The Michigan Department of State has suspended the license of the Carvana dealership in Novi, MI, for "imminent harm to the public," a claim Carvana calls "baseless."
In a media release, the state said Carvana LLC, owned by Paul Breaux and located off of Novi Road near I-96, committed several alleged violations of the Michigan Vehicle Code. The alleged violations were discovered during an investigation by the state regulatory staff of multiple complaints from consumers about title problems with their vehicles.
A phone receptionist for the Carvana store told the Free Press she had no way to contact Breaux and directed the Free Press to Carvana's media relations. In an email, Carvana spokesperson Kristin Thwaites said, "We reject the Michigan Secretary of State’s allegations as baseless and reckless and we strongly disagree with the state’s heavy-handed and abrupt effort to shut down a growing Michigan business with tens of thousands of customers over what amounts to technical, paperwork violations involving title and transfer issues."
Thwaites said Carvana has corrected "99% of the technical paperwork violations cited in the state’s report and welcome the opportunity to address the state’s ongoing concerns through constructive dialogue, changes to outdated regulations through legislation, or in the courts."
Probation violation
The state said the dealership’s problems began in February 2021, when the state's regulatory staff conducted a general compliance inspection, finding multiple notices of noncompliance with the state vehicle code. The state and Carvana representatives had a preliminary conference in March 2021 to address the violations.
In May 2021, Carvana entered an 18-month probation agreement with a $2,500 administrative fine and admitted to several violations of the code, according to the media release. One of the stipulations of the probation agreement was that all dealership employees who handled paperwork would attend the department’s dealer training program.
But the state said the dealership violated the probation agreement, so the state held a second preliminary conference with multiple Carvana representatives in January. The state department continued to work with Carvana on compliance and on Feb. 7, Carvana representatives signed a six-month probation extension with a $5,000 administrative fine and admission of several more violations of the state's code.
But state officials received several complaints from consumers even after the probation extension, it said. So the state conducted another investigation that led to the current violations and suspension.
According to the state's media release, the violations include:
- Failing to make application for title and registration within 15 days of delivery for 112 customers since agreeing to an earlier probation extension.
- Committing fraud in connection with selling or otherwise dealing in vehicles where Carvana employees admitted to destroying title applications and all applicable documents pertaining to the sale of three vehicles that were sold to customers and Carvana took the vehicles back.
- Failing to maintain odometer records.
- Improperly issuing temporary registrations.
- Failing to have records available for inspection during reasonable or established business hours.
- Possessing improper odometer disclosure records on which the odometer disclosure had been signed on behalf of the car buyer.
- Violating terms of a probation agreement 127 times.
'Arcane and outdated regulations'
The Michigan Department of State said it will seek to revoke Carvana's dealer's license at an administrative hearing. No date was given for that hearing.
Carvana's Thwaites said Carvana works collaboratively with state leaders and regulatory agencies in many states and, "in most instances, arcane and outdated regulations have struggled to keep pace with our innovative business model, technology and surging customer demand for a new, convenient and accessible way to shop, buy and trade-in used vehicles. We urge the Secretary of State to begin dialogue to resolve this matter as expeditiously as possible. Meanwhile we will continue serving our customers, creating jobs and investing in Michigan while this matter is being resolved."
Consumers who have a complaint against Carvana or who have purchased a vehicle from that dealer and have had problems obtaining the title should call the Office of Investigative Services automotive complaint line at 517-335-1410.
