UPDATED: Volkswagen Settles Charges Over Cheating Emissions Tests, Deceiving Customers

The automaker will compensate customers and invest in public projects aimed at reducing emissions

UPDATED: Volkswagen Settles Charges Over Cheating Emissions Tests, Deceiving Customers
Image: Volkswagen
June 28, 2016
Updated: July 12, 2016

Volkswagen (VW) has agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. The agreement comes in the form of two related settlements, one with the United States and the State of California, and one with the Federal Trade Commission (FTC).

Volkswagen will offer U.S. consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles, and spend up to $10.03 billion to compensate consumers under the program. In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.

The settlements partially resolve allegations by the U.S. Environmental Protection Agency (EPA), as well as the California Attorney General's Office and the California Air Resources Board (CARB) under the Clean Air Act, California Health and Safety Code, and California's Unfair Competition Laws, relating to the vehicles' use of "defeat devices" to cheat emissions tests. The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its "clean diesel" vehicles.

According to the related civil complaint, Volkswagen allegedly equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions. This is known as a "defeat device." The use of this device resulted in harmful emissions being released at up to 40 times EPA-compliant levels during standard driving conditions.

The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles and do not address any potential criminal liability.

"Today's announcement shows the high cost of violating our consumer protection and environmental laws," said FTC Chairwoman Edith Ramirez in a written statement. "Just as importantly, consumers who were cheated by Volkswagen's deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them."

Volkswagen must offer to buy back any affected 2.0 liter vehicle at their retail value as of September 2015 -- just prior to the public disclosure of the emissions issue. Consumers who choose the buyback option will receive between $12,500 and $44,000, depending on their car's model, year, mileage, and trim of the car, as well as the region of the country where it was purchased. In addition, because a straight buyback will not fully compensate consumers who owe more than their car is worth due to rapid depreciation, the FTC order provides these consumers with an option to have their loans forgiven by Volkswagen.

Consumers who leased the affected cars will have the option of terminating their leases (with no termination fee) or having their vehicles modified if a modification becomes available.

If you believe your vehicle is eligible for a VW buyback, visit VWCourtSettlement.com.

The settlement of the company's Clean Air Act violations also requires Volkswagen to pay $2.7 billion to fund projects across the country that will reduce emissions of NOx where the 2.0 liter vehicles were, are or will be operated. Volkswagen will place the funds into a mitigation trust over three years, which will be administered by an independent trustee.

"Today's settlement restores clean air protections that Volkswagen so blatantly violated," said EPA Administrator Gina McCarthy in a written statement. "And it secures billions of dollars in investments to make our air and our auto industry even cleaner for generations of Americans to come. This agreement shows that EPA is committed to upholding standards to protect public health, enforce the law, and to find innovative ways to protect clean air."

The Clean Air Act settlement also requires VW to invest $2 billion toward improving infrastructure, access, and education to support and advance zero emission vehicles. The investments will be made over 10 years, with $1.2 billion directed toward a national EPA-approved investment plan and $800 million directed toward a California-specific investment plan that will be approved by CARB.

Update: California Attorney General Kamala D. Harris has announced that Volkswagen will pay an additional $86 million in civil penalties to the state of California. Of this sum, $10 million will be directed to local government agencies and academic institutions to research and develop technology to detect "defeat devices" and better assess on-road emissions.