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65–005 PDF 2011

S. HRG. 109–1123 

PROTECTING THE CONSUMER FROM FLOODED 

AND SALVAGE VEHICLE FRAUD 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONSUMER AFFAIRS, PRODUCT 

SAFETY, AND INSURANCE 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

NOVEMBER 16, 2005 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

TED STEVENS, Alaska, Chairman 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

DANIEL K. INOUYE, Hawaii, Co-Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

LISA J. SUTHERLAND, Republican Staff Director 

CHRISTINE DRAGER KURTH, Republican Deputy Staff Director 

DAVID RUSSELL, Republican Chief Counsel 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

SAMUEL E. WHITEHORN, Democratic Deputy Staff Director and General Counsel 

LILA HARPER HELMS, Democratic Policy Director 

SUBCOMMITTEE ON CONSUMER AFFAIRS, PRODUCT SAFETY, AND 

INSURANCE 

GEORGE ALLEN, Virginia, Chairman 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MARK PRYOR, Arkansas, Ranking 

DANIEL K. INOUYE, Hawaii 

BARBARA BOXER, California 

(III) 

C O N T E N T S 

Page 

Hearing held on November 16, 2005 ...................................................................... 1 

Statement of Senator Allen ..................................................................................... 1 

Statement of Senator Pryor .................................................................................... 3 

WITNESSES

Brauch, William L., Special Assistant Attorney General/Director, Consumer 

Protection Division, Iowa Attorney General’s Office ......................................... 4 

Prepared statement .......................................................................................... 6 

Bryant, Robert M., President/CEO, National Insurance Crime Bureau ............. 14 

Prepared statement .......................................................................................... 17 

Chappell, Karen, Deputy Commissioner, Virginia Department of Motor Vehicles; on Behalf of the American Association of Motor Vehicle Administrators ........................................................................................................................ 10

Prepared statement .......................................................................................... 12 

Fuglestad, Alan, Vice President, Operations and Technology, Experian Automotive .................................................................................................................... 37 

Prepared statement .......................................................................................... 39 

Hall, Donald L., President and Chief Executive Officer, Virginia Automobile 

Dealers Association; on Behalf of the National Automobile Dealers Association ........................................................................................................................ 42

Prepared statement .......................................................................................... 44 

Shahan, Rosemary, President, Consumers for Auto Reliability and Safety ....... 19 

Prepared statement .......................................................................................... 30 

Article from the January 2002 Consumer Reports, entitled, ‘‘Wrecks In 

Disguise’’ ........................................................................................................ 19 

(1) 

PROTECTING THE CONSUMER FROM 

FLOODED AND SALVAGE VEHICLE FRAUD 

WEDNESDAY, NOVEMBER 16, 2005 

U.S. SENATE, SUBCOMMITTEE ON CONSUMER AFFAIRS, PRODUCT

SAFETY, AND INSURANCE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:34 p.m. in room 

SD–562, Dirksen Senate Office Building, Hon. George Allen, 

Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. GEORGE ALLEN, 

U.S. SENATOR FROM VIRGINIA 

Senator ALLEN. Good afternoon to everyone and welcome to this 

hearing of the Senate Subcommittee on Consumer Affairs, Product 

Safety, and Insurance. I call this hearing to order. While the impetus of today’s hearing was unfortunately the devastation caused by 

the recent hurricanes, we hope to examine ways to protect consumers from further harm brought by the illegal and fraudulent 

transfer of flooded and salvage vehicles. 

The Ranking Member of this Subcommittee, Senator Mark Pryor 

of Arkansas, personally conveyed to me his concern about this and 

his commitment to preventing the sale of flooded cars to 

unsuspecting buyers and I thank him for his interest and his experienced leadership. He has experienced this in Arkansas when he 

was Attorney General. He will be here forthwith. He is on his way. 

But I wanted to get the hearing started in a timely fashion. 

We are promoting this as a forum to actually learn, to listen from 

all of you who have come here. I very much thank each and every 

one of our witnesses, some who have flown in this morning, for 

being here. Your insight, your knowledge, will be very, very helpful 

to us and we thank you for your testimony and your preparation. 

After Hurricanes Katrina and Rita hit the Gulf Coast, questions 

arose about what the Federal Government should do. There are a 

lot of things the Federal Government is doing appropriately along 

with the states and private industry, and we all want to help people rebuild their lives and their communities and get back on their 

feet. We also want to protect victims from fraud and illegal activities. 

In addition to the tremendous economic loss that was caused by 

this year’s hurricanes, a window has been opened that may create 

circumstances for fraudulent and illegal activities. One way that 

could happen is through fraudulent transfer of the flooded and 

2 

salvaged vehicles without the seller fully disclosing the vehicle’s 

damage history. This tragedy has left an estimated 500,000 motor 

vehicles flooded in Alabama, Mississippi, and Louisiana. This hearing is an attempt to show malefactors that we are remaining vigilant and are aware that fraud can take many forms, particularly 

associated with flooded vehicles, and to develop solutions to deter 

any further deceptive behavior. 

The damage history of a car is an important information factor 

for a consumer to know when purchasing or making a decision to 

purchase a vehicle. In addition to financial considerations, a vehicle’s safety can also be diminished after having sustained flood 

damage. Fraud can occur through what is known as title washing 

or the process of physically transferring a flooded or salvaged vehicle to a state that does not require the other State’s brand on that 

particular vehicle to carry forward. In other words, all indication 

on a vehicle’s title of prior damage is removed from that title. This 

is when problems can occur, as potential buyers of that vehicle are 

not aware of that vehicle’s damage history. 

Lack of public disclosure of a used car’s previous damage can 

lead to financial problems. The cars are usually reinsured after a 

new owner takes possession. If some problem develops with the car, 

the insurance company is going to get hit again for a claim on that 

car. Many lawsuits and litigation can result, which is hardly productive, but that can ensue. And even worse, it can lead to an unsafe vehicle being on the roads and causing wrecks and physical 

harm. 

So in hopes of averting any further harm caused by unsafe flooded and salvaged vehicles, we have invited these witnesses here 

today who will describe the problems that we face, which can unfortunately occur when a car has been significantly damaged. We 

look to all of you, all six of you, and the organizations and associations that you represent, to offer us possible solutions as well. 

We look forward to hearing from each of our witnesses on the 

prudence of Federal involvement. I am not one who is always 

claiming for Federal jurisdiction, but this is interstate commerce 

and there may be an appropriate Federal role and that is what we 

want to hear from you in addressing this vehicle fraud issue stemming from an event like a flood, as well as options for decreasing 

fraud in the used car market. 

With that, the person who I was extolling the virtues of earlier 

on this issue, who has a great deal of experience and knowledge 

on this subject. If you would like to make an opening statement, 

Senator Pryor, then I will introduce our witnesses. 

I will also say that—I do not know; have votes started? All right, 

we have three votes. Three votes. What we are going to have to do 

is kind of run this like a tag team. So what we are going to try 

to do is not have to recess and start up back and forth. So one of 

us will always be here while the other is voting. 

Senator PRYOR. If you want to go vote now—— 

Senator ALLEN. Well, I will introduce the witnesses. 

Senator PRYOR. OK, great. 

Senator ALLEN. Go ahead. 

3 

STATEMENT OF HON. MARK PRYOR, 

U.S. SENATOR FROM ARKANSAS 

Senator PRYOR. Let me make a very brief statement and let me 

just thank all of you for being here and thank you for your attention to this issue. I want to thank the Chairman for his leadership 

on this and helping pull this hearing together. We all know that 

there is a real problem with flooded cars and the issue of a branded 

title or salvaged title. On the Federal level, some sort of uniform 

standard I think is probably in order. We need to get input from 

you about what is the best approach and get your thoughts on the 

plusses and minuses of various approaches on this. 

But you know the numbers and know the facts on this better 

than anyone. But basically, if consumers in this country buy a car 

that has been flooded, they are almost guaranteed to have problems with that car one way or the other. It is going to be rust, it 

is going to be the engine, it is going to be the electrical system, it 

is going to be safety, like the air bags do not work, or something. 

You know that it is going to happen. 

This is a major headache for not just consumers, but car dealers 

and insurance companies, and really is something that I think we 

need to take a serious look at. 

I want to thank the Chairman for his leadership in having this 

hearing today and assembling the witnesses. Mr. Chairman, thank 

you for doing this. 

Senator ALLEN. Thank you. Thank you again, Senator Pryor, for 

your leadership on this very important issue. 

Before we listen to the testimony of our witnesses, our panelists, 

let me introduce them, all gathered here. First we have Bill 

Brauch, who has flown in from Iowa to join us today. Mr. Brauch 

is a Special Assistant Attorney General in the Iowa Attorney General’s Office, and the Director of the Consumer Protection Division. 

He is known for his work on automobile salvage safety issues. We 

are glad you are able to make it and we look forward to your testimony. 

Next we will hear from Karen Chappell, who is the Chief Deputy 

Commissioner for the Virginia Department of Motor Vehicles. She 

holds many responsibilities with the Virginia DMV and can help us 

understand what the states are currently doing to combat vehicle 

fraud. Her institutional knowledge of motor vehicle practices in the 

Commonwealth is very much appreciated and we thank you for attending today. 

We then will hear from Bob Bryant, the President and CEO of 

the National Insurance Crime Bureau. The NICB has taken the 

lead in developing sources for combatting vehicle fraud, including 

a new online database in coordination with their members, some of 

which are the largest property and casualty insurance companies. 

Mr. Bryant has been instrumental in trying to prevent flooded cars 

from being sold to unsuspecting buyers. We thank you for testifying 

today, Mr. Bryant. 

Next we have Rosemary Shahan, from the organization, Consumers for Auto Reliability and Safety. Ms. Shahan has been deeply involved in California’s past motor vehicle legislation, including 

initiation of the State’s lemon law. She has also played a leading 

role in the adoption of a motor vehicle safety standards approach 

4 

nationwide, and in working to protect all consumers, Ms. Shahan 

is to be commended. Thank you again for agreeing to testify. 

Then we will hear from Alan Fuglestad, Vice President of Operations and Technology at Experian Automotive. Mr. Fuglestad has 

firsthand knowledge of Experian’s extensive database that assists 

dealers and consumers in learning all the relevant information of 

a vehicle’s history before buying or selling it. Experian also has an 

online database that is helpful in determining whether a vehicle 

has ever been damaged. Mr. Fuglestad’s technical expertise will be 

enlightening and we thank you for testifying. 

Finally, we will listen to Don Hall, President and CEO of the Virginia Automobile Dealers Association, testifying on behalf of the 

National Auto Dealers Association. Mr. Hall has an extensive career in the automobile retailing business and he and I have had a 

chance to discuss important issues pertaining to auto dealers in the 

past. He is a well-respected leader and in his current capacity as 

the Virginia Auto Dealers Association leader, he represents dealers 

throughout Virginia on an assortment of issues, and we appreciate, 

Mr. Hall, your attendance today and look forward to your insight. 

Now, Mr. Brauch, you can begin. 

STATEMENT OF WILLIAM L. BRAUCH, SPECIAL ASSISTANT 

ATTORNEY GENERAL/DIRECTOR, CONSUMER PROTECTION 

DIVISION, IOWA ATTORNEY GENERAL’S OFFICE 

Mr. BRAUCH. Thank you, Mr. Chairman and Senator Pryor. On 

behalf of Attorney General Tom Miller of Iowa, thank you for inviting me here today. 

Senator ALLEN. Mr. Brauch, I am going to go vote first. I am 

going to turn over the chair to Senator Pryor. I will be back as 

quickly as possible. 

Mr. BRAUCH. Thank you. 

Well, this is a very timely issue. The Chair was right that Hurricanes Katrina and Rita and half a million flooded vehicles bring 

this to us today. But this is a problem that has been with us for 

a while. It has been with us because it is so lucrative. Scam artists 

are able to obtain vehicles which have been substantially wrecked 

or flooded, clean them up to the point where it is hard to notice 

the problem, and then sell the vehicle to unsuspecting consumers, 

who pay far more than the vehicle is worth. 

Nothing diminishes the value of a vehicle more than past collision or flood history, nothing. And consumers with the information, 

knowing it is a flood, knowing it is a collision vehicle, will make 

a choice either not to purchase the vehicle or to pay much less for 

it than they would a comparable vehicle that does not have that 

background. 

We have made significant efforts in the past 10 or so years to 

deal with this situation. We have passed laws at State levels and 

enforced them. We have the National Motor Vehicle Title Information Service, or NMVTIS, up and running, at least in some states 

at this point. And we have the development of Carfax and 

Experian’s service, AutoCheck, online and other companies to provide information to consumers. 

But we are not there yet. We have a long way to go. The scam 

artists are still making money and consumers are still being tarVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
5 

geted. It is not just a value issue, of course, but it is a safety issue 

as well. 

Some of the contributing factors, some of the things that maybe 

we need to improve, are as follows: First of all, we have a lack of 

uniform nomenclature among the states. Most states now over the 

past 10 years have adopted the word ‘‘salvage’’ to describe these titles, although not all states have. But even that is not consistent. 

In many States it has different meanings from other states. ‘‘Salvage’’ might mean cars that are damaged but can be repaired and 

put back on the road. It might mean both those types of vehicles 

and vehicles which have to be parted out, sold for parts, or destroyed because they cannot be operated on the road any more. So 

we do not have a consistent nomenclature out there. 

We, as the Chair noted, we do not have uniform recognition by 

the states of each other’s brands. They are not all carrying the 

brands forward from other states, and therefore we have the title 

washing problem that he described. 

We also have a lack of reporting by insurance companies when 

they total out a vehicle. Under NMVTIS they were required to report that to the title information service. However, the Department 

of Justice has never adopted the regulations to put that in place 

and therefore it is my understanding that is not being done. Even 

beyond that requirement, that requirement does not apply when insurance companies total out a vehicle but allow their policyholder 

to retain ownership. That is a problem as well. 

We also have a problem in disclosure in that in many states the 

title is not present at the time of sale because there is a lien on 

that vehicle, and in most States the lienholder holds that title until 

that lien, that loan, is paid off. So even if you have disclosure on 

titles, the title might not be there, and that consumer might not 

see that title for years after they purchase the vehicle, until they 

pay off their loan. That is a problem. 

We also need to get NMVTIS up and running across the country. 

It provides substantial benefits if we can fund it and we can get 

all the states contributing to it. 

Some other solutions that we need to pursue: Establishing uniform title terms as much as we can possibly do; requiring all states 

to recognize and carry forward each other’s brands is vitally important. One thing we might look at as far as a uniform definition, 

might be to set minimums, to say that a state must at least adopt 

a salvage law that says, for example, the damage is 75 percent of 

the market value, but then let that be the floor and let the States 

go beyond it. For example, if a state wants to have a 50 percent 

standard, therefore be more inclusive and pick up more vehicles, 

states should be allowed to do that. But setting a Federal minimum 

would be very important here. 

Also, making sure that we require the insurance companies to report totaled vehicles, so that consumers get notice of it. There really is no reason that cannot happen and it really has to happen, because those vehicles may not show up in the titling process. They 

may not show up in the system. We need to get that information 

out to consumers, out to dealers who take vehicles in trade, to 

other insurance companies and to others in the process. 

6 

When the title is not present, we ought to think about a written 

disclosure requirement, much like the odometer law. We have done 

something like that in Iowa, where we have combined the odometer 

statement and the damage disclosure statement under our damage 

disclosure law in one form which is used when the title is not 

present at the time of sale. That could be done with this as well. 

We also need more effective enforcement mechanisms. If we are 

going to look at a potentially nationwide process here, we need to 

take a look at giving authority to Federal agencies that enforce it, 

DOJ criminal and FTC civil, as well as providing enforcement authority to State Attorneys General to bring action, much like we 

can under the odometer law or other Federal laws that allow us to 

enforce them in State or Federal court. 

The odometer law has the capability of State or Federal court for 

the State AGs. Laws like the Do-Not-Call law that we can enforce 

as well as the FTC allow us to enforce in Federal court. Better to 

give us the discretion to choose, but in any event to give us a cause 

of action so we can get money back for consumers under that law 

if we do not have an equivalent State law. 

Also, additional Federal funding for NMVTIS is vitally important. 

Everybody agrees there is a problem here and I am very pleased 

to see the way that this is being handled, that instead of having 

a bill to shoot at right away and everybody tearing it down, we are 

working together to put information together. From what I have 

seen, many of us are singing the same tune here, from industry 

and from government. That is important. We are able to see, by 

handling it this way how much we have in common and how much 

interest everyone has in making sure that this process is one where 

consumers and dealers and others can see the history of that vehicle and make an informed choice, so the marketplace can work 

properly. 

That is really my final point. It is key that the marketplace work 

well because our laws, our consumer protection laws, are designed 

not just to protect consumers, but to ensure that the marketplace 

operates fairly. In order for it to operate fairly, consumers need the 

information, as do others, to make informed choices so that the 

true value of that vehicle is reflected in what people pay. 

Thank you, Senator. 

[The prepared statement of Mr. Brauch follows:] 

PREPARED STATEMENT OF WILLIAM L. BRAUCH, SPECIAL ASSISTANT ATTORNEY

GENERAL/DIRECTOR, CONSUMER PROTECTION DIVISION, IOWA ATTORNEY GENERAL’S

OFFICE

I. Introduction 

On behalf of Iowa Attorney General Tom Miller, thank you very much for inviting 

me to participate in this hearing. I have worked in the area of motor vehicle fraud 

enforcement for over 18 years with the Iowa Attorney General’s Office, and authored 

Iowa’s motor vehicle damage disclosure law. Among the responsibilities of the Consumer Protection Division is enforcing Iowa laws governing used motor vehicle 

sales. 

Nothing affects used vehicle values more than prior salvage or flood history. 

While the unfortunate results of Hurricanes Katrina and Rita have brought the 

flood vehicle issue to the forefront, consumers have faced the prospect of unknowingly purchasing former flood or salvage vehicles for a number of years. 

7 

1 Consumer Reports, March 2003 issue, ‘‘Wrecks in Disguise.’’ 2Those states include Hawaii, Iowa, Kentucky, Maine, Nevada, New Jersey, New Mexico, 

North Carolina, North Dakota, South Dakota and Wisconsin. 3Two states, South Dakota and Washington, do not have a salvage title or the equivalent. 

South Dakota relies on its auto damage disclosure law to provide information to car buyers 

about past damage. The title for a vehicle in Washington which has a certain degree of damage 

and is less than six model years old at the time of the loss will receive a ‘‘WA Rebuilt’’ brand 

if the vehicle is repaired for road use. 4Pub. L. 102–519, 102nd Congress, October 25, 1992. 

The successful effort in the 1970s and 1980s against vehicle odometer fraud under 

Federal and State law has driven scam artists to perhaps this even more lucrative 

means of defrauding used car buyers. It begins when they purchase damaged vehicles, most often at auction, for well below average retail. Then, they repair the vehicles to hide the prior damage and sell them to unsuspecting buyers with no disclosure of the prior damage. The resulting sale price is several times more than the 

vehicle is worth, given that the retail value of a former salvage or flood vehicle diminishes by 50 percent or more than the average retail value for the same year, 

make, and model vehicle.1 This not only hurts consumers, but steals business away 

from dealers who sell honestly by making full disclosure. 

To a great degree, this has occurred because consumers generally do not receive 

adequate notice of the damage history of a motor vehicle prior to purchase. That 

is not to say there are no tools available to consumers. Some states have enacted 

used auto damage disclosure laws akin to the Federal odometer law, requiring presale disclosures.2 Additionally, companies like Carfax, AutoCheck, and others provide vehicle history information for a fee. However helpful, these tools have not been 

sufficient to prevent the scam from growing. 

Nationwide pre-sale consumer notice of prior salvage or flood history is essential 

for the marketplace to work. Our free market system presumes informed buyers 

making rational choices. Unfortunately, when it comes to vehicles which have been 

flood-damaged or involved in significant collisions, consumers do not get the information they need to choose whether to purchase a used vehicle or how much to pay 

for it. Millions of American consumers are purchasing used vehicles every year they 

would not have purchased, or for which they’d have paid much less, had they known 

of the vehicle’s true prior history. Thus, too much consumer money is flowing into 

the hands of unscrupulous operators, resulting in higher prices than warranted and 

the unwitting operation of potentially unsafe vehicles on America’s roadways. 

Although law enforcement officials have actively pursued scam artists who sell 

these vehicles without notice, the problem remains acute. However, there is much 

we can do to provide greater protection to the car buying public and to ensure that 

our used vehicle marketplace operates more efficiently and fairly. 

II. Current State and Federal Laws Are Not Adequate to Prevent Vehicle 

Salvage and Flood Fraud 

A. Differences in Nomenclature Make it More Difficult for Consumers Across the 

Country to Receive Notice 

Nearly every state issues salvage titles or the equivalent. Unfortunately, the 

states use a variety of differing terms to describe the titles for salvage vehicles including salvage, damaged, junk, unrepairable and others.3 These descriptive terms 

generally appear on auto titles. While most states have ‘‘salvage’’ titles, in some 

states that includes both vehicles which are significantly damaged but can be repaired for road use and those that cannot be repaired and can only be sold for scrap 

or parts, while in others it refers to vehicles which can be repaired for road use but 

does not include vehicles which can only be sold for scrap or parts. The lack of consistency across the states in describing damaged vehicles on auto titles is unnecessarily confusing for consumers and for state officials who have to learn and interpret 

these differing title brands. In addition, scam artists are able to pick and choose 

among differing state laws to attempt to title a vehicle in a jurisdiction which will 

not brand it. 

There currently is no Federal law which requires standardization of state title 

brands. However, Congress has recognized the problem of auto title fraud as long 

ago as 1992, when it enacted the Anti Car Theft Act.4 A portion of that Act included 

a requirement that the Department of Transportation work with states to establish 

the National Motor Vehicle Title Information Service (‘‘NMVTIS’’), a means by 

which law enforcement and consumers could get information about the past histories of specific motor vehicles. Unfortunately, for a number of reasons, including 

lack of funding, NMVTIS has taken a great deal of time to become established and, 

8 

5 49 U.S.C. section 30504(b). 

after nearly 15 years of trying, only about half the states are currently submitting 

data and consumers still do not have access to it. 

B. The Failure of State Laws to Uniformly Mandate Recognition and Carrying 

Forward of the Title Brands of Other States Exacerbates the Problem 

In addition, while state motor vehicle titling officials are very aware of each other’s title brands and definitions, the laws of some states do not permit the states 

to recognize each other’s title brands and carry them forward on new titles. In addition, the brands can differ to such a great degree that it is very difficult to determine whether there is an equivalent brand in a state receiving a vehicle from another state. Some titling anomalies are even more difficult to understand. For example, Iowa will carry forward a flood brand from another state but lacks its own separate flood brand (the vehicle is either branded salvage or not). These titling differences make understanding their meaning more difficult for consumers and frustrate state officials who would prefer to provide as much information about the vehicle to consumers as possible. 

Private companies which sell vehicle history information for a fee, such as Carfax 

and AutoCheck, have established themselves in the used car marketplace in the interim. But, because some states do not promptly report title transfers and brands, 

even these services are lacking to some degree in being able to provide the information consumers need in time for them to use it. 

C. Auto Insurance Providers Do Not Uniformly Report Totaled Vehicles 

The situation is further exacerbated by the lack of reporting by auto insurance 

providers. Insurance companies and law enforcement agencies are able to learn 

about vehicles that insurance companies have totaled, but similar information is not 

made generally available to the buying public. There is a legal obligation for insurance companies to report to the NMVTIS system when they total a vehicle.5 However, it is my understanding that this requirement has never been implemented and 

that insurance companies have not been reporting this information to NMVTIS. 

And, further, this reporting requirement does not apply to the likely thousands of 

instances where insurance companies allow their policyholders to retain title. In 

many states, if the insurance company doesn’t take title, there is no requirement 

the owner obtain a salvage title. Thus, in states lacking an auto damage disclosure 

law, a totaled, owner-retained vehicle may be sold with no disclosure to buying consumers. While such an act may violate state laws against deceptive and unfair practices, proving a violation often comes down to the buyer’s word against the seller’s, 

which is quite difficult to prove. 

D. Auto Title Branding Laws, In and Of Themselves, Are Not Totally Effective In 

States Permitting Secured Parties to Retain Titles 

Additionally, title branding laws, alone, are not totally effective in that most 

states permit entities holding security interests in vehicles, in most cases, lenders 

to trade-in customers, to retain the vehicle’s title until the loan is paid. Thus, even 

if a title is branded ‘‘Prior Salvage’’ as would be the case under Iowa law, the consumer would not see that title brand at the time of sale and may not see it for many 

years if the consumer obtained a loan to purchase the vehicle. We have been faced 

with that situation in numerous consumer complaints in our office and we know it 

is a problem elsewhere across the country. Iowa addresses this, in part, by requiring 

a separate written disclosure on a secure form when the title is unavailable. But, 

this still results in false disclosures not being discovered until the title is released 

to the buyer. 

III. Potential Solutions Exist and Congress Can Help 

A. Establish Uniform National Nomenclature 

One part of the solution could be requiring the states to adopt uniform language. 

A title for a vehicle that has been in a major collision and has not been repaired 

should have the same name throughout the country. This would greatly enhance 

consumer knowledge and foster better recognition by the states of each other’s title 

brands. The same approach could be taken for flood-damaged vehicles and for reconstructed vehicles—those which have been damaged and repaired. For example, the 

national uniform title terms could be ‘‘salvage,’’ ‘‘flood,’’ and ‘‘reconstructed.’’ The potential downside to this approach is the costs that states would incur in phasing 

out non-uniform title brands and establishment of the new, uniform national 

brands. 

