reported on Oct. 26 that it had an "exclusive" report on problems with BMW (BAMXY) vehicles that could suddenly lose power due to defective high-pressure fuel pumps (HPFP). That's a story I broke over three months ago on DailyFinance. But no matter, at least the ABC story appears to have sparked BMW into announcing it would recall 151,000 vehicles affected by the HPFP problem and replace their fuel pumps and add new software.
(I hope that solves the problem, but two BMW owners I spoke with for my original reporting on this problem in July had their fuel pumps replaced, and it didn't fix the issue. Both owners eventually sold their vehicles back to the manufacturer. Perhaps BMW has a solution now that will work.)
While BMW has finally admitted the need for a recall (earlier, it had not done so despite numerous customers' complaints about the fuel-pump problem), the ultimate-driving-machine-maker now also faces a related charge: that it's buying back these vehicles from owners and reselling them without disclosing their sordid history. That's according to Robert Silverman, founding partner of law firm Kimmel & Silverman in Ambler, Pa.,who's representing many current and former BMW owners.
Silverman alleges that BMW has been buying back these vehicles and reselling them with titles that don't reveal to the new buyers that the cars were bought back and the specific reason why they were bought back. Silverman says that results in a so-called laundered title.
Lemon Laws and "Branded Titles"
To understand what a laundered title is, a little background on lemon laws is needed. These are state laws (every state has one but the provisions differ) meant to provide a remedy to consumers of vehicles that repeatedly have mechanical problems that cannot be fixed -- known as lemons. Starting in 1996, one such remedy was to give consumers the chance to sell back their lemon at full purchase price to the manufacturer. But some manufacturers responded to this by reselling the bought-back lemons without disclosing this fact to the new buyers.
To counteract this, many states introduced a new legal requirement that manufacturers disclose to potential buyers a vehicle's status as a repurchased lemon. This disclosure -- which is supposed to be on a separate piece of paper in big letters -- is called a "brand." And the seller's obligation to provide a potential buyer with a so-called "branded title" is required in many states through their lemon laws.
For example, New Jersey's Lemon Law: N.J.S.A. 56:12-1 requires the seller to display prominently to the consumer the fact that the manufacturer bought back the vehicle because it was a lemon. Specifically, the New Jersey law requires that the seller display the following message: "NOTICE OF NONCONFORMITY IMPORTANT: THIS VEHICLE WAS RETURNED TO THE MANUFACTURER BECAUSE IT DID NOT CONFORM TO THE MANUFACTURER'S WARRANTY AND THE NONCONFORMITY WAS NOT CORRECTED WITHIN A REASONABLE TIME AS PROVIDED BY LAW."
A laundered title is one where that branding has been removed. For an example of a laundered title, let's look at the case of Allison Mangot, the original source for my July story about the defective HPFPs and who was featured in Nightline's story. According to Mangot, her husband's BMW 335i (VIN: WBAWL73529P473918), purchased in New Jersey, had a slew of repairs -- replacing tires, turning off the check-engine light, reduced power and finally complete loss of power -- before BMW bought it back with a check for $12,600 marked "cash settlement for fuel pump related issues" that she received on Aug. 7, 2010.
But the title for that vehicle, which was resold after BMW bought it back from Mangot, does not disclosethe lemon buyback. Instead, it lists the vehicle's condition as "(used) excellent." The CarFax report for the 335i indicates that its title had "no problem." And that could present legal problems for BMW because New Jersey state law requires the title to be branded, which it clearly was not.
BMW's Tom Kowaleski responded to a request for comment by noting that the carmaker had made a recall announcement and declined to comment on the laundered titles issue. Said Kowaleski: "Our recall announcements went out at 11:30 this morning [Oct. 26], and you can obtain them at www.BMWUSANEWS.com. As to your other question, you ought to talk to Robert Silverman."
And indeed I have. Silverman claims that in the "numerous" laundered title cases he's working on, BMW or an auction firm has resold these vehicles as "certified pre-owned." Silverman believes that such conduct is "illegal, unethical and immoral because the sellers aren't telling the buyers that those vehicles are lemons."
Silverman advises that if you happen to be in the market for a used BMW turbocharged vehicle, model year 2007 to 2011 (the models with the defective fuel pumps), don't buy it until the seller shows you the car's entire repair history.