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Suit Charges Feds Fail to Fight Title-Washing

National database would help consumers spot rebuilt vehicles

February 6, 2008

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 15 years after Congress required the federal government to set up a national database to allow car buyers to determine whether a vehicle has been stolen or rebuilt after a wreck, the system is still not in place, three consumers groups said in a lawsuit filed against the Department of Justice (DOJ).

Public Citizen, Consumers for Auto Reliability and Safety (CARS) and Consumer Action sued in the U.S. District Court for the Northern District of California. The groups want the court to order the DOJ to move forward with creation of the National Motor Vehicle Title Information System.

The database would help consumers avoid purchasing a potentially dangerous used car by allowing them to instantly check the validity of a car’s title and mileage and learn whether it had been stolen or was a junk or salvage vehicle.

A salvage vehicle is one that was totaled in collision, fire, flood or other event to the extent that its value, plus the cost of repairing it for legal operation, is more than its fair market value immediately before the event that caused the damage.

“People’s lives are at risk because they are buying used cars that are missing air bags or have other critical safety defects due to their hidden histories as junked or salvaged vehicles,” said Public Citizen President Joan Claybrook.

“How much longer will consumers have to wait before the federal government delivers what Congress asked for in 1992?”

Agencies do nothing

After passing a law in 1992 under the leadership of then-Rep. Charles Schumer (D-N.Y.) that called for the national database, Congress shifted responsibility of establishing it to the DOJ in 1996 because the Department of Transportation had failed to make any headway.

The move didn’t make a difference; the DOJ has now delayed more than 10 years without making progress on this critical source of information for consumers.

Every year, people all across the country fall victim to auto fraud when they buy used cars that were rebuilt after a wreck. The auto safety groups held a telephone news conference Wednesday to discuss details of the suit. These victims spoke to reporters:

• Alicia Purvis of Baton Rouge, La., who bought a used 2003 Volkswagen Golf only to have its rear axle fall off while she was driving it. Later, she learned the car had previously been in a serious collision.

• Army Sgt. Rosa-La Williams, who bought a 2002 BMW 325i and later found out from the manufacturer that before she owned it, the car had been totaled after it hit a tree and the engine caught fire.

• Jed Faulkner of Farmville, Va., who unknowingly purchased a 1999 Ford Ranger that had been totally rebuilt and owned by 11 different people in the four years before he bought it.

• Zonya Jones of Waynesboro, Va., who was told that the $20,000 used 2000 Ford Windstar van she had bought for her family needed to have its title branded as salvaged.

“If I had been able to check the Golf’s history while I was thinking about purchasing the car, I would have saved a whole lot of trouble,” Purvis said. “What if another car had been involved in the collision where the axle fell off?”

Jones added: “Consumers need information available to be able to check out this kind of fraud, and we need laws to protect consumers from being victimized.”

DOJ drags its feet

Under the 1992 law, junk and salvage yard operators are required to file monthly reports to the database operator. Each report is supposed to contain a list of the vehicle identification numbers of all junk and salvage vehicles obtained during the previous month. The law also requires insurance companies to file similar reports.

But the DOJ has yet to establish regulations that would tell insurance companies and junk and salvage yards how to report their information.

The suit filed by the consumer groups asks the court to find the Department of Justice in violation of the 1992 law for not having established the database or even the regulations setting it up. The suits asks the court to order the DOJ to issue the regulations within 30 days of finding the agency in violation.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety, said the problem is particularly prevalent in California, where her group is based.

“Californians are driving countless cars that have been totaled and rebuilt - many of these drivers have no idea that they’re driving a defective vehicle,” she said. “While the DOJ is fiddling, America's car buyers are getting burned.”

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