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CONSUMER PROTECTION IN THE USED AND 

SUBPRIME CAR MARKET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

MARCH 5, 2009 

Serial No. 111–9 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

PARKER GRIFFITH, Alabama 

ROBERT E. LATTA, Ohio 

(II) 


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(III) 

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

BOBBY L. RUSH, Illinois 

Chairman 

JAN SCHAKOWSKY, Illinois 

Vice Chair 

JOHN SARBANES, Maryland 

BETTY SUTTON, Ohio 

FRANK PALLONE, New Jersey 

BART GORDON, Tennessee 

BART STUPAK, Michigan 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

ZACHARY T. SPACE, Ohio 

BRUCE BRALEY, Iowa 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan (ex officio) 

CLIFF STEARNS, Florida 

Ranking Member 

RALPH M. HALL, Texas 

DENNIS HASTERT, Illinois 

ED WHITFIELD, Kentucky 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bobby L. Rush, a Representative in Congress from the Commonwealth 

of Illinois, opening statement .............................................................................. 1 

Prepared statement .......................................................................................... 3 

Hon. George Radanovich, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

Prepared statement .......................................................................................... 8 

Hon. John Sarbanes, a Representative in Congress from the State of Maryland, opening statement ...................................................................................... 10 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 10 

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

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 14 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 14 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Texas, opening statement ................................................................................ 15 

Hon. Bruce Braley, a Representative in Congress from the State of Iowa, 

opening statement ................................................................................................ 16 

Hon. G.K. Butterfield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 17 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 18 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 224 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, prepared statement .................................................................................. 212 

WITNESSES

Eileen Harrington, Acting Director, Bureau of Consumer Protection, Federal 

Trade Commission ............................................................................................... 19 

Prepared statement .......................................................................................... 22 

James H. Burch, II, Acting Director, Bureau of Justice Assistance, Department of Justice ..................................................................................................... 38 

Prepared statement .......................................................................................... 40 

Rosemary Shahan, President, Consumers for Automobile Reliability and 

Safety .................................................................................................................... 52 

Prepared statement .......................................................................................... 56 

John W. Van Alst, Staff Attorney, National Consumer Law Center ................... 76 

Prepared statement .......................................................................................... 78 

Keith Whann, General Counsel, National Independent Automobile Dealers 

Association ............................................................................................................ 131 

Prepared statement .......................................................................................... 133 

Scott Waldron, President, Experian Automotive .................................................. 147 

Prepared statement .......................................................................................... 149 


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VI 

SUBMITTED MATERIAL

Letter of February 2, 2009, from Robert Ellsworth to Governor 

Schwarzenegger .................................................................................................... 53 

Statement of Public Citizen .................................................................................... 159 

Statement of William L. Brauch ............................................................................ 170 

Article entitled, ‘‘Buying a Used Car? Get a ‘Peach,’ not a ‘Lemon,’ by Donna 

Miles, American Forces Press Release ............................................................... 217 

Statements of National Automobile Dealers Association, submitted by Mr. 

Stearns .................................................................................................................. 235 


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CONSUMER PROTECTION IN THE USED AND 

SUBPRIME CAR MARKET 

THURSDAY, MARCH 5, 2009 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:12 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Bobby L. Rush 

(chairman) presiding. 

Members present: Representatives Rush, Schakowsky, Sarbanes, 

Sutton, Stupak, Green, Butterfield, Barrow, Matsui, Castor, 

Braley, Radanovich, Stearns, Gingrey, Scalise and Barton (ex officio). 

Staff present: Michelle Ash, Counsel; Christian Fjeld, Counsel; 

Anna Laetch, Professional Staff; Valerie Baron, Legislative Clerk; 

Brian McCullough, Minority Professional Staff; Will Carty, Minority Professional Staff; and Shannon Weinberg, Minority Counsel. 

OPENING STATEMENT OF HON. BOBBY L. RUSH 

Mr. RUSH. The committee will now come to order. 

The chairman recognizes himself for 5 minutes for the purposes 

of opening statement. While the mortgage and home foreclosure 

crisis has garnered much-deserved attention in Congress and in the 

media, there has been much less focus on similar problems that are 

associated with the purchase of automobiles although repossession 

rates are on the rise and only getting worse. The National Association of Attorneys General lists auto issues as among its top 10 in 

consumer complaints. For poor and working-class Americans who 

do not own a home, automobiles are usually the single biggest 

asset they possess and they are essential in getting people to and 

from work, church and other places. As such, it is extremely important that when consumers, particularly low-income consumers, purchase their vehicles, the vehicles are, number one, in good working 

order, and two, affordable with reasonable financing terms. 

Unfortunately, evidence suggests that fraudulent practices with 

regard to both the condition and financing of used cars are on the 

rise. When it comes to the condition of vehicles, consumers are too 

often unaware of previous damage inflicted on the vehicle. Cars 

could have been written off as ‘‘total loss’’ vehicles by the insurance 

companies, sold to salvage yards and then rebuilt and resold to 

consumers without them knowing the history of the vehicle. The 

National Motor Vehicle Title Information System, also known as 


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NMVTIS, will eventually be a valuable tool to aid consumers in obtaining the information about the condition of their vehicle and establishing a database in which States and other stakeholders share 

their title information. However, NMVTIS remains an incomplete 

project as only 13 States are participating in the system while 14 

more provide information but not using NMVTIS as a primary resource. 

Moreover, even when NMVTIS is fully operational, the database 

will only have limited benefits for consumers unless the information is made available to them at the point of purchase, that is, at 

the lot itself. Many car buyers, particularly low-income buyers, do 

not have a computer or Internet access to take advantage of 

NMVTIS. The FTC’s Used Car Rules require dealerships disclose 

warranty information on every car they sell, a buyer’s guide posted 

on the vehicle. I believed that the Used Car Rules and the buyer’s 

guide could be a useful tool to provide customers with branding information on an automobile right at the point of purchase. 

Consumers are also being increasingly fleeced by abusive financing schemes when buying cars and in most car transactions the 

dealership has a dual role. It not only sells the cars but arranges 

for financing as well. This one-stop shopping can be very beneficial 

to customers and dealerships can play a valuable role in assisting 

customers in their quest for a creditor. However, too often the dealership and the creditor work together to needlessly saddle customers with high-interest-rate loans of exorbitant fees. Such discretionary practices known as loan packing and dealer markup have 

a disparate impact on people of color, particularly on African-American and Latino consumers. Dealerships will also charge bogus 

‘‘document fees’’ ranging from $400 to $700 for processing charges 

of minimal cost. Lastly, dealerships will conduct ‘‘yoyo sales’’ where 

they send the customer off the lot with a car only to call him or 

her back several days later to renegotiate the terms of the loan 

under coercive conditions. 

Let me close by saying that as chairman of this committee, I 

would like us to focus our consumer protection mission on matters 

that particularly affect poor and working-class people. Too often 

consumer protection issues are driven by upper- and middle-class 

interests and not enough attention is given to matters that disproportionately affect low-income customers and consumers. Today’s hearing is only one of many that I hope to conduct that will 

focus on consumer matters that affect poor people. 

With that, I yield back the balance of my time. 

[The prepared statement of Mr. Rush follows:] 


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Mr. RUSH. And I recognize now for 5 minutes for the purposes 

of opening statement the ranking member of the subcommittee, Mr. 

Radanovich. 

OPENING STATEMENT OF HON. GEORGE RADANOVICH 

Mr. RADANOVICH. Thank you, Mr. Chairman. I appreciate you 

calling today this hearing to protect consumers in the used-car 

market. 

