HMI Industries Inc., a cleaning appliance company, has agreed to pay a $725,000 civil penalty to the U.S. Consumer Product Safety Commission (CPSC). The penalty is for an alleged defect in its floor cleaners that can cause them to overheat and pose a burn hazard. The agency accused the company of knowingly delaying reporting the alleged defect until 2009. By that time, according to the CPSC, HMI had received some 120 reports from consumers about the cleaners overheating and causing property damage.
Two consumers had also sustained injuries by 2009, according to the CPSC. HMI and the CPSC had announced the recall of 44,000 floor cleaners at that time. But HMI claimed at the time that it had received only 40 consumer complaints of overheating and carpet damage and no injury reports. The CPSC said in a statement announcing the agreed-upon penalty:
Federal law requires manufacturers, distributors and retailers to report to CPSC immediately, within 24 hours, after obtaining information reasonably supporting the conclusion that a product contains a defect which could create a substantial product hazard, creates an unreasonable risk of serious injury or death or fails to comply with any consumer product safety rule or any other rule, regulation, standard or ban enforced by CPSC.
The CPSC provisionally accepted the penalty agreement in a 2-to-1 vote. As part of the agreement, HMI has also agreed to implement a compliance program, through which it would make sure that it reports the necessary information to the agency within legally required deadlines. HMI has also agreed to report any problems in its internal controls that could impair accurate reporting to the CPSC. The CPSC said further in its statement:
HMI agreed to provide written documentation of such improvements, processes and controls, upon request of CPSC staff, to cooperate fully and truthfully with CPSC staff and to make available all information, materials and personnel deemed necessary to staff to evaluate the company’s compliance with the terms of the agreement.
The settlement also suspends $325,000 of the penalty and monthly installment payments, based on HMI’s financial limitations. The CPSC, like other federal regulators in recent years, has targeted companies’ internal policies as part of their enforcement push.
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