data, informing its customers and offering the repair – and there is no particular target for success. The notification regulations are antiquated and there are no benchmarks for acceptable repair rates and no incentive for manufacturers or the agency to improve.

 Moral Hazard

Using state DMVs to inform consumers of open recalls has value. At the end of the day, it will probably raise the recall repair rate – but the bill goes beyond mandating that consumers are informed. The result will come at great expense to consumers without placing any of the responsibility or burden where it belongs: on those who created the problem in the first place. As the AAMVA noted, it simply transfers manufacturers’ recall notification failures onto already beleaguered state Department of Motor Vehicles and consumers.

The auto industry has been tripping over itself to develop advanced safety systems, vehicle-to-vehicle communications and driverless cars. When it comes to stuffing as much shiny technology as possible under one hood, it’s all Jetsons. When it comes to telling a consumer that the product you sold them for thousands of dollars has a major safety problem, then it’s the turn of the twentieth century. Stamps, snail mail – if absolutely pushed, a phone call. Manufacturers still use outdated R.L. Polk registration data snapshots to identify consumers in a recall. A whole big data cottage industry devoted to securing current vehicle owner information has sprung in response – mostly for the use of people who want to sell you things. But it certainly could be used by entities that want to fix their mistakes.

The recall regulations only require that manufacturers conducting campaigns to contact “registered owners determined from state motor vehicle registration records, augmented with corporate records by first class mail. The regulations outline the characteristics of the envelope, noting that this is a SAFETY RECALL NOTICE. The letter itself must provide, at a minimum: a clear description of the defect; an evaluation of the risk to motor vehicle safety; a statement of the measures to be taken to obtain the remedy; a statement that the defect/noncompliance will be remedied without charge; a statement of the earliest date on which the defect/noncompliance will be remedied; and a description of the procedure to be followed by the recipient of the notification in informing NHTSA whenever a manufacturer, distributor, or dealer fails to or is unable to remedy without charge such defect or failure to comply.

It does not require the manufacturer to tell you that the defect has already caused deaths and injuries – if that is the case. (The U.S. Consumer Product Safety Commission routinely includes such information in recall announcements.) Further, there are no requirements involving specific efforts manufacturers must make to notify hard-to-locate owners.

Safety Research & Strategies has its own vision for a more robust recall system that requires NHTSA to institute benchmarks for acceptable recall completion rates, require Recall or Audit Queries for recalls that fall below that benchmark, and empowered the agency to level civil penalties specifically for failure to achieve the minimum benchmark. (See Improving the Recall System for the 21st Century)

Practical Matters

If drivers must take their vehicles in for annual inspections and emissions tests before renewing their registration, why not add open recalls?  We have identified a passel of practical problems.

For the state:

• If the consumer is off the hook if he or she receives the recall notice after the registration notice, how will the DMV know? Recalls are always announced long before consumers get notices – sometimes its weeks or even six to eight months before a consumer gets the actual letter. How will the DMV know what the manufacturer mailed out and when a consumer received it?

• Who is in charge of defining the motorists “reasonable efforts” to get the recall done? Is it incumbent now for state DMVs to write these definitions? Who will write the rules for what constitutes “demonstration” of these “reasonable efforts?” Will it vary from state to state?

• If the flow of registrations, and even more importantly for state coffers, the flow of registration fee collection is interrupted by a motorist’s inability to complete a recall, what does that do the department of transportation budgets?

• What happens if the repair parts take more than two months to become available? Does the DMV write rules and institute procedures for issuing multiple temporary registrations?

• Where is the federal money to support this mandate that will force already under-funded and over-worked DMVs to add new responsibilities, new tasks, and integrate a new computer system?

No carrot in this bill, just sticks.

For the motorist:

• How does the motorist “demonstrate” that he or she did not get a notice? This is a very common problem. How do you prove a negative?

• How will the motorist “demonstrate” that the parts are not available? Will the manufacturers or dealers have to put their availability problems in writing to give the consumer something to take to the DMV? Will manufacturers and dealers inform the DMV directly? Will the motorist have to take time to get this proof from the dealer and stand in a bunch of lines to convey it to the DMV?

• Repair parts are not simultaneously shipped to every dealer in a state. Will the motorist be forced to call multiple dealers in search of recall repair parts to complete his vehicle registration?

• What happens if the repair parts aren’t available for six months – as is the case with Takata airbag inflators – or you can’t get a timely appointment? Will the motorist have to go back to the DMV for more temporary registrations?

Collateral Consequences:

Driving an unregistered vehicle in some cases, in some states, is actually a crime. The penalty in the most benign scenario is a fine.

• What if you can’t get your vehicle repaired, can’t convince the DMV that it’s not your fault and can’t get your vehicle registered? What if you have to use your car to get to work and you get pulled over?
• Is a recall now an occasion to impose a criminal record or fines?
• Will this disproportionately affect motorists who are also poor and members of minority groups?
• Will it raise your insurance rates?
• Will it increase your liability in a crash caused by the defect?
•  Will it hamper you in civil action against a manufacturer?

Limitations

This bill is also beset by some limitations:

In some states, you renew your registration every two years—or have an option to renew every four years. If the recall notice comes after registration, this method would not pick up an open recall until multiple years later. How does this improve the system?

DMV’s are supposed to use NHTSA’s VIN look-up tool to identify if a particular vehicle has an open recall. What if the recall is for an after-market component or a tire? That VIN look-up does not contain information for those recalls. Is it okay to get your vehicle registered with recalled tires?

We can all agree that drivers are responsible for taking care of the wear and tear on their vehicles that results from normal and foreseeable use. Manufacturers are responsible for selling you a defect-free vehicle. Manufacturers are responsible for launching a recall within five days of discovering a vehicle defect. Manufacturers are responsible for notifying consumers about those defects and making those repairs available.

Let’s not confuse these issues.