A car is one of the single biggest purchases that consumers 

make, and although a car is a depreciating asset, it is quite often 

invaluable to the owner, particularly if it is the only way to travel 

to work and earn a paycheck. While many in this room live in big 

cities with mass transit, those of us in more rural areas lack such 

conveniences. My district is an agricultural hotspot with farms that 

cover vast acreage in the beautiful San Joaquin Valley in California and workers are often geographically separated from their 

place of work by many miles with few, if any, viable alternatives 

for commuting. Without a car, getting to work can be nearly impossible regardless of income, so it is vitally important that they find 

a safe, reliable car, and the last thing anybody needs is to find out 

that the car she has purchased has hidden damage that can greatly 

reduce the car’s value, or worse, present a safety hazard to her and 

her family. 

In the aftermath of Hurricane Katrina, this committee’s attention was drawn to the fact that hundreds of thousands of cars were 

flooded and should not be resold and put back on the road. And although State laws usually require the title of the damaged car to 

carry a brand reflecting the car’s true condition, unscrupulous people find ways to obtain new clean title in another State, a practice 

referred to as title washing. With a clean title, the path is clear to 

sell the car to an unsuspecting consumer or business. 

Because of the varying State laws, the NMVTIS system was 

mandated by the Anti-Car Theft Act of 1992 to provide an interoperable electronic system for the States and for law enforcement 

to improve title efficiency and reduce fraud. However, technological 

barriers and chronic underfunding have prevented the system from 

truly helping to eliminate title washing. 

Recently, however, the DOJ has opened the system to the public 

and required information to be provided by private-sector entities 

such as insurance companies and salvage yards, and while it is improving, the system remains only as good as the information that 

goes into it. Unfortunately, only 27 States are currently participating in providing information, and one of them, my home State 

of California, is not allowing the information to be made public. 

In the interim, American entrepreneurial spirit has filled the information void and produced several competing information products that are commercially available to consumers and businesses 

to research a car’s history. Paying a handful of dollars to research 

a car for what a consumer will pay thousands of dollars is money 

well spent. I am pleased that one of the companies, Experian, will 

be testifying today about their auto check service, and I am interested to hear whether NMVTIS will become an additional tool for 

the consumer or a replacement to a private-sector service. 


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In addition to buying a car with hidden damage, consumers must 

avoid other pitfalls to purchasing a used car. In fact, a plethora of 

State and federal laws already exist to inform and protect consumers. The FTC’s Used Car Rule requires information of existing 

warranty to be disclosed through a buyer’s guide label on the car 

and many States have laws restricting certain fees and mandating 

additional disclosures. 

Despite these protections, reports of some abusive sales and lending practices by a small minority of unscrupulous actors still persist. The report comes at precisely the time when many of our fellow Americans have lost their jobs or have reduced income from 

the slowing economy and cannot afford the additional costs. With 

many State budgets busting at the seams, the State and local enforcement we depend on to protect consumers is susceptible to the 

restraints of limited resources, and under the economic climate, we 

must ensure that our laws work effectively to protect consumers 

and eliminate fraudulent practices that result in unnecessary costs 

to consumers. 

Owning a car is an expensive proposition. Financing costs, insurance premiums, maintenance, gas and State and local taxes require 

a substantial portion of income for the average American. I don’t 

have to tell my fellow Californians who may see our gas prices increase and vehicle registration fees increase this year to offset our 

budget cars. But cars today are also safer, more advanced technologically and last longer than any time in history. I think any discussion of affordability must also examine the role of the federal 

and state mandates and taxes, and I also believe that if we want 

to help consumers, any measure we discuss must be carefully examined to ensure that they do not increase compliance costs that 

only result in higher purchase prices and ownership costs. 

Mr. Chairman, I look forward to working with you and making 

sure that consumers have access to the information they need to 

make an informed car purchase and that unscrupulous actors who 

would violate the law are brought to justice. 

Mr. Chairman, I yield back. 

[The prepared statement of Mr. Radanovich follows:] 


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Mr. RUSH. I want to thank the ranking member. 

The next member the chair recognizes is the gentleman from 

Maryland, Mr. Sarbanes, recognized for 2 minutes for the purposes 

of opening statement. 

OPENING STATEMENT OF HON. JOHN P. SARBANES 

Mr. SARBANES. Thank you very much, Mr. Chairman. Thanks for 

holding this hearing. You said it rightly when you pointed out that 

we have had a lot of focus on the subprime mortgage industry and 

all the abuses that have to be there but we are increasingly discovering that there was and continues to be in many respects a sort 

of subprime culture that has developed out there and the tentacles 

of it reach far and wide, and in some senses the place where 

subprime meets the financial entrepreneur is a place where predators lurk and it is not just about a subprime culture, it is about 

an emerging predatory culture. Certainly in the arena in the purchase and sale of automobiles the potential for abuse is high. There 

is a legion of opportunities to take advantage of people and exploit 

people and that is what this hearing hopefully is going to shed 

some light on. 

I expect we will come from this hearing with many perspectives 

but among them will certainly be that additional protections for the 

consumer are needed in this arena, and another will be that the 

depths of this culture of subprime and the potential for predators 

is very high and extends to many arenas so we have to be vigilant 

for what those other arenas can be going forward. 

So thank you for calling this hearing and I am looking forward 

to hearing the testimony from the panel. Thank you. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the former ranking member of this subcommittee, the former 

chair of the subcommittee, the gentleman from Florida, Mr. 

Stearns is recognized for the purposes of an opening statement for 

2 minutes. 

OPENING STATEMENT OF HON. CLIFF STEARNS 

Mr. STEARNS. Good morning, and thank you, Mr. Chairman. 

Thank you for having this hearing. As you mentioned, in the 109th 

Congress I was chairman of the subcommittee. We examined this 

problem of title washing and fraud to discuss better ways to protect 

the consumers who unknowingly purchase these vehicles and they 

were damaged, and I thank you very much, Mr. Chairman, for continuing the investigation. 

This year again we introduced the Damaged Vehicle Information 

Act, which is H.R. 1257, with my distinguished colleague from 

Texas, Mr. Green, and I thank him sincerely for his support. Our 

bill would require vehicle identification numbers, VINs, of totaled 

vehicles to be immediately sent to the vehicle history databases 

which would then be made available immediately to the public so 

that consumers would be provided with complete information regarding any salvaged or flooded automobile that they may be purchasing. Towards that end, Mr. Chairman, I ask unanimous consent to put in the record a letter from the Salvage Auto Fraud Reform Coalition, which represents millions and millions of vehicles 

and a list of the supporters including Experian, who is a witness 


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today, including, Mr. Chairman, the National Association of Minority Automobile Dealers, for their support for Mr. Green and our 

legislation, H.R. 1257. May I put that in the record, Mr. Chairman, 

by unanimous consent? 

Mr. RUSH. So ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. STEARNS. We are all aware, I think, of what the problem is, 

and as I pointed out, we have bipartisan support here. We had 80 

cosponsors in the last Congress and we worked it through the National Highway Traffic Safety Administration, NHTSA, to ensure 

this public disclosure of damaged vehicles. DOJ’s system, which is 

NMVTIS, the National Motor Vehicle Title Information System, 

was only recently made available to the public on January 30 and 

is operating off an incomplete database, so NMVTIS doesn’t specifically track vehicles that have been damaged and had airbags deployed and the entry of data on this system often lags behind the 

time it takes to obtain a new title for a damaged car in another 

State. Thus, I believe NHTSA is the right agency to be charged 

with tracking damaged vehicle information, and of course, Mr. 

Chairman, as you know, this is in our jurisdiction and we have 

been a very strong advocate for the consumers, and I thank you for 

having this hearing. 

[The prepared statement of Mr. Stearns follows:] 


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Mr. RUSH. The chair thanks the gentleman. Now the chair recognizes my friend, the chair of the Oversight Subcommittee of this 

committee, the gentleman from Michigan, Mr. Stupak, is recognized for the purposes of opening statement for 2 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. I will waive my opening 

as I would like to reserve my time for questions. 

