Rental car companies targeted for renting recalled (but unrepaired) vehicles
The groups petitioned the Federal Trade Commission to prohibit Enterprise Holdings, the country's largest rental car company, from allowing recalled but unrepaired vehicles out on the road. The petition aims to draw attention to a loophole that prohibits the FTC from requiring the car rental industry to clean up its act, despite the fact that the agency's jurisdiction falls squarely on regulating unfair practices.
In the petition, the Center for Auto Safety, based in Washington D.C., and Consumers for Auto Reliability and Safety, based in Sacramento, Calif., argue the lack of such a requirement led Enterprise in 2004 to rent a recalled Chrysler PT Cruiser to two California sisters, who died in a car crash caused by a safety defect that wasn't fixed. The vehicle had been recalled because power steering fluid could leak and cause a fire in the engine compartment.
The groups are joined by the mother of the two women, Carol Houck, who has said her daughters, aged 20 and 24, died because Enterprise put "profits before safety." In May, the company admitted its negligence and a jury awarded the women's parents $15 million. According to Houck, the award amounts to one day's worth of revenue for the $13 billion privately-held company, which claims it makes more than 30 million car rental transactions every year.
"Enterprise should have adopted a policy to ground all cars that were recalled," said Clarence Ditlow, executive director of the Center for Auto Safety, which in 1988 filed a similar complaint against Budget Rent-A-Car. "The problem is, $15 million is petty cash to Enterprise," he noted, questioning the effect the penalty would have on the company's future policies if it continued to be trusted to decide how it rents damaged cars.
The car rental giant, which also owns Alamo Rent-A-Car and National Car Rental, issued a statement saying that it did not rule out rentals when manufacturers only suggested that cars be repaired, but not grounded. In the statement, which came just two months after Enterprise admitted its negligence in the fatal incident, executive vice president Greg Stubblefield said the company would evaluate recalls case by case.
Enterprise has also defended itself by saying that neither Chrysler nor the National Highway Traffic Safety Administration recommended grounding the more than 400,000 PT Cruisers recalled in 2004. Instead, the company claims owners were simply asked to contact their local dealers to schedule service appointments.
However, NHTSA does not have the authority to require car rental companies to carry out recalls, because it only regulates car sellers. And, while the FTC does oversee the rental car industry, it considers the repair of recalled cars by rental companies discretionary.
"These are repairs that are done at no cost to the company -- the manufacturer takes care of it," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety. "If you're a rental car customer, how are you supposed to know whether a car has been recalled? Without legislation, we don't trust the rental companies to make that choice."
Shahan added that the reason this issue hasn't come to the forefront of consumer protection legislation is a subversive arrangement the car rental companies force upon victims when they sue that precludes from talking about the lawsuit.
"If people have a family member that's injured, they are often saddled with huge medical bills. So the companies refuse to cover the charges and wear them down unless they sign what they call a 'confidentiality agreement' -- we call it a 'gag agreement.'"
The fact that Enterprise has failed to introduce new policies regarding renting recalled vehicles "shows real disregard for the value of their companies," said Shahan. "Just from a business standpoint it can't possibly pay to put their customers at risk that way."