The vehicle resale company CarMax has agreed to settle a civil lawsuit for over $1 million that was brought by the district attorneys of six California counties alleging violations of state consumer protection laws.
The suit was filed in Santa Clara County Superior Court by the counties of San Francisco, Santa Clara, Sonoma, and three in Southern California.
The company agreed to pay $1.1 million, including $900,000 in penalties, to resolve allegations it did not transfer ownership titles of used vehicles within the timeframe required by law, according to a statement from Sonoma County District Attorney Carla Rodriguez.
The other money will cover costs related to the counties’ investigations and to pay for future enforcement of consumer protection laws.
The company did not admit liability and disputed the claims, but agreed to an injunction prohibiting the delay of vehicle title transfers, known as “pink slips” in California because of the color of the paper showing legal ownership of a vehicle.
The company said in a statement that the period covered by the settlement included the disruptions caused by the COVID-19 pandemic, which it said contributed to DMV process changes and backlogs.
A CarMax spokesperson said those issues had been addressed with new internal controls.
“CarMax is dedicated to delivering the most customer-centric car buying experience in the industry, and that commitment includes timely vehicle title and registration processing.”
CarMax, which sells vehicles online and at physical dealerships, cooperated with the investigation and took steps to address any alleged issues before the settlement was finalized, according to San Francisco District Attorney Brooke Jenkins.
Failing to transfer a vehicle title in a timely manner prevents the new owner from proving ownership or using the vehicle as collateral for a loan.
The company was accused of failing to transfer the ownership titles within the 30-day window required by law and allegedly was not complying with other deadlines when paperwork bounced back with errors or needed fixing, according to a statement from Jenkins’ office.
Failing to transfer the titles in a timely manner prevents a new owner from proving ownership to refinance, resell, or use the vehicle as collateral for a loan, all of which they are entitled to do under California consumer protection laws.
CarMax agreed to implement internal policies to prevent the issue from recurring, including placing holds on vehicles that the company doesn’t physically have the pink slip for or won’t have a path to get it within the required timeframe.
The company also agreed to ensure smog checks and Vehicle Identification Number verifications are done before reselling a vehicle, ensure it has enough employees to process the ownership titles, and assign a high-level manager responsibility for regional compliance, according to the Sonoma County District Attorney’s Office.
This story was updated at 5:17 p.m. Tuesday, March 31, to include a statement from CarMax.