Mr. RUSH. The chair thanks the gentleman. The chair therefore 

proceeds to recognize the gentleman from Texas, my friend, Mr. 

Green, for the purposes of opening statement for 2 minutes. 

OPENING STATEMENT OF HON. GENE GREEN 

Mr. GREEN. Thank you, Mr. Chairman, for holding this hearing 

on consumer protection in the used car market. There are a number of issues we will be looking at in the hearing. I look forward 

to hearing from our witnesses on financing scams, title washing 

and the ability of consumers to find basic background history of 

used cars. 

Used car scams have been around for decades but since 2001 in 

my hometown of Houston we have seen spikes in flood damage-related fraud after Tropical Storm Allison, Hurricane Katrina and 

again last fall with Hurricane Ike. Technology has made Carfax 

and Autofax reports more accessible and programs like the DOJ’s 

National Motor Vehicle Title Information System, which more 

States are beginning to participate in, will help consumers and 

used car dealers alike. Unfortunately, some unscrupulous used car 

dealers will remain and the individuals they will take advantage 

of will most likely be those who are unable to access information 

such as vehicle history reports or simply don’t know it is available 

or where to find it. The president of the Houston Better Business 

Bureau stated in a Houston Chronicle article last March that their 

office still receives one or two complaints a week from individuals 

who have unknowingly purchased previously wrecked or otherwise 

damaged cars. For low-income individuals and families who do not 

own homes, a vehicle is probably their single biggest asset and depend on it for their income and can least afford to pay for repairs 

or go without that vehicle if it in the shop. 

I hope to hear from our witnesses on how we can best make vehicle history information available to all consumers prior to purchase. 

I also look forward to the testimony on abusive practices during the 

purchasing and financing process. This is something that the subcommittee has looked at in the past and the problems in accessing 

vehicle history but there can be just as much fraudulent activity 

in this part of the process and it disproportionately affects the 

same parts of the population. 

Again, I want to thank our chairman and my good friend from 

Chicago for holding the hearing. I look forward to working on legislation to solve that problem. I yield back my time. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the gentleman from Georgia, Dr. Gingrey. 

OPENING STATEMENT OF HON. PHIL GINGREY 

Mr. GINGREY. Mr. Chairman, thank you. In the way of disclosure, 

I want to say that my dad and my two uncles were in the used car 

business almost all their adult lives, and I would like to have a dolVerDate Mar 15 2010 04:51 Feb 04, 2012 Jkt 067097 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 E:\HR\OC\A097.XXX A097

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lar for every hour I spent going with them to New York to Jerome 

Avenue to buy some of these used cars and take them south or sit 

around an auction lot for hours and hours while they were purchasing cars, so I have a lot of interest in this issue. 

Chairman Rush, I want to thank you for calling the hearing and 

it does affect so many Americans each year. The purchase of a used 

car, the United States Department of Transportation estimated in 

2007 that almost 41.5 million used cars were purchased in the 

United States. I have got four of them. In these challenging economic times, individuals around the country will first look to the 

used car sector when buying a car to keep their own cost down so 

therefore it is incumbent on this subcommittee to ensure that individuals have access to the most pertinent and up-to-date information on the cars that they plan to purchase. 

In 1992, Congress took a large step toward preventing auto 

fraud, particularly this issue of title washing, when it passed the 

National Motor Vehicle Title Information System. I also applaud, 

Mr. Chairman, the work of my good friend from Florida, Mr. 

Stearns, for the work on this issue in both the 109th and 110th 

Congresses. He introduced the Damaged Vehicle Information Act to 

direct the National Highway Transportation Safety Administration, 

NHTSA, to provide information about the fair market value and 

the safety of automobiles. So I look forward to working with him 

on this legislation and with you, Mr. Chairman, during this Congress. 

You know, despite the attempts to compel the full disclosure of 

auto information through NMVTIS, there have been a number of 

obstacles at the State level to get the information distributed. As 

a result, the private sector through a number of sources has been 

able to fill the void left by the federal and State governments to 

get vehicle history information including title and damage information into the hands of the consumer. It is my hope that any legislative remedy we may find will not undercut the ongoing efforts that 

the private sector is doing in their endeavors to help consumers. 

Mr. Chairman, as we move forward on this important issue, we 

must also recognize the number of existing federal and State laws 

that address a number of components of the used car industry. I 

would suggest that we move cautiously on the issue because it is 

critically important for us to enforce the laws that we already have 

before adding new layers of federal regulation and bureaucracy, but 

I know it is a problem. I look forward to hearing from all the witnesses this morning on this important issue, and Mr. Chairman, I 

yield back. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the vice chair of the subcommittee, my friend from Illinois, 

Ms. Schakowsky, for 2 minutes for the purposes of an opening 

statement. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, for holding this 

hearing. 

As has been said, for many people buying a new or used car may 

be the largest purchase that they ever make outside of purchasing 

a home. Far too often, consumers with a lack of resources or poor 


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credit are taken advantage of and it is our responsibility to ensure 

that it doesn’t happen to anyone regardless of their income. Consumers should have access to reliable and accurate information, 

even if they don’t have access to Web sites or Consumer Reports 

magazine. Likewise, they should be assured that when they sign a 

contract, they are getting the best deal possible, even if they don’t 

have access to a lawyer or financial adviser. It is also imperative 

that outright instances of fraud are addressed and that the Federal 

Trade Commission has the appropriate authority and resources to 

do so. In Illinois in 2007, complaints about new and used car sales 

were one of the top 10 consumer complaints reported to the Office 

of the Attorney General that year. There were nearly 1,500 complaints in 1 year alone. It is clear that this is an issue that needs 

more attention. 

I also want to address the issue of cars sold across State lines 

with titles that have been cleared of the vehicle’s history. These 

histories may include accident damage or other circumstances such 

as natural disaster damage that is critical for the buyer to know. 

For instance, cars that were flooded during Hurricane Katrina had 

severe saltwater damage but were sold with titles that did not reflect this history. Saltwater can be incredibly destructive to cars, 

making them more likely to break down. A car in the shop is costing money and isn’t getting the owner to his or her job. 

It is not just a fairness-in-value issue. There are also serious 

safety concerns. A California teenager, Bobby Ellsworth, was killed 

in 2003 when the used pickup truck he was riding in crashed and 

the airbags did not deploy. The truck had been totaled in a previous accident and resold at auction but the airbags had never been 

replaced. The spaces for the airbags were stuffed with paper towels. The National Motor Vehicle Title Information System is slowly 

being built and implemented by the Department of Justice to share 

information between States and with consumers. It is critical that 

this effort must move forward quickly. I say in my district we have 

many public transportation options but in general we remain cardependent and it is our responsibility in Congress to ensure consumer protection for auto purchases. 

Thank you, Mr. Chairman. 

Mr. RUSH. The chair now recognizes the gentleman from Iowa, 

Mr. Braley, for the purposes of opening statement. 

OPENING STATEMENT OF HON. BRUCE L. BRALEY 

Mr. BRALEY. Thank you, Mr. Chairman, and Ranking Member 

for holding this hearing. 

To my friend from Georgia, I think we have had some parallel 

life experiences. I have very fond memories of helping my uncle do 

inventory of parts at his dealership in my hometown of Brooklyn, 

Iowa, and he worked at that dealership for 60 years. My brotherin-law ended up working with him. 

One of the things that concerns me about this economic crisis is 

the ripple effect it is having on car dealerships all over the country 

who are being weeded out by automakers who are turning their 

backs on the dealership network that built their companies in the 

first place. But I also know that any business and any profession 

is only as strong as how the public perceives them, and usually it 


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is the weakest links in our professions and our businesses that 

drive the demand for public action and that is why this hearing is 

so important, Mr. Chairman, because we know from the materials 

that have been provided to the committee including the letter 

drafted by my attorney general, Tom Miller, that there are numerous problems that become some of the most compelling issues that 

attorneys general all over the country face on a daily basis, which 

is issues of consumer fraud that directly relate to these important 

purchases. 