9 

6 49 U.S.C. sections 32701–32711, more formerly titled the Motor Vehicle Information and 

Costs Savings Act. 

B. Establish Uniform Federal Minimum Standards Within the Different Title 

Descriptions 

Presuming the states used uniform nomenclature to define salvage, flood and reconstructed vehicles, the question remains when the states will require that those 

titles be obtained. For example, some states require salvage titles only when insurance companies take ownership due to collision damage. Others use percentage 

thresholds, such that if the cost to repair a vehicle exceeds a certain percentage of 

its retail value at the time of the damage a salvage title must be obtained. One way 

to deal with this would be for Congress to require that salvage titles be obtained 

when collision damage exceeds a certain minimum threshold, say 75 percent of retail value, but permit states to adopt a more expansive standard, for example, 50 

percent of retail value. In addition, all states should require salvage titles to be obtained when insurance companies total a vehicle, regardless of whether the insurance company takes title or the title is owner-retained. By adopting a national minimum definition, consumers and dealers seeing the title brand will know that the 

vehicle has incurred at least the amount of damage required by the state with the 

least expansive standard. 

C. Require Uniform Recognition by States of Each Other’s Title Brands 

Perhaps the most vital piece of the puzzle, and one that could stand on its own 

if the others prove not achievable, is requiring all states to recognize all of each other’s title brands. Under this proposal, states would not be required to analyze the 

meaning of each other’s title brands in an attempt to discern state equivalence. Instead, they would simply include a brand on the face of the title with the title brand 

from the other state and the two-letter abbreviation for that state. This would provide substantial assistance to consumers and would reduce costs for states which 

currently carry forward title brands but are required to convert them to their own 

state’s nomenclature, a sometimes difficult endeavor. An expansion of NMVTIS to 

all states would also help in this regard. 

D. Require Insurance Companies to Report All Totaled Vehicles to National Databases, Whether Government-Established or Private 

Insurance companies should be required to report all totaled vehicles to NMVTIS, 

and make the information available, for a reasonable fee, to private auto title information providers as well. This should apply, regardless of whether the policyholder 

retains ownership or the insurance company takes title. In the event it is not possible to adopt some of the other proposals suggested in these comments, ensuring 

that consumers and auto dealers have easy access to information regarding whether 

a vehicle has been previously totaled by an insurance provider would assist the market to operate efficiently and ensure that consumers and dealers get this vital information before deciding whether to purchase a vehicle or take it in trade. 

E. Establish Disclosure Requirements Akin to Federal Odometer Law—at a Minimum, Pre-Sale Written Disclosure of Title Status If Title Is Not Present at Time 

of Transfer to Buyer 

The Federal Odometer Act 6 has very effectively reduced odometer fraud, in great 

part, by requiring auto sellers to issue buyers written mileage disclosures. While 

auto title brands can effectively communicate past damage, as noted above, titles 

are often not required to be present at the time of sale. Therefore, consumers do 

not see titles and the brands which appear upon them. This problem could be eliminated by requiring a pre-sale written disclosure of title status in the event the title 

is not present at or before the time of sale. The disclosure statement could be handled in much the same way as the odometer statement. In fact, in Iowa we have 

combined the odometer and damage disclosure statements on the separate disclosure form required to be used when the title is not present at the time of sale. Written disclosures protect not only buyers and dealers who take vehicles in trade, but 

sellers who wish to retain written evidence of having made the disclosure. 

F. Establish Remedies for Enforcement If Vehicle Owners Do Not Obtain Required 

Titles or Required Disclosures Are Not Made or Are False 

A law requiring action is only as good as its enforcement mechanisms. The Federal odometer law has been effective because it has provided various enforcement 

possibilities. For auto salvage and flood vehicles the same must be true. There must 

be a strong means of deterring vehicle sellers from concealing or misrepresenting 

prior salvage or flood history. I recommend providing for Federal criminal and civil 

10 

remedies, and civil remedies for state Attorneys General, akin to the odometer law, 

national telemarketing law, and others. Federal laws that authorize state Attorneys 

General to act in state or Federal courts to obtain injunctive relief, restitution for 

consumers, civil penalties, and attorney fees are vital to ensuring there are enough 

‘‘cops on the beat’’ to deter auto title fraud. Enabling the Federal Government to 

act is also vital to addressing large operators. I know our state departments of 

transportation or motor vehicles officials stand ready to assist state Attorneys General in bringing these actions, given the successful working relationship we’ve had 

with them in the odometer enforcement area. 

G. Consider Additional Funding to Help Bring All States Online With NMVTIS 

NMVTIS has taken a great deal of time to get going, yet it shows tremendous 

promise. Iowa Department of Transportation officials have described for me the benefits they’ve seen in being able to access title history information at the point the 

citizen seeks a title transfer, including whether the vehicle had been previously titled as salvage or flood. Making that same information available to consumers prior 

to their decision whether to purchase a vehicle is vital. The reason for the delay 

in the establishment of NMVTIS appears to be the cost incurred by states having 

to upgrade their computer auto titling systems in order to participate in NMVTIS. 

Perhaps Congress could consider additional funding to the states to assist in this 

vital endeavor. 

IV. Conclusion 

Consumers unknowingly purchasing vehicles which have incurred substantial 

past collision or flood damage is the greatest consumer problem regarding used vehicle sales. Other than their homes, automobiles are the most expensive items most 

consumers purchase in their lifetimes. Beyond their cost is the importance of motor 

vehicles to our lives, including our means of getting to work and school. Lack of a 

dependable, safe motor vehicle can mean loss of jobs and fewer opportunities, especially for the millions of Americans who live in places lacking access to mass transit. 

Consumers are unknowingly paying millions of dollars more in the aggregate for 

these vehicles than they are truly worth. Those excess payments line the pockets 

of scam artists who are all too willing to take advantage of a system of auto titling 

which is in substantial need of improvement. 

Congress can help reduce the incidence of salvage and flood fraud and assist the 

marketplace to work more fairly and efficiently. Congress can do this by working 

with the states to establish uniform descriptive terms for auto titles, recognition by 

the states of each other’s title brands and carrying forward those brands on subsequent titles, and require written disclosures when titles are not present. In addition, 

Congress can act to ensure that motor vehicle history information systems like 

NMVTIS, and those of private companies, have the information consumers, auto 

dealers, and law enforcement officials require, including title histories and notice of 

insurance company totaled vehicles. Finally, Congress can act to ensure that whatever steps are taken can be enforced by the Federal Government and by the states. 

Senator PRYOR. Thank you very much. By the way, I am a big 

fan of your boss. We served together as attorney general. He is fantastic. 

Ms. Chappell. 

STATEMENT OF KAREN CHAPPELL, DEPUTY COMMISSIONER, 

VIRGINIA DEPARTMENT OF MOTOR VEHICLES; ON BEHALF 

OF THE AMERICAN ASSOCIATION OF MOTOR VEHICLE 

ADMINISTRATORS 

Ms. CHAPPELL. Thank you, Senator. I am the Deputy Commissioner of the Virginia Department of Motor Vehicles, but today I 

am speaking on behalf of the American Association of Motor Vehicle Administrators, or AAMVA. 

I would like to thank you for the opportunity to discuss two solutions that AAMVA and the State departments of motor vehicles believe will help protect consumers from motor vehicle fraud: first, increased participation in the federally-mandated National Motor VeVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
11 

hicle Title Information System, or NMVTIS; and second, uniform 

salvage branding legislation. 

Congress recognized the consumer value in a system like 

NMVTIS and in 1992 passed the Anti-Car Theft Act. This Act directed the States to begin the development and the rollout of a national online real-time motor vehicle title history system. A 2001 

cost benefit analysis commissioned by the Justice Department indicated that once fully implemented nationwide, NMVTIS has the potential to save consumers from $4 to $11.3 billion annually. 

When Senator Allen was Governor of Virginia, the Commonwealth became one of the first states to join NMVTIS. Because of 

that progressive step, Virginians began to realize consumer benefits such as the reduction in brand washing, the ability to carry forward brands from other states that did not appear on the paper 

title that we were presented, and the detection of stolen motor vehicles. 

States participating in NMVTIS today can detect fraudulent titles by verifying the paper title data against what is on the electronic record, identify odometer rollbacks by verifying odometer 

readings, determine if a vehicle is stolen, and view the brand history and carry forward all state brands. 

Although this system is built, some components that Congress 

stipulated are still not realized, for instance the provision of title 

history reporting by insurance companies and junk and salvage 

yards into NMVTIS. This function is critical in noting where insurance claims have been paid on vehicles that have been deemed 

salvaged, not repairable, or flooded. If reported directly to the system, this vehicle history would be available to participating DMVs 

as well as to consumers in a timely manner. But due to a lack of 

funding, today NMVTIS represents 52 percent of the vehicle population in the United States. 

Until the objectives set by Congress in the Anti-Car Theft Act 

are fully realized and every state is online and sharing vehicle history data with each other, the consumer will not have the information they need to make informed purchase decisions. 

Also, consumers need consistency in how each state defines all 

vehicle brands, including salvage, nonrepairable, and flood. Criminals can exploit this loophole and vehicle brands get lost or washed 

with an outdated paper title. Lack of consistency in branding definitions leaves the consumer at a major disadvantage when purchasing a new or used vehicle. 

AAMVA has supported a number of efforts to help establish national salvage branding legislation, 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, and in addition, those State 

DMVs that participate in NMVTIS have a useful tool that helps 

compensate for the lack of uniform salvage branding requirements. 

State DMVs and AAMVA are doing their part to protect consumers and we ask that you help us to do more to ensure consumers have complete protection from motor vehicle fraud. 

I would like to thank you for this opportunity to share our members’ concerns and welcome any questions you may have. 

[The prepared statement of Ms. Chappell follows:] 

12 

PREPARED STATEMENT OF KAREN CHAPPELL, DEPUTY COMMISSIONER, VIRGINIA

DEPARTMENT OF MOTOR VEHICLES; ON BEHALF OF AMERICAN ASSOCIATION OF

MOTOR VEHICLE ADMINISTRATORS

Good afternoon, Mr. Chairman and distinguished members of the Committee. I 

am Karen Chappell, Deputy Commissioner of the Virginia Department of Motor Vehicles and today I am speaking on behalf of the American Association of Motor Vehicle Administrators (AAMVA). 

AAMVA Background 

Founded in 1933, AAMVA is a state-based, nonprofit association representing 

motor vehicle agency administrators, senior law enforcement officials, and the industry in the United States and Canada. Our members are the recognized experts 

who administer the laws governing motor vehicle operation, driver credentialing, 

and highway safety enforcement. AAMVA plays an integral role in the development, 

deployment and monitoring of both the commercial driver’s license (CDL) and motor 

carrier safety programs. The Association’s members are responsible for administering these programs at the state and provincial levels. As a non-regulatory organization, AAMVA uses motor vehicle expertise to develop standards, specifications 

and best practices to foster the enhancement of driver licensing administration and 

vehicle titling and registration. 

Consumer Concerns 

AAMVA and its members place the concerns of consumers first. AAMVA has long 

realized the potential danger motor vehicle title fraud presents and has worked to 

combat the problem for years. Motor vehicle fraud costs consumers billions of dollars 

a year with life-threatening consequences. It endangers human life by putting unsafe vehicles back onto our roads. Title fraud dupes hard-working consumers into 

buying vehicles that look good on paper, but are not safe and reliable. Perhaps the 

most important issue concerning title fraud is the adverse effect it has on the consumer. For instance: 

• In 2003, over 450,000 cases of odometer fraud cost consumers more than $1 billion. 

• Roughly 50,000 to 100,000 vehicles have had their Vehicle Identification Numbers (VINs) stolen or cloned. Consumers won’t realize this until after the vehicles have been purchased or their numbers have been duplicated. 

• Each year 200,000 stolen vehicles are shipped overseas where law enforcement 

organizations believe they are being used or resold to fund terrorist activities. 

• Each year, 1.5 million motor vehicles are reported stolen at an average cost of 

$5,000 per vehicle, amounting to total costs of $8 billion. 

• Over 30,000 vehicles were flood-damaged after Hurricane Floyd ravaged eastern 

North Carolina in 1999. An untold number of these vehicles were destined to 

be resold to the unsuspecting consumer. 

• Most recently, the hurricanes that battered the Gulf Coast region caused flood 

damage to an estimated 500,000 motor vehicles. Unfortunately, many of these 

vehicles will be resold to unsuspecting consumers. 

Addressing the Concerns 

I would like to discuss two solutions that AAMVA, and the state Departments of 

Motor Vehicles, believe will help protect consumers from motor vehicle fraud: increased state participation in the federally-mandated National Motor Vehicle Title 

Information System or NMVTIS and uniform salvage branding legislation. 

Congress recognized the consumer value in a system like NMVTIS, and passed 

the Anti-Car Theft Act in 1992. To comply with this Act the states began the development and roll-out of this national online, real-time motor vehicle title history system. 

The Anti-Car Theft Act also directed the Secretary of Transportation to establish 

the Motor Vehicle Titling, Registration and Salvage Advisory Committee to study 

problems which relate to motor vehicle titling, vehicle registration, and controls over 

motor vehicle salvage which may affect the motor vehicle theft problem. The Advisory Committee, which included motor vehicle administrators and other stakeholders, developed recommendations in 1994 which AAMVA continues to support. 

While AAMVA realizes that a number of efforts to establish national standards have 

been unsuccessfully attempted, the Association feels that NMVTIS helps alleviate 

some of the concerns this lack of uniformity presents. While national standards for 

title branding at the time the Advisory Committee was established were of paramount importance, years later, the capability of NMVTIS to communicate a vehicle’s 

13 

title history between jurisdictions helps mitigate the need for identical matches on 

brands among jurisdictions. 

The importance of NMVTIS as a reporting mechanism can best be illustrated by 

the fact that a 2001 Justice Department cost-benefit analysis indicated that, once 

fully implemented nationwide, NMVTIS has the potential to save consumers from 

$4 to $11.3 billion annually. 

A pilot evaluation report of NMVTIS conducted by AAMVA in 1999 further indicates that: 

• NMVTIS can be used to instantly and reliably verify information on the previous state’s title document prior to issuing a new title. During the pilot period, 

data verification occurred 97 percent of the time within the performance requirement of 7 seconds. 

• NMVTIS deters fraud by reducing the occurrence of title washing. Brands are 

washed from titles when the state that issues the new title does not carry forward a brand issued by some previous state. Since NMVTIS maintains brands 

on a central file, they are available to any inquirer and are never washed from 

titles. Using data from the pilot, NMVTIS could prevent approximately 57,000 

titles from being washed per year. 

• NMVTIS reduces the issuance of stolen titles to stolen vehicles. Many state 

DMVs do not conduct NCIC checks prior to vehicle titling. Pilot data show that 

use of NMVTIS could effect a cost avoidance of almost $214 million per year 

in insurance payoffs on stolen vehicles. 

• Law enforcement officials believe that NMVTIS provides significant value as 

well. Law enforcement agencies, such as auto theft task forces, can use 

NMVTIS to investigate thefts and recover vehicles. AAMVA is also analyzing 

possible enhancements to NMVTIS, such as inclusion of export data, which will 

provide even more assistance to auto theft investigators. 

Senator Allen, when you were Governor, the Commonwealth became one of the 

first states to join NMVTIS. And because of that progressive step, Virginian’s began 

to realize such consumer benefits as a reduction in brand washing, the ability to 

carry forward brands that did not appear on the paper title and the detection of 

stolen motor vehicles. 

States participating in the system today: 

• detect fraudulent titles by verifying paper title data against electronic records, 

• identify odometer rollbacks by verifying odometer readings, 

• determine if a vehicle is stolen, and 

• view the brand history and carry forward all state brands. 

Although this system is built, some components that Congress stipulated are still 

not realized; specifically, these include the provision of data by insurance companies 

and junk and salvage yards into NMVTIS. This function is critical in noting where 

insurance claims have been paid on vehicles deemed salvage, total loss or flooded. 

If reported directly to the system, this vehicle condition would be available to participating DMVs, as well as consumers, in a timely manner, preventing them from 

becoming victims of inaccurate or untimely title information. If this reporting mechanism had been in place before hurricanes struck the Gulf, the concerns about the 

current situation would not be as great. 

But due to lack of Federal funding, today NMVTIS represents 52 percent of the 

vehicle population in the United States. Until the objectives, set by Congress in the 

Anti-Car Theft Act, are fully realized and every state is online and sharing vehicle 

title history data with each other, consumers will not have the up-to-date information they need to make informed purchase decisions. 

Also, consumers need to know how each state defines all vehicle brands, including: salvage, junk and flood. Criminals can exploit the loophole created by an absence of standardized vehicle brands. In addition, vehicle brands get lost, or washed, 

when outdated paper titles are used to create new titles. Lack of consistency in 

branding definitions 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. 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 salvaged motor vehicles. In addition, state 

DMVs participating in NMVTIS have a useful tool that helps compensate for the 

lack of uniform salvage branding legislation. 

14 

AAMVA also works to help DMV employees more quickly and accurately spot fake 

titles by continuing to advance its Vehicle Document Examiner Certification Program (VDEC). This program provides instruction on: 

• Fraud prevention and employee responsibility, 

• How to effectively examine features of vehicle documents, 

• Alteration and counterfeit detection techniques, 

• Basic interviewing techniques used in customer service, and 

• Recognition of jurisdictional policies and procedures. 

This national training program increases vigilance for fraudulent documents 

among title examiners as well as educating them about statutes, policies and procedures. The VDEC program provides better service and security in state DMVs and 

will deter fraudulent enterprises. 

State DMVs and AAMVA are doing their part to help protect consumers from 

motor vehicle fraud. Please help us do more to ensure consumers have better protection from motor vehicle fraud. 

Mr. Chairman, thank you for the opportunity to share our members’ concerns. 

AAMVA applauds your efforts in addressing the issue of motor vehicle title fraud 

and feels strongly that with the support of Congress, the solution is well within 

reach. 

I welcome your questions. 

Senator PRYOR. Thank you very, very much. 

I know the Chairman does not want to take any recesses, but we 

are about 5 minutes past due on this vote, so let me do this. Let 

me just take a very brief recess. Hopefully, it will be less than a 

minute because he will walk in. Let me race down and vote and 

then come right back. So if you do not mind, just hold tight for a 

couple of minutes here until Senator Allen gets back. Thank you. 

I will be back. 

[Recess from 2:54 p.m. to 2:56 p.m.] 

Senator ALLEN [presiding]. I call the Subcommittee back to 

order. I ran into Senator Pryor on the elevator in passing. We are 

going to have 10-minute votes, which is going to make this really, 

really difficult, but it should not be too much. 

As I understand it, Mr. Brauch and Ms. Chappell have testified. 

Mr. Bryant, you have not started. 

STATEMENT OF ROBERT M. BRYANT, PRESIDENT/CEO, 

NATIONAL INSURANCE CRIME BUREAU 

Mr. BRYANT. That is correct. 

Senator ALLEN. OK. Well, we would now like to hear from you, 

Mr. Bryant. 

Mr. BRYANT. I am delighted. Good afternoon, Chairman Allen. 

My name is Bob Bryant and for the last 6 years I have been President and Chief Executive Officer of the National Insurance Crime 

Bureau. Prior to this position I was a Special Agent with the Federal Bureau of Investigation, retiring as Deputy Director in 1999. 

NICB was created in 1912 and is the Nation’s premier nonprofit 

organization dedicated exclusively to fighting insurance fraud and 

vehicle theft, crimes that impose about $30 billion annually in 

losses to the property and casualty industry and the American public and the policyholders. Our more than 350 employees strive 

every day to prevent and detect such crimes as car theft and fraudulent sale of damaged vehicles to the American consumer. With the 

support of more than 1,000 member insurers and self-insured companies, NICB offers the most complete array of expert fraud soluVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
15 

tions from any single source in the world, including investigating 

all types of property and casualty insurance fraud. 

It is within this context that salvage and flooded vehicles present 

an economic and safety concern for the Nation’s consumers. The entire problem with salvage and flooded vehicle fraud can be condensed into two words: title disclosure. Disclosing the condition of 

a vehicle as salvage or flood-damaged is all that is necessary to defeat this problem. However, there is a vast amount of money to be 

made by selling these vehicles to unsuspecting consumers. 

For example, let us take a 2004 Chevy Tahoe that has a resale value of $28,000. If that same vehicle was damaged in the floods 

of Hurricane Katrina, it might now be worth only around $5,000 

as salvage. If you take that same Tahoe and spend $3,000 to detail 

it and remove any obvious signs of water damage, you may be able 

to sell it for close to $28,000. In one transaction, you have made 

a net gain of $20,000. If you multiply that by the potential given 

by the thousands of vehicles affected by Hurricanes Katrina, Rita, 

and Wilma, including recent floods in the Northeast, you can quickly appreciate what makes this fraud so pervasive and enticing. 

However, beyond the gain to the perpetrator and the criminal, is 

the economic and personal harm to innocent people. While stealing 

a vehicle requires a certain amount of stealth, daring, and knowledge, passing it off as a clean resale is an art form. People who 

traffic in stolen vehicles know what it takes to obtain a clean title 

and how to produce counterfeit vehicle identification numbers, or 

VIN. These two items are the core of the problem with salvage, 

flood-damaged vehicles, and stolen vehicle traffic. 

A title to a vehicle is its birth certificate, while its VIN is its fingerprint. When a new vehicle is sold by a dealer, the state issues 

a title. That title follows the vehicle from owner to owner, state to 

state. The VIN remains with the vehicle forever. Each VIN is 

unique to the vehicle to which it was issued by the manufacturer, 

but both these items are fraudulently duplicated, altered, or otherwise manipulated to enable the fraudulent resale of defective or 

stolen vehicles. 

In a perfect scenario, once a vehicle is declared salvaged or flooddamaged and the title is branded as such, that description should 

never be removed. However, there are states where the titling process does not pick this up, and many times a clean or new title is 

issued for such vehicles, and sometimes it is a simple procedure. 

That process is known as ‘‘title washing’’ and it occurs by simply 

taking a branded title through a state with lax titling requirements 

and having a clean title issued in return. A clean title is the ‘‘Holy 

Grail’’ for those who make a living selling defective or damaged vehicles to innocent people. 

One other area I would like to add is on cloning. In addition to 

salvage and flooded vehicle fraud, cloning is a trend that NICB 

finds with increasing regularity. 

[Bell rings.] 

Mr. BRYANT. Is my time up? 

Senator ALLEN. Keep going. 

Mr. BRYANT. OK. 

Senator ALLEN. No, that is not for you. 

Mr. BRYANT. That is for you, right? 

16 

[Laughter.] 

Mr. BRYANT. I am glad I do not have to vote. 

Cloning is the auto theft of the new millennium. Unlike VIN 

switching, where a person applies a VIN plate from one vehicle, 

usually a salvage vehicle, to another, usually a stolen one, cloning 

occurs when a person applies a counterfeit VIN from another vehicle to an identical stolen vehicle. Thus, there are two vehicles carrying the same vehicle identification number. 

We see many cases where we have five vehicles registered in five 

different states, all with the same vehicle identification number, 

and this is really an increasing issue we see all the time. 

I guess the one thing I would just say, certainly more important 

than preventing economic losses resulting from these types of flood 

potential, are serious injury or death due to mechanical failure of 

flood-damaged vehicles. Every flood-damaged or salvage vehicle 

that is fraudulently sold to an unsuspecting buyer is a potential 

coffin-on-wheels for that person and their family. A vehicle that 

has been under water for any period of time is bound to experience 

severe electrical and mechanical difficulties. It is only a matter of 

time before that vehicle is liable to fail. 

NICB and our member companies and law enforcement recognize 

the unprecedented magnitude of the flood-damaged vehicles that 

the recent hurricanes brought about. Along with the flooding that 

resulted from the levee failures around New Orleans, the number 

of flood-damaged vehicles were estimated at between 300,000 and 

500,000. We acted quickly to try to get in front of the fraud that 

these numbers would surely bring. With the total support of our 

member companies and working side-by-side with law enforcement 

professionals in Alabama, Louisiana, Mississippi, and Texas, NICB 

sent teams of special agents into the region to begin collecting the 

vehicle identification numbers for the creation of a database storing 

all of the vehicles damaged by the hurricanes or floods. 

It was not long after this process that we decided to offer a way 

for consumers to query this database at no cost to prevent them 

from buying a lemon. On October 17, this feature was activated on 

our website, nicb.org. Presently a consumer can simply place a vehicle identification number in the search feature and see if that 

specific vehicle was affected by the storms. 

The Katrina database has proved to be a very popular feature 

with our colleagues in the industry, law enforcement, consumer 

groups, and the media. As of today, it has been linked through the 

websites of several states to allow direct access. My principal concern is that I do not want anyone buying one of these cars if it is 

going to harm them. 

The recommendation is that loopholes in State titling procedures 

have been apparent for decades. As we confront the challenges 

posed by this season’s hurricanes, the need for Federal action is beyond urgent. First, if insurers or other owners terminate a vehicle’s 

title, it should not be re-issued. As long as a single state is willing 

to re-title a non-repairable vehicle, then plates will be bought or reproduced, and slapped on the stolen or salvaged vehicles. 

Second, where vehicles can be restored to safe operating condition, any brand indicating that a vehicle is a salvage or flooded veVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
17 

hicle should be carried forward in any title record. Consumers can 

then make choices. 

