November 30, 2023

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State Of Texas Takes On Vroom

Law360 (April 21, 2022, 6:04 PM EDT) — Texas has filed a state court action against Vroom Automotive LLC, accusing the online used car dealer of misleading customers about the condition and ownership of vehicles it sells and their financing application statuses, after receiving almost 5,000 consumer complaints about the company in just three years.

Attorney General Ken Paxton’s office announced the lawsuit Wednesday, asking a Travis County District Court judge to enter temporary and permanent injunctions prohibiting Vroom from continuing to mislead customers on various fronts. The lawsuit is also seeking civil penalties ranging from up to $10,000 to up to $250,000 per violation of the Texas Deceptive Trade Practices-Consumer Protection Act, according to court documents.

The lawsuit is based on almost 5,000 consumer complaints submitted to the Better Business Bureau and Paxton’s office since 2019. Roughly 4,000 were submitted just in the year leading up to the lawsuit’s filing, according to court documents.

Vroom, which launched in 2013, began to “aggressively scale” its business in 2019 ahead of its $468 million initial public offering in June 2020. While other dealerships experienced decreases in sales due to supply chain issues caused by the COVID-19 pandemic, Vroom continued to expand. The online dealership saw its sales increase from 10,000 in 2018 to more than 53,000 in the first three quarters of 2021, the lawsuit says.

This growth, however, “allowed inadequate systems and procedures to spiral into violations” of the state’s deceptive trade practices act, Texas alleges.

The Lone Star State accuses Vroom of violating its deceptive trade practices act by misrepresenting the condition of its cars, which are purported to have accident-free Carfax reports. The company has also misrepresented whether it obtained clear title of the vehicles before reselling them and failing to disclose systemic delays in processing title and registration, among other things.

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