I also, Mr. Ranking Member, grew up and live in a district where 

there are more pickup sales, I think, than there are automobile 

sales because of the large agricultural businesses that depend on 

those vehicles and so when these purchases are made, they are 

made with the understanding and the good-faith belief that the vehicles that are being obtained are going to live up to the representations that have been made, and that is why even though these 

challenges are great and the solutions are not going to be easy for 

many people, the more we do together to create a system where the 

public and the dealers have faith that the product they are providing lives up to the high expectations of consumers and this government, the more we are going to move toward a day when we 

have faith and confidence that those purchases are going to be legitimate, they are going to be dependable, and I think that more 

than anything is going to restore confidence in the U.S. automobile 

industry, and that is why I look forward to working with everyone 

here today in making that day come. 

Mr. RUSH. The chair will proceed now to recognize the gentlelady 

from Florida, Ms. Castor, for 2 minutes of opening statement. 

Ms. CASTOR. Thank you, Mr. Chairman. I will waive my opening 

statement at this time and I look forward to hearing the testimony. 

Mr. RUSH. With that said, the chair now recognizes the gentleman from North Carolina, my friend, Mr. Butterfield, for the 

purpose of opening statement. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD 

Mr. BUTTERFIELD. Thank you very much, Mr. Chairman, for convening this very important hearing today and thank you for your 

leadership. I also thank the six witnesses for their anticipated testimony this morning. 

Mr. Chairman, I cannot say that my father was a used car dealer 

but what I can say is that my ex-wife’s father was a used car dealer. He is a very delightful man who is now 90 years of age and is 

and was very respected in our community because he treated people right. 

Mr. Chairman, according to the Hill newspaper yesterday, I live 

in the fourth district from the bottom in terms of annual median 

income in the United States, number four from the bottom. That 

means I have a lot of poor people in my district and so this issue 

really strikes home to me. The experience of owning a car does tremendous things for a person. Not only does it get them to work, 

it gives them freedom, it gives them independence and pride, and 

certainly a great number of people in the United States have had 

this experience but for some the experience has not been so great. 

Many people including those who have low income or minorities or 


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they speak a different language, they have fallen victim to predatory dealers who take advantage of their lack of knowledge and experience when purchasing a vehicle. 

Of particular interest to me is the abusive financing practices 

employed by some dealers. Many car dealers, and I have personally 

experienced this, discourage customers from securing private financing from a local bank. The dealers prefer to finance the deal. 

They shop around for financing companies that will split a higher 

interest rate with the dealer, benefiting both the dealer and the 

financer but harming the consumer. Another problem, Mr. Chairman, is that some dealers charge excessive fees for processing paperwork. These fees can be as much as $700 on a car that isn’t 

worth much more than that. 

So Mr. Chairman, I have run out of time. This hearing today is 

most appropriate. I thank you for convening it and I look forward 

to the testimony of the witnesses. I yield back. 

Mr. RUSH. The chair now recognizes my friend from my home 

State of Georgia, Mr. Barrow, for 2 minutes of opening statement. 

Mr. BARROW. I thank the chair. I will waive an opening. 

Mr. RUSH. The chair thanks the gentleman. Now we will proceed 

to the gentlelady from Ohio. Ms. Sutton is recognized for 2 minutes 

for the purposes of opening statement. 

OPENING STATEMENT OF HON. BETTY SUTTON 

Ms. SUTTON. Thank you, Mr. Chairman. Chairman Rush, thank 

you for holding this important hearing today on consumer protection in the auto market. 

For many working families in Ohio, in my district and across the 

country, frankly, cars are essential to their livelihood. Consumers 

in the market for used cars need accurate and reliable information 

in order to make sound purchasing and financing decisions, and 

the National Motor Vehicle Title Information System went public 

on January 30, 2009. By facilitating the electronic exchange of information between States, insurance companies and salvage yards, 

consumes will now have information about the history and condition of used cars they are considering purchasing. The database 

system will protect consumers from fraud and unsafe vehicles and 

in addition taxpayer savings are estimated to be between $4 billion 

and $11 billion annually. 

Now, I am proud to note that Ohio is one of the 13 States that 

is already fully participating in the National Motor Vehicle Title 

Information System by providing data and inquiring into the system before issuing new titles. But we need to ensure that all of the 

States are fully participating and we need to find efficient ways to 

make the information available to consumers and buyers. Not all 

consumers have access to electronic media so I would be interested 

in hearing from the witnesses today on ways to provide the database services to consumers in addition to over the Internet. 

I look forward to the testimony and the recommendations from 

today’s witnesses, and I yield back the balance of my time. 

Mr. RUSH. The chair thanks the gentlelady. Now we will proceed 

to the matter of the witnesses. We want to first of all thank the 

witnesses collectively for taking time out of your busy schedule to 

be here to share your information not only with the members of 


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this subcommittee and the Members of Congress but also the citizens of this Nation. You are indeed doing a great service for our 

country in that you have taken the time out to come and provide 

testimony on this very important and vital issue. 

I want to introduce you now and then, as is the new custom of 

this committee, we will have you sworn in for testimony after the 

introduction of each and every one of you. First of all, to my left 

and to your right, those in the audience, Ms. Eileen Harrington. 

She is the acting director of the Bureau of Consumer Protection for 

the Federal Trade Commission. We want to welcome you, Ms. Harrington. Next to her is Mr. James H. Burch II. He is the acting director of the Bureau of Justice Assistance for the Department of 

Justice. Mr. Burch, we welcome you. Next to Mr. Burch is Ms. 

Rosemary Shahan. She is the president of Consumers for Automobile Reliability and Safety. We want to thank you and welcome 

you for your participation. Next we have Mr. John W. Van Alst. He 

is the staff director of the National Consumer Law Center. Mr. Van 

Alst, we certainly welcome you. Mr. Keith Whann is the general 

counsel of the National Independent Automobile Dealers Association. Mr. Whann, thank you and we welcome you. And last but not 

least is Mr. Scott Waldron, who is the president of a company 

called Experian Automotive, and we certainly welcome you for your 

participation. 

And now if you would join me in rising from your seats, we will 

issue the oath. Please let the record reflect that all witnesses once 

they have indicated will have answered in the affirmative. 

[Witnesses sworn.] 

Mr. RUSH. Now we will begin with Ms. Harrington for the purposes of 5 minutes of opening statement. 

TESTIMONY OF EILEEN HARRINGTON, ACTING DIRECTOR, 

BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE 

COMMISSION; JAMES H. BURCH II, ACTING DIRECTOR, BUREAU OF JUSTICE ASSISTANCE, DEPARTMENT OF JUSTICE; 

ROSEMARY SHAHAN, PRESIDENT, CONSUMERS FOR AUTOMOBILE RELIABILITY AND SAFETY; JOHN W. VAN ALST, 

STAFF ATTORNEY, NATIONAL CONSUMER LAW CENTER; 

KEITH WHANN, GENERAL COUNSEL, NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION; AND SCOTT 

WALDRON, PRESIDENT, EXPERIAN AUTOMOTIVE 

TESTIMONY OF EILEEN HARRINGTON 

Ms. HARRINGTON. Thank you very much, Chairman Rush, Ranking Member Radanovich and members of the committee. 

The Federal Trade Commission’s formal testimony has been submitted for the record this morning. My oral statement and any 

questions that I answer reflect my views, not necessarily those of 

the Commission. 

Consumers in the market for a used car need access to truthful 

information that will help them make good purchasing decisions. 

