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Suit Alleges Carfax Reports Are Incomplete and Unreliable

May 10, 2004

MEMPHIS, Tenn. -- Carfax Inc., provider of vehicle history reports, is being sued on the grounds that it fails to disclose the limitations of its database. The class action, still in its infancy, claims that Carfax's information is unreliable because the company can't access public accident records in 23 states.

"Of the four million-plus accidents each year, we believe it's missing the vast majority," said David McLaughlin, attorney for the plaintiffs. "Yet it is convincing people that it can tell them whether or not their cars have been involved in accidents." Carfax seems to be hoodwinking the consuming public about the abilities of its service, said McLaughlin.

But Carfax claims it clearly discloses what its reports cover. "We have every state-identified major accident in our database and an ever-increasing number of non-state-reported accidents," said spokesperson Larry Gamache. This includes police reports and information from service and repair shops.

The company said it has over three billion unique vehicle history records in its online database. But it doesn't claim to cover every accident that has ever happened, particularly because an indeterminable number of them remain unreported.

"There's a significant number -- and nobody knows how many -- of accidents that happen and aren't reported at all," said Gamache. "No insurance claim, no repairs ... no police are called."

McLaughlin believes the unreported accidents are inconsequential. "Of the four million reported accidents, how many does Carfax pick up?"

The plaintiffs in the suit include car buyers and dealers who have purchased vehicles with clean Carfax reports and later discovered that their vehicles had been in accidents. Some of them found out about previous damage and repair to their vehicles when they took them to a mechanic. Auto repair shops have also come forward to testify of the discrepancies.

This is no surprise to Gamache. "We encourage every consumer to take our information and go to a mechanic and have them examine the car," he says. Carfax advocates a common-sense approach to used-car buying, which includes getting the car inspected, looking at consumer reports and getting input from other car buyers.

"Carfax is one tool -- and an important one -- but only one tool in a process," says Gamache.

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