Finally, all crucial vehicle titling information should be electronically available, not only to law enforcement, but to every insurer 

and consumer. 

Thank you, Senator. 

[The prepared statement of Mr. Bryant follows:] 

PREPARED STATEMENT OF ROBERT M. BRYANT, PRESIDENT/CEO, 

NATIONAL INSURANCE CRIME BUREAU

Good afternoon Chairman Allen, Ranking Member Pryor, and distinguished members of the Subcommittee. My name is Bob Bryant, and for the last six years, I have 

been President and Chief Executive Officer of the National Insurance Crime Bureau. Prior to this position, I was a Special Agent of the Federal Bureau of Investigation, retiring as Deputy Director in 1999. 

The National Insurance Crime Bureau (NICB) was created in 1912, and is the nation’s premiere nonprofit organization dedicated exclusively to fighting insurance 

fraud and vehicle theft; crimes that impose more than $30 billion annually in losses 

to insurance companies and their policyholders. Our more than three hundred employees strive every day to prevent, detect and deter such crimes as car theft and 

the fraudulent sale of damaged vehicles to American consumers. With support from 

more than one thousand member insurers and self-insured companies, NICB offers 

the most complete array of expert fraud solutions from any single source in the 

world, including investigating all kinds of property and casualty insurance fraud. 

It is within this context that salvage and flood vehicles present an economic and 

safety concern for the nation’s consumers. The entire problem with salvage and flood 

vehicle fraud can be condensed into one word—‘‘disclosure.’’ Disclosing the condition 

of a vehicle as salvage or flood-damaged is all that is necessary to defeat this problem. However, there is a vast amount of money to be made by selling these vehicles 

to unsuspecting consumers. 

For example, let’s say a 2004 Chevy Tahoe has a resale value today of $28,000. 

If that same vehicle was under water in New Orleans, it might now be worth only 

$5,000 as salvage. If you take that same Tahoe and spend $3,000 to detail it and 

remove any obvious signs of water damage, you may be able to sell it close to its 

$28,000 value. In one transaction, you have a net gain of $20,000. If you multiply 

that activity by the potential given the thousands of vehicles affected by Hurricanes 

Katrina, Rita, and Wilma, including the recent floods in the Northeast, you can 

quickly appreciate what makes this kind of fraud so pervasive and enticing. However, beyond the pure gain to the perpetrator of this kind of fraud is the economic 

cost to innocent people. 

A person engaging in this kind of activity is not going to obtain replacement parts 

from a legitimate supplier. More than likely, the source of parts required to make 

salvage or flood vehicles appear pristine is a stolen identical vehicle. 

While stealing a vehicle requires a certain amount of stealth, daring, and knowledge, passing it off as a clean resale is an art form. People who traffic in stolen vehicles know what it takes to obtain a clean title and how to produce a counterfeit vehicle identification number or VIN. Those two items are at the core of the problem 

with salvaged, flood-damaged, and stolen vehicle trafficking. 

Title Washing 

A title is a vehicle’s birth certificate, while a VIN is its fingerprint. When a new 

vehicle is first sold by a dealer, the state issues a title. That title follows the vehicle 

from owner to owner, state to state. The VIN remains with a vehicle forever. Each 

VIN is unique to the vehicle to which it was issued by the manufacturer, but both 

of these items are fraudulently duplicated, altered, or otherwise manipulated to enable the fraudulent resale of defective or stolen vehicles. 

In a perfect scenario, once a vehicle is declared salvage or flood-damaged and its 

title ‘‘branded’’ as such, that description should never be removed. However, there 

are states where the titling process is lax that having a new, clean title issued for 

such vehicles is a simple procedure. That is the process known as ‘‘title washing,’’ 

and it occurs by simply taking a branded title through a state with lax titling requirements, and having a clean title issued in return. A clean title is the Holy Grail 

for those who make a living selling defective or damaged vehicles to innocent consumers because once you have that clean title, there is nothing to prevent selling 

that vehicle for market value as a perfectly fine used vehicle. 

18 

Cloning 

In addition to salvage and flood vehicle fraud, cloning is a trend that NICB finds 

with increasing regularity. Cloning is auto theft for the new millennium. Unlike 

VIN switching, where a person applies a VIN plate from one vehicle (usually a 

salvaged vehicle) to another (usually a stolen one), cloning occurs when a person applies a counterfeit VIN from another vehicle to an identical stolen vehicle. Thus, 

there are two vehicles carrying the same VIN. NICB has investigated situations involving five vehicles—all with the same VIN—meaning that four of them were stolen. 

Consumer/Public Safety 

Certainly more important than preventing economic losses resulting from these 

kinds of fraud is preventing potential serious injuries or even death, due to mechanical failure of a flood-damaged vehicle. 

Every flood-damaged or salvaged vehicle that is fraudulently sold to an 

unsuspecting buyer is a potential coffin on wheels for that person and their family. 

A vehicle that has been under water for any period of time is bound to experience 

severe electrical and mechanical failures. It is only a matter of time, and should 

that failure occur while on the interstate, well you can imagine the terrible consequences. 

Similarly, a salvaged vehicle made whole for fraudulent resale is not likely to 

sport original equipment manufacturer replacement parts, or even new after-market 

parts, as the motive for these people is profit (not safety) and there is less profit 

in using good parts. Thus, that salvage resale has a high potential for mechanical 

or electrical failure, and should that occur at high speed on an interstate, the consequences are grim. 

NICB Katrina Database 

NICB, our member insurance companies, and law enforcement recognized the unprecedented magnitude of flood-damaged vehicles that Hurricanes Katrina, Rita 

and, more recently, Wilma left in their paths. Along with the flooding that resulted 

from the levee failures around New Orleans, the number of flood-damaged vehicles 

was estimated to be between 300,000 to 500,000. 

NICB acted quickly to try and get in front of the fraud that these numbers would 

surely bring. With the total support of our member companies and working sideby-side with law enforcement professionals in Alabama, Louisiana, Mississippi and 

Texas, NICB sent teams of Special Agents into the region to begin collecting VINs 

for the creation of a database storing all of the vehicles damaged by the hurricanes 

or floods. 

It was not long after this process began that I decided to offer a way for consumers to query this database—at no cost—to prevent them from buying a lemon. 

On October 17, this feature was activated on our website www.nicb.org. Presently, 

a consumer can simply place a VIN into the search feature and see if that specific 

vehicle was affected by these storms. 

The Katrina Database has proved to be a very popular feature with our colleagues 

in the industry, law enforcement, consumer groups, the media and the states. As 

of today, several states have linked their websites with ours to allow their residents 

direct access. 

Recommendations 

The loopholes in state titling procedures have been apparent for decades. As we 

confront the challenges imposed by this season’s hurricanes, the need for Federal 

action is beyond urgent. Our efforts and the efforts of those engaged in the fight 

against fraud would be far more effective if Congress would assure the following improvements. 

First, if insurers or other owners terminate a vehicle’s title, it should not be reissued. As long as a single state is willing to re-title a non-repairable vehicle, VIN 

plates will get bought or reproduced, and slapped onto stolen or salvaged vehicles, 

and rebuilt wrecks will endanger the lives of everyone on the highway. 

Second, where vehicles can be restored to safe operating condition, any brand indicating that a vehicle was a salvage or flood vehicle should carry forward to any 

new title record. Consumers then can make intelligent choices about the value of 

that vehicle, and thieves cannot use the titling records for those vehicles in their 

illegal operations. 

Finally, all of the crucial vehicle titling information should be electronically available not only to law enforcement, but to every insurer and consumer. 

19 

We look forward to working with the Committee in our joint efforts to keep Hurricane Katrina and other disasters from haunting American car buyers for years to 

come. Thank you. 

Senator ALLEN. Thank you, Mr. Bryant. We appreciate your testimony. 

We would like to hear from Ms. Shahan. 

STATEMENT OF ROSEMARY SHAHAN, PRESIDENT, 

CONSUMERS FOR AUTO RELIABILITY AND SAFETY 

Ms. SHAHAN. Thank you, Mr. Chairman. I am Rosemary Shahan, 

President of Consumers for Auto Reliability and Safety, which is a 

nonprofit consumer group based in Sacramento. Since 1979, I have 

worked on behalf of consumers on the State and Federal level, and 

I really appreciate your and the Committee’s interest in working 

with everyone to help protect consumers from flooded and salvage 

fraud. 

I think everyone agrees that there is a problem, that we need 

some Federal assistance to address it. I would like to enter into the 

record, if I could, this article. It is a report from the 2002 January 

issue of Consumer Reports magazine and it has—— 

Senator ALLEN. It will be entered in the record. By the way, I 

do not know if Senator Pryor said. All of you, to the extent you may 

summarize your statements, your full statements will be put in the 

record, as well, of course any documentation that any of you so desire. 

[The information referred to follows:] 

Consumer Reports, January 2002 

WRECKS IN DISGUISE

When a car or truck has been so badly damaged in an accident that an insurance 

company declares it a total loss, it usually means the labor and parts required for 

proper repair would cost too much, given the vehicle’s worth. You might think that 

would put severely damaged vehicles on a one-way trip to the junkyard for parts 

or scrap. 

Instead, hundreds of thousands of these wrecks make a U-turn each year and get 

right back on the road. One big reason: Insurance companies, which own the piles 

of twisted metal after they pay off a total-loss claim, have discovered they can get 

more bucks for the bang-ups if they sell the wrecks at salvage auctions. The practice 

has fostered a thriving industry that rebuilds severely damaged vehicles—craftily 

enough to hide their traumatic pasts yet cheaply enough to turn a sizable profit. 

Some of the new breed of rebuilders are refugees from criminal pursuits, says Bill 

Brauch, director of the consumer-protection division of the Iowa attorney general’s 

office. ‘‘Instead of rolling back odometers, people who wanted to defraud consumers 

turned to rebuilding damaged cars whose history could be concealed,’’ he says. 

This shadow auto industry now annually beats, bends, and bangs out as many 

as 400,000 rebuilt wrecks that are five or fewer model-years old, Consumer Reports 

estimates; no authority keeps track of the total. That represents 3 percent of the 

13 million used vehicles sold in that model-year group in 2001. But the number 

looms large, because rebuilt wrecks, like all used vehicles, are not subject to Federal 

safety standards. 

Insurers say that as much as they disdain shoddy rebuilding, they cannot stop 

it. ‘‘Once we sell the vehicle to a salvage yard, there’s very little we can do to influence the process,’’ says Mary Beth McDade, a spokeswoman for Progressive Insurance, the nation’s fourth largest auto insurer. 

The Highway Loss Data Institute (HLDI), a leading highway-safety institute 

funded by the insurance industry, and several other data providers hold key information that could help reveal the scope of the problem. But industry officials say 

they cannot release their data, citing confidentiality concerns and contractual prohibitions. As a result, the full extent of this murky enterprise is largely unknown. 

20 

But according to a Consumer Reports study using data from the National Highway Traffic Safety Administration (NHTSA) and the database of Carfax, a company 

that sells vehicle history reports to consumers and businesses, 20 percent of vehicles 

that were damaged severely enough to be ‘‘totaled’’—that is, labeled by an insurer 

as not worth repairing—after fatal accidents in the U.S. from 1993 through 1999 

were rebuilt, reregistered, and put right back on the road. 

Our six-month investigation also found the following: 

• There’s no way for consumers to know for sure the history of a used vehicle. 

States have widely differing laws concerning rebuilding practices and damage 

disclosure, and critical oversight is lacking in most states. It’s not uncommon 

for rebuilt wrecks to hopscotch from state to state, receiving new titles ‘‘washed’’ 

of any hint of past problems. 

• Overall, 30 percent of vehicles that had been totaled after a fatal accident and 

then put back on the road with a title that disclosed the damage had that disclosure subsequently removed, our study found. 

• Wrecked cars can be rebuilt safely, experts say. But there are strong financial 

incentives to cut corners. Consumers should especially steer clear of newermodel vehicles that have been totaled and rebuilt, unless a trusted mechanic 

can vouch for the repairs. The damage is usually severe, which can encourage 

rebuilders to skimp on repairs to make a profit. 

This report tells you the best way to identify such vehicles before you buy a used 

car and what to do if, after reading this, you think you may own one. 

Flawed Disclosure 

Used-car buyers have always had to be wary of unscrupulous individuals fobbing 

off a ‘‘cream puff’’ previously creamed in an accident. In all states except Wyoming 

and the District of Columbia, the used car’s certificate of title is supposed to tell 

about severe accident damage. But title disclosure is incomplete. For starters, accident disclosure is required only if damage exceeds typically 70 percent or more of 

the vehicle’s pre-accident book value or the insurer declares the vehicle a total loss. 

Lesser damage is not disclosed on the title. 

In most cases, when an insurance company declares a total loss, it pays off the 

policyholder’s claim and takes title to the vehicle. Often, the insurer must then 

apply for a different type of title for that vehicle, one generically known as ‘‘salvage,’’ though different states use other designations, including ‘‘junk,’’ 

‘‘unrebuildable,’’ ‘‘scrap,’’ and ‘‘parts only.’’ Whatever it’s called, a salvage title’s key 

distinction is that it declares the wreck not worth repairing, as far as the insurer 

is concerned, and doesn’t allow the vehicle to be operated on public roads. 

At this point, the wreck itself usually sits at a salvage auction company, which 

often obtains the salvage title and handles other paperwork as agent for the insurer. 

Three national chains, ADESA Impact, Copart, and Insurance Auto Auctions, sell 

insurance salvage vehicles almost exclusively at auctions throughout the country 

and handle about half of the estimated 2.5 million vehicles totaled each year. (Other 

auction chains sell unwrecked fleet, auto-rental company, and off-lease vehicles.) 

From here, the car or truck might be sold to a dismantler for parts, a scrap processor, or a rebuilder or used-car dealer who works with a rebuilder to put the vehicle back together. In any event, the salvage title is transferred from the insurer to 

the buyer. If the wreck is rebuilt, it must regain a type of title that allows it to 

again operate on public roads. That’s almost easier done than said because the majority of states require no special inspection of rebuilt wrecks. When inspection is 

required, it’s often cursory, industry experts say. 

Consider this red-letter warning on California salvage titles: ‘‘The vehicle described herein has been declared a total loss salvage vehicle’’ and ‘‘may not be registered without a brake and light inspection.’’ The title says nothing, for example, 

about the frame, suspension, or air bags. 

When a new title is issued for a rebuilt wreck, disclosure about prior damage 

leaves much to be desired. Every state uses different designations and methods of 

notice. Among the worst: Colorado, which alerts consumers that the vehicle was rebuilt with an ‘‘R’’ on the title in front of the vehicle’s identified ‘‘make,’’ in samesize type. Among the best: Washington state, which requires ‘‘WA REBUILT’’ in big 

letters running diagonally across the title. 

The lack of uniform titling is made worse by the fact that states can’t easily share 

information with one another. The National Motor Vehicle Title Information System, a computerized database designed to connect all state motor vehicle departments, may alleviate the problem, but it has been bogged down in development and 

may not be fully operational for several years. 

21 

Do the Math 

Salvage disclosure leaves another mark on a vehicle: It diminishes book value— 

even if the car or truck is rebuilt as good as new. 

Say you have a choice between two used cars, which you know are identical except 

for this: Car #1 had been totaled and rebuilt; Car #2 was never so much as dinged 

by a shopping cart. Which would you want? 

Of course you’d prefer Car #2, because Car #1 comes with the uncertainty of hidden damage. If the title does not divulge the accident, Car #1 can be sold for its 

regular book value. But if the damage becomes known, book value diminishes dramatically. ‘‘At best, a vehicle that’s had a salvage title would be worth half its Blue 

Book value, even after repair,’’ says Charlie Vogelheim, executive editor of Kelley 

Blue Book, a leading publisher of used-car prices. 

That’s because the market of potential buyers shrinks to only those willing to buy 

uncertain quality. And for that gamble, informed buyers demand a steep discount. 

But that puts a squeeze on rebuilders. If you rebuild a total-loss vehicle by the 

book—with salvage titling, repairs that might be specified by an insurer, full disclosure to the consumer, and a sale price based on the diminished book value—you’d 

be hard-pressed to make a profit. 

Consider an extended-cab 1993 Chevrolet K1500 pickup we found in Florida. It 

had a book value of $18,150 as of March 8, 1995. That was just before it sustained 

more than $14,520 in damage in a fatal rollover on Interstate 4 near Tampa, according to the application for salvage title filed by Progressive Insurance. With a salvage 

title, the book value of the rebuilt pickup drops to $9,075. 

So how could a rebuilder afford to spend several thousand dollars to buy the 

wreck, plus $14,520 more that Progressive certified it needed in repairs? Even if the 

rebuilder’s labor costs were far lower than Progressive estimated, there would be little room for a profit. 

The Chevy pickup was rebuilt. We tracked it to Kentucky, where it was sold for 

$16,775, records show. More on that later. 

The Safety Threat 

Rebuilders have been around for as long as there have been car accidents. And 

many do high-quality work. Some use their mechanical know-how to create laborof-love bargains for family and friends. Collision repair shops often keep a rebuild 

project on premises to occupy employees during slack times. And car buffs like Bill 

Plain—‘‘Plain Old Bill’’ to folks around Ocala, Fla.—save money on the cost of parts 

by specializing in one favorite model; Plain rebuilds pre-1992 Mazdas. 

But a different group of rebuilders elbowed their way into salvage auction yards 

in the 1990s. These rebuilders were on the prowl for quick, high profits. 

‘‘Backyarders,’’ as they are called, often have neither the expertise nor the equipment to do the job right. ‘‘They’ll take the car to their backyard, tie it to two trees, 

and pull out the frame that way,’’ says George Menchen, a rebuilder and retired collision-repair-shop owner from Santa Rosa, Calif. 

Supply is no problem, since insurers realized they can make far more money selling wrecks at auto auctions than to junkyards. ‘‘State Farm has always tried to recover as much as we can from salvage,’’ says Dave Hurst, spokesman for State 

Farm, the Nation’s largest insurer. Kim Hazelbaker, senior vice president at HLDI, 

the insurance-industry research group, says insurers have been intent on extracting 

more dollars from wrecks in recent years because of thin industry profits. ‘‘They’re 

trying to lower costs; one way to do that is to reclaim significant value from salvage 

vehicles,’’ Hazelbaker says. 

According to a 1997 HLDI study, insurers recovered $2,756 on average per totaled 

1995–97 model-year car or passenger van sold as salvage, or 18 percent of what they 

paid out in total-loss claims for those vehicles. And they received $4,293 per totaled 

pickup, sport-utility vehicle, or large van. That’s 23 percent of total-loss claim payouts for those vehicles. Those prices were for one- and two-year-old, low-mileage vehicles, the cream of the rebuilding crop. Many more older cars and trucks—more 

than five years old—are totaled and salvaged, too, but their high mileage, age, and 

lower book value make them less attractive for rebuilding. By contrast, insurers are 

paid only a few hundred dollars to a thousand dollars or so for parts-only vehicles 

and maybe $50 for those destined for the scrap shredder. 

We estimate that insurers recover about $1 billion a year from the salvage sale 

of wrecks five or fewer model-years old and $2.5 billion annually from wrecks of all 

ages, based on information from State Farm; analysts at A.M. Best, which rates the 

financial soundness of insurance companies; and ADESA Corp., owner of the thirdlargest salvage auction chain. 

Are rebuilt wrecks safe? 

22 

‘‘It is possible to make repairs to a vehicle that had been involved in a severe 

crash in such a way that the resulting vehicle has a structure that is similar to an 

uncrashed vehicle,’’ says Bob Lange, executive director for safety integration at General Motors. ‘‘But if it’s not properly repaired, the safety performance of the original 

product could be compromised.’’ 

To understand how easily safety can be shortchanged, you have to consider newcar design and development. Today’s unibody vehicles are engineered as a single 

crash-protection unit. All individual components are aligned to work together to one 

end: Dissipate the fantastic crash energy created when 3,000 to 5,000 pounds of machinery rapidly decelerates from 55, 35, or 20 mph to zero so that the people inside 

can safely ‘‘ride down’’ the same deceleration with minimal injury. 

New vehicles must comply with Federal safety standards. To test and refine their 

design, automakers conduct up to 100 crashes using 50 or more prototypes that cost 

$300,000 to $800,000 each. 

By contrast, the rebuilding industry is subject to almost none of that rigor. 

Cutting Corners 

If rebuilders replace all damaged parts, the level of safety should be the same, 

because the repairer would be simply replicating the original safety engineering. 

That, however, can be expensive, so even reputable mechanics take shortcuts. Experienced hands can do that without shortchanging safety. The problem comes when 

such repairs are made by rebuilders out to make a fast buck. By so doing, they can 

create a vehicle very different from the one Detroit intensively tested. 

Potential problem areas include: 

Sectioning. Instead of replacing a damaged critical structural component with a 

new one, rebuilders cut out only the damaged section and splice in a new piece. This 

procedure has the blessing of automakers and of the Allstate subsidiary Tech-Cor, 

a repair facility that develops ‘‘cost-effective repair procedures,’’ according to a company bulletin, and shows anyone with a computer and Internet access how to do 

it. 

But a Tech-Cor bulletin warns that sectioning must be performed only by a properly-trained technician, requires the use of accepted procedures, and must maintain 

the vehicle’s ‘‘original energy management characteristics intact to ensure the proper functioning of passenger safety devices.’’ 

‘‘We regularly conduct rigorous testing procedures, including crash tests, to validate the effectiveness of replacement procedures,’’ Jack Ribbens, Tech-Cor’s engineering manager, wrote in an e-mail exchange with Consumer Reports. When asked 

for details, and for comment on the issue of untrained rebuilders using such techniques, Allstate and Tech-Cor declined to be interviewed. 

Bending, banging, cutting, welding. Pry bars, hammers, and welding torches provide cheaper fixes than replacement with a whole new part. The problem is that 

when high-strength steel alloys are torched, some lose their strength and rigidity 

while others lose their flexibility. ‘‘If the rigidity of the metal changes, the crash 

pulse that the air-bag sensor has to feel may change and the air bag may fire too 

soon or too late,’’ says Priya Prasad, manager of safety research and development 

at Ford Motor Co. 

Clipping. This procedure involves cutting two smashed vehicles of the same make 

and model in half and welding the undamaged half of one to the undamaged half 

of the other. 

‘‘Clipping can be done in a safe manner, provided it’s done properly,’’ says Lou 

DiLisio Jr., Chairman of the Collision Industry Conference, a repair-shop education 

and training group. But without Federal safety standards and government inspections, who’s to know whether this intricate procedure is done properly? 

Cheating on air bags. Air bags are expensive, so ‘‘a lot of lower-cost vehicles get 

totaled because of air-bag deployment,’’ says John Eager, senior director of claims 

services for the National Association of Independent Insurers. He added: ‘‘You can 

spend $3,300 just for the air-bag system alone.’’ 

Rebuilders can save thousands by forgetting the air bags. ‘‘There are cars out 

there right now that had air bags deployed and were rebuilt and never had a new 

bag put in,’’ says Richard Morse, who chaired NHTSA’s Motor Vehicle Titling Registration and Salvage Advisory Committee. 

Alternatively, rebuilders can use recycled air bags, which are cheaper than factory-fresh replacements. But Robert Redding, the Washington, D.C., lobbyist for the 

Automotive Service Association, a trade group comprising 15,000 collision repair 

shops, says the risks of using recycled air bags is an important issue that has been 

ignored by safety regulators. ‘‘These things are very sophisticated pieces of electronic equipment, and when you see 60 used air-bag modules sitting on the ground 

23 

underneath a tin shed in a salvage yard, that’s a little scary,’’ says Redding, who 

notes they can be damaged by exposure to the elements. 

The Insurance Institute for Highway Safety (IIHS) recommends against recycled 

air bags because of the risk that they may come from the hundreds to thousands 

of cars that are flooded each year. The air-bag system’s electronic diagnostics ‘‘cannot check whether the module itself, the folded air bag, gets damp or wet,’’ says 

Brian O’Neill, IIHS president. ‘‘If it does get wet, that can impede the way the air 

bag unfolds.’’ 

Not replacing safety belts. The most effective piece of safety equipment is also the 

most easily overlooked by a rebuilder and used-car buyer. Belts protect passengers 

and help them gradually decelerate by stretching, which permanently damages the 

belt. The belt retractors have metal spikes that become permanently damaged as 

well, as they bite into the belt to hold the load constant. Belts and retractors should 

be replaced after a frontal crash at speeds of 15 mph or higher or if the belts are 

frayed or their fibers have been partially melted together by friction, advises Prasad 

of Ford. 

Internal corrosion. This can be created by sloppy welds or failure to apply zincbased undercoating—though generous undercoating is a favorite cover-up for shoddy 

workmanship. But the biggest corrosion problems start with vehicles that have been 

submerged above the door sill in floodwaters—especially salt water—that invade the 

sensitive electronic components in the dashboard and engine. Air-bag sensors and 

electronics can be harmed as well. 

Flood cars can be properly restored, says Plain, the Ocala, Fla., rebuilder, but it 

takes about 75 hours to strip the car down to its shell, replace all electronics, wash 

the upholstery, and dry up and protect wiring and connections. Such work isn’t 

cheap, either. 

Because much of that work can be left undone and undetected, other collision repairers and experts recommend that consumers avoid vehicles that have slept with 

the fishes. When only a cosmetic mop-up and air fresheners are used, flood cars can 

literally corrode from the inside out, causing mystery problems and electrical failures. 