The Commission’s Used Car Rule helps consumers get some important pieces of information. First, it prohibits dealers from making 

misrepresentations about the car, and second, it requires them to 

display a buyer’s guide on the used car that they are selling. The 


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buyer’s guide conveys to consumers whether the car sold is sold as 

is, meaning that the dealer assumes no responsibility for future repairs, or is covered by a warranty. If it is covered by a warranty, 

dealers must disclose what portion of the repair costs the dealer 

will pay. Because this information must be displayed on each used 

car offered for sale, shoppers can walk a used car lot and make immediate effective comparisons. Since 1985 the Commission has 

partnered with State and local consumer protection agencies to enforce the Used Car Rule. This partnership has resulted in hundreds 

of State enforcement actions as well as 80 federal actions and federal civil penalty orders totaling more than $1 million. In addition, 

hundreds of state actions have been brought to enforce compliance 

with the rule and the FTC has directly supported those State enforcement actions by providing training and investigative assistance. 

The FTC is currently reviewing the Used Car Rule to examine 

its effectiveness and to determine whether amendments could increase that effectiveness. As part of our review, we asked for comments and we have received many thoughtful comments, some 

from the panelists you will hear from today. Generally, commenters 

expressed support for the rule. Some suggest expanding its scope 

to require broader disclosures and others prefer to make only 

minor modifications. I can’t comment on the Commission’s likelihood of adopting any particular recommendation today but we will 

of course give all comments careful consideration as the Commission considers next steps. 

Consumer education materials put out by the FTC encourage 

consumers to get information about a car’s condition by seeking an 

independent inspection and by checking the car information 

against the National Insurance Crime Bureau’s database of vehicle. 

These steps can help consumers avoid buying cars that have prior 

damage, and we are pleased, as some of the members have also indicated, that the Department of Justice’s National Motor Vehicle 

Title Information System, which compiles information from States, 

insurance carriers and salvage yards, has recently been made 

available to consumers. The emergence of these and other publicly 

available databases can help consumers get accurate information 

about a car’s titling, odometer data and certain damage history, 

and the Commission staff is updating our education materials to 

tell consumers about the newly available DOJ system. And we certainly recognize comments made by some of the members about the 

digital divide, how to get information to consumers who don’t have 

Internet and electronic information access is a big challenge, and 

I am happy to talk more about that later in questions and answers. 

Of course, to buy a car, a consumer usually needs a loan. At the 

FTC, we protect consumers at every stage of the credit lifecycle 

from when credit is first advertised to when debts are collected. 

The Commission does this by enforcing section 5 of the FTC Act, 

which prohibits unfair and deceptive acts and practices as well as 

through enforcement of the Truth in Lending Act. Most recently 

the FTC’s work in this area has focused on mortgage lending but 

the FTC has previously brought 29 cases alleging deception in the 

advertising of financing and lease terms for cars. In these cases car 

manufacturers, dealerships and ad agencies settled FTC charges 


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that their ads misrepresented credit or lease terms available to 

consumers. 

As important as loan origination is, however, it is just as important for consumers to avoid falling deeply into debt on a loan secured by their car. Some debt cycles can begin with an emergency 

need for cash that is fulfilled by costly car title loans. The Commission enforces the Truth in Lending Act to make sure consumers 

know the cost of credit including high-cost payday and car title 

loans, and the Commission protects consumers who fall into debt 

by enforcing the Fair Debt Collection Practices Act. Pursuant to 

these statutes, the FTC investigates and brings law enforcement 

actions against lenders, abusive debt collectors, credit repair companies and debt settlement firms who target delinquent customers 

who are in default. 

Thanks again for the opportunity to testify. I am happy to take 

your questions. 

[The prepared statement of Ms. Harrington follows:] 


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Mr. RUSH. The chair now will recognize Mr. Burch for the purposes of opening statement. Please limit your comments to 5 minutes. 

TESTIMONY OF JAMES H. BURCH, II 

Mr. BURCH. Mr. Chairman, Ranking Member Radanovich and 

other distinguished members of this subcommittee, I am pleased to 

have the opportunity to discuss with you today the Department of 

Justice’s efforts to protect consumers from fraud and unsafe vehicles through the National Motor Vehicle Title Information System, 

what we call NMVTIS. We appreciate this subcommittee’s interest 

in consumer protection by preventing auto theft and fraud. 

Fraud involving vehicles is a profitable business for criminals 

and one that burdens States, the auto industry, insurers and consumers. According to estimates in the 2007 Uniform Crime Reports 

from the FBI, there were 1.1 million vehicles stolen nationwide. 

The National Insurance Crime Bureau reports that auto theft alone 

costs consumers and insurance companies nearly $8 billion per 

year. In an effort to combat automobile theft and fraud, NMVTIS 

was established by Congress in 1992. In 1996, by amendment, Congress moved responsibility for NMVTIS from the U.S. Department 

of Transportation to the Department of Justice because of the Department’s overall goal of reducing theft and fraud. 

NMVTIS enables users to access automobile titling information 

including brand history and certain historical theft data through a 

web-based system. It also facilitates the electronic exchange of information between States, which improves titling efficiency and reduces fraud. This exchange of information is particularly helpful in 

combating vehicle identification number, or VIN, cloning and title 

washing, which are significant problems and growing trends in the 

United States. By making available in one system specific pieces of 

information from motor vehicle titling agencies, automobile recyclers, junk and salvage yards and insurance carriers across State 

lines, NMVTIS protects States and consumers from fraud and unsafe vehicles. 

In January 2009, the Department announced the availability of 

the National Motor Vehicle Title Information System specifically 

for consumers. The system provides the public with valuable information about a vehicle’s condition and history and helps consumers 

make informed car buying decisions. Through NMVTIS, once a vehicle is titled or branded by a State motor vehicle titling agency or 

is determined by an insurance carrier to be salvage or total loss, 

that data and other important information becomes a permanent 

part of the vehicle’s NMVTIS record. The law requires that the operation of the system be paid for through user fees and not dependent on federal funding. Therefore, NMVTIS is designed as a fee-forservice system. Prior to purchasing a vehicle, a consumer can access NMVTIS through an authorized third-party provider and view 

information such as the most recent odometer reading, the brand 

history for that vehicle, the history of any salvage or total-loss determinations, and other historical data including theft data. While 

authorized providers may charge a fee for their service, consumers 

benefit from these services that are market driven, and as of today 

do not cost more than $3.50 per successful VIN search. 


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In addition to providing information to individual consumers, the 

law requires that NMVTIS information be made available consistent with relevant privacy laws to other prospective purchasers 

such as businesses that purchase used automobiles or other commercial consumers. Commercial consumers include lenders who are 

financing the purchase of automobiles and automobile dealers. 

Lenders, dealers and insurance carriers are integral components of 

the automobile purchasing and titling process and their ability to 

avoid fraud then protects individual consumers as well. 

NMVTIS also serves as a powerful tool for law enforcement. With 

access to this system for the first time, law enforcement will have 

direct access to State motor vehicle data in near real time. Previously law enforcement had to contact individual State motor vehicle titling agencies by phone during business hours to track down 

title data. With access to NMVTIS 24/7, law enforcement agencies 

will be able to better identify stolen motor vehicles, enhance their 

ability to detect vehicle theft rings and combat other criminal enterprises that use vehicles. In research conducted at the request of 

DOJ, NMVTIS estimated to safe taxpayers between $4 billion and 

$11 billion each year. When fully implemented, NMVTIS will have 

data from every State and will be queried before any State issues 

a new title for vehicles coming in from another State. In addition, 

the system will be available for queries before a prospective purchaser buys any used vehicle. These efforts will protect the American public from title fraud, keep stolen vehicles from being fraudulently retitled and will make it more difficult, if not impossible, for 

criminals to clone or conceal stolen vehicles for criminal purposes. 

This concludes my statement, Mr. Chairman. Thank you for the 

opportunity to testify today. I welcome the opportunity to answer 

any questions you or members of the subcommittee may have. 

