If she doesn't have a required license, the child without a car seat is almost secondary! I would report that and have the car taken away and the mother fined (for giving the keys to someone without a license). To heck with her own stupidity in deciding to be reckless, I don't want anyone on the road that might hurt ME and mine! Driving isn't just physical, there are tests about the traffic rules! I don't care if she knows how to turn a wheel, hit me with no license and there will be jail time and what happens to her child and the family then?

Kathryn, you and your family's and other people's safety is much more important than what your niece feels about you! I think you do her no favors trying to be "kind".