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Congress Treads Water on "Flood Car" Bill

GOP Has a Hot Potato for Democrats

By Joe Benton
ConsumerAffairs.com

December 7, 2006

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

More than a year has gone by since hurricanes Katrina and Rita devastated the Gulf Coast, flooding hundreds of thousands of new and used cars on dealer lots. Now a handful of members of Congress say they are still trying to pass legislation to protect consumers from rip-off artists selling the flood-damaged cars -- but not until the next session of Congress.

There is a plentiful dose of "Washington as usual" politics mixed in with all of the consumer protection promises as well.

Led by two Republicans, Sen. Trent Lott from Mississippi and Rep. Cliff Stearns from Florida, the group promises to continue an effort to pass total-loss disclosure legislation when the new Congress convenes in January.

"The more consumers hear about the danger caused by rebuilt wrecks, the more they want Congress to do something about it," said David Regan, Vice President of Legislative Affairs for National Automobile Dealers Association which is backing the Republican-led effort.

"With more than five million vehicles totaled by insurance companies just last year -- more than half a million of them coming from the Gulf Hurricanes of 2005 -- something has to be done to permanently notify consumers about these severely damaged vehicles," he said.

Thousands of flood vehicles are sold at salvage auctions and at least partly rebuilt, later showing up with clean titles that will not tip off consumers that the vehicle was severely damaged.

NADA insists the proposed legislation is nonpartisan. The claim is not altogether accurate and in some sense similar to the partial disclosure tainting many flood car titles.

Backers of the flood-car legislation are trying to position their bill as a priority when the new Congress takes office in January. Democrats will control both the House and Senate for the first time in 12 years.

Follow the Money

Key elements of the insurance industry oppose the bill and insurance interests give about a third of their campaign contributions to Democrats, a somewhat higher percentage than automotive interests.

So backing the flood car bill could cause some Democrats to turn their backs on big campaign contributors early in their control of the Congress. That is an uncomfortable position for any politician these days -- a hot potato the Republicans have been happy to pitch to the Democrats.

The bill would require insurers to provide notice whenever they declare a vehicle a total loss for any reason, placing a new disclosure burden on the industry. Vehicle identification numbers would go into a database. Buyers could use the information to make sure they are not getting a repaired wreck or flood-damaged vehicle that, legally or not, has been given a clean title.

The insurance industry is certain to chip away at the legislation, even if it does not openly oppose it.

Supporters of the legislation claim that permanently red-flagging damaged vehicles would reduce the likelihood that dangerous cars will end up in a consumer's driveway. That is the sort of catchy language written to embarrass a politician agreeing with insurance industry executives who backed their last campaign.

The bill would also require insurance companies to reveal the reason for the total loss and the date of total loss, the odometer reading on that date, and whether or not the airbag deployed.

Flood-damaged vehicles are surfacing far from the Gulf Coast, but conflicting and confusing state motor vehicle title laws hamper a buyer's ability to spot these problem cars.

"The goal of this legislation is simple -- if a vehicle is totaled, the VIN should be disclosed to the public," a NADA official said.

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