[The prepared statement of Mr. Burch follows:] 


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Mr. RUSH. The chair thanks the gentleman. Now, Ms. Shahan is 

recognized for 5 minutes of opening statement. 

TESTIMONY OF ROSEMARY SHAHAN 

Ms. SHAHAN. Thank you, Chairman Rush and Ranking Member 

Radanovich and distinguished members of the committee. I really 

appreciate the invitation to testify today. I am very grateful to you 

and to your staff for the work that you have been doing on this 

issue. 

For 30 years, since 1979, I have been working on behalf of consumers at the State and Federal level and I hear from consumers 

who have car problems on a daily basis. We have members who 

have had car problems. We have members who have lost children 

because they were in unsafe cars. Representative Schakowsky referred to the Ellsworths, who are members of CARS, whose son 

Bobby was killed for lack of an airbag, and they asked that a letter 

that they wrote to Governor Schwarzenegger be admitted. I would 

request from the chair and the committee that we would submit 

their letter for the record. 

Mr. RUSH. Hearing no objection, so ordered. 

[The information follows:] 


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Ms. SHAHAN. Thank you very much. 

Their letter asks the governor to ensure that California fully participates in the National Motor Vehicle Title Information System, 

or NMVTIS, and California with some prodding has begun to participate in NMVTIS but it is restricting access to the information 

to the public, and that is a problem. We believe that it is illegal. 

We were among the consumer groups including Public Citizen and 

Consumer Action that sued the Department of Justice because 

after so many years the Anti-Car Theft Act had not been implemented and people need it desperately. We need this information 

more now than we ever have before and we were very grateful that 

Judge Patel in San Francisco ruled in our favor and ordered the 

DOJ—we saw it actually as a rather friendly lawsuit—ordered the 

DOJ to issue the final rules, which it did, and starting the end of 

this month for the first time ever, the insurance industry and the 

salvage pools and junkyards will be submitting data to the title 

system and it will be made available to the public and competitive 

forces can then come into play. The cost of accessing the information can come into play. In our comments to the FTC, we along 

with other consumer groups asked that the information also be included on the used car buyer’s guide so that consumers who don’t 

have access to computers when they are car shopping or for other 

reasons may not have access to credit in order to get the information from the database will be able to get it on the car at the time 

of purchase. According to the National Highway Traffic Safety Administration, which commissioned an Academy of Sciences study on 

where car information is most useful, they said absolutely, you 

know, put it on the car. We have the five-star ratings on cars, the 

EPA ratings are on cars. That is where people want it. That is 

where it does the most good and we are hoping that we can achieve 

that with Congress’s help. 

Let me just say this. Since I have been doing this for 30 years, 

the irony we face now is that new cars have never been better. We 

have the best cars that are being manufactured. We are best 

known for initiating California’s Lemon Law. That was back in the 

days of the Plymouth Volare, which, you know, was falling apart 

bolt by bolt. The cars are better than ever before but the sales 

practices are worse than ever before, and not only do we have problems with things like yoyo financing and, you know, very creative 

ways of ripping consumers off over their car loans, and I would like 

to note for the record that there is a victim of yoyo financing who 

is here from Virginia, who typifies what happens. When she purchased the car, she thought she had a deal and about a month 

later she heard from the dealer who said you have to bring the car 

back, and if you don’t, I will report it as stolen, and she actually 

ended up losing her job because her car was taken from her—or it 

wasn’t taken but the tow truck driver showed up at her place of 

business and it was a real problem and she is still having to deal 

with that. 

So we have all these problems in the sales of cars that are 

shrinking our market. You know, it used to be the first purchase 

people made was a new car. You know, back in Henry Ford’s day, 

cars didn’t last as long so people would buy a new car and over 

time they would go from the Chevy up to the Cadillac, and instead 


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what is happening now is, most people, their first purchase, especially if they are a young person starting out, is a used car. And 

if that transaction goes well, all kinds of opportunities open up for 

them. They get good credit, they have access to better education, 

better jobs, and if that transaction goes poorly, they may never recover from it. Their credit is hurt. It affects their life for a long 

time, and we are hoping that that is something that Congress will 

work with us on resolving. 

And we also have a new problem that is emerging, and that is 

so many dealers going out of business with collateral damage to 

their customers where they promise to pay off the lien on the cars 

that are trade in and they don’t, and you have been hearing about 

zombie banks. These are like zombie dealers. You don’t know from 

one day to the next whether the dealer you go to is solvent or not, 

and consumers are buying cars where the liens have not been paid 

off end up, you know, in a world of hurt when the lien holder repossesses the car from them even when they make every payment 

in full and on time. And as Mr. Radanovich knows, this is a real 

problem in California that we need help with as well. 

[The prepared statement of Ms. Shahan follows:] 


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Mr. RUSH. Thank you so very much. We will have ample opportunity during the question-and-answer period. 

Our next witness is Mr. Van Alst for 5 minutes. You are recognized. 

TESTIMONY OF JOHN W. VAN ALST 

Mr. VAN ALST. Chairman Rush and Ranking Member Radanovich and distinguished members of the subcommittee, it is an 

honor for me to testify before you today on behalf of the low-income 

consumers and clients of the National Consumer Law Center about 

consumer protection in the used car market. I thank you and your 

staff for holding a hearing on these very important issues. 

For years I was with Legal Aid in North Carolina and every day 

I saw working families that lacked a safe, reliable car because of 

the abuses and problems in the used car sales and finance market. 

These families lost jobs and they were unable to get their children 

to school or daycare and to doctors’ appointments. Since I have 

joined the National Consumer Law Center, I have had the privilege 

to work with hundreds of advocates and attorneys across the Nation trying to address these issues and I have seen just how widespread and common they truly are, and in part that was the basis 

for the report that we produced on fueling fair practices, which I 

have submitted to the committee, and Mr. Chairman, with your 

permission, if we may have that added to the record as well, I 

would appreciate that. 

Mr. RUSH. Hearing no objections, so ordered. 

[The information appears following Mr. Van Alst’s testimony.] 

Mr. VAN ALST. Cars in poor and even dangerous condition are 

sold to consumers as safe and reliable transportation, and this 

could be avoided if dealers were required by the FTC to disclose 

known defects and to post NMVTIS reports on the cars that are offered for sale and if insurance companies were just required to report all claims data in the United States, the same way that those 

same insurance companies are required to do so in Canada. Consumers are often charged higher interest rates than they qualify 

for. You see, because the dealers typically arrange the financing, 

they contact prospective lenders who inform the dealer of the terms 

on which they would be willing to lend. Often the dealer puts the 

consumer in a higher interest rate loan and splits the difference 

with the lender. For example, if the lender is willing to lend to the 

consumer at 8 percent based upon the consumer’s credit history, 

the dealer will put the consumer in a loan at 16 percent and then 

the lender and the dealer split that extra money that will be paid 

by the consumer over the life of the loan. 

These markups, as you have pointed out, have a disparate racial 

impact. Litigation mounted by NCLC and others has demonstrated 

that minority car buyers pay significantly higher dealer markups 

than non-minority car buyers with the same credit histories. This 

practice costs consumers hundreds of millions, if not billions of dollars, and yet it is undetectable by the consumers and most anyone 

else, for that matter. While the FTC and the DOJ are charged with 

enforcing the Equal Credit Opportunity Act, which prohibits such 

disparate treatment, they currently lack the tools to know when it 

is occurring and to combat it effectively. This and other problems 


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could be addressed through the creation of a federal data collection 

system for auto finance similar to the Home Mortgage Disclosure 

Act. 