With no standards and no inspections, there’s no way to know whether a rebuilt 

car is safe. ‘‘Our repairers tell us they can rebuild these cars from the ground up, 

and they can make them safe,’’ Redding says. ‘‘Whether they’re all safe? How in the 

world will we know unless they’re inspected? The majority of states have no inspection.’’ 

Questionable Titles 

Used-car buyers are at a further disadvantage when a vehicle’s salvage history 

is not disclosed. 

In Indiana, for example, State Farm Insurance sold, exchanged, or transferred 

hundreds of totaled vehicles in the 1990s without getting the required salvage titles, 

according to Jeffrey Modisett, the Indiana attorney general, who reached a settlement with State Farm in 1998. Consumers who ultimately bought these vehicles 

‘‘did so without knowledge of the damage, safety, reliability, and true value of these 

vehicles,’’ he said. 

Hurst, the State Farm spokesman, says the insurer offered to buy back 437 improperly titled vehicles as part of the settlement. He says the problem stemmed 

from a misunderstanding by a salvage dealer who disposed of the cars and trucks 

for State Farm. 

Christopher Gridley of Louisiana had a different problem involving State Farm, 

according to a lawsuit filed in June 2000. He purchased a 1998 Volvo S70 with a 

clean title in November 1999, he says, but when he brought it in for repair after 

an accident of his own, the repair shop told him the car had previously been 

wrecked and improperly rebuilt. According to the lawsuit, which is still pending, 

State Farm declared the car totaled a month before Gridley bought it, but the company didn’t apply for a salvage title. Hurst says the allegations are ‘‘without foundation.’’ 

In California, three plaintiffs say in a class-action lawsuit that National Car Rental System did not obtain the proper salvage title after their cars were wrecked by 

rental customers, rebuilt, and subsequently sold to them with clean titles. Because 

the lawsuit is ongoing, National said that it wouldn’t comment. 

No one knows exactly how many rebuilt wrecks are for sale whose titles hide their 

histories. To get an idea, however, Consumer Reports analyzed some 10,000 cars and 

trucks offered for sale at 35 locations in 23 states one week last summer. They were 

being auctioned by Insurance Auto Auctions, one of the nation’s leading auction 

chains, which says it sells insurer-totaled vehicles almost exclusively. Twenty percent of the vehicles we analyzed had clean titles. Wide differences in state salvageVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
24 

titling regulations may partly explain why. At any rate, the numbers suggest the 

relative ease with which damage too great for insurers to repair can remain hidden 

from consumers. 

But even if a vehicle gets a salvage title, that title can easily be washed by registering the car in a state with more lenient thresholds for salvage- or rebuilt-branding. For example, in Oklahoma, a salvage title is required when damage equals only 

60 percent of the car’s book value. For a car with more damage, a rebuilder can simply retitle the car in Texas, where a salvage title isn’t required until damage hits 

75 percent of book value. 

Remember the Chevy pickup wrecked in Florida? Progressive Insurance’s office in Brandon, Fla., declared it ‘‘unrebuildable’’ because it required more than $14,520 

worth of repairs, or at least 80 percent of book value, the Sunshine State’s salvage 

threshold. 

The wreck was then shipped to Kentucky, which has a lower salvage threshold 

than Florida (75 percent of book value), but other loopholes. Whoever rebuilt this 

pickup produced two notarized estimates from two body shops swearing that the rebuilding cost had fallen to as little as $4,969, or a mere 27 percent of book value— 

a $9,550 cost saving. 

The pickup was rebuilt and given a new title with an inconspicuous ‘‘Rebuilt Vehicle’’ notation near the bottom of the certificate. 

Kentucky says the state issues 40,000 rebuilt titles a year. The Chevy pickup was 

still on the road in the vicinity of Canada, Ky., as of July 2000, Carfax’s last notation. 

Recommendations 

Before you buy any used vehicle, have a mechanic whom you trust inspect it thoroughly; at a minimum, cover the checkpoints (Telltales Signs of a Rebuilt Wreck) 

on pages 27 and 28. 

Used cars that show evidence of prior repairs are not inherently unsafe; that depends on the severity and type of damage, the quality of the repair, and the age 

of the vehicle. (A totaled older-model car actually may have had relatively minor 

damage, given that it wasn’t worth a lot to begin with.) 

But avoid a newer-model vehicle that was totaled and rebuilt (or an older vehicle 

rebuilt years ago when it was newer) unless you have the assurance of your mechanic that repairs are proper and safe. Because of their higher book values, newer 

vehicles must sustain significant crash damage to be totaled. (An exception would 

be vehicles totaled because of extensive cosmetic damage from, say, hail.) The high 

cost of repairing extensive damage provides rebuilders with plenty of incentive to 

cut corners. But the biggest problem is that the majority of states require no safety 

inspection on the repair work. 

If you believe you may have inadvertently bought a rebuilt wreck, ask your local 

or state consumer-affairs department about the applicable laws in your state. The 

National Association of Consumer Advocates’ website, www.naca.net, maintains a 

list of lawyers who are experienced in these matters. 

Insurers should support meaningful legislation to regulate rebuilding. And Congress and states should require the following: 

Claims reporting. Since accident damage is the first event that leads to all other 

problems involving rebuilt vehicles, insurers should be required to report to state 

motor-vehicle authorities the vehicle identification number of every vehicle that is 

totaled or that sustains frame or flood damage. 

Release of claim data. To provide consumers with the best information about past 

accidents, Federal legislation should require insurers and their data-service vendors 

to make their existing accident and total-loss databases available to motor vehicle 

departments—for a fee, if need be—so that authorities from all 50 states and consumers can check whether a vehicle has been totaled or sustained major damage. 

Safety inspections. Every vehicle that has suffered frame damage or that has been 

totaled and rebuilt should be required to be inspected for the quality of its repairs. 

Uniform titling. Congress should establish uniform titling standards in all states 

regarding rebuilt vehicles. 

---------------------------------------------------------------------- 

Diary of a Rebuilt Wreck 

Black 1998 Mercedes E320 four-door wagon, VIN: WDBJH65F9WA560114. Manufactured in Germany. Retail value in 1998: $50,000. 

January 15, 1998: 

Registered in Forrest City, Ark. Odometer: 18 miles. 

May–August 1999 

25 

A crash causes $30,000 in damage. 

Car is rebuilt across the state line, in Memphis, Tenn. Damage doesn’t appear 

to meet threshold for Arkansas title disclosure. Odometer: 11,459. 

Mercedes-Benz flags the car’s 4-year, 50,000-mile warranty: Repairs deemed accident-related won’t be covered. 

November–December 1999: 

Owner trades in car to Mercedes-Benz of Memphis for a new one. Odometer: 

12,569. 

Sold for $30,000 to Mid-South Motors of Memphis. 

Sold for $29,000 to Peck Daniels Auto Sales of Memphis. 

Sold for $34,000 to Southern Imports, Leesburg, Fla. 

December 20, 1999: 

Sold for $36,000 to Ocean Imports of Houston, Texas. Odometer: 13,823. 

December 31, 1999: 

Sold for $45,000 to a man in Houston, Texas. Odometer: 14,300. 

February 4, 2000: 

Sold back to Ocean Imports, Houston, Texas, for $45,000 after Houston owner 

says he discovered the prior damage. Odometer: 14,422. 

February 18, 2000: 

Sold for $29,500 back to Southern Imports, Leesburg, Fla. Odometer: 14,223. 

February 28, 2000: 

Sold for $29,500 to McNeill Automotive, St. Petersburg, Fla. Odometer: 14,423. 

March 22, 2000: 

Sold at a West Palm Beach, Fla., auto auction to Walter’s Auto Sales & Service 

of Riverside, Calif. Odometer: 15,801. 

May 2, 2000: 

Sold for $34,800 at Riverside Auto Auction to Auto Mart of San Ramon, Calif. 

Odometer: 15,911. 

June 5, 2000: 

Sold to Julie Ray of San Francisco for $43,455. Odometer: 16,112. 

April 2001: 

Bought back by Auto Mart for $43,455 plus legal fees after Ray learns of prior 

damage, sues Auto Mart, and settles. 

October 2001: 

Sold by Auto Mart to new owner for ‘‘just under’’ what Ray paid, Auto Mart 

says. Odometer: 27,981. 

---------------------------------------------------------------------- 

Our Study 

No one seems to know how many rebuilt wrecks are on the road today, and 

whether their current owners know the history of these vehicles. Insurers have the 

best information to help answer these questions, but they aren’t releasing it. 

We analyzed government data on an important subset of all wrecks: Some 393,000 

passenger vehicles involved in fatal accidents from 1993 through 1999. Of those, we 

focused on the 58,000 late-model cars and trucks deemed to have disabling damage 

by police at the accident scene for which we could find vehicle-history information. 

Our analysis provides new statistical evidence that a severe crash is not the end 

of the road for many wrecks. Indeed, more than 40 percent of the passenger vehicles 

involved in such crashes were rebuilt and retitled for use on public roads, according 

to our study. 

Other key findings: 

• All vehicles identified by police as having disabling damage are not necessarily 

a total loss, as defined by states and hundreds of individual insurance companies. So we zeroed in on the 41,800 vehicles deemed by an insurer as totaled, 

as indicated by their receiving a ‘‘salvage,’’ ‘‘junk,’’ ‘‘dismantled,’’ or ‘‘non-legal 

26 

highway’’ title as their first title following the fatal crash date. About 20 percent 

of those cars, or 8,300, were subsequently retitled for use on public roads. 

• About one-third of the 8,300—roughly 2,500 vehicles—had titles ‘‘washed’’ of 

their salvage history. That means the latest title said nothing about the vehicle 

being totaled and then rebuilt. Overall, 6 percent of the totaled cars we studied 

had their title washed. 

• Newer vehicles were more likely to be rebuilt. Experts say this is because their 

age and low mileage make them more attractive to used-car buyers. Approximately 25 percent of totaled vehicles that were the current model year or one 

model-year old at the time of the accident were retitled for the highway vs. just 

15 percent of totals that were 5 model-years old. (See table below.) 

Which vehicles get rebuilt? 

Age of Vehicle Percent Totaled And Rebuilt 

0–1 yr. 25 

2 24 

3 19 

4 17 

5 15 

All cars 0–5 20 

Source: Consumer Reports, Carfax, NHTSA 

A spokesman for the National Highway Traffic Safety Administration (NHTSA), 

a division of the Department of Transportation, said the agency has no official comment on our study. But NHTSA’s Richard Morse, former chairman of the agency’s 

Motor Vehicle Titling Registration and Salvage Advisory Committee, said of our 

findings, ‘‘That’s a lot of cars.’’ Morse said hard numbers on rebuilt vehicles are 

scarce and that lack of information has impeded reform efforts. ‘‘It’s hard to build 

up a whole lot of support in Congress if you don’t have a whole lot of numbers,’’ 

he said. 

Said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, 

a California-based safety-advocacy organization: ‘‘These numbers are a big red flag 

for used-car buyers. They validate the concern that tremendously damaged cars do 

go back on the highway.’’ 

Our study tapped the Federal Fatality Analysis Reporting System (FARS), a computer database maintained by NHTSA that contains detailed information about 

every fatal U.S. motor vehicle accident. 

Most FARS data are public and accessible via the Internet or CD–ROM, but 

NHTSA does not disclose the entire vehicle identification number (VIN) because it 

regards that as personally identifying information, which it is not allowed to release. 

The FARS data also have no information about the vehicle’s title history. 

Carfax, one of two leading providers of vehicle title-history information, maintains 

a 1.6-billion-record database including VINs and vehicle histories. But it does not 

have the detailed accident information that’s in the FARS database, though it has 

accident data reported by some states. 

Our analysis for the first time joined information from these two databases, 

through a special agreement between NHTSA, Carfax, and Consumers Union, designed to preserve the confidentiality of the FARS VINs. Consumers Union never 

saw the VINs. 

The findings apply only to the group of fatal crashes we studied, not to all wrecks. 

And our numbers are conservative. For example, we excluded from the study titles 

with incomplete information about their salvage, washed-title, or road-legal status. 

---------------------------------------------------------------------- 

Caution, Before you buy any used car . . . 

Bring a friend with you, preferably one who knows cars. Thoroughly inspect the 

exterior, interior, trunk, engine compartment, tire wear, and undercarriage. 

Be direct. Ask the seller whether the car has been in an accident or a flood, and 

gauge his or her reaction. 

Inspect the title for ‘‘salvage,’’ ‘‘rebuilt,’’ or similar notations. If the seller is an individual, check the title to make sure you’re dealing with the vehicle owner. 

Take the car for a test drive. Make right and left turns at various speeds; turning 

should be smooth. On a straight roadway, check that the car doesn’t pull to one side. 

Ask your friend to follow behind in the car you arrived in to look for rear wheels 

that seem to skew to one side—a sign that the frame may be out of alignment. 

27 

Have the car inspected. If you’re really interested in the car, have a qualified mechanic or vehicle appraiser examine it inside and out. Agree in advance with the 

seller that you’ll pay for the examination if the car passes muster and the seller 

will pay if significant problems are discovered. Have the mechanic look under the 

air-bag covers to check that the air bags are present and functioning. 

Check the warranty. Ask the service or warranty department of the local dealer 

if the warranty is still in effect 

Investigate the VIN. Use the Internet to find out whether the car’s vehicle identification number (VIN) is listed among the thousands of cars severely damaged in 

floods in North Carolina in recent years (www.jus.state.nc.us/cpframe.htm). And, 

yes, even cars used in crash tests can wind up rebuilt. The National Highway 

Transportation Safety Administration takes steps to prevent this by titling its 

crash-test cars ‘‘not rebuildable’’ and publishing their VINs on the Internet 

(www.nhtsa.gov/cars/problems/salvage). The Insurance Institute for Highway Safety also titles its crash-test cars unrebuildable but does not publicly disclose the 

VINs. It provided them to Consumer Reports, however, and we found that only 1 

of 150 apparently had been retitled for the road. 

Buy a title-history report. Ask the seller to pay if there are problems. Two Internet 

providers sell this information. Carfax (www.carfax.com) charges $15 per report on 

a single VIN and $20 for 60 days of unlimited access; Experian Automotive (www.eautohistory.com/1lautohistory/index.html) charges $15 per history report for a single VIN and $20 for five. Both systems use state motor-vehicle departments to compile their reports, but each has other sources that differ slightly. Other history-report services repackage Experian’s basic data. 

Size up the seller. If it’s a car dealer, consult the Better Business Bureau; if it’s 

an individual, browse the classifieds for other auto ads with the same phone number—a sign of an unlicensed broker who sells used cars by posing as the owner. 

---------------------------------------------------------------------- 

Telltale Signs of a Rebuilt Wreck 

1. Paint that chips off or doesn’t match indicates damage repair and poor blending. 

2. Paint overspray on chrome, trim, or rubber seals around body openings reveals 

that the adjacent panel was repaired. 

3. Misaligned fenders suggest a poor repair job or use of non-original equipment 

manufacturer (non-OEM) parts. 

4. CAPA (Certified Automotive Parts Association) sticker on any part may indicate collision repair. 

5. Uneven tread wear reveals wheel misalignment, possibly because of frame damage. 

6. Mold or air freshener cover-up suggests water damage from a leak or flood. 

7. Silt in trunk may mean flood damage. 

8. Fresh undercoating on wheel wells, chassis, or engine strongly suggests recent 

structural repairs covered up. 

9. Door that doesn’t close correctly could point to a door-frame deformation and 

poor repair. 

10. Hood or trunk that doesn’t close squarely may indicate twisting from side impact. 

11. Dashboard lights, power windows, and other electronics with intermittent 

problems could be a sign of flood damage. 

12. Dashboard air-bag indicator that doesn’t light up could mean the air bag was 

replaced improperly—or wasn’t replaced at all. 

13. Big dents, kinks in structural components, or crimped or crunched fuel lines 

and pipes underneath are the easiest problems to find because rebuilders assume 

you won’t be looking there. 

14. Uneven surfaces on frame components could be filler, seam sealer, or welding 

beads. 

15. Damaged/gouged nuts and metal on top surface of strut tower (which connects 

the front wheels to the frame) in engine compartment may mean the frame was realigned. 

16. New metal on only one part of the hood apron shows section repair rather 

than replacement of the entire apron piece. 

17. Welding bead anywhere on heavy frame members underneath the engine suggests frame-rail sectioning or sloppy repair of a cutout made in the rail to perform 

repair work. 

18. Inconsistent welds around hood apron, door, door frame, or trunk exemplify 

a nonfactory weld. 

28 

19. Frayed safety belts or belt fibers that have melted together because of friction 

indicate a previous frontal impact above 15 mph. 

20. Missing car emblem or name on trunk may mean a non-OEM part was used. 

---------------------------------------------------------------------- 

What We Don’t Know 

The Highway Loss Data Institute (HLDI) and its affiliate, the Insurance Institute 

for Highway Safety (IIHS), describe their mission as ‘‘finding out what works and 

what doesn’t work to prevent motor-vehicle crashes in the first place.’’ Their aim 

is to reduce human and property losses from automobile accidents. The combined 

$14.6 million annual budget of these private nonprofit groups is provided mainly by 

75 insurance companies. 

Through crash testing and research of damage claims make-by-make, model-bymodel, the institutes analyze the human, vehicular, and environmental factors associated with accidents. Consumer Reports uses IIHS data in our safety assessments 

of specific models. 

A unique database maintained by the institutes—millions of records on loss 

claims related to roughly two-thirds of all insured late-model cars and trucks in the 

U.S.—allows them to glean rich information about those models that are more frequently involved in accidents. 

That same database could help answer critical questions about rebuilt wrecks, 

such as: How many totaled vehicles have been rebuilt and put back on the road? 

Are there patterns or trends that merit further investigation or better regulation? 

There’s no evidence that the safety of rebuilt vehicles is a major problem, says 

Brian O’Neill, president of HLDI and IIHS. ‘‘Is it possible that repairs are related 

to vehicle performance during a crash? That’s impossible to know,’’ he says. ‘‘If I 

were going to have concerns about this issue, I’d be concerned whether consumers 

are adequately informed about the history of the vehicle.’’ 

For this report, we asked HLDI for the vehicle-identification numbers (VINs) and 

other basic details for all collision-totaled cars and trucks in its database. Merged 

with the extensive title-history database of Carfax, a Fairfax, Va., company, the 

HLDI data could provide the most comprehensive picture to date of rebuilt wrecks. 

The HLDI board, whose members are executives from the nation’s largest auto 

insurers, turned down our request. ‘‘The conditions in which we get our data from 

insurers is that we cannot release any individual records, and a VIN is an individual record,’’ says O’Neill. 

Even if the data were made available, ‘‘Knowing that there are that many rebuilt 

vehicles doesn’t tell you very much,’’ O’Neill says. He notes that some wrecks are 

bought by car thieves, who remove the VIN plate and put it on a stolen car of the 

same make, model, and year. He said he had no information on how often that 

might happen. 

CCC Information Services (CCCIS), an insurance-industry service provider, maintains its own database containing information on 30 million vehicles that have been 

identified as totaled, salvaged, borderline totaled, stolen, or damaged since 1980. 

The company declined our request for information from the database; contracts with 

insurance-company customers prevents it, says Susan Jablonski, a spokeswoman. 

We also asked Experian Automotive, a leading seller of vehicle-history reports, 

which draws on the CCCIS database to include the barest major-damage information about individual vehicles. Ken Kauppila, Experian’s executive vice president, 

says his database has information on 10 million salvage vehicles and that the company retrieves data in large batches for car dealerships. But the company’s contract 

with its partners doesn’t allow release to Consumer Reports, he says. 

Ms. SHAHAN. Thank you very much, Senator. 

It has a classic example that I told Consumer Reports about of 

a woman who is a real estate agent in San Francisco who bought 

a car that was new at one time in Arkansas, and it was a Mercedes. The first owner registered it in Arkansas and then it sustained $30,000 worth of damage. At that time Mercedes red-flagged 

the warranty and deemed that repairs that were accident-related 

would no longer be covered. 

Then it was sent to Tennessee, Texas, and Florida and sold at 

one point to an individual who got it bought back in Texas, then 

it went to Florida again, then to California, Riverside, and then up 

to San Francisco, where Julie Ray bought it. 

29 

It was a so-called ‘‘certified’’ car, so the implication was that it 

had already been inspected, had passed a very rigorous inspection. 

She paid $43,455 for this car. Then when she started having serious problems with it, she tried to get Mercedes to honor the existing warranty that supposedly was in effect, and Mercedes said no. 

They would not honor the warranty because of the prior damage. 

So she paid extra to get a car that was certified. She paid extra 

to get a car with the manufacturer’s warranty. And not only was 

it a very dangerous car because the prior wreck was very shoddily 

repaired, but she could not get it repaired under the warranty. 

With my testimony I have brought copies of other examples. We 

are seeing this all over the country, where certified cars are being 

sold, supposedly with additional protections, that consumers cannot 

use because of prior damage status. It is a serious problem. In California Governor Schwarzenegger just signed legislation, it is the 

first in the country, and it is part of the Car Buyer’s Bill of Rights, 

to address the sales of certified wrecks. It outlaws selling prior 

damaged cars if they had any frame damage as a certified car. We 

think that that is an important step. 

But because of the mobility of these cars, there is nothing any 

individual State can do that is sufficient. We need better protection. As others who have testified before me have said, consumers 

should have access to the databases that are out there that already 

exist, whether it is through improving NMVTIS, whether it is 

through better access to NICB for the public. 

We are not asking for personal identifiers or information about 

the owners. We are just asking for the consumers who are looking 

to buy the car to have access to the same information that others 

have, the insurance company or self-insured entity if it is a rental 

car company or a car dealership, or very often, the manufacturers. 

We do not believe that the consumer should be the last to know. 

If you are looking at a car, we think that the information really 

belongs right on the car. Here is an example of the car buyer’s 

guide [indicating] that the Federal Trade Commission has required 

on every used car since 1985. It would go a long way toward cleaning up fraud if there were information on the buyer’s guide. The 

dealer is supposed to say whether or not there is a warranty in effect, but what often happens is—here is an example of a car buyer’s guide. A young man who works as a landscaper bought a BMW 

and on the guide it said it had a warranty, a full factory warranty 

for 4 years or $50,000, but in fact, BMW would not honor that warranty due to prior damage. 

So the representation that is being made to consumers in the 

Federally-required buyer’s guide is very often misleading. It is like 

a triple whammy because the car is not worth as much as they are 

paying for it, and they pay extra for warranty coverage they cannot 

use. If they get an extended service contract, extended service contract companies will not honor the warranties on these vehicles either. 

This will not solve the problem entirely if the disclosure is on 

used cars because, unfortunately, and lot of times we forget this, 

a lot of times flood-damaged cars or wrecks are new. We hear from 

consumers, not very often but occasionally, who buy new cars that 

were damaged and there was no disclosure and the manufacturer 

30 

1State of California: Report to the Legislature: A Study of Auto Body Repair Problems with 

Findings and Recommendations (July 1, 1994). ‘‘According to a 1984 DCA/BAR [Department of 

Consumer Affairs Bureau of Automotive Repair] study of unibody repairs, the ability of improperly repaired unibody vehicles (95 percent of today’s passenger cars are of unibody design) to 

withstand a second crash is significantly compromised and would result in serious injury and 

death to the occupants. . . . Finding: More than 70,000 structurally damaged and 150,000 

salvaged vehicles are returned to our streets and highways every year without a safety inspection, and they pose a potential hazard to all of California’s twenty million unsuspecting motorists.’’ 

will not honor the warranty on them or part of the warranty is 

void. 

So we need something that goes beyond the used car sticker. We 

look forward to discussing what that might be with other parties 

and look forward to your questions. 

[The prepared statement of Ms. Shahan follows:] 

PREPARED STATEMENT OF ROSEMARY SHAHAN, PRESIDENT, CONSUMERS FOR AUTO RELIABILITY AND SAFETY

Mr. Chairman and Senators: Thank you for the invitation to testify today regarding ways to protect consumers from flooded and salvage vehicle fraud. My name is 

Rosemary Shahan, and I am the President of Consumers for Auto Reliability and 

Safety, or CARS, a nonprofit auto safety and consumer advocacy organization based 

in Sacramento, California. 

CARS is dedicated to preventing motor-vehicle related fatalities, injuries, and economic losses. Since 1979, I have worked at the State and Federal levels on behalf 

of consumers on a range of auto-related issues. I appreciate the opportunity to highlight some of the worst problems posed by flooded and salvage vehicle fraud, and 

to make some recommendations for your consideration. 

Problem 

Damaged Vehicles Pose a Serious Threat to the American Public 

Every year, millions of vehicles are in serious collisions, or in flood disasters. Most 

people assume that severely damaged vehicles are crushed, or sold solely for parts. 

In fact, many are destroyed. Many are taken apart and usable parts are recycled 

by professional and responsible recyclers. But every year millions of severely damaged autos are sent by insurers to auctions and then sold to unscrupulous auto dealers and rebuilders. They are then sold under false pretenses to car buyers. The deceptions artificially inflate profits for the unscrupulous insurers, auctions, rebuilders, and dealers who profit from perpetrating fraud, at the expense of the motoring 

public and honest businesses alike. 

This is particularly troubling since shoddily rebuilt wrecks and flood cars Pose a 

serious safety problem—to the owners and to all who share the roads with them.1

The problem of flooded and salvage vehicles goes far beyond title branding. At its 

core, the problem is systemic fraud—knowing and deliberate concealment of material facts. Fraud involving prior wreck or flood damage costs American consumers 

billions each year and also endangers lives. 

