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States Need Help Fighting Used Car Fraud

November 16, 2005

Salvage Titles • Suit Charges Feds Fail to Fight Title-Washing • Carfax Reports Record Amounts of Title "Washing" • Congress Treads Water on "Flood Car" Bill • States Need Help Fighting Used Car Fraud • Title-Washing Scams Follow Katrina • Pennsylvania Suit Challenges State Farm Salvage Title Deal • State Farm's Wrecked Car Owners Feeling Slighted • State Farm Pays $40 Million to Settle "Branded" Car Title Issue • California Bill Would Expose Totaled Vehicles

State motor vehicle agencies are warning Congress that consumers are vulnerable to fraudulent used car sales, especially in the wake of flood damage from the Gulf Coast Hurricanes.

Karen Chappell, deputy commissioner of the Virginia Department of Motor Vehicles, told the Senate Commerce, Science and Transportation Subcommittee on Consumer Affairs, Product Safety and Insurance, that as many as 500,000 vehicles were damaged by Hurricanes Katrina and Rita.

"Consumers deserve real-time and reliable access to the title histories of any motor vehicle they plan to buy," said Chappell. "And buyers and sellers need to know how each state defines all vehicle brands, including salvage, junk and flood."

As part of the Anti-Car Theft Act, state DMVs and the American Association of Motor Vehicle Administrators (AAMVA), developed a national online, real-time motor vehicle history system. Chappell said a U.S. Department of Justice cost-benefit analysis indicated this system has the potential to save consumers from $4 billion to $11.3 billion annually.

But due to lack of federal funding, the system currently serves only 52 percent of the U.S. vehicle population.

"Motor vehicle fraud costs consumers billions of dollars a year with life threatening consequences," said Chappell.

"It endangers human life by putting unsafe vehicles back onto our roads, and title fraud dupes hard-working consumers into buying vehicles that look good on paper, but are not safe or reliable."

She said criminals can easily exploit the loopholes in varying state vehicle "branding" definitions. Vehicle brands, such as flood, non-repairable or salvage, can get lost in the transfer from state to state. This expunges the past histories of motor vehicles. And this lack of consistency leaves the consumer at a major disadvantage when purchasing a new or used motor vehicle.

AAMVA has supported a number of efforts to help establish national salvage branding legislation to eliminate these inconsistencies and protect consumers. But to date, none have been successful.

In the absence of federal legislation, many states have enacted additional laws or strengthened existing laws governing the titling or branding of salvage vehicles.

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