SAN JOSE — CarMax has agreed to pay $1.1 million and review its practices to settle litigation from multiple California county prosecutors alleging the national auto dealer was slow-footing title transfers to customers in violation of state law.
The settlement with the online auto-sales company follows similar litigation resolved a year ago against AutoNation, another prominent national dealer of predominantly used cars.
The Santa Clara County District Attorney’s Office headed the litigation, joined by district attorneys in San Francisco, Sonoma, Los Angeles, Riverside and Ventura counties. The monetary settlement consists of $50,000 paid to a state consumer protection fund, $150,000 to cover prosecutors’ investigative costs and $900,000 in civil fines.
Santa Clara County Superior Court Judge Jeffrey El-Hajj approved the settlement Tuesday. The underlying lawsuit, filed Feb. 17, alleged CarMax over the past five years was routinely delaying the transfer of vehicle pink slips after a sale, thereby violating state vehicle and business codes.
As a result of the alleged practice, prosecutors said, customers were financially liable for the cars they just bought, but needlessly lacked valid documentation to exercise their rights as owners, namely the ability to resell, refinance or offer the vehicles as collateral for loans.
CarMax agreed to shore up its practices to ensure titles are transferred to buyers within the state’s 30-day deadline. The terms of the settlement also compel the company to place sales holds on vehicles where the dealer does not have possession of a pink slip — or a clear path to getting it within 30 days — or lacks a smog certificate or other required documents.
Additionally, CarMax will be required to adequately staff its dealerships and conduct training to ensure title transfers are processed within the deadline. The district attorney’s office said Wednesday that CarMax “cooperated with the investigation and quickly took steps to improve its compliance,” an assertion backed by the fact that the civil litigation was filed just over a month ago.
“Buying a car is a huge investment for many people, and that comes with the right to receive ownership on time,” District Attorney Jeff Rosen said in a statement. “Dealerships, whether large or small, need to meet their legal deadlines.”
In a statement Wednesday, CarMax representatives emphasized the company did not admit to any wrongdoing as part of the settlement, and that part of the timeframe of the allegations included the COVID-19 pandemic “when vehicle title processing was impacted industrywide” by DMV closures, backlogs, and short-staffing “which were outside of CarMax’s control.”
The statement continues: “During and since that time, we have strengthened our systems, processes, and oversight to better support timely title delivery, and we remain focused on continuously improving the systems and processes that support our customers.”