Prior damage vehicles may not provide adequate protection in a subsequent crash. 

Air bags are sometimes not replaced. Some major franchised auto dealers have sold 

cars missing air bags or with shop rags where the air bags belong. This is a serious 

safety threat. Auto manufacturers have reconfigured seat belt designs so that seat 

belts work in tandem with the air bag as a safety system. Consequently, in a moderate-to-severe collision, a driver or passenger who is wearing a seat belt, but whose 

vehicle is missing an air bag, is prone to suffer and debilitating serious head, facial, 

or spinal cord injuries, or be killed. 

Insurers Part of the Problem 

Some insurers destroy vehicles that are non-repairable and properly brand the titles of ‘‘salvage’’ autos, but others engage in fraud. The fraudsters send nonrepairable vehicles and salvage or flood cars to auctions, often with clean titles. In return, 

insurers recoup more than the vehicles are actually worth, given their damaged condition. 

The Nation’s largest auto insurer, State Farm, has a shameful record of violating 

state title-branding laws and failing to properly brand titles as ‘‘salvage.’’ In 1998, 

State Farm settled a case brought by the Attorney General of Indiana. According 

to Indiana Attorney General Jeffrey Modisett, ‘‘State Farm sold, exchanged, or 

31 

2 ‘‘Attorney General Modisett, State Farm settle salvage motor vehicle title case,’’ News Release, State of Indiana Office of the Attorney General, July 28, 1998. 3 ‘‘State Farm violated agreement on selling totaled cars,’’ St. Louis Post-Dispatch, January 

24, 2005. 4 Ibid. 5 Ibid. 

transferred salvage vehicles it had acquired without obtaining salvage 

titles... People who purchased these vehicles did so without knowledge of the 

damage, safety, reliability and true value of these vehicles.’’ 2

That case reportedly came to light because ‘‘a car dealer in Greenfield, IN, made 

a startling discovery. After repairing what he thought was a relatively new Ford 

pickup, he routinely sent the manufacturer a bill for his warranty work. Ford refused to pay. It told the puzzled dealer that a records check found that the pickup 

had been in a wreck, an insurance company had declared it a total loss and had 

resold it. That voided the warranty... After a two-year investigation, State 

Farm admitted selling about 1,400 totaled cars, trucks and sport-utility vehicles in 

Indiana—all without the required state salvage titles.’’ 3

Earlier this year, State Farm settled yet another case, this time with 49 state attorneys general and the District of Columbia. The company publicly admitted that 

it had resold at least 30,000 totaled vehicles without salvage titles. State Farm reportedly conceded that ‘‘the number could turn out to be as high as 40,000.’’ 4 A 

spokesperson for State Farm is quoted as saying ‘‘We don’t know whether it was 

an error, a mistake or malfeasance.’’ 5

Owners of those salvage vehicles were not immediately notified. Over a year after 

State Farm notified the attorneys general, the owners received letters informing 

them their vehicles were ‘‘salvage.’’ The titles are belatedly being branded ‘‘salvage.’’ 

Some owners have found that not only is their vehicle worth far less than they paid 

for it, but they face losing insurance coverage or having their coverage reduced due 

to the salvage history. 

Hapless victims may also find the lender will call the entire loan due, on grounds 

the vehicle is not sufficient collateral for the loan. Under the new Federal bankruptcy law, they may be held liable for the entire amount of the loan, based on the 

inflated price they paid, while in the past the amount could have been reduced to 

reflect the fair market value of the damaged vehicle. If the consumer is unable to 

pay the full loan, they may end up having the vehicle repossessed. For many people, 

that means they would lose their only means of transportation, and potentially lose 

their jobs. 

Flood Cars Pose Unique Problems 

The entire Nation has witnessed national news coverage showing tens of thousands of new and used flooded cars resulting from the recent disasters in the Gulf 

region and Florida. They have garnered tremendous media attention, and rightfully 

so. Flood cars pose a unique set of hazards to consumers. Thanks to sophisticated, 

advanced safety technologies and the increasing computerization of automobile design, flood cars are even more hazardous than in the past. Virtually all of today’s 

cars have sensitive electronic components that control major systems, including the 

engine, brakes, and air bags. Those electronic components, immersed in water and 

contaminants such as silt and petroleum residues, will inevitably deteriorate and 

corrode, particularly if the vehicle was submerged in salt water, rendering the vehicles unreliable. 

Compounding the problem: complicated electronic components tend to be the most 

expensive to replace. They are also not visible, but are usually enclosed, making 

their condition difficult to detect and easy to conceal. The temptation for unscrupulous rebuilders and dealers is to cut corners and simply do a cosmetic clean-up, replacing the carpeting and upholstery and leaving the compromised electronics untouched. 

At one time, the typical vehicle could be submerged in water over the sill without 

compromising its safety. Those days are gone. Now, most passenger vehicles have 

electronic systems located under the seats. Flood damage to the point where vital 

electronic components are soaked in water makes today’s vehicles totally unreliable. 

They will be plagued by a whole host of major electronic problems. 

For example, the air bags may or may not inflate in a crash. If they do inflate, 

they may inflate too soon or too late. The anti-lock brakes may not work. In an 

emergency braking situation, on a rain-slicked road, a driver who has learned to 

slam on his or her anti-lock brakes may lose control and spin out. The engine may 

stall out intermittently, without warning, during driving in heavy traffic—an obvious safety hazard. 

32 

6 ‘‘What insurers are doing,’’ Automotive News, October 31, 2005. 7 AB 68 (Montan ̃ ez), Statutes of 2005. 8 ‘‘In Harm’s Way—at Home: Consumer Scams and the Direct Targeting of America’s Military 

and Veterans,’’ Report by National Consumer Law Center, May 2003. ‘‘Automobile-related 

scams: Cars are a big source of financial trouble for service people. The Navy-Marine Corps Relief Society, for instance, gives the largest single portion of its cash aid to military families— 

nearly a quarter of all its aid—for car-repair assistance . . . military legal assistance officials 

Over time, flood cars are also prone to develop mold and mildew that can cause 

serious health problems, particularly for people who suffer from allergies or asthma. 

According to one news report, some insurers, such as Progressive, have been destroying many of their flood cars, but others, including State Farm, reportedly have 

failed to do the same.6 This raises the question: what possible legitimate purpose 

can there be for placing flooded vehicles back into the stream of commerce? This 

question takes on a certain urgency when it involves an unprecedented number of 

flood cars that were submerged in heavily contaminated salt water for days or 

weeks. 

Self-Insured Entities 

A complicating factor: some self-insured entities, including rental car companies, 

large auto dealers and auto dealer chains, may not be required to brand titles ‘‘salvage,’’ or ‘‘flood,’’ and since there is no claim filed, it is harder to trace and document 

the damage history. 

New Vehicles 

Salvage and flood car fraud also involves new vehicles. For example, some auto 

dealerships had hundreds of new vehicles on their lots when the flood waters rose. 

If history is any guide, new car buyers from coast to coast will eventually end up 

saddled with problem-plagued ‘‘new’’ vehicles that were once submerged in flood 

waters. In some cases, the manufacturers will refuse to honor the warranties, citing 

the prior flood histories. Those histories will be known to the manufacturer, but not 

the buyer. 

‘‘Certified’’ Damaged Vehicles 

Some rebuilt wrecks are even being sold by supposedly ‘‘reputable’’ dealers as 

‘‘certified’’ used cars, and the dealers are charging a premium—with the representation made that the vehicles have passed a rigorous, 130+ or 150+ point inspection. 

Sometimes the vehicles are advertised ‘‘complete with factory/manufacturer warranty.’’ 

But—manufacturers will not honor warranties on prior damage vehicles, certainly 

not for area repaired, and sometimes for entire vehicle. Nor will consumers who 

paid extra for an extended service contract be able to have necessary repairs covered, since prior wreck and flood damage are excluded under the contracts. 

This is a triple whammy for consumers. Consumers pay extra for ‘‘certified’’ used 

cars, pay extra for factory or OEM [original equipment manufacturer] warranties, 

and pay extra for extended service contracts, in order to be protected. Then when 

problems arise, they discover not only did they pay thousands more than the Blue 

Book price when the vehicle is actually worth thousands less, but the warranty is 

void and the contract won’t cover repairs. It’s a very rude surprise to be forced to 

incur unexpected, unanticipated repair costs—if the vehicle is repairable. Some are 

beyond repair. 

California recently enacted landmark legislation, the Car Buyers Bill of Rights, 

signed into law by Governor Schwarzenegger, to curb various forms of auto fraud, 

including sales of previously damaged vehicles as ‘‘certified’’ used cars. The impetus 

for the ‘‘certified’’ provision came from numerous cases where consumers paid thousands extra to buy cars that had been ‘‘certified,’’ only to find they were grossly unsafe to drive, due to prior damage that had been shoddily repaired and was concealed at the time of sale. 

California’s law, which will take effect next July, expressly forbids the sale of used 

vehicles with ANY frame damage as ‘‘certified.’’ 7

Salvage and Flood Car Perpetrators Target Victims 

Who is targeted for sales of rebuilt wrecks and flood cars? While even highly sophisticated, well-educated consumers sometimes fall prey to auto salvage fraud, 

some dealers have shown a propensity to target particularly vulnerable individuals. 

Due to their inexperience buying cars, teenagers and students buying their first vehicles are often targeted. Other targets: recent immigrants, and members of our 

armed forces, especially enlisted personnel.8

33 

in the San Diego region told NCLC that high-priced used car sales are ‘the single largest consumer [contract] problem that we see here in Legal Assistance.’ ’’ 9Financial Fitness: The Importance of Financial Fitness to the United States Marine Corps’ 

Mission. A Final Report. Prepared for and funded by The United States Marine Corps, prepared 

by The Financial Fitness Evaluation Team, University of California, Riverside. August 2000: 

‘‘We found widespread agreement that when Marines have pressing financial problems, their 

performance in the field can be significantly compromised, even to the point of endangering 

themselves, their unit, and the mission itself... Buying cars causes more problems than any 

other single financial factor.’’ 10 ‘‘Scamsters preying on military families,’’ Los Angeles Times, April 2, 2003. ‘‘Operating just 

outside the gates of major bases, some car repair shops and dealerships prey on military families, particularly when a husband has been shipped out of the country, said Karen Varcoe, a 

consumer economics specialist at UC Riverside who has written academic studies on the financial problems of military personnel.’’ 11 ‘‘After car breaks down, Iraq vet wages new battle—with dealer.’’ Sacramento Bee, April 14, 

2005: ‘‘Last month, the Assembly Committee on Banking and Finance heard testimony about 

financial scams aimed at members of the military. John Irons, director of the Navy-Marine 

Corps Relief Society in San Diego, told lawmakers his informal survey of Navy lawyers found 

‘the number one issue they are confronted with is used car dealers who are taking advantage 

of military personnel.’ Among the alleged problems: sale of ‘certified’ junkers. . . .’’ [Note: Active 

duty representatives of the U.S. Armed Forces also testified that they had conducted their own 

informal surveys and reached the same conclusions.] 12 ‘‘Creditors Press Troops Despite Relief Act,’’ New York Times, March 28, 2005. 13 CLUE is a registered trademark of ChoicePoint Asset Company. 

The armed forces themselves have documented the harm that ensues from used 

car fraud, noting that such frauds can compromise the troops’ ability to perform 

their duties, even ‘‘to the point of endangering themselves, their unit, and the mission itself.’’ 9 According to experts, unscrupulous dealers prey on military families.10

Recently, representatives of the armed forces testified at a hearing in California 

that auto-related scams, including rebuilt wrecks being sold as ‘‘certified’’ used cars, 

are the worst consumer-related problems troops stationed in California face.11

To make matters worse, some auto dealerships are disregarding the 

Servicemembers Civil Relief Act, intended by Congress to protect all active-duty 

families from foreclosures, evictions, and other financial consequences of military 

service. 12

Recommendations 

Designate Vehicles Non-Repairable and Retire VINs 

Severely damaged vehicles and flood cars that have been submerged in salt water 

should be declared non-repairable and destroyed. The Vehicle Identification Numbers, or VINs, should be permanently retired to curb fraud and to reduce the incidence of VIN-switching, which contributes to vehicle theft, carjackings, and other related crimes. 

National Databases Present Opportunities, Challenges 

For vehicles that are suitable for repair and resale as safe, reliable transportation, 

full disclosure to sellers and consumers alike is needed. 

With the advent of CLUE 13 and other vast electronic databases, insurers, manufacturers, lenders, dealers, and other entities have access to relevant data that is 

sometimes withheld from consumers, or is not provided in a timely fashion. The 

challenge policy makers face is how to make that information accessible to prospective buyers in an efficient, cost-effective, meaningful way. 

While improved title branding will assist as an important enforcement tool, title 

branding is of limited usefulness in curbing salvage fraud. One reason: consumers 

usually do not see the titles until after a sale is consummated. It may be years later, 

when the lien is paid, that they finally see the title for the first time. 

Also, thanks to computer technology, it is now quite easy for unscrupulous sellers 

to counterfeit titles, so even if states were to adopt uniform standards, and carry 

forward other states’ title brands, auto salvage fraud involving vehicles with false 

clean titles would continue to occur. 

However, a national electronic database with relevant information holds promise 

for curbing fraud. Prior to sale, prospective buyers should have access to the same 

information about the vehicle’s history as the insurers, manufacturers, or other entities that already enjoy access. (Of course, the prior owner(s) personal information 

should be kept private.) Vehicle owners, who are entrusting their personal safety, 

and their family’s safety, to the reliable operation of the vehicle, should not be the 

last to find out their vehicle’s damage history. 

34 

14 As part of the Department of Transportation and Related Agencies Appropriations Act, 1995 

(Pub. L. 103–331; September 30, 1994), Congress provided NHTSA funds ‘‘for a study to be conducted by the National Academy of Sciences (NAS) of motor vehicle safety consumer information 

needs and the most cost effective methods of communicating this information.’’ The NAS study 

was completed and released to the public on March 26, 1996. It is titled ‘‘Shopping for Safety— 

Providing Consumer Automotive Safety Information,’’ TRB Special Report 248. Based on its 

findings, the study makes recommendations to NHTSA on ways to improve automobile safety 

information for consumers. 

The most effective way to provide vehicle history information in a timely fashion 

to all prospective purchasers and bridge the Digital Divide is to require relevant information from a national database be displayed on vehicles themselves. 

A precedent to consider: after extensive research into effective means of disclosing 

vehicle safety information to the public, the National Academy of Sciences issued 

a report recommending that the relevant information be provided on a separate 

sticker on the vehicle itself.14 The National Highway Traffic Administration sought 

comments on that approach, and adopted the Academy’s recommendation, requiring 

on-vehicle safety ratings disclosures on all new vehicles. 

Federal Trade Commission Used Car Buyers Guide 

For used vehicles, an on-vehicle Buyer’s Guide already exists. Since 1985, the 

Federal Trade Commission has required that all licensed auto dealers must post a 

Buyers Guide on each used vehicle sold to retail consumers. The Guide includes information about warranty coverage and warnings aimed at informing consumers 

about common pitfalls involved in purchasing used cars. Dealers must provide consumers with the Buyers Guide as part of the sale or lease transaction. 

Requiring the disclosure of vehicle history information would also help address 

the inherent deception that occurs when a vehicle is advertised and sold with a supposed warranty that is actually void due to prior damage. Currently, the Buyers 

Guide on relatively new damaged vehicles usually states that the vehicle is being 

sold with the remainder of the manufacturer’s factory warranty. However, if the 

warranty is void due to prior damage, that should be fully disclosed prior to sale, 

along with the prior damage history. Otherwise, buyers are being misled into believing they are obtaining vital protections that prove to be illusory. 

Enforcement and Remedies for Victims 

In order to discourage scamsters from engaging in auto salvage fraud, it is important for any Federal legislation to provide for remedies and penalties that are at 

least as strong as under the Federal Odometer Act. That Act provides for victims 

to obtain multiple damages and attorneys fees, and also provides criminal penalties. 

Salvage and flood car fraud is even more serious than odometer fraud, since it clearly impacts the motoring public’s safety, and should invoke commensurate sanctions. 

Any Federal statute should create a floor and not a ceiling for states, allowing 

states to provide stronger protection. This non-preemptive effect is particularly important since some states may find they are being targeted, and need to take stronger steps to avoid becoming dumping grounds for salvage and flood car frauds. 

Ease of enforcement: providing damage information on the Used Car Buyers 

Guide would provide law enforcement agencies with a relatively simple, cost-effective, uniform method for monitoring disclosures and ensuring compliance. Rather 

than attempting to delve into whether or when the prior damage disclosure was 

made during complicated sales or lease transactions, law enforcement officials could 

simply monitor and spot-check the Buyers Guides on open display. 

Conclusion 

Thank you again, Senators, for the opportunity to testify. I appreciate the Senate’s interest in examining this serious form of fraud, and I welcome the opportunity 

to work with you and the Subcommittee Counsel to develop positive, effective ways 

to protect the public from flooded car and salvage fraud. 

ATTACHMENTS: 

1. Federal Trade Commission Used Car Buyers Guide from a so-called ‘‘certified’’ 

BMW. The buyer, who works as a landscaper, paid over $30,000 for the BMW. 

When he test-drove it, the traffic was congested and he was unable to drive more 

than about 35 mph. As soon as he drove it home, and got to speeds over 60 mph, 

it shook violently. A subsequent expert inspection found that the vehicle had sustained major damage in a crash. The repairs were woefully inadequate and shoddy. 

As a result, the frame was bent and the suspension was shot. It would take thousands more dollars to fix it so that it was safe to drive. BMW refused to honor the 

35 

‘‘Full factory warranty, 4 years or 50,000 miles’’ touted on the Buyers Guide due 

to the prior damage. The buyer had also purchased an extended service contract. 

The holder of the service contract excluded coverage for repairs due to the prior 

damage. 

The dealer refused to refund the purchase price. The BMW sat unused in the 

owner’s driveway for over a year, while he drove an old truck and continued making 

$500 per month in car payments, pending resolution of a lawsuit. 

2. CARFAX Vehicle History Report for the same BMW, reporting ‘‘no severe accidents reported to DMV, Guaranteed!’’ This report was presented by the dealership 

to the buyer prior to sale. 

3. Blank Federal Trade Commission Used Car Buyers Guide 


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Senator PRYOR [presiding]. Thank you very much. 

Mr. Fuglestad. 

STATEMENT OF ALAN FUGLESTAD, VICE PRESIDENT, 

OPERATIONS AND TECHNOLOGY, EXPERIAN AUTOMOTIVE 

Mr. FUGLESTAD. Thank you, Senator Pryor, for the opportunity 

to testify today. My name is Alan Fuglestad and I am Vice President of Operations and Technology for Experian Automotive. I plan 

to touch on a few topics today related to how private industry and 

Experian can help and is helping protect consumers on flooded and 

salvage vehicle fraud. 


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38 

First let me give a brief description of Experian Automotive. We 

are a unit of Experian that delivers information solutions to the 

automotive marketplace, car manufacturers, dealers, lenders, and 

consumers. Our core data asset that drives these solutions is our 

national vehicle database. This database houses information on 

more than 500 million vehicles, of which about 285 million of those 

vehicles are in operation on the road today. Our sources include the 

State departments of motor vehicles, auto auctions, police accident 

reports, and salvage yards. 

One of Experian’s key automotive solutions that is applicable to 

today’s topics is its AutoCheck vehicle history report. A vehicle history report helps consumers and businesses make vehicle purchase 

decisions by understanding historical events for pre-owned vehicles. 

This report can reveal frequency and location of title and registration, past title brands, past accidents, and even odometer history. 

Let me touch briefly on how Experian helps prevent vehicle title 

fraud, especially in the wake of the recent hurricanes. We feel 

there are important steps consumers can take to protect themselves from unknowingly buying a car damaged by one of these 

hurricane storms. In addition to a physical inspection, one of the 

most important steps a potential buyer can take is to better understand the history of a car prior to purchasing it by obtaining a vehicle history report. This report can tell potential buyers if the vehicle has severe flood damage or has been branded salvage, as well 

as where and how many times the vehicle has been titled. 

Now, in the wake of the recent hurricanes, Experian set out on 

an awareness campaign for car dealers and consumers. Experian 

launched a cooperative effort with the National Automotive Dealers 

Association designed to educate its members and build awareness 

of the large number of storm-damaged cars that would potentially 

be hitting the market after these storms. 

Information was supplied about how to identify and recognize a 

storm-damaged vehicle and a process was established so that dealers and others could report their own vehicles damaged by the 

storms. Our goal was to make this information available more 

quickly than traditional reporting processes through the State 

DMVs. 

Experian is now making this information available to dealers 

and consumers at no charge via its AutoCheck Storm Scan feature, 

which includes three key pieces of information. Number 1 is the 

self-reported information from the car manufacturers and dealers. 

Number 2 is past vehicle title brands, whether or not they are the 

result of storm damage. Number 3 is the title and registration history that does reveal whether the vehicle has been titled or registered in areas affected by a storm during the past 12 months. 

Let me move briefly to address how private industry and 

Experian can work with AAMVA and its members. We have been 

in discussion with AAMVA for some time now about how we may 

further support their efforts with the National Motor Vehicle Title 

Information System initiative to combat title and vehicle fraud. We 

do fully support the efforts of AAMVA in moving toward providing 

real-time information on vehicles during the vehicle titling process. 

For the past several years, private industry, including Experian, 

has developed data assets and solutions for the marketplace that 

39 

can be leveraged effectively to support the National Motor Vehicle 

Title Information System initiative. As far as some examples of 

where industry can help: first, in providing a comprehensive data 

repository. I spoke of our national vehicle database earlier. 

Experian does receive vehicle data from all of the U.S. jurisdictions. A comprehensive data source we feel is imperative in combatting title and vehicle fraud. 

Second, in managing the data. Experian has expended significant 

resources and expertise in interpreting, standardizing and hosting 

this data to provide the common formats that our solutions use for 

the marketplace. 

Third, in distributing or providing access to this data. Experian 

has developed secure, flexible methods for distributing our vehicle 

history reports and services based on the needs of our partners and 

clients and consumers. 

Next, I will briefly discuss how industry can work with other 

governmental agencies in these efforts. Today Experian does offer 

our AutoCheck services free of charge to law enforcement agencies 

to support their investigative efforts. Experian is also in discussion 

with the NICB to offer their hurricane-affected vehicle database 

free of charge to consumers. 

But whether working with AAMVA, the State DMVs, or other organizations, once again having a comprehensive vehicle history information database or repository available at the point-of-purchase 

or titling a vehicle or during an investigation is critical to consumers, businesses, DMVs, law enforcement, and others in combatting title and vehicle fraud. 

Finally, I was asked to speak briefly on issues regarding DMV 

data costs. We do purchase this data from the 51 jurisdictions. No 

doubt that the high and unpredictable nature of our data costs 

from the State DMV organizations is one of our primary risks of 

doing business. There are significant differences in pricing between 

the various State DMV organizations as well as significant fluctuations from year to year. I can get into more details on that during 

the Q and A, but that does conclude my initial statement. 

Thank you. 

[The prepared statement of Mr. Fuglestad follows:] 

PREPARED STATEMENT OF ALAN FUGLESTAD, VICE PRESIDENT, 

OPERATIONS AND TECHNOLOGY, EXPERIAN AUTOMOTIVE

Description of Experian Automotive 

Experian Automotive delivers information solutions to manufacturers, dealers, 

lenders, insurance companies, and consumers. Experian helps automotive clients increase customer loyalty, target and win new business, and make better lending and 

vehicle purchase decisions. Its National Vehicle Database, housing information on 

more than 500 million vehicles, meets the industry’s growing demand for an integrated information source. Experian technology supports several top automotive 

websites including eBay Motors, CarsDirect.com, NADAguides.com and Yahoo! 

Autos. 

One of Experian’s key automotive solutions is its AutoCheck Vehicle History Report. A Vehicle History Report is designed to help consumers and businesses make 

better vehicle purchase decisions by quickly and easily understanding potentially 

significant historical events for pre-owned vehicles manufactured in 1981 or later. 

Using the Vehicle Identification Number (VIN) and depending on the information 

reported to Experian, an AutoCheck vehicle history report can reveal frequency and 

location of title and registrations, past title brands, past accidents, and odometer 

history. Through its joint venture with The First American Corporation (leading 

40 

provider of mortgage title insurance), Experian also offers consumers a vehicle title 

insurance policy (TitleGuard) that covers hidden title defects (e.g., water damage, 

salvage) with coverage up to the full purchase price of the vehicle. 

AutoCheck Vehicle History Reports supply information about pre-owned vehicles 

from a multitude of data sources, including state departments of motor vehicles 

(DMVs), auto auctions, police accident reports, and salvage yards. AutoCheck is the 

volume leader in supplying vehicle history information to the automotive industry. 

Dealers, consumers and manufactures can easily access the AutoCheck information 

via the AutoCheck website or other methods. AutoCheck offers toll-free telephone 

and e-mail support to all clients should they have questions regarding any event in 

the vehicle’s past. 

How Experian Automotive Helps Prevent Vehicle Fraud 

Consumers who live thousands of miles from areas recently hit by hurricanes may 

think they have little to be concerned about, but those in the market for a used car 

are wise to takes steps to protect themselves from purchasing a flood-damaged vehicle. Even if potential buyers are not in an area directly affected by a hurricane or 

flooding, cars often are repaired and shipped across the country in a matter of 

weeks, putting consumers at risk of buying damaged vehicles. 

