Nov. 24, 2010— -- As the busiest travel holiday of the year gets underway, U.S. safety officials have launched an investigation to determine how quickly rental car companies repair vehicles that have been recalled for safety issues. The National Highway Traffic Safety Administration (NHTSA) has sent letters to GM, Chrysler and Ford asking for details on the recall repair status of almost 3 million cars that are among the vehicles most commonly rented.
NHTSA says the crackdown was prompted by "incidents involving allegations of personal injury and death" allegedly caused by "safety defects" on rental vehicles, including a 2004 case documented in an ABC News report in which two sisters died in a PT Cruiser rented from Enterprise that had been subject to a safety recall.
No federal law requires that rental companies fix recalled cars before handing the keys to consumers, and as the ABC News report documented, not all firms have policies in place to ensure that vehicles under safety recall are repaired before they're rented.
Executives from Enterprise, the country's largest car rental company, admitted that recalled cars were sometimes rented without being fixed during testimony for a lawsuit filed by the parents of Raechel and Jacquie Houck, sisters who died when their rented Chrysler PT Cruiser caught fire and hit a truck on a California highway.
"When demand called, we rented out recalled vehicles, it happened, I won't lie," said Mark Matias, a former Enterprise area manager in San Francisco, in an affidavit filed for the case in 2008. "If all you have are recalled vehicles on the lot, you rent them out. It was a given. The whole company did it. Enterprise's corporate offices look the other way regarding this fact."
Other Enterprise executives testified that there was no companywide policy requiring cars under recall to be held back from rental.
Avis, Hertz and Enterprise
At the time of the ABC News report, neither Avis nor Hertz had such companywide policies either, according to their spokespeople. Both companies said they assessed safety recalls on a case-by-case basis, and work closely with the car manufacturers to make sure repairs are done in a timely manner.
Paula Rivera, public affairs manager for Hertz, now says the company's policies have been "streamlined" since the ABC News report and that Hertz will no longer rent vehicles under safety recall to the public until they are repaired.
Avis did not immediately respond to a request for comment.
A spokeswoman for Enterprise Holdings, the parent company of National, Alamo and Enterprise, said the company had not changed its policy since the ABC News report in July, but that it had "grounded" Toyota and Pontiac Vibe vehicles earlier this year without any government mandate or manufacturer order, and that Enterprise grounds vehicles whenever a manufacturer expressly recommends it.
"We, of course, are willing to cooperate with the Federal Trade Commission and the National Highway Traffic Safety Administration in any inquiry they wish to make concerning our current practices," said Laura Bryant of Enterprise. "We are confident those practices and procedures are fully consistent with our commitment to provide customers vehicles that are safe to drive."
The Federal Trade Commission (FTC) is currently considering a petition filed by the Center for Auto Safety -- and prompted by the Houck case -- that would prevent Enterprise Holdings from renting out vehicles that are still subject to a safety recall.
"The rental car companies have been hiding a dirty little secret – they wait until it's convenient to do safety recall repairs," said Clarence Ditlow, executive director of the Center for Auto Safety. "By auditing auto company recall repair records for cars sold to rental car companies, NHTSA will expose the secret that cars consumers rent have unrepaired safety defects. Using the NHTSA data, the FTC can require rental cars to be parked until fixed for safety recalls."
Houck Family Wins $15 Million
Raechel and Jacquie Houck rented their Chrysler PT Cruiser in October 2004, one month after Enterprise received a recall notice that an underhood engine fire could result from a possible leak in the vehicle's power steering fluid.
Raechel, 24, and Jacquie, 20, died instantly after their car caught fire and hit an oncoming semi-tractor trailer on Highway 101 in northern California. The sisters had rented the car in Santa Cruz, California to visit their parents in Ventura County.
"You want them to drive something safe, so I sent them the money to go to Enterprise and get a rental car," recalled their father Chuck Houck.
During the court case, the Houck's lawyers discovered that the Enterprise Santa Cruz branch had rented the PT Cruiser three other times since the recall notice.
"I had never imagined in a million years that a company could rent a car they knew was recalled," said the girls' mother, Cally Houck.
During the discovery phase of the case, an Enterprise manager, Thomas Moulton, was asked, "Did you ever consider the possibility that Enterprise should not rent cars to the public after they've received recall notices from the manufacturer?"
"No," responded Moulton.
"Do you think it's a good idea to do that, to rent cars that can catch fire, to the public?" he was asked."I have no idea," responded the Enterprise manager during the deposition.
The Houcks had earlier turned down a $3 million settlement offer that would have prevented them from talking about their case against Enterprise. After Enterprise's admission of negligence, an Alameda County jury awarded the family $15 million.
Senator Charles Schumer, D.-New York, has called on the FTC to expand on the Enterprise petition from the Center for Auto Safety by requiring all of the rental car companies to repair recalled vehicles before they rent them. "By knowingly renting recalled vehicles, rental car companies have shown a brazen disregard for the safety of their consumers," said Schumer in his letter to FTC commissioner Jon Leibowitz. "This gap in the current law is wrong, and the FTC should immediately fix this problem so that there are no more preventable tragedies. If the FTC can't or won't act, Congress will."
In its return letter to Schumer, the FTC acknowledged that the "alleged practices could pose serious safety concerns to consumers," and said agency staff are still reviewing the issue.