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.

What are Your Rights?

If you own a lemon car, lemon truck, lemon RV, or lemon motorcycle, you have rights under your state’s laws, as well as rights under federal law. Although Lemon Laws vary from state to state, if your vehicle qualifies as a lemon, you may be entitled to:

*Have your vehicle replaced with an identical or comparable model *Receive a refund of the price you paid for the vehicle, less a deduction for mileage
*Reimbursement for other damages or costs associated with your lemon vehicle
*Other damages, as well as punitive damages

The interests of dealers and manufacturers
If you own a lemon, you’ve probably experienced enormous frustration when you’ve taken your vehicle in for repair. You may have asked yourself why the dealer or manufacturer simply doesn’t give you a replacement vehicle or refund. While this would happen in a perfect world, manufacturers and dealers want to save money. As a result, most of them use delay tactics or make you jump through hoops in the hope that you will either go away or that the Lemon Law time period (which differs from state to state, but is usually between one and two years after purchase) will expire. This is the reason why Lemon Laws were enacted in the first place.

The role of a Lemon Law attorney
Generally speaking, it's best to have an attorney represent you in your Lemon Law claim. While you don’t need a Lemon Law lawyer in order to file a claim, having one will significantly increase the chances of getting the settlement you deserve. Vehicle manufacturers have powerful legal teams that are adept at avoiding Lemon Law claims, and often only obey the law when they’re faced with the threat of a lawsuit by Lemon Law experts. When they are, they usually settle very quickly, since they know that the cost of going to court will be much higher. For these reasons, it's in your best interest to have an advocate who knows the law and works on your behalf.

Some states require that you go through arbitration before filing a lawsuit, while others mandate it only if the manufacturer's arbitration process is certified, and still others leave the question of entering arbitration up to the consumer. In addition, you are not necessarily bound by the decision of the arbitrator. Even if you decide to enter arbitration, it is a good idea to have legal representation.

A good Lemon Law lawyer will work on your behalf to get the compensation to which you’re entitled – typically in the form of a settlement. Your Lemon Law attorney should conduct a thorough investigation of your vehicle’s repair history, then present the manufacturer with a statement outlining your case and demanding full recovery. More often than not, the manufacturer will settle; if not, though, your Lemon Law attorney should be prepared to sue the manufacturer or enter into arbitration.

The costs of a Lemon Law attorney
You shouldn’t have to pay a Lemon Law lawyer to handle your Lemon Law case. That's because the law says that the manufacturer is responsible for paying the consumer’s attorney’s fees in successful Lemon Law claims. Most of the time, manufacturers pay legal fees as part of settling your claim. If your case goes to trial or arbitration, the court will order the manufacturers to pay attorney’s fees. Either way, you shouldn’t have to pay anything.

Remember, although you can file a Lemon Law claim on your own, it’s in your best interest to have an attorney to fight for your rights.