While it’s too early to know exact numbers, some experts estimate nearly 500,000 

cars have been damaged by Hurricanes Katrina and Rita. There are steps consumers can take to help protect themselves from unknowingly buying a car damaged by a hurricane. 

One of the most important steps a car-buyer can take is to better understand the 

history of a car prior to purchasing it by obtaining a vehicle history report. A vehicle 

history report can tell potential buyers if the vehicle has severe flood damage, been 

branded ‘‘lemon’’ or ‘‘salvage,’’ if the vehicle has been in an accident, where and how 

many times the vehicle has been titled and the vehicle’s odometer history. 

Consumers can check a car’s reported background by obtaining a history report 

from the seller or dealer or online through AutoCheck Vehicle History Reports. Consumers can enter a car’s Vehicle Identification Number (VIN) at www.autocheck.com 

and receive a detailed vehicle history report. 

Experian recommends a thorough vehicle inspection be performed as well. We advocate consumer inspection tips from the National Automobile Dealers Association 

(NADA), to help detect significant water damage when buying a used car: 

• Check the vehicle’s title history; 

• Examine the interior and the engine compartment for evidence of water and 

grit from suspected submersion; 

• Check for recently shampooed carpet; 

• Check under the floorboard carpet for water residue or stain marks from evaporated water not related to air-conditioning pan leaks; 

• Look for rusting on the inside of the car and under interior carpeting and visually inspect all interior upholstery and door panels for any evidence of fading; 

• Check under the dashboard for dried mud and residue, and note any evidence 

of mold or a musty odor in the upholstery, carpet or trunk; 

• Check for rust on screws in the console or other areas where the water would 

normally not reach unless submerged; 

• Check for mud or grit in alternator crevices, behind wiring harnesses and 

around the small recesses of starter motors, power steering pumps and relays; 

• Complete a detailed inspection of the electrical wiring system, looking for rusted 

components, water residue or suspicious corrosion; and 

• Inspect the undercarriage of other components for evidence of rust and flaking 

metal that would not normally be associated with late model vehicles. 

By taking a few simple precautions when buying a used car, consumers can safeguard themselves from the frustration of wasting their hard-earned money on a 

flooded or damaged vehicle. 

In the wake of the most recent hurricanes, Experian set out on an awareness 

campaign for dealers and consumers. Experian launched a cooperative effort with 

NADA designed to educate its members and build awareness of the large number 

of storm damaged cars that would be hitting the market after these catastrophes. 

Information was supplied about how to identify and recognize a storm-damaged vehicle and a process was established so that dealers and others could report their 

own vehicles damaged by the storms. Our goal was to make this information available more quickly than the traditional reporting process through state DMVs. 

Experian is now making this information available to NADA members and conVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
41 

sumers at no charge via its AutoCheck storm scan functionality, which includes 

three pieces of information: 

1. Self-reported information on storm damaged vehicles from dealers and manufacturers. 

2. Past vehicle title brands whether or not they are the result of a storm. 

3. Title and registration history that reveals whether the vehicle has been titled 

or registered in areas affected by storm during the previous twelve months. If 

considering a purchase of one of these vehicles, Experian recommends a professional vehicle inspection. 

Experian also provided state attorneys general offices with vehicle inspection tips 

and AutoCheck storm scan availability so they may educate their constituents regarding the risk of purchasing a storm damaged vehicle. 

How Experian Works With AAMVA and Its Members 

Experian has enjoyed a good relationship with the American Association of Motor 

Vehicle Administrators (AAMVA) for many years. We are also an Industry Member 

with the ‘‘sister’’ organization, Canadian Council of Motor Transport Administrators. 

Experian supports AAMVA as an Associate Member and through our participation 

in the Industry Advisory Board. We have been in discussion with AAMVA for some 

time about how we may further support their efforts to combat title and vehicle 

fraud. 

For the past several years, industry has developed assets and solutions for the 

marketplace that can be leveraged to support the National Motor Vehicle Title Information System (NMVTIS) initiative. For example, 

• Experian currently receives vehicle data from all U.S. jurisdictions. A comprehensive data source is imperative in combating title and vehicle fraud. 

• Experian has expended significant resources in analyzing, interpreting, validating, standardizing, and hosting this data to provide a comprehensive national database of vehicle data to be used in solutions and services. This process 

allows the data to be used in a ‘‘common’’ format while retaining the specific 

content of the different sources. 

• Experian has developed secure, flexible methods for distributing our vehicle history reports and services based on the needs of our partners and clients. 

Public/Private Efforts to Improve Titling and Disclosure of Brands 

Experian welcomes the opportunity to work with government to provide critical 

information to consumers and business. 

Experian Automotive has dedicated staff who are researching and analyzing potential data sources everyday. We are always looking for important data that can 

impact our AutoCheck report to the benefit of business and consumers. 

Experian offers our AutoCheck services free of charge to law enforcement agencies 

to support their investigative efforts. We support organizations such as the National 

Odometer and Title Fraud Enforcement Association (NOTFEA), the International 

Association of Lemon Law Administrators (IALLA) and the Association of Traffic 

Safety Information Professionals (ATSIP). 

Experian is also in discussion with the National Insurance Crime Bureau (NICB) 

to offer their Hurricane Affected Vehicle Database free of charge to consumers. This 

is an important opportunity to forge a partnership between public and private participants for the greater good. 

Whether working with AAMVA, the state DMVs or other organizations, having 

comprehensive vehicle history information available at the point of purchase or titling a vehicle, or during an investigation, is critical to consumers, businesses, 

DMVs, law enforcement and others in combating title and vehicle fraud. 

Issues Associated With Data Costs 

The high and unpredictable nature of our data costs from the state DMVs is one 

of our primary risks of doing business. Experian pays millions of dollars annually 

to the states for the right to collect and preserve this data. There are significant 

differences in pricing between the various state DMV organizations, and we’ve seen 

significant increases in pricing from year to year. In addition, in order for the data 

to continue to be useful, it is necessary to store and maintain the information for 

an indefinite period of time. Experian currently stores information on more than 500 

million vehicles in our database. 

Experian provides information solutions based on a national database of vehicle 

information. As a bulk data purchaser, we must aggregate data from all of the 

DMVs prior to offering our services and solutions (and beginning to recover costs). 

42 

To add to the business risk of our data cost, various state and Federal laws and 

regulations greatly restrict what we can do with the records we purchase, which 

limits our ability to recover the cost of this data. 

Finally, in addition to the cost of acquiring this data, we also expend significant 

resources interpreting, validating, aggregating, and standardizing the various statespecific file formats for use in our solutions. 

Senator PRYOR. Thank you. 

Mr. Hall. 

STATEMENT OF DONALD L. HALL, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, VIRGINIA AUTOMOBILE DEALERS 

ASSOCIATION; ON BEHALF OF THE NATIONAL 

AUTOMOBILE DEALERS ASSOCIATION 

Mr. HALL. Thank you, Senator. To begin with today, I am here 

speaking on behalf of the Virginia Automobile Dealers Association, 

the National Automobile Dealers Association, and our 20,000-plus 

members nationwide. Senator, I will go one step further and say 

we are also here on behalf of the 36 million purchasers of vehicles 

every year. They are very important to us and we think we are the 

consumer advocates here. 

Hundreds of thousands of vehicles are totaled each year. It was 

estimated in 2001 by a well-respected consumer organization that 

about 20 percent of those were rebuilt. They estimate in about 30 

percent of those the titles were washed. People had no knowledge 

of what took place with those rebuilt vehicles. 

As we all know, this year has been a very tough year on this 

great Nation of ours in terms of hurricanes, tornadoes, and so 

forth. We had Hurricane Katrina with 500,000 vehicles. We had a 

number of hurricanes up and down the East Coast. We had flooding in the Northeast, the Western States, tornadoes in Iowa, in fact 

even last night, unfortunately, tornadoes that hit in Indiana and 

other parts of the Midwest that destroyed vehicles. 

We are very, very concerned about those salvage vehicles, probably to a tune of probably a million cars before it is all said and 

done this year. I guess the basic question, Senator, and to all of 

your colleagues, would be this: Do consumers have the right to 

know the history of a car? It is our stance and our belief that consumers have that right to know and the only way, unfortunately, 

we have found to address this issue is to come to Congress and ask 

Congress to intervene in our behalf. 

Safety issues are very important. Many of the speakers today 

spoke about that, but just to make the point, any time you buy a 

vehicle that has been wrecked or under water, you want to know 

about that before you make the decision. You want to know whether it has impacted the electrical system, whether it has impacted 

the air bags and any other kind of equipment on that car. You have 

a right to know it and you ought to know it, so when you make 

a decision to buy you do so with that knowledge. 

We are very concerned about the economic impact this has on 

consumers. There was a great example used earlier by one of the 

panelists today dealing with a Chevrolet Tahoe. The fact of the 

matter is, these cars that have been branded are worth less money. 

We want consumers to know that and make a decision, again, with 

that knowledge. 

43 

So we are very much in favor, very much in favor of brands being 

carried forward from State to State to State. There are basically 

three things that are important to us as an industry, as the automotive industry. One is transparency, two is timing, and three is 

technology. It is important that we have complete histories of these 

cars. We do not want to sell vehicles to the consumers of the 

United States of America without that knowledge. We want you to 

have it. In fact, in most cases we do not even want to sell those 

vehicles. We want to stay away from them. Unfortunately, so often 

we find out after the fact. 

Timing is important to us as well. It is critical that when these 

State agencies and other Federal agencies have this information 

that it be passed on to these third-party vendors that are out there 

as soon as possible, so we can get it and we know it. So often you 

hear about the story of an individual who bought a car only to find 

out months later that it had been in fact branded. We as the dealer 

public or the dealers in this country, we do not know about it oftentimes either until after the fact, and that is not right. 

The technology is there. That is what is unique about today’s discussion. We are already there. We have third-party vendors already 

providing this. We have other State and Federal agencies who have 

the capacity to provide this information. What we need is more 

complete information to be able to help us make a better decision 

about whether or not we want to sell that vehicle and/or as a consumer, whether or not you want to buy that vehicle with that 

knowledge. Again, we think the answer is to require brands to go 

forward. 

If I can, and I will not enter this in the record, Senator, but this 

is a book about two inches long—two inches thick, rather—that has 

51 different ways to register cars throughout this country, 51 different ways, and they are as different as night and day. I have 

tagged several states, without naming any States—and yours is not 

one of them, Senator—that have the policy of either accepting a 

brand from another State and not carrying it forward or even stating that they do not accept a brand from another state and therefore do not carry it forward. 

As indicated earlier, oftentimes those titles are physically taken 

to those states, the fees are paid, they re-issue a new title, the 

brand is gone, and three or four titles later that car then is moved 

into, as an example, the Commonwealth of Virginia and sold to an 

unsuspecting dealer and consumer, and now both are going to be 

disadvantaged because they did not have this knowledge. 

As simple as passing on from title to title to title these brands, 

it is critical to us. 

It is a complicated system. It has been reduced to this big old 

book. We hope that ultimately with technology we can get it to 

something a little less than this, and make it simpler to know how 

to title vehicles and what they mean. 

The insurance industry has taken what I would consider to be 

a baby step, if you will, in terms of saying, ‘‘let us tell folks about 

Katrina cars, let us let them know about these vehicles.’’ Well, my 

comment is this: If you buy a car that came out of Indiana after 

last night’s horrible tornadoes, do you have a right to know that? 

Our answer as an industry is absolutely yes. 

44 

It does not matter—Katrina was terrible and it is the reason this 

hearing is taking place, but let us go after all the vehicles in this 

country. Let us give consumers the right to know. The key is once 

again, do consumers have the right to know? It is our position that 

they do. We absolutely support this. We hope that brands will be 

carried forward from State to State to State and make sure that 

consumers know. 

Senator Pryor, we appreciate the opportunity to speak on behalf 

of the dealers. We appreciate the good work that you have done not 

only in your State but here in the Senate as well, and thank you. 

[The prepared statement of Mr. Hall follows:] 

PREPARED STATEMENT OF DONALD L. HALL, PRESIDENT/CHIEF EXECUTIVE OFFICER, VIRGINIA AUTOMOBILE DEALERS ASSOCIATION; ON BEHALF OF THE NATIONAL

AUTOMOBILE DEALERS ASSOCIATION

My name is Don Hall. I am the President of the Virginia Automobile Dealers Association. 

I am appearing on behalf of the National Automobile Dealers Association (NADA) 

and its 20,000 franchised auto and truck dealerships involved in the retail sale, 

service and repair of new and used motor vehicles, both domestic and import. The 

majority of NADA’s members are small family-owned and community-based businesses that employ more than one million people nationwide. 

I am also a member of NADA’s Title Integrity Task Force, a group of representatives from state dealer associations that seeks to combat title fraud and to identify 

solutions that will create more transparency in the title history process to protect 

vehicle purchasers. 

I applaud the Subcommittee and the leadership of Senators Allen and Pryor on 

this important national issue. While motor vehicle titling is traditionally the province of the states, by nature motor vehicles are mobile and are frequently titled 

across state lines. Several years ago, we passed legislation in Virginia to require 

permanent branding on titles for seriously damaged vehicles. Unfortunately, because vehicles cross state lines, vehicles purchased and sold in Virginia do not come 

only from Virginia. Because of the inherent mobility of vehicles, title fraud is a national problem that requires a national solution. 

Amid the personal devastation of the gulf coast hurricanes this year we are faced 

with an unprecedented number of flood vehicles that may result in a dramatic increase in title fraud. It is estimated that more than 500,000 vehicles were damaged 

by flooding in the Southeast region and many will be cleaned up and sold to unknowing vehicle purchasers. 

But the problem goes beyond flood vehicles from the Gulf region hurricanes. 

Flooding in New England and North Carolina and other areas of the Nation has 

led to countless other flood vehicles. And this barely scratches the surface of salvage 

vehicles, which result when insurance companies deem a car to be ‘‘totaled’’ as a 

result of collision, theft or fire damage. These vehicles can be rebuilt and given a 

clean title that does not disclose damage. 

The National Automobile Dealers Association is pleased to be included in your 

hearing to discuss the problem of flood and salvage cars. Each year new car and 

truck dealers buy millions of used vehicles at wholesale auctions or in trade. Dealers 

and consumers, as purchasers of vehicles, must rely on the accuracy of the titles 

of used cars. NADA’s Chairman, Jack Kain, spoke to the Automotive Press Association on October 6 on the issue, outlining many of the strategies that I will present 

today for laying the foundation to stop title fraud. 

The Risk to Car Buyers 

The Problem 

The complicated 51-jurisdiction state motor vehicle titling regime invites fraud. 

The large-scale damage of three major hurricanes highlights the flaws in our current motor vehicle titling laws. Hundreds of thousands of flooded vehicles in the 

Gulf Coast region may be wholesaled and retailed without fundamental disclosure 

of the severity of the flood damage. Because 51 jurisdictions title vehicles 51 different ways, many opportunities for fraud exist. Under the current system, any unscrupulous rebuilder can repair or refurbish a wrecked or flood damaged car (typically a late model car ‘‘totaled’’ by an insurance company) and obtain a ‘‘clean’’ or 

‘‘washed’’ title in a state with weak title disclosure rules. The new title will contain 

45 

no reference to the damage, leaving the buyer (consumer or dealer) to rely on a 

physical inspection of the vehicle to expose flood damage. NADA’s website at 

www.nada.org contains tips on how to spot a flood vehicle. 

Vehicle purchasers believe they can rely on the title history and vehicle history 

reports, which are currently incomplete. Vehicle history services can only report information to which they have access. Recent court cases and settlements illustrate 

that insurance companies receive higher sale prices for these totaled vehicles at salvage auctions if the titles are not branded. 

The current unreliability of information creates a blanket suspicion of all vehicles 

from a particular region due to an inability to obtain information for individual vehicles. The current system creates an environment where all vehicles from Louisiana, Mississippi, Alabama and other states in the Gulf region are inherently suspect as flood damage vehicles, penalizing all sellers in those states, even those 

whose vehicles have not suffered damage. We have specific information that this is 

already occurring in Louisiana. 

The Solution 

More transparency, more timeliness, and more technology is necessary to provide 

buyers a more complete and reliable title history before the sale, and penalties must 

be created for intentional circumvention of damage disclosure. We are not talking 

about how states title vehicles; we are talking about sharing information they currently collect. All buyers of a used vehicle (consumers, businesses, and even automobile dealers taking a vehicle in trade) have the same economic interest—determining fair market value prior to purchase. A more complete, near real-time title 

history would provide a more accurate picture of a vehicle’s prior condition/use. 

• Transparency: More complete title history data is needed. Most states departments of motor vehicles (DMVs) are collecting the necessary title data about 

damaged vehicles, but there are exceptions. The motor vehicle title laws of each 

should provide a threshold level of disclosure to capture significant damage to 

a vehicle. Also, the states should move to more uniform classification of the title 

data. 

• Timing: More current title history data is needed. Title histories provide key 

data that dramatically affect fair market value and may raise safety-related 

concerns. Yet, as many as 30 to 60 days may pass between the time that a vehicle is damaged and the time that data reflecting that damage are publicly available. This delay facilitates criminal activity. 

• Technology: More accessible title history data is needed. The information industry in the private sector should have access to insurance company information 

for total loss vehicles (VIN, odometer reading, and date of declaration of total 

loss) and salvage auction sales data (VIN, odometer reading, date of salvage 

auction sale). Additionally, DMVs should make title data commercially available 

in bulk on a daily basis to the information industry. This information, marketed 

to consumers by private sector companies, would enable consumers to have 

more information before buying a vehicle. 

Enforcement of existing penalties is needed to prevent attempts at circumventing 

disclosure. In any system there exists an opportunity and incentive to circumvent 

the system. As described below, Congress has already enacted applicable penalties; 

they should be enforced. 

Background On Motor Vehicle Titling Laws 

The laws of fifty states and the District of Columbia govern the titling and registration of motor vehicles, which creates a systemic lack of uniformity. A motor vehicle title documents ownership of a specific vehicle, while a motor vehicle registration provides permission to operate a specific vehicle. Although the trend in state 

titling laws has been toward more uniformity during the past several years, the 51 

jurisdictions still conduct business 51 different ways. Each jurisdiction has created 

a distinct paper title, different computer programs to issue and track titles and registration, and a separate, extensive body of statutes and regulations to govern the 

titling and registration of motor vehicles within their respective borders. Additionally, these discrepancies can be complicated by the informal policies and procedures 

used by title clerks, which may vary even within jurisdictions. 

One purpose of a motor vehicle title is to provide public notice about certain characteristics of a specific vehicle. A motor vehicle title has a unique title number assigned by the issuing jurisdiction and a unique Vehicle Identification Number (VIN) 

assigned by the manufacturer to the specific vehicle. The 17-character VIN conveys 

information about the vehicle, such as year, make, model, body type, and engine 

type. The unique identifiers facilitate the tracking of vehicles for a variety of purVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
46 

poses. For example, state or local taxing authorities may rely on VIN information 

to assess personal property taxes. The paper title includes the name and address 

of the owner, existence of a lien holder, and other information about the specific vehicle’s prior condition or use. 

Federal and state privacy laws strictly limit the use of personal information obtained in the titling process. The Federal Driver Privacy Protection Act and similar 

state statutes limit the distribution of names and addresses included in title databases. The distribution of VIN-based title branding data does not include vehicle 

ownership identifiers 

In common usage, a ‘‘title brand’’ is a notation of the face of a certificate of title 

that provides notice to all subsequent purchasers of the damage, condition, or prior 

use of a vehicle. A ‘‘brand’’ is a word, symbol or abbreviation printed on the title 

itself. The 51 titling jurisdictions use a wide variety of brands, such as reconstructed, salvage, rebuilt salvage, rebuilt, restored, reconditioned, junk, non-repairable, taxi, police, flood damage, fire damage, unsafe, and repaired. The complete list 

is extensive and confusing. 

While state titling laws and procedures are becoming more uniform, no single 

database contains all of the data necessary to obtain a completely accurate title history. In recent years, the American Association of Motor Vehicle Administrators 

(AAMVA), the trade association of state motor vehicle administrators, has encouraged the adoption of uniform definitions and procedures for dealing with title 

brands. Despite these efforts, four fundamental problems remain: 

• Some states still do not brand all vehicles that sustain major damage. Most 

states typically brand vehicles that sustain significant damage from accidents, 

floods, etc., especially if an insurance company declares a total loss. The most 

significantly damaged vehicles are covered by the following brands in most 

states: salvage, rebuilt salvage, flood, and non-repairable. However, some of the 

current databases are still incomplete. As a practical matter, some states need 

to be more aggressive in branding vehicles, especially to ensure that total loss 

vehicles are branded. 

• The current databases provide conflicting information. While many states have 

consistent concepts for title branding, the specific definitions and symbols are 

inconsistent and confusing. For instance, the percentage of damage required for 

a salvage brand varies from state to state. The private sector will interpret and 

summarize the information so that consumers can understand the significance 

of this information. 

• Not all states ‘‘carry forward’’ the brands of other jurisdictions, and some states 

carry forward the brands of other jurisdictions to a limited extent. Even worse, 

some jurisdictions re-issue titles without carrying forward the brands of their 

own jurisdiction. 

• No single database captures current state tilting information. (It is impossible 

to search all of the databases simultaneously.) Currently, title data reside in 51 

databases that are not accessible by one search engine. Private vendors provide 

access, but their databases have a 30 to 60 day lag time. The absence of near 

real-time title histories literally invites fraud. 

Technology—The Essential Element of Any Solution 

Congress has recognized that technology should play a critical role. The Anti-Car 

Theft Act of 1992 authorized the creation of the National Motor Vehicle Title Information System (NMVTIS). As envisioned, NMVTIS would become the single source 

for title history data from all 51 jurisdictions. AAMVA has attempted to link all 51 

databases in real-time using a combination of Federal funds, state funds, and internal resources. The system envisioned would provide real-time, title clerk-to-title 

clerk linkage and then provide third party access to title histories. NMVTIS has not 

been completed because state resources are required to reconfigure state DMV systems to communicate with NMVTIS. AAMVA’s attempts to design and implement 

a system to provide third-party access to NMVTIS have failed. 

The challenge facing NMVTIS is funding—initial costs to configure the system 

and continued operating costs. Unless the system can generate income through the 

sale of data to third parties (VIN-based information that does not include vehicle 

ownership identifiers), the future of the system is in doubt. The existing economic 

model of NMVTIS—relying exclusively on public funding—is not sustainable. 

Private sector information vendors are essential to the distribution of data to consumers. Private sector vendors already buy DMV data in bulk and provide title history reports to consumers, but the vehicle histories are not accessed in as timely 

a manner as they should be. However, incumbents in the market are well-positioned 

to leverage technology to the advantage of consumers. Any NMVTIS-based solution 

47 

must rely on the private sector to package and market title histories to the general 

public. These vendors already buy title data in bulk, usually every month. If the 

states simply provided daily electronic updates instead of monthly, the private sector could use technology to close the window for fraud. The end result would be an 

efficiently administered, up-to-date system that would provide consumers with more 

timely information. 

Potential Legislative Solutions 

All states should ‘‘carry forward’’ prior brands when issuing new titles. This requirement is one of the first steps necessary to provide a ‘‘closed loop’’ system. Once 

any state brands a vehicle, every subsequent jurisdiction titling and registering that 

vehicle must carry forward all previous brands of all previous jurisdictions. For example, if Virginia brands a title as a flood vehicle and the car is re-titled in Kentucky, the Kentucky title should carry the notation ‘‘VA–FL’’ (an abbreviation for 

Virginia-Flood Damage). Just as important, this carry forward requirement would 

require every state to carry forward previous brands on duplicate titles issued within the same jurisdiction. In short, interstate and intrastate brand carry forward is 

critical. 

In addition to placing the brands on titles, states should brand registrations as 

well. Owners often do not see a title if the vehicle is subject to a lien, but every 

owner receives a registration document. 

Congress should encourage all states to, at a minimum, brand vehicles within 

these four basic categories to capture the most relevant data for vehicle purchasers: 

salvage, rebuilt salvage, flood, and non-repairable. The most significantly damaged 

vehicles are covered by the following brands in most states: salvage, rebuilt salvage, 

flood, and non-repairable. To avoid needless confrontation over the exact wording of 

definitions, the states should retain flexibility in defining these terms. 

All states should make existing title data readily available on a cost structure 

that reflects electronic records rather than paper records. Currently, private sector 

information vendors such as CarFax and Experian buy title history data in bulk and 

aggregate the data from various states to provide title histories to consumers. The 

states sell this data in bulk to these vendors and the lag time may be as long as 

60 days. The laws of some states have not been updated to reflect economic commerce. Congress could encourage the states to make title data more available so 

that data vendors can obtain daily downloads of active title and registration and 

brand files. 

All states should be encouraged to move to electronic titling of motor vehicles. If 

every state DMV issued electronic titles, the benefits to the consumer would be significant. Title histories would be more readily available, and the perfection and release of liens, an essential element of motor vehicle commerce, would be more efficient. An electronic titling regime does not mean the elimination of paper titles, because paper titles will be necessary for years to come to facilitate consumer-to-consumer transactions. 

