Texas Attorney General Ken Paxton has filed a lawsuit against online car seller Vroom for allegedly failing to disclose information about the vehicles it sold to Texas consumers, including their history and condition. Paxton filed the lawsuit against Vroom, which also does business under Texas Direct Auto, in Travis County District Court on April 20.
Vroom also allegedly misrepresented and failed to disclose significant delays in transferring clear titles and obtaining vehicle registrations, as well as failed to adequately disclose terms of financing and approval. These alleged actions represent violations of the Texas Deceptive Trade Practices Consumer Protection Act.
Under Texas law, a car dealer has 30 days from selling a vehicle to file the title and registration paperwork and 45 days if the car is financed.
According to the press release from Paxton’s office, Texas consumers have filed over 5,000 complaints with both the Better Business Bureau and the Office of the Attorney General against Vroom and Texas Direct Auto over the last three years.
A CBS 11 investigation also found that the Texas Department of Motor Vehicles (DMV) has issued Vroom more than eighty violations since 2019, including fifty-nine cease and desist orders.
A Vroom spokesperson told CBS 11, “We are aware some customers are experiencing delays in receiving their titles and registrations. We are actively working with them to resolve their issues as quickly as possible so they can fully enjoy the vehicle they purchased from us.”
The Houston-based company also does business in Arizona and Florida, where it has faced similar problems. The Florida Department of Highway Safety and Motor Vehicles recently issued Vroom a $47,000 fine for forty-seven counts of not transferring a vehicle title per Florida law. Arizona officials have said they are looking into similar complaints.
After Florida filed its complaint, investigator Shannon Behnken of WFLA contacted Vroom for comment and received an emailed statement from a company spokesperson, who wrote:
“Our goal is for every customer to enjoy their vehicle from the moment their purchase is complete. As consumers turn more and more to buying cars online, we are investing significantly in our people, processes and operations, so every step in getting a customer their vehicle is an experience they deserve. We are committed to continuing to work with customers … and the Florida Department of Motor Vehicles to solve any issues that Florida residents might have at any point in that process.“
According to the company’s website, Vroom has seen its sales skyrocket, with $2.4 billion in e-commerce revenue for the fiscal year of 2021, a 167% increase from the previous year.
In its most recent annual report filed with the U.S. Securities and Exchange Commission, Vroom noted it has had trouble keeping pace with its proliferation.
“From time to time, we have been subject to audits, requests for information, investigations and other inquiries from our regulators related to customer complaints. As we have encountered operational challenges in keeping up with our rapid growth, during the past six months there has been an increase in customer complaints, leading to an increase in such regulatory inquiries. We endeavor to promptly respond to any such inquiries and cooperate with our regulators,” the company wrote.
Paxton’s lawsuit claims that Vroom has not controlled its expansion efficiently and has enabled inefficient processes and procedures to spiral into violations of the Texas Deceptive Trade Practices Consumer Protection Act.
Though the Texas DMV has issued over eighty violations over the last three years, it has taken no action on Vroom’s dealership license, and the total fines levied against the company are less than $35,000.
Better Business Bureau of Houston President Don Parsons says his office receives numerous complaints about Vroom each day, remarking that consequences for the company should be made more severe.
“I think maybe it’s about time they got in there and used a bigger stick because the little one isn’t working,” he said. “There is no other company in my database that racks up as many complaints as Vroom.”
Vroom currently has an “F” rating with Better Business Bureau.
The lawsuit filed by the State of Texas details several consumers’ claims of vehicles misrepresented as being in good condition.
One Texas consumer reported that the oil change and engine service lights came on within hours of delivery in one case. The consumer also noticed an irregularity in the windshield and scratches on the wheel. The buyer took the vehicle to a nearby dealership and was told the car required spark plugs, new filters, an oil change, and a radiator leak to be repaired.
In another case, a Texas consumer complained that when Vroom delivered their vehicle, they immediately noticed a strong odor in its interior, and the interior carpet looked replaced.
The vehicle was taken to a mechanic who reportedly identified areas of internal rust that could only be caused by sitting in water for an extended amount of time.
The consumer alleged that Vroom never disclosed the rusted areas but allowed them to return the car. Still, she later noticed Vroom had apparently relisted the exact vehicle without any information regarding the flood damage.
Another Texas consumer claimed that a local Cadillac dealership discovered multiple issues with his vehicle when he took it for an inspection upon delivery. The car reportedly had a damaged tire and rim, a cracked spoiler and windshield, several bolts missing from the undercarriage, and even evidence of a prior accident.
The consumer was quoted $8,000 to fully repair the issues that were not identified and addressed during Vroom’s “rigorous inspection process,” a procedure that the company’s site claims all of its vehicles undergo prior to being sold.