Texas Suing Online Car Retailer Vroom

Online car retailers like Carvana, Vroom, and Shift had their business skyrocket during the pandemic. While new car dealers struggled with inventory shortages, the used car market exploded, and companies offering a fully-online purchasing process had huge growth. Some of that seems to be unraveling already: Carvana is weathering a major sales downturn this year, despite the market being as hot as ever, and the company is struggling with some major complaints over mishandled paperwork and other issues. They’re not the only one. THis week, Automotive News reports that the state of Texas is suing online seller Vroom over major issues including alleged title delays and misrepresented vehicle histories.

In a 21-page petition, the Texas attorney general’s office lays out damning claims against Vroom. One of the most surprising things is the number of complaints against Vroom the Better Business Bureau and the Texas AG have received: Nearly 5,000 in the past three years, 4,000 of which came in the past 12 months.

It sounds like Vroom simply grew too big, too fast, with barely any infrastructure or processes in place to handle the volume of transactions. The Texas filing describes a customer who bought her vehicle in February 2021, and still had not received the title or registration for the car as of January 2022. Other customers received their vehicles, drove them for several weeks, then were contacted by Vroom and told that they had never been approved for financing. According to the Texas AG, Vroom would then threaten these customers with repossession if they did not agree to new, more expensive financing terms, pay in full, or find their own financing. One Texas customer had her car for several weeks, then heard from Vroom that she never had approval from her bank. The company then ran credit checks on the customer with multiple lenders, collecting a non-refundable $249 application fee on every financing application.

The worst part? Texas alleges that Vroom is selling vehicles with accident histories that haven’t been disclosed. Some vehicles have allegedly been sold needing extensive repair, or showing evidence of flood damage, information that was never given to the buyers. From the Texas AG’s filing:

In one case, within hours of delivery, a Texas consumer reportedly noticed that the oil change and engine service lights came on, and there was an irregularity i
n the windshield and scratches on the wheel. The consumer took the vehicle to a nearby dealership, and after an inspection was told it needed 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 the vehicle, the consumer immediately noticed a strong odor in the interior that she described as similar to being near a boat. She noted that the interior carpet looked as if it had been completely replaced. The next day, she took it to a mechanic for a standard inspection. The inspection identified several areas of internal rust that could only be caused by sitting in water for an extended amount of time […] as well as other conditions that indicated flood damage. The consumer stated that [Vroom] never disclosed the rusted areas or the other evidence of flooding.

In the case of the flood-damaged vehicle, Vroom accepted the vehicle back, but the buyer soon saw it re-listed on the company’s website, again with no mention of damage.

The state of Texas is pursuing action against Vroom under its Deceptive Trade Practices Act, which could carry a fine of up to $10,000 for each violation.