The National Motor Vehicle Title Information System, authorized in the Anti-Car 

Theft Act of 1992, should be reconfigured to focus on providing consumers transparency prior to a transaction. The vast majority of the resources of NMVTIS have 

been used in an attempt to link DMVs so that title clerks can talk to title clerks 

electronically before issuing new titles. Unfortunately, most title fraud occurs before 

a title clerk ever sees an application for a new title. Most DMVs exist to document 

motor vehicle ownership after a transaction has occurred. Moreover, DMVs do not 

have the statutory authority, the expertise, or the financial resources to package 

and market VIN history data in the general public. 

In contrast, there is an active, innovative, and highly competitive information industry that could provide more complete, timely and accurate vehicle title histories. 

The DMVs and the private sector must work together more aggressively to enhance 

consumer access to title history data. 

Congress should require the Department of Justice to implement the Anti-Car 

Theft Act for the benefit of consumers. DOJ has existing statutory authority to create more motor vehicle title transparency in a matter of months. 42 U.S.C. 

§ § 30501–30505. 

Congress should compel DOJ to initiate the rulemaking that was originally intended and enforce the penalties under existing law for failing to submit data to 

NMVTIS. The rule should: (1) recognize that NMVTIS has been created; (2) require 

insurance companies to submit to NMVTIS VIN-based information on total loss vehicles; (3) require salvage auctions and junk yards to submit to NMVTIS VIN-based 

information for vehicles sold at salvage auctions and junk yards; (4) require 

NMVTIS to engage a private sector joint venture partner to market the NMVTIS 

data to consumers no later than June 30, 2006; and (5) encourage state DMVs to 

48 

submit VIN-based motor vehicle title and registration data to NMVTIS in electronic 

batch form every 24 or 48 hours. NOTE: All data marketed to the public must comply with Federal and state privacy protection statutes. 

Any Federal remedies must reflect federalism. Motor vehicle titling laws fall within the jurisdiction of the states. Federal preemption of this state-based regulatory 

regime could be challenged under the Tenth Amendment to the U.S. Constitution. 

To limit such a challenge, Congress could use incentives (provide grant money) or 

penalties (withhold certain Federal funds) to encourage states to change their respective motor vehicle titling laws promptly. 

Conclusion 

Vehicle purchasers should have the right to know about significant vehicle damage that may affect the safety, drivability, durability, and value of a car or truck. 

Only if armed with fully disclosed information regarding a prospective vehicle can 

a purchaser make an informed buying decision. Only when armed with this information will a purchaser know what repairs to inspect prior to purchase. 

Any solution to the title fraud problem must be viewed through the pre-transaction lens. The technological solution to the problem of flood vehicles—and all other 

title fraud—lies in creating near real-time, pre-transaction access to the vehicle history data that DMVs, insurance companies and salvage yards currently collect. 

The solution employs existing private sector companies. A vibrant third-party information industry already exists using the limited information currently available. 

Adding to that information would add value to the industry and value to the information currently available to vehicle purchasers. 

Our focus is on creating accessibility to this information, not providing it directly. 

We seek to take a currently antiquated element of what states do and encourage 

states to bring that function into the information age for the benefit of vehicle purchasers, not to dictate to states how they do it. 

On a final note: the Coordinating Committee for Automotive Repair recently introduced a report on the health hazards of many flood vehicles since ‘‘contaminated vehicles and their parts are likely to be distributed over a much larger area than was 

directly impacted by the hurricane.’’ Flood cars only highlight a broken title system. 

If we work together to solve flood vehicle problems, these same solutions will reduce 

all types of title fraud, such as odometer fraud and VIN cloning. 

It is now time to modernize the titling system and bring the titling system into 

the 21st Century. Congress can take simple steps to help notify vehicle purchasers 

that their vehicles have been seriously damaged. Complete and timely title information benefits us all. Congress should take this opportunity to take action that helps 

prevent scam artists from ‘‘washing’’ titles and keeps damaged vehicles from ending 

up back on the road. 

NADA and automobile dealers in Virginia and throughout the country are prepared to assist with efforts to eliminate title fraud. Thank you for the opportunity 

to present our views, and I look forward to your questions. 

Senator PRYOR. Thank you very much. 

I know that Senator Allen will return in just a moment. We had 

a total of three votes. So I voted on the first vote. I was the last 

vote on the first vote and the first vote on the second vote, and I 

am sure he is doing that right now, and when he gets back I will 

probably have to leave to take care of my third vote. 

But let me, if I may, start with you, Mr. Hall, because you are 

really a critical player in all of this. Back when I was the Attorney 

General of my state I had a very good relationship with the auto 

dealers in Arkansas. You may want to check with some of them. 

But they would be the first to tell you they would always get nervous when the Attorney General was starting to look around at consumer issues relating to cars, because a lot of times if you are not 

careful the auto dealers are the ones who get stuck with the costs 

and the risk, etcetera. 

So this is a situation where a lot of times people think you have 

to make a choice, you have to be either pro-consumer or pro-business, but this is one of those areas where you can be both at the 

same time and everybody is much better off. 

49 

I saw your orange book there, ‘‘51 different ways to brand cars 

or title cars.’’ I know in Arkansas before I was the Attorney General at one point at least the State did not have any branded title 

law. So we were one of those States that you could go to to wash 

the title. We recognized that and we changed our law. 

So I think that that is very positive and very pro-consumer. But 

I am very glad to hear you say that consumers—and you stress it 

over and over—consumers have a right to know. I agree with that. 

I think the marketplace is really what we are trying to clean up 

here and make sure the marketplace is fair and there is transparency and people know what they are buying because, like you 

said, if someone knows—if someone is about to buy a salvage car 

or a flooded car, I guarantee you in their mind it is not worth as 

much as a car in better condition. It is just not. So let the marketplace operate as it should. 

I assume that it is very common with your membership that they 

unknowingly take possession of these cars with the washed titles, 

is that right? You mentioned 30 percent of the time. You think it 

is that high in your state? 

Mr. HALL. First of all, Senator, let me say this to you. To begin 

with, what is unique as at least I appear today is this: We are not 

asking you to come down on the side of consumers over car dealers 

or car dealers over consumers either way. The bottom line is we 

want you to come down on the side of consumers and we are consumers. We buy those 38 million cars and then resell those cars. 

In my 27 years of working for auto dealers, I can absolutely attest to this Committee today that dealers do not want to sell vehicles that have brands on them without that knowledge and make 

that knowledge fully available to consumers. They have had dealings with the Attorney General’s Office. They have expressed over 

and over again: All we want to do is know, but unfortunately we 

do not hold the information. The information comes from the insurance industry and those individuals that own those vehicles. As a 

result, we have a tough time selling a vehicle, only to find out 

later. 

Unfortunately, some of the vehicles, Senator, that are rebuilt are 

done so good that, even with years of experience, it would be very 

difficult to detect until after you have taken it, you have driven it 

for a period of time, and/or it gets hot in Arkansas with a flood car, 

and so forth. 

So I am here today to tell you that we absolutely are on the side 

of the consumers with this issue. We want to know. We want the 

responsibility to tell consumers about that knowledge and let the 

consumers make informed decisions. But as a follow-up, in Virginia 

we average about 10,000 cars a year that would fit into this category on average. In Virginia we have passed a very, very tough 

law that deals with title branding and salvage vehicles. The difficulty is it only protects the good citizens of the Commonwealth of 

Virginia. It does not do much good for other folks and/or cars that 

come from somewhere else into Virginia. 

Our goal and our aim and the position of the National Automobile Dealers Association is to say, if it is good enough for Virginia, it is good enough for consumers and it ought to happen nationwide. 

50 

Senator PRYOR. Let me ask this too, before I turn it over to the 

chairman here. You mentioned that some of these cars can be restored and they can look great and it is very hard to tell. But can 

you fix these cars well enough to where they are not going to have 

any mechanical or electrical problems? 

Mr. HALL. Senator, to begin with, I think it would be difficult to 

say that you could absolutely fix it and not have mechanical problems or not. I would say this to you. Historically speaking, these 

vehicles have problems. I think the key is this. The price that you 

pay for that vehicle should be considerably less than what it would 

be if it were not a branded car. 

The issue is for you to understand what you are buying. There 

are folks that may want to buy those vehicles for various reasons. 

We do not want to take away their right to purchase those vehicles. 

What we want to make sure is they know what they are buying, 

what it means. If it says ‘‘Iowa brand’’ on it, then they have to figure out what that means and understand what potentially is going 

to happen. 

My experience in all the many years of representing car dealers 

is this: I would not allow my adult age children to drive around in 

these cars. I would not want you, Senator, or anyone else that I 

know to drive these cars, because generally speaking, they are not 

good investments for lots of reasons, and typically they do not drive 

real well and they do have problems that are manifested down the 

road. 

Senator PRYOR. I am going to turn it over to the Chairman. 

Thank you. 

Senator ALLEN [presiding]. Thank you, Senator Pryor. 

What would anybody—Don, what would anybody want these cars 

for, the people that buy them? Demolition derbies? 

Mr. HALL. Senator, I appreciate the question. Let me say a couple of things to you. First of all, people want to sell them, as testimony that was given earlier would indicate, which is there is a lot 

of money in these cars. You buy them very inexpensively at the 

auto auction. 

Senator ALLEN. Why would any consumer want to buy a car that 

has been flooded when you have all the problems that would be associated with it to the engine, to the electrical system, to mold 

growing inside the panels? Why would anybody want to buy one of 

these? 

Mr. HALL. Senator, I would say this to you. The reasonable person probably would not, but oftentimes because of brands not carrying forward they would not know that it had been a flood car or 

a damaged car. I think the people that tend to buy them, if they 

buy them with full knowledge, then they buy them because the 

price is greatly reduced. Maybe they have some special expertise in 

working on vehicles where they want to take on that liability and 

responsibility. 

But as a general rule, unfortunately, most cases that I am privy 

to over the years are situations where consumers have bought 

them, dealers did not know, consumers did not know, only to find 

out later they in fact had a brand from some other state and it was 

manifested months later. 

51 

Senator ALLEN. Let me ask all of you this, which states are the 

states where you have talked about in the beginning on washing 

titles? Are there certain States that are the States where you can 

wash titles, if any of you? Don? 

Mr. HALL. Mr. Chairman, I will chime in for a minute. You were 

not here. 

Senator ALLEN. Yes, I missed it; I am sorry. 

Mr. HALL. That is not a problem, sir. This book [indicating] is 

the book that has how to title cars in 51 different jurisdictions. I 

have made a conscious decision not to mention various states so as 

not to embarrass the states. 

Senator ALLEN. I have now asked you. 

Mr. HALL. You have, so I am now obligated to answer that question. I would submit to you that if you had a good friend in Alaska, 

as an example, you do not send the car to Alaska; you send the paperwork to Alaska. Then Alaska at that point will issue a title and 

wash it. 

There are a number of states, and they are all marked here in 

this book, that in various forms either will not recognize a title, 

therefore will not carry it forward, if they can recognize it and it 

seems to be synonymous with something they use they will carry 

it forward, or they say point blank, we do not carry forward brands 

from other states. That is the problem in a nutshell, is the fact that 

they are not carried forward. 

Senator ALLEN. Well, how many states—are there other states 

other than Alaska, which is a good state? The value of that is the 

Chairman of this Committee—— 

Mr. HALL. Is from Alaska. 

Senator ALLEN.—is from Alaska. 

Mr. HALL. I noticed he is not here, Mr. Chairman. 

Senator ALLEN. Are there other States? 

Mr. HALL. There are and I could literally go through if you would 

like. 

Senator ALLEN. Well, how many are there? Half a dozen, ten? 

Mr. HALL. More than a half a dozen that have different variations of either do not carry it forward under any circumstances, 

do not use it if they cannot recognize it, or will conform it to some 

other term in their state if they think they can sort of figure out 

what it means. In Virginia, Mr. Chairman, I might submit that 

what Virginia does, our home, it will take a brand from Florida, 

as an example, and put on that title and the registration card, 

which is critical—most of us never see a title, but the registration 

card—they will put on there ‘‘Fl. brand’’. 

At that point, it is up to the dealer and it is up to the consumer 

buying the vehicle to find out, what does that mean, ‘‘Fl. brand’’ 

and what does that brand involve? It may not be a brand Virginia 

recognizes, but through the wisdom of Virginia and our State DMV 

they have seen fit to carry forward brands on the registration card 

and on the title so everyone knows what they are dealing with. 

Senator ALLEN. All right. Let us assume they have that. The vast 

majority of people buying a used vehicle in Virginia, and I would 

say any other state, would have no idea of what a Florida brand 

means. I doubt if people in Georgia or Alabama or other states 

would understand it. Would the National Insurance Crime Bureau 

52 

or would Experian information databases, would that help? How 

would either of those help a consumer if they tried to log onto their 

websites and tried to get that information? 

Mr. FUGLESTAD. Mr. Chairman, certainly Experian’s national vehicle database does have all the historical records associated with 

that. We do go to great lengths to standardize and normalize our 

data to have some consistency. For example, we will bring the multitude of brands into 51 key types that we currently have and support in our database. 

But certainly the brand history and all of those transactions will 

appear on a vehicle history report if obtained by a consumer at the 

time of purchase. That should throw up the red flags at that point 

that there was something in the history of this vehicle. Whether or 

not the brands do carry in the formality of registering or titling 

with the DMV organizations between States, it will occur on the 

vehicle history report. 

Ms. SHAHAN. Mr. Chairman. 

Senator ALLEN. Yes, Ms. Shahan. 

Ms. SHAHAN. That was a very good question, I think, about 

which States do not recognize different titles. What we have found 

is that really all it takes is one State not recognizing titles and 

then the titles can be sent there from anywhere in the country. In 

California, we had a problem where the highway patrol found a lot 

of salvage cars that had been brought in from Arizona and they 

physically stayed in California, but the titles were sent to Oregon, 

and Oregon did not recognize Arizona’s salvage brand and they put 

on there something like ‘‘prior something,’’ not anything that would 

raise a lot of red flags. When it came back to California, then it 

got a clean title because California did not recognize whatever Oregon was using as its terminology as meaning salvage. 

I think that is one reason we are looking to electronic databases 

to solve this. One flaw with title branding, even if we had 100 percent carrying forward of titles, is that more sophisticated thieves 

are now counterfeiting titles, and you cannot even rely on the titles. Sometimes they just use whiteout. There were some flood cars 

from Hugo that were sent to Florida where they used a paper 

punch to punch out the place physically on the title where ‘‘Flood’’ 

had been stamped in North Carolina, and then they duplicated 

that and had a clean title coming from Florida. 

So paper titles—— 

Senator ALLEN. So you catch that by what, by having the vehicle 

ID number? 

Ms. SHAHAN. By having an electronic database, hopefully. 

Senator ALLEN. But having it all on the vehicle ID number on 

the electronic database? 

Ms. SHAHAN. That is right, and then it is a permanent record 

that is not in the control of someone who can just—— 

Senator ALLEN. Tamper with it. 

Ms. SHAHAN.—tamper with it, right. Hopefully, it would be a secure database, and then it is part of that vehicle’s history for the 

rest of its life. You know, there are potential problems with the 

VIN numbers being inaccurate. It is not going to be 100 percent, 

but it is so far superior to—it is sort of the 21st century solution 

for the problem. 

53 

Senator ALLEN. Mr. Brauch, let me ask you this, because I think 

the attorney general’s office clearly can have an impact on this. Let 

us presume—and Ms. Chappell, you may want to answer this, too. 

Let us presume that the National Motor Vehicle Title Information 

System were up and running and all across this country, in every 

State, and anybody who wanted to, whether they were a dealer or 

whether they were a consumer, could have access to the database, 

or anybody else involved in the industry. 

It seems to me that this is where we are getting to. Would this 

be the most advantageous approach? I am just listening to how you 

get around this fraud and so forth using data that cannot be tampered or altered, with relevant information quickly and easily accessible. 

Mr. BRAUCH. Mr. Chairman, yes, the answer is yes. That is one 

of the most effective parts of what we can do here. One of the most 

effective solutions is to actually make NMVTIS work the way it 

was designed to work. What you described is how it is envisioned 

to work, and getting the information real-time, not just at the point 

of titling, but for consumers, well in advance of making a decision 

whether to purchase, this is so vitally important that they know 

about this history. 

We can talk about branding titles, but, as we have noticed when 

we talk about ‘‘Fl brand,’’ we do not know what that means. The 

title, as I mentioned, is not often present at the time of sale and 

so consumers do not see it in any event. 

So having that kind of availability, whether it is through 

NMVTIS, through AutoCheck, Carfax, or all of those, would go a 

long way. But we still have to have enforcement to be able to go 

after the folks who lie, who do the sorts of things Rosemary described. 

Senator ALLEN. Who would you say would be in the best position 

to go after those who are fraudulently passing on these vehicles? 

Mr. BRAUCH. Federal and State law enforcement, sir. I think that 

we have a very good model in the odometer statute, where you 

have Federal criminal, you have State civil, and some States have 

enacted their own State laws. But what those provide are basically 

51 cops on the beat, the AGs plus U.S. DOJ. I know this committee 

has jurisdiction over the FTC, if there is some way to authorize the 

FTC as well to bring action, kind of modeled on the do-not-call 

process that we have in place. That works very well and it really 

provides us the ability to prioritize, where the Feds can go after the 

biggest operators and the states can go after regional or other national operators and really hit them where it hurts, because we 

really want to knock the crooks out of this area. 

So by getting the information into NMVTIS, getting it out to consumers, and having strong enforcement capability, we can really, 

really put a dent in this. 

Senator ALLEN. The reality is apparently that this information as 

far as NMVTIS is concerned, it is not all in there. 

Mr. BRAUCH. Right. 

Senator ALLEN. First of all, they have not accumulated all the information on all the vehicles because different states do it differently. 

Mr. BRAUCH. Yes, sir. 

54 

Senator ALLEN. So would we have to have a Federal mandate 

that all States require this? Go ahead. 

Mr. BRAUCH. I just want to answer that question. I think a Federal mandate that States recognize each other’s titles is important. 

A Federal mandate that States carry forward those brands on each 

other’s titles is very important. I do not know if we have to mandate a bottom line definition of salvage or not. I mentioned that in 

my comments, that it might be helpful to have a minimum and 

allow the States to be more expansive. But if that proves unworkable, and that has been one of the problems that we have had in 

the past in trying to enact this, at least by requiring the States to 

recognize each other’s title brands, carry them forward, have reporting across the country, and enough resources out there for 

NMVTIS to be up and operational as it is envisioned, those are the 

things that are going to make a huge difference. 

Senator ALLEN. Ms. Chappell. 

Ms. CHAPPELL. AAMVA would like to see, first of all, the uniform 

salvage branding legislation, which would ensure that we are all 

calling the same type of damage the same thing and carrying that 

forward. But NMVTIS really is the solution to the problem. If all 

51 jurisdictions were participating in NMVTIS today, nobody would 

be able to wash a brand from a title because there would not be 

a DMV in the country who would title that vehicle without first 

checking this database and comparing what was on that paper title 

that the clerk is looking at with what the database is telling them. 

To get to that point, we are going to need additional funding. 

Senator ALLEN. Has anyone—has anybody estimated what the 

funding would be for and the amount? 

Ms. CHAPPELL. We do have some estimates. I do not know if— 

$25 million is what we need to bring the additional States online. 

But full participation in NMVTIS is bigger than that, as I mentioned in my testimony. We have got a requirement for the insurance industry and the junk and salvage yards to provide information to NMVTIS as well, and without the regulations, that has not 

happened. 

Senator ALLEN. What is your bottom line figure for the States? 

Ms. CHAPPELL. $25 million. 

Senator ALLEN. $25 million. All right. Now, if it costs $25 million, with Experian and Carfax and those in the private sector, are 

they not of use and benefit in this sort of discerning or title search? 

Ms. CHAPPELL. I think that they are essential, that there needs 

to be a partnership between the DMVs, AAMVA, and the information resellers. Historically, there has been a partnership with those 

three entities and I think that we are all major players in this. 

Mr. FUGLESTAD. I agree with that, Mr. Chairman. If you look at 

the power that can be brought, I will not say by flipping a switch, 

but very quickly, by marrying these initiatives, talking about private industry with their breadth and depth of data, collecting that 

today, standardizing, managing those data repositories today, 

marrying that with the real-time notion of NMVTIS, I think would 

be a very powerful solution, and in fact, it would probably make 

NMVTIS a more viable solution in the short term since it will be 

comprehensive. 

55 

Obviously, the States that are not participating directly in 

NMVTIS, we would not have real-time data. They would still be 

feeding through our typical batch transaction cycle and the validation and normalization. But it would be basically overnight to have 

all of the breadth of the 51 jurisdictions’ data available, with much 

of it available real-time through the NMVTIS system and then 

what is not available real-time could be brought forward by private 

industry. 

Senator ALLEN. So you envision—I would hate to put a private 

enterprise out of business in the midst of all of this when you can 

actually find a public/private partnership, so to speak, to take the 

best minds and creativity of the private sector and the government 

to satisfy a desire on the part of consumers to receive accurate title 

information. And I add car dealers as consumers because, ultimately, they would want to know what they are buying. In many 

cases there are no titles and that is one of services you get at a 

dealership. Ah, I do not know where the title is, it is lost. You find 

a few inspection stickers around and so forth, and they have to go 

through DMV. It is kind of a DMV office at a car dealership. So 

you have all of that. 

So a dealer on a trade-in will be a consumer as well. To the extent that a public/private partnership could work out, that would 

be the approach, because I do not care to put creative entrepreneurs out of business. 

You may have different recollections, but this is not an issue of 

first impression. When Senator Pryor brought this up, I said, let 

us have a hearing, figure out what all the stakeholders and knowledgeable people think about this concern that he saw as attorney 

general of Arkansas. There were some shows. I cannot remember 

which one of the broadcast networks had it, but it was actually a 

car from Virginia that was washed through Mississippi to Arkansas from Hurricane Floyd, I think it was. 

But in the past this has failed, this effort in the Senate has 

failed. What is different now or why did that fail? I know, Mr. Hall, 

you have been involved and probably some of the other panelists 

have. And what can we do now to make sure that what we are 

doing is appropriate for Federal jurisdiction at the least cost, but 

effectuating the desire that consumers, purchasers, whether they 

are individuals, whether they are companies, whether they are 

dealers, know what they are buying and making an informed 

choice? 

So what is the difference now? Or what were the pitfalls that 

stopped this previously so that we can actually effectuate something positive and constructive? 

Mr. HALL. Mr. Chairman, I am sure that others could comment 

as well. I think part of the problem in the past was a desire to create a standardization of what brands are, so that the Federal Government would say there are certain brands that would be accepted. As an advocate of States’ rights, we knew back then that was 

a problem, the idea of telling each State how they would have to 

handle this and not handle it. And frankly, the cost of doing this 

whole program was a major concern. 

I think part of the message here today is that the private sector 

has it available. What has happened, though, is the insurance inVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00059 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
56 

dustry up until recently has not seen fit to release a lot of this information, and as a result of Katrina now, because of the number 

of cars that are out there, they have seen fit, and I respect that 

fact and I appreciate it, to release that information, those VIN 

numbers and the fact that they are flood cars. 

The concern we have is that Katrina is only one part of probably 

another half a million cars that are going to exist this year as well. 

So in the past it was a combination of the complexity of trying to 

have one uniform way of doing it, and the protection of States’ 

rights and States having the ability to do things the way they want 

to do things; two, kind of an unfunded mandate, if you will; and 

three, just the overall expense of providing this. 

What has brought this to the forefront today as far as we are 

concerned, I am certain, is the fact that Katrina with that many 

cars at one time—it would take us years to get 500,000 cars out 

of the Commonwealth of Virginia in this situation. But when you 

have one particular national tragedy like Katrina and the number 

of cars, so now it is such where there are a lot of folks, including 

the insurance industry, have said, let us do something about it, let 

us make that information available. 

Our comment is to go one step further, make all cars available. 

Probably the easiest way to have this happen, the first baby step, 

if you will, Mr. Chairman, is the idea of carrying brands forward 

from State to State. It may not be a perfect system. It is not going 

to tell you what an ‘‘Fl brand’’ is at that time. You are going to 

have to do some due diligence as a consumer. You are going to 

have to work with your dealer—that obviously is going to be noted 

to you—and talk about it. 

But it is a system that at least gets the brands going from State 

to State and prevents the washing of titles in other States. 

Senator ALLEN. Any other? 

Mr. BRAUCH. Mr. Chairman, I was very involved in the process 

back in the 1990s and I would agree with Mr. Hall primarily in 

what he has described. From the perspective of the State attorneys 

general, it was the lack of flexibility that the Federal proposals 

were providing. They were telling the States, this is how you must 

define ‘‘salvage,’’ it must be 75 percent, and if a State wanted to 

define it more broadly the proposal would not allow that. 

The other thing that it did was it limited the number of years 

that were covered by the proposal. In other words, the car had to 

be something like six model years old or newer, and it was not 

picking up at all older vehicles. We were very concerned about that 

as well. Again, we wanted States to be able to be broader in their 

perspective, broader in what they covered, than that. 

Ms. CHAPPELL. Mr. Chairman, if I may, from the AAMVA perspective. 

Senator ALLEN. Ms. Chappell. 

Ms. CHAPPELL. I would have to say that the reason NMVTIS only 

represents 52 percent of the vehicle population at this point-in-time 

is primarily a funding issue. So anything that could be done to find 

new funding sources to bring the rest of those jurisdictions on 

should get us to where we need to be, as well as ensuring that the 

regulations are done for the insurers and the junk and salvage 

yards to report their data. 

57 

Senator ALLEN. Back to this funding, this $25 million—why do 

some States fund this and do not look to the Federal Government 

to assist them in doing it, like Virginia, and I reckon Iowa and 

California, also? Why do some States recognize it is important to 

fund NMVTIS, and others do not? 