The buying process itself is intentionally structured to be needlessly complicated and time consuming to wear down and confuse 

car buyers and enable dealers to slip in overpriced add-ons and 

other items that are profitable for the dealer and often not very 

useful for the consumer. Excess dealer profits are hidden in additions such as window etching service contracts, rustproofing and 

vastly inflated document preparation fees. Dealers also use tactics 

such as yoyo sales where the consumer drives away in a newly purchased car only to be called back several days or a week later and 

told sometimes untruthfully that financing could not be arranged 

at the original terms and the consumer has to enter into a new 

contract at a higher interest rate or with a higher down payment. 

Of course, if the consumer rather than the dealer had decided that 

they didn’t want to take the car and tried to get out of it, the dealer would have told them the sale was final. Sometimes the dealer 

will have already sold the consumer’s trade-in or tell the consumer 

that he or she is responsible for extra charges if the new, less desirable terms are not accepted. The FTC especially if it receives enhanced rulemaking authority should prohibit such tactics as unfair 

and deceptive. 

These abuses and all the other abuses we see in the used car 

market do not just harm the individual car buyer that gets the bad 

car or the bad loan. These practices make the entire market less 

competitive and less transparent. Dealers that would like to deal 

fairly with the public and compete on price and quality of the car 

are driven out of business by dealers using these deceptive tactics, 

and just as we have seen from the problems in the mortgage industry, the inflated cost and discriminatory loans and the outright 

fraud in these transactions can spill over to the larger economy. 

While many of the changes that are necessary to bring transparency, efficiency and competitiveness into the market will have 

to occur at a State level, there are a number of very important 

things that the Congress and agencies and the Administration can 

do to stop these abuses, and these changes are urgently needed. 

The current system results in unfair transactions and hamstrings 

working families that have to have a car. We look forward to working with you, and I am happy to answer any questions you might 

have. 

[The prepared statement of Mr. Van Alst follows:] 


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Mr. RUSH. Thank you very much. 

The chair now recognizes Mr. Keith Whann from the National 

Independent Automobile Dealers Association. 

TESTIMONY OF KEITH WHANN 

Mr. WHANN. Mr. Chairman, members of the subcommittee, it is 

my pleasure to offer oral testimony on behalf of myself in my capacity as general counsel to the National Independent Auto Dealers 

Association here today. 

My career in the motor vehicle industry has spanned the last 25 

years while NIADA has represented independent, non-franchised 

motor vehicle dealers for over 60 years. NIADA and its State affiliated associations represent more than 20,000 dealers located across 

the United States. We recognize how vitally important the motor 

vehicle industry is and the impact the used motor vehicle segment 

of the industry has on our economy. There are currently about 249 

million motor vehicles on the road, the median age of which is approximately 8–1/2 years. There are approximately 40 million retail 

used motor vehicle transactions per year roughly split between 

franchised dealers, independent dealers and private individuals. 

Used motor vehicles, because of what they are, carry a history 

of use and condition. During the process of trade among these vehicles, consumers and dealers alike need access to accurate, timely 

information about the history and condition of the vehicles. This information affects how much either will pay for the vehicle. This is 

particularly important to consumers because outside of housing, it 

often represents the largest single purchase that they will make. 

In a dealer’s case, his ability to pass on timely and accurate information to a consumer means the difference between developing a 

consumer that will refer new business to him and having a consumer full of ill will who at a minimum drives business away from 

him. 

It should be no secret that the motor vehicle industry is one of 

the most heavily regulated in the country with a maze of overlapping and sometimes conflicting federal and State legislation and 

implemented regulations. Unfortunately, the good intentions that 

inspired these efforts have in large part created an increase in the 

cost of motor vehicles and in many instances led to confusion on 

the part of the consumer and frustration for dealers. Nevertheless, 

tens of thousands of businesses have developed practices and procedures that allow them to carry on commerce within the confines of 

those restrictions. Therefore, we do not advocate comprehensive 

overnight change in this area but gradual change is needed for the 

benefit of both the consumer and the dealer. I will be happy, Mr. 

Chairman, to work on behalf of NIADA with those responsible for 

making the changes if that should be your desire. 

My entire professional career has focused on motor vehicles, consumer protection issues and the motor vehicle industry as a whole. 

In considering my written testimony, I realize I could discuss dozens of issues affecting consumers in the used motor vehicle industry including everything from advertising issues and car buyer bills 

of rights to spot deliveries in the finance and insurance process as 

a whole, all of which would have merit. However, I elected to comment upon four issues that are currently at the forefront of the 


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motor vehicle industry at the national level: warranties, including 

what they are and how they are created and disclosed, the FTC 

Used Car Rule, including the content of the form itself and complications that arise from its completion, financing of motor vehicle 

transactions, and the tax treatment of a buy-here, pay-here transaction. 

Touching on this last issue, in these uncertain economic times, 

it has become increasingly difficult for capital to flow from lenders 

to credit-impaired consumers for the purchase of a used motor vehicle. A person’s credit can become impaired for various reasons, 

often as a result of some event over which they have no control 

such as loss of a job, health-related issues or other family circumstances. Likewise, new families just starting out may not have 

established credit and may have difficulty obtaining financing. For 

all of these people, a car is not a luxury but a necessity. Because 

of these considerations, I am suggesting that a mechanism needs 

to be implemented as soon as possible to incentivize sales of used 

motor vehicles. An easy and inexpensive way to accomplish this is 

to permit used motor vehicle dealers like similarly sized businesses 

to utilize a modified cash or installment sale method of accounting 

for transactions that the dealers finance for their customers. Permitting such modification would provide customers with impaired 

credit or no credit access to additional financing sources for their 

used motor vehicle purchases. 

While preparing for this hearing, I could not help reflect on instances where at least at first impression cooperative resolution of 

competing issues might not have seemed possible. Working with 

the National Highway Traffic Safety on the implementation of the 

Anti-Car Theft Act of 1992 with representatives of the IRS to develop an audit technique guide for the used motor vehicle industry 

and with representatives of the FTC in interpreting the FTC Used 

Car Rule and publication of a dealer’s guide to the rule come to 

mind. In each circumstance, work by dedicated people with differing points of view yielded an effective result. 

Mr. Chairman, I thank you for the opportunity to participate 

here today and will answer any questions later as time permits. 

Thank you. 

[The prepared statement of Mr. Whann follows:] 


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Mr. RUSH. Mr. Waldron, you are recognized for 5 minutes for 

opening statement. 

TESTIMONY OF SCOTT WALDRON 

Mr. WALDRON. Chairman Rush, Ranking Member Radanovich 

and members of the subcommittee, I appreciate the opportunity to 

testify before you today regarding the protection of consumers 

shopping for a used car. Today I will discuss how the timely disclosure of total-loss vehicles can help protect consumers as well as 

what Experian Automotive does to help inform consumers and 

businesses in the used car market. 

Experian is an information services company that is a leader in 

consumer credit, marketing services and electronic commerce. 

Experian Automotive, based on Schaumburg, Illinois, works with 

consumers, manufacturers, dealers, auctions, finance and insurance 

companies and people throughout the automotive retail channel. 

Our national vehicle database housing records on more than 600 

million vehicles along with Experian’s credit consumer and business information assets meets the growing demands of our industry 

and consumers in providing valuable information in a timely and 

cost-effective manner. Experian Automotive is similar to other business units in that we analyze and compile third-party information 

to help consumers and organizations make good decisions. 

One piece of information not usually available in a timely manner is when an insurer declares a vehicle loss. It can take up to 

60 days to be registered in State titles. In that time the vehicle is 

likely to have already been sold to an auction, then to a dealer and 

then on to a consumer. This is information that both the dealer and 

the consumer would want to know before they bought the vehicle. 

To ensure that information on vehicles declared a total loss is disclosed in a timely manner, Experian believes that total-loss information should be made commercially available and has and does 

support legislation requiring the disclosure of vehicles declared a 

total loss. 

Switching now to how Experian helps protect consumers and 

dealers in the used car market, I am going to discuss the Auto 

Check Vehicle History Report. Auto Check is designed to help consumers and businesses make better vehicle purchase decisions by 

quickly and easily understanding key vehicle events. Using the vehicle identification number, or VIN, an Auto Check Vehicle History 

Report reveals frequently and location of title and registrations, 

title brands, accidents, odometer history and a number of other 

things for consumers. The information comes from many data 

sources including State departments of motor vehicles, auto auctions, police accident reports, salvage yards and so on. Compiling 

information from many sources allows Auto Check users to view 

significant information about the vehicle in a single convenient format. Consumers, dealers, auctions and manufacturers access Auto 

Check information via the Auto Check and other partner Web sites 

and directly through asking dealers for a copy of the report. The 

extensive use of Auto Check in the wholesale market by automobile 

auctions and dealers enables the parties to more quickly decide on 

a fair price. 


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Now, while vehicle history reports are important, confusion often 

remains over the relative significance of various pieces of information presented in them. To help quantify and weigh various pieces 

of information, Experian Automotive developed a rating methodology based on statistically valid models. The result is the Auto 

Check score. This number compares a particular vehicle to others 

in its class and age range in order to help build confidence in a 

purchase decision. It leverages Experian’s continuously updated vehicle database in combination with a company’s expertise in data 

analysis to provide a single number score from 1 to 100 for comparison purposes, making it easy for a buyer to understand what 

information they are looking at. Attached to my prepared testimony are two examples of Auto Check Vehicle History Reports. The 

first one you would see shows a clean vehicle and the second shows 

a vehicle with title issues. 

My last point is that there are numerous ways Experian Automotive works with public and private organizations to improve titling and brand disclosure. For example, Experian has been working with the National Insurance Crime Bureau to combat vehicle 

theft rings. We provide information to them at no charge to detect 

fraud in vehicle identification numbers including VIN cloning and 

counterfeiting. NICB has disseminated 290 leads since August of 

2007 based on data provided by Experian. From these leads, over 

100 vehicles have been recovered with a combined estimated value 

of about $2 million. 

In conclusion, the business model for Experian Automotive is to 

provide businesses and consumers with relevant information from 

a wide variety of sources in a timely manner. The information in 

the Auto Check Vehicle History report and importantly, the Auto 

Check Score, helps consumers know whether or not the car is a 

good deal for them. On a personal note, Experian is in business to 

be successful but nothing is more personally satisfying to me than 

the e-mails, phone calls and letters we get from consumers thanking us for helping them pick the best car for them or more importantly, helping them avoid a car with a troubled history. 

Thank you, and I would be happy to take questions on any of 

this. 

[The prepared statement of Mr. Waldron follows:] 


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Mr. RUSH. The chair thanks the gentleman. The chair recognizes 

himself now for 5 minutes for the purposes of questioning the witnesses. But before I proceed, I would like to request unanimous 

consent to enter into the record a statement by Public Citizen and 

the testimony of Mr. William Brauch, the director of the Consumer 

Protection Division in the Iowa Attorney General’s Office. Hearing 

no objections, so ordered. 

[The information follows:] 


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Mr. RUSH. To all the witnesses, we certainly hope that the 

NMVTIS system will be a useful system when it is fully implemented but it is only available online. Its use will be limited. A 

shopper comparing several cars at a used car lot may not be able 

to leave the lot, find a computer and log on to access information 

about the different cars. At some point buyers may not have a credit card to even pay for this report. Now, several of you mentioned 

in your testimony the value of having this information available to 

buyers at the time of the sale, and I would like to explore for a couple moments how this can be done. 

Ms. Shahan, you recommend that adding National Motor Vehicle 

Title Information System information to the buyer’s guide that is 

currently required to be posted prominently on the car, that this 

will help. Is my assessment of what you recommended, is that correct, and can you explain why this is the right place for this information to be displayed on the vehicle? 

Ms. SHAHAN. Yes, Chairman Rush, you are totally right. We 

strongly recommend and we have for a long time that there be disclosure on the used car buyer’s guide and it won’t apply to cars 

that are private-party sales but we believe that consumers have a 

different expectation. When you walk onto a car lot and you are 

buying a car from a licensed dealer, you tend to think that it is different from buying from Joe Schmoe on the street. So since 1985, 

the Federal Trade Commission has required all used car dealers in 

the country to post a used car buyer’s guide on the car. It is very 

minimal in the level of protection it gives consumers now. It could 

be far more valuable if it also included whether the vehicle was in 

the National Motor Vehicle Title Information System as having 

been salvaged, and, you know, if I had my way, actually those cars 

would be segregated on the car lot and like cordoned off so that 

they are not mixed in with other cars. Because these are cars that 

overwhelmingly with very rare exceptions pose a real safety hazard 

to the public. They may have bent frames. The Katrina cars, the 

flood cars, if they are saltwater flooded, all the electronic systems 

in those cars are going to corrode. They are basically rotting from 

the inside out. There is no way they can possibly be made safe, and 

a car with a bent frame, if it is an SUV, it is very likely to roll 

over in an emergency braking situation or even just in normal use 

if it is in a subsequent collision. The cars today are built with 

unibody construction so that they in order to protect you have to 

have some structural integrity, and if they have already been in a 

crash severe enough that they had to be totaled, chances are very 

good that they don’t have that same structural integrity. 

Mr. RUSH. Thank you very much. I really appreciate your answer. 

Let me move on to Mr. Burch. Mr. Burch, you noted that DOJ 

is exploring methods of access that do not rely on the Internet or 

credit cards. Would you please care to elaborate? 

Mr. BURCH. I will. Thank you, Mr. Chairman. We have talked 

with each of the consumer access providers that are currently making access to NMVTIS available to see if they have the business 

processes established to accept requests for payment via mail 

where it could be provided via check, et cetera, or some other type 

of payment process that does not involve commercial credit. They 


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are looking into that and have promised to get back to us, but we 

are also looking at other options as well. In particular we know 

that some of the nonprofit organizations that are dedicated to addressing these kinds of issues specifically, particularly the consumer organizations, we have asked that they consider being a consumer access portal provider. We would like to facilitate that. Additionally, we have asked the States to consider being a consumer access portal provider where consumers can walk up to the counter 

and pay for and request a NMVTIS search there in person, which 

clearly would not require credit. So we are looking at all of those 

options. 

Mr. RUSH. Thank you. 

Mr. Whann, in your testimony you express some concerns about 

including NMVTIS information in the buyer’s guide, arguing that 

dealers could be liable for gaps in the NMVTIS database. First of 

all, is that correct, and would you please explain it more? 

Mr. WHANN. Yes, Mr. Chairman. I think everyone can agree that 

a car that has been damaged and been repaired improperly is unsafe and shouldn’t be on the road, and cars that have been in a 

flood or had saltwater damage, that is the most insidious. The 

problem isn’t necessarily with the disclosure of the information but 

the problems it causes. If NMVTIS was a database that was comprehensive and everyone had access to it, dealers would be happy 

to pass on the information that is available to them. The unfortunate reality is, is this database is being updated on an ongoing 

basis so when a dealer takes a car in on trade or purchases one 

and completes the FTC sticker, that information might be accurate 

at that time and the very next day may be inaccurate. We also 

have concern that consumers would rely too heavily at this point 

on information that is not going to be complete and therefore if a 

statement posted on the motor vehicle is there, it is going to be 

considered an advertisement under the State’s unfair and deceptive 

practices act and the dealer is going to be liable for the untruthfulness of the report that they can’t control. I think NMVTIS is a very 

useful tool and I think there will come a day when there will be 

access and we can talk about that type of disclosure. We just don’t 

think we are here yet. 

Mr. RUSH. Thank you very much. 

My time is up, so I will now recognize the ranking member, Mr. 

Radanovich, for 5 minutes for purposes of questioning the witnesses. 

Mr. RADANOVICH