It can be looked upon as rewarding the less diligent by saying 

that the taxpayers, the Federal taxpayers, are going to help out 

those that have been slow to do it or inattentive, whereas others, 

whether it is California, Virginia, Iowa, Florida, spend their own 

funds on maintaining NMVTIS. How do you handle that? 

Ms. CHAPPELL. As of today we have 15 jurisdictions that are participating in NMVTIS. 

Senator ALLEN. 15. 

Ms. CHAPPELL. Nevada came online today. And as far as I know, 

Federal funding was used by each of those jurisdictions, including 

Virginia. 

Senator ALLEN. Well, was Federal funding available—Nevada 

undoubtedly got some Federal funding. Let us assume there are 

other States, the other 35 States that have not gone to this sort 

of reporting and branding. Is that funding available to those States 

presently? 

Ms. CHAPPELL. Federal funding? 

Senator ALLEN. Right. How does Nevada get Federal funding? 

Does Nevada have some special legislation or pot of money that it 

allocates the Federal funds in one way, and another State allocates 

Federal funds a different way? 

Ms. CHAPPELL. The way the Federal funding has worked historically with NMVTIS is that a pot of money is given for implementing NMVTIS and then States that are interested in pursuing 

it this particular year who have IT resources available to do the 

work this particular year will go to AAMVA and request that they 

be given a piece of that Federal money to help support their development efforts. 

Senator ALLEN. Is there a State match to this? 

Ms. CHAPPELL. In some States what it has cost has been more 

than what the Federal funds that have been used by that State, 

so the State has contributed. I cannot tell you that it was a 50– 

50 match or anything. 

Senator ALLEN. But there is some State share usually to it? 

Ms. CHAPPELL. Yes. 

Senator ALLEN. Well, when Virginia did it, how much was Federal funding, and how much was State funding? 

Ms. CHAPPELL. Virginia’s cost for NMVTIS as a pilot state are 

higher, were higher than what it costs a State to do today, because 

we were involved in defining the requirements for both sides of the 

system. We spent approximately $2 million to bring up NMVTIS 

and we got $750,000 from the Federal funds. 

Mr. BRAUCH. Mr. Chairman, can I add something to that? I think 

that the information regarding NMVTIS we got from the Iowa Department of Transportation just this week was that that had 13 

States participating online, so it must be up to 15 now. But there 

were an additional 10 states that are participating by batching information in, plus another 9 that are in development for either 

batch or online. So there are over 25 and maybe more than 30 

58 

states that either are participating right now or may very soon participate in NMVTIS. 

Senator ALLEN. So it is not as bad as it sounds. 

Mr. BRAUCH. It is not as bad as it sounds. But there is a strong 

need out there for more assistance. There was Federal funding at 

the very outset. In Iowa, I found out, we were able to bring ours 

online because we had Federal funding and because the timing was 

right. We were also in the process of upgrading our State system 

with State funds. We were able to combine it, as you say, a State 

match, and therefore get it done. But some other States may not 

be in that position yet and maybe need that Federal funding to 

help get them over the hump. 

Senator ALLEN. Would a company like Experian be able to buy 

data from NMVTIS? 

Ms. CHAPPELL. At this point in time they do not purchase data 

from NMVTIS, but we do envision giving them access to NMVTIS 

data. In fact, when we were talking earlier about the consumer 

having basically real-time access to NMVTIS data, one model 

would be that the consumer works with the third-party reseller, 

such as Experian, and they would not come directly to a department of motor vehicles, nor would they go to AAMVA. 

Mr. BRYANT. Senator. 

Senator ALLEN. Yes, Mr. Bryant. 

Mr. BRYANT. Could I make a comment? The answer to our issues 

here is NMVTIS and this issue needs to be funded and standardized and it needs to be done now. The reason that there is concern 

now is because you have 350,000/500,000 vehicles that are out 

there. Before the hurricanes hit, NICB had around 40 to 50 

cloning—I am sorry—title-washing vehicles, title-washing investigations going on from Alaska, Alabama, et al. These investigations are very complex because the vehicles go from state to state. 

The way you stop that is by having standardization of terms and 

communication and electronic databases. 

The funding for NMVTIS is the real issue. When we created the 

Katrina database, there are 200,000 VINs in that database that 

NICB put together with law enforcement authorities, insurance 

companies, and from salvage pools. We are trying to prevent titlewashing and fraud. It is going to hit us like a plague, and that is 

our concern. 

Once again, I reiterate, NMVTIS is really the answer and it 

needs to be seriously considered. 

Senator ALLEN. Thank you. 

Senator PRYOR. Ms. Shahan, did you want to say something? 

Ms. SHAHAN. I just wanted to add that I think NMVTIS is part 

of the solution, but it is not the entire solution. I think it is important to put some information on the car itself. When the National 

Highway Traffic Safety Administration was tasked by Congress 

with coming up with the best way to get information to consumers 

about vehicle safety, they contracted with the National Academy of 

Sciences to look into that issue. The Academy of Sciences came 

back and recommended putting safety information right on the car. 

They said that is when it is most useful. 

Senator ALLEN. On the automobile itself? 

Ms. SHAHAN. That is right. 

59 

We already have a requirement that has been in effect since 

1985. The Federal Trade Commission requires every licensed dealer selling used cars to put a buyer’s guide on the car explaining 

whether it is being sold with a warranty or without a warranty. 

That would be the logical place to put some information saying: 

‘‘This is a problem vehicle and you need to look further into the 

database to get more information from it,’’ so you can tell on the 

car. 

As Mr. Brauch has pointed out, usually consumers do not have 

access to the title, so they are unaware at the time of purchase 

about the brand on the title. But as the National Academy of 

Sciences found, if you put it on the car, it’s very useful. That is the 

time when you need to know, when you are looking at the car physically. 

It does not resolve the question of what you do with online purchasing. There is probably a way to deal with that. But it is the 

most cost-efficient way, using existing requirements and just building on those. It is at least as important for the consumer to know 

that this is a car that swam with the fishes as it is to know whether or not it has a warranty. 

As a matter of fact, usually if it has a damage history, even if 

the buyer’s guide says there is a warranty on it, the manufacturer 

has voided the warranty, maybe for the entire car, or certainly for 

the part that is damaged, because manufacturers for some reason 

do not want to warrant parts when they have no idea whose parts 

are in that car. They could be totally different parts, not original 

equipment manufacturer parts. They have no control over who did 

the repairs. So, of course they are not going to honor the warranty 

on those cars. 

Senator ALLEN. Right. And in some cases, though, the dealer 

may not know. If you only have 15 states, or let us assume half 

the States have some sort of way that you could determine the 

prior condition or whether it is a salvage vehicle or whether it had 

been flooded, the dealer may not even know that. 

Ms. SHAHAN. That is right, and that is why I would agree that 

dealing with NMVTIS and having uniform access that is very timely makes perfect sense. Then it would be very easy for a dealer to 

download information, by vehicle VIN from NMVTIS, whatever, 

when filling out the buyer’s guide to say whether there is a warranty or not, and then include in here, lo and behold, this is in the 

Federal database as a damaged car and if you are looking at this, 

you are a teenager buying your first car, you are a parent looking 

for a car, it is right there on the car, so you can factor that into 

your decision before you get to the point where you have agreed on 

a price, before you get into the little room where things happen. 

Senator ALLEN. That is just plain old horse-trading. That is the 

most fun part of it, almost. 

Senator Pryor, any questions? 

Senator PRYOR. Thank you, Mr. Chairman. I do have a couple of 

questions probably for each witness, if that is OK. 

Senator ALLEN. Of course. 

Senator PRYOR. Let me—I am sorry; is it ‘‘CHA-pell’’ or ‘‘cha– 

PELL’’? 

Ms. CHAPPELL. ‘‘CHA-pell.’’ 

60 

Senator PRYOR. ‘‘CHA-pell.’’ I am sorry, I mispronounced that 

earlier. 

Ms. Chappell, let me ask you. We have talked a lot about 

NMVTIS here. 

Ms. CHAPPELL. Yes, sir. 

Senator PRYOR. I am not as familiar with it as I am sure I will 

be. Tell me, what is the purpose of NMVTIS? What does it accomplish? 

Ms. CHAPPELL. The basic concept of NMVTIS is that for each vehicle there is only one record and only one title. 

Senator PRYOR. So this, NMVTIS, is designed to thwart titlewashing, right, and different terminology in different States; is 

that right? 

Ms. CHAPPELL. It is designed to make available all information—— 

Senator PRYOR. In one place. 

Ms. CHAPPELL.—in one place, on every vehicle that is on the 

road. 

Senator PRYOR. When you say ‘‘all information,’’ do you mean 

like insurance information, like it was in an auto accident back in 

2001? Is that the type of information, or is it who has owned it? 

I mean, tell me what type of information? 

Ms. CHAPPELL. There is no personal information in NMVTIS, so 

name of owner, address of owner, none of that is there. Information 

that is about the vehicle itself—the year, the make, the model, the 

VIN, whether it has been branded, what those brands are, what 

the odometer reading was at the time of each titling transaction. 

Senator PRYOR. So it is basic consumer protection and just basic 

information transparency on this vehicle? 

Ms. CHAPPELL. Yes, sir. 

Senator PRYOR. Now let me ask this. Is NMVTIS a Federal Act? 

Is it a State-to-State compact? What is it? 

Ms. CHAPPELL. NMVTIS is the name of the actual automated 

system. 

Senator PRYOR. Right. 

Ms. CHAPPELL. It was created to comply with language that is in 

the Anti-Car Theft Act. 

Senator PRYOR. Right. 

Ms. CHAPPELL. Which required that there be a national database. 

Senator PRYOR. But is it just an agreement among the states? Is 

that what it is? Or is it something the State legislature has to 

pass? 

Ms. CHAPPELL. In Virginia we did not. It was an agreement between us and AAMVA. I do not know—it is federally-mandated. 

Senator PRYOR. OK, I got you. I know how that works sometimes. 

Ms. CHAPPELL. Probably better than I. 

Senator PRYOR. Unfortunately. 

The other thing is, I was just going to ask you, Ms. Chappell, is 

about real-time. You talked about real-time a few minutes ago. 

Ms. CHAPPELL. Yes, sir. 

Senator PRYOR. What is your definition of ‘‘real-time’’? 

Ms. CHAPPELL. Real-time means that if somebody comes into an 

office today to title a vehicle, the vehicle identification number that 

61 

is on the application they provide the front teller clerk is put into 

the Virginia automated system and that information is sent out 

through AAMVANET, which is the network for AAMVA, and 

AAMVANET knows where that vehicle is currently titled, so it 

points the query to the current state of title and the information 

that that other State has—let us say it is Kentucky—comes back 

and shows to the clerk standing at the front counter. 

So I have got the Kentucky title in front of me and I am able 

to compare what is on the record with what is on this piece of 

paper in front of me. And if there is a discrepancy, I can stop the 

title transaction right then. If it comes back that the vehicle is stolen, I am certainly not going to title that vehicle. 

Senator PRYOR. Right, OK. 

Mr. Brauch, let me ask you, if I may, based on your experience 

in the Attorney General’s Office there in Iowa and also just your 

experience with NAAG, et cetera, looking at this as a national 

problem as well, is washing titles a problem with a few bad actors 

or is it spread across the entire U.S. with people that are just selling their own vehicle engaged in this practice, or are there more 

like companies out there that almost specialize in this, that know 

all the tricks of the trade and do that? 

Give me a sense of the scope of what we are talking about? 

Mr. BRAUCH. It is a very broad scope. Unfortunately, there are 

large companies that operate nationally that may, in some respects, violate the laws and there are individuals operating out of 

their back yards who do it on an occasional basis. So it is large, 

it is small, and it is all over the place. 

It is something that is not hard to do if you know how to work 

cars and you have larceny in your heart and you want to rip people 

off. So it can be done by individuals, it can be done by small used 

car dealers, it can be done by larger companies. 

Senator PRYOR. Let us say if a consumer in your State is going 

to buy a used car. Right now as I understand it he can get—there 

are a few services—I think Carfax is one and I do not know how 

many there are total, but Carfax is the one that I know the name 

right off the bat. But what do they have to do, pay a fee to access 

Carfax? They type in the VIN number? 

Mr. BRAUCH. That is correct. Other than this new service that 

they and NCIB and AutoCheck are providing here on the flood vehicles, which is a wonderful service—— 

Senator PRYOR. Right. 

Mr. BRAUCH. But generally, yes, they pay a fee to get information about that vehicle. I do not know whether the services maybe 

offer the first one free to somebody who signs up or something of 

that nature. But the bottom line is there is a fee for it. 

There are alternatives. For example, consumers in Iowa for a 

number of years have been able to contact the Department of 

Transportation and they will provide them that kind of information 

to the best of their records. So that is available out there. 

Senator PRYOR. Will a company like Carfax be able to catch a 

washed title? Will they be able to say, well, it was titled in Kentucky and then it went to Mississippi, then it went somewhere else 

and somewhere else? 

62 

Mr. BRAUCH. Often they are. They do not always catch it, but 

often they do, very often. Those kinds of services and NMVTIS 

itself are extremely helpful in going back and saying, oops, before 

it was washed in whatever State it was titled as salvage in New 

York or whatever it might be. 

Senator PRYOR. Right. 

Mr. Bryant, let me jump to you if I can quickly. You—and again, 

I am glad you are doing it, but you have this web-based listing system now in the aftermath of Katrina, right? 

Mr. BRYANT. Yes, sir. 

Senator PRYOR. Is that available to the general public? 

Mr. BRYANT. It is available to the general public and it is free. 

There is no charge. 

Senator PRYOR. OK. And are you contemplating trying to expand 

that or trying to build on that? Do you have a sense of the success 

rate based on what you have done? 

Mr. BRYANT. We have had a lot of internal discussions of whether we should expand that over a period of time, because natural 

disasters unfortunately are not going to go away. Frankly, there 

are other issues here as far as title-washing and so forth. We are 

having discussions, and have not made any final decisions. 

Senator PRYOR. What percentage of the automobile insurance 

companies participate in what you are doing? Is it everybody? Is 

it just one or two companies? 

Mr. BRYANT. The rules of the game in the Gulf Coast area affected by the hurricanes is that we take vehicle identification numbers from anybody and everybody. They do not have to be members 

of NICB. We have had—all the major insurance companies are involved. They are supporting it and furnishing information. We have 

certainly some of the salvage pools; most of them are furnishing us 

information, even down to Orkin Exterminating giving us a car. 

We are taking information and entering it in a database. That 

is what we are doing in coordination with the Louisiana State Police, the Mississippi State Police, and some other authorities. 

Senator PRYOR. Ms. Shahan, let me ask you. You were telling a 

story. I was in and out on voting, but you were telling a story about 

a Mercedes-Benz and the person bought it as a certified car. You 

mentioned this Mercedes story, but are other auto manufacturers 

doing the same thing? Are they selling cars as certified or whatever 

their program may be called, but certified, and then not honoring 

the warranty because they have a salvage title? 

Ms. SHAHAN. Yes, that is correct. 

Senator PRYOR. Is it your impression that all the auto industry 

is doing that? 

Ms. SHAHAN. Yes. 

Senator PRYOR. Are you familiar with the California Car Buyer’s 

Bill of Rights? 

Ms. SHAHAN. Yes. 

Senator PRYOR. Will that help the people in California with that 

problem? 

Ms. SHAHAN. I hope so. Unfortunately, it does not outlaw selling 

flooded cars as certified, but it specifically outlaws selling any vehicle that has sustained any frame damage. We are hoping that that 

is applied literally and broadly, to include vehicles that have 

63 

unibody construction. You know, there was some question. Some 

dealers said, well, it may not apply to unibody, and 95 percent of 

passenger cars are unibody. It was certainly our intention that it 

would include those cars. 

Senator PRYOR. I like your idea about somehow thinking through 

a way of actually posting it on the windshield or the window when 

you buy it, because the buyer’s guide is already required. Again, I 

do not know all the mechanics and the logistics of how that would 

work and how the responsibility of that would flow, but I think 

that is a common sense idea that I would like to pursue with you. 

Let me ask one thing. I missed part of your testimony. I am not 

sure you mentioned it. But my understanding is some companies 

with large fleets, like a rental car company, somehow or another, 

given the way they are structured and how they do their business, 

they may not be picked up in the system, so to speak, maybe because they do their own repairs. I am not quite sure, but is there— 

are they in a special category, these rental car companies? 

Ms. SHAHAN. They are, because they are self-insured. What has 

happened in some States in the past is that self-insured entities do 

not report to NICB necessarily. This is one of the flaws we have 

found with the Carfax database. We recommend to consumers that 

they check Experian or Carfax as one of the components of finding 

out the history, but we also tell consumers it is not a substitute for 

getting your own inspection done, because there are flaws with 

those databases. I am not faulting those companies, but it is only 

as good as the information that goes in. 

So for instance, in the State Farm case, State Farm has admitted 

to the State AGs that it withheld salvage titles, it did not brand. 

About 30,000 to 40,000 vehicles that were salvage did not get salvage brands. For that reason, they would not show up as salvage 

in those databases. 

Senator PRYOR. That makes sense. 

Mr. Fuglestad, let me ask you a couple of quick questions. That 

is, back—let me preface by saying that when I was the attorney 

general in Arkansas we passed a do-not-call law. One thing that 

was very important to us is that the do-not-call law actually 

worked and actually made sense and it was workable. So we spent 

a lot of time with the phone companies and others to try to make 

sure that we could iron out all the details and all the kinks in the 

system before we passed the legislation. 

So I am glad that you are here in part of this discussion, because 

you have some real world experience that I think would be very 

helpful to the Committee and very helpful to the Chairman and I 

as we do our follow-up on this. 

But let me ask about Experian. You pay for that service, right? 

Mr. FUGLESTAD. Yes. 

Senator PRYOR. I mean, for me. If I come in—— 

Mr. FUGLESTAD. Yes, consumers pay for that service. 

Senator PRYOR. And what is that? How does that work? Is that 

a one-time fee or what? 

Mr. FUGLESTAD. Yes, there is a one-time fee for consumers that 

go to AutoCheck.com to get a vehicle history report. There is really 

two flavors. One is a single report, or if I am in the market for a 

64 

used car, I can get an unlimited number of reports for a 60-day period. There are two different ways to do it. 

Senator PRYOR. I see. 

Mr. FUGLESTAD. We also work with many of the dealers in providing history reports to them, with manufacturers on their certified pre-owned vehicle programs. So there is a variety of ways we 

get the vehicle history information out. 

Senator PRYOR. You have about 500 million cars? 

Mr. FUGLESTAD. 500 million, about 530 million vehicles that are 

represented in our database. We do not retire the records after 

they may have been retired on the road. Through our internal calculations, we have 280 million vehicles in operation or on the road 

today. 

Senator PRYOR. Your report does include the brand? If title has 

been branded in one state or another—— 

Mr. FUGLESTAD. That is correct. 

Senator PRYOR.—you pass that on. Do you explain to the consumer what the brand means in that state? 

Mr. FUGLESTAD. Yes, there is a lot of explanation on what the 

different brands are. We do try to standardize to a certain degree. 

As I stated earlier, we have 51 brand types that we try to bring 

in into those types, because there is a lot of diversity across the 

States. 

One of the things that we do, I guess I should mention that is 

a little bit different from the NMVTIS model, is we take on the 

standardization. We do not necessarily have the ability to require 

States to get their formats specific for us, so what we have to do 

is take it as it comes to us, typically electronically, daily, weekly, 

monthly, depending on the State, and we take that, standardize it, 

normalize it, instead of asking the States, obviously, to change 

their formats to abide by what we do. 

So we do a lot of that data management and that is what, when 

I talk about leveraging private industry, it is on that management, 

it is on the breadth and depth. We have been collecting this data 

for years. I think we will see, obviously, in the States that are not 

participating in NMVTIS, but even in some of the States that are 

participating, we might see deeper and richer information. I think 

some deeper analysis can be done to bring that to the table. 

I think that would be very effective, to analyze that. Even on the 

distribution side, we talked a little bit about how we get this out 

to the marketplace and to consumers and dealers and such. We 

have a variety of flexible, secure means for getting that information 

in the vehicle history reports out to consumers on a very, very 

high-scale basis. 

Senator PRYOR. Do you have any sense of how many people use 

your service and change their mind on a car they are about to buy? 

Do you have any sense of that? 

Mr. FUGLESTAD. We do not have any sense other than 

testimonials. We have received several testimonials that allude to 

that. In fact, we do not have any mechanism for really tracking 

that. We do turn out, in different flavors now, we do turn out about 

a million either branded title vehicle history reports or vehicle history checks, depending on the customer or the partner we are dealVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
65 

ing with, a month. So it is a very high volume and it is rolling 

through. 

We provide all the branded title reporting to the auction houses 

as the vehicles go through the auctions. They are using 

AutoCheck’s services to check the vehicle for any historical brands 

or potential problems. So it is a very high-scale volume there. 

Senator PRYOR. Let me ask you about Ms. Shahan’s idea about 

having the information posted on the window, like the buyer’s 

guide. What if there was a law that required retailers, I guess, to 

post some sort of information on the windshield or the window like 

they do with the buyer’s guide? Would—at initial first blush, do 

you think that your company would be in favor of something like 

that? 

Mr. FUGLESTAD. I think so, as long as we include the AutoCheck 

vehicle history report with that. 

[Laughter.] 

Senator PRYOR. I understand that. Well, actually that is kind of 

what I am getting to. It sounds like a consumer would have more 

than one option, or seller, let us say a seller, like a car dealer, on 

the used car lot would have more than one option to choose from, 

maybe if we left it to their discretion, for them to post some sort 

of standardized type format, so that when a consumer goes from lot 

to lot to lot they would see pretty much the same type of information posted. 

But if your company was one of those that was providing that information, it might change a little bit the nature of your business 

because you would be dealing more with sellers than buyers. But 

it is something to think about. 

Mr. FUGLESTAD. Sure. And Senator, just briefly, that is something that is done today, not necessarily posted on the vehicle, but 

many dealers again through our service or our competitor’s service 

Carfax, they do provide that history report to the buyer. So the 

seller in that case is actually paying for that service. 

Senator PRYOR. Let me ask this, the last question for the car 

dealers in Virginia. Let us just say hypothetically right now in your 

State, if a car dealer does the background check on the vehicle, 

finds out it is salvage, but does not disclose that to the consumer, 

what does that do to your liability or your member’s liability? How 

does that—does that make you responsible in any way? Are you— 

is that some sort of deceptive trade practice? 

Mr. HALL. First of all, Senator, as a former attorney general you 

have much greater expertise in this area than I would. I would 

submit this to you. The bulk of all new car dealers nationwide retail the most used cars nationwide, Number 1. 

Number 2, if a dealer were to determine that, I can assure you 

that in Virginia, and I am certain with Dennis Yungmeyer in Arkansas and his folks, they are going to make sure that that car is 

never sold at a retail dealership. Unfortunately, what happens is 

we have got the car, we are stuck with it. So it is wholesaled then 

and ends up on a used car lot someplace, who knows where, and 

it may or may not have the title washed later on. 

But the answer is certainly there is significant liability. Car dealers are very much aware of that and are very much uninterested 

in selling cars of that nature with that knowledge. Part of the probVerDate Nov 24 2008 13:58 Mar 10, 2011 Jkt 065005 PO 00000 Frm 00069 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\65005.TXT SCOM1 PsN: JACKIE
66 

lem we have got is, Experian is a wonderful company, as is Carfax, 

but the data is very incomplete today. So therefore we are selling 

those cars as we speak, without knowledge. We have run the reports, we have represented them as such, and even, unfortunately, 

having done that, we lose in court, frankly, honestly stated. 

But we find out after the fact because the information takes 

months to get in and/or it never gets in the system, but it is determined later, months later, the car in fact was put together, two 

cars put together, or it was under water or whatever else. 

But I can assure you that the typical new car dealer who sells 

the majority of all used cars retail is not interested in selling a car 

with that information. They do not want to sell it. They want to 

get rid of it. 

Senator PRYOR. That is where we get back to, you are on the side 

of the consumer. 

Mr. HALL. Yes, sir. 

Senator PRYOR. And you want to see this have a good resolution. 

Mr. Chairman, that is all I have. 

Senator ALLEN. Thank you, Senator Pryor. 

I do not have any further questions. I want to thank all our panelists today for your interest and your expert insight. I am particularly proud of Ms. Chappell and Mr. Hall from Virginia, but all of 

you, from California and Iowa and Illinois, and Mr. Bryant is 

headquartered there in Virginia as well. Thank you. 

This issue of flooded and salvage vehicles, we want to go about 

this in a thoughtful, logical, and effective way. Your insight and 

your perspectives have really given us—I have taken notes and our 

staffs have been taking notes. I thank you also for bearing with the 

way the Senate operates. We did want to keep this moving and you 

have provided us with a very valuable perspective. As we cobble together some legislation, we are going to keep in contact with each 

and every one of you and others in your association to make sure 

that we can move forward, because there was a pretty good unanimity and convergence of approaches here. So we want to make 

sure that as legislation goes forward it is appropriate, while also 

recognizing that the Federal Government cannot do this alone. It 

will be in partnership with the states and obviously the private sector as well, and others who care about the consumers, as we all do. 

Thank you so much for your attendance, your interest, and your 

sterling leadership. 

[Whereupon, at 4:20 p.m., the Subcommittee was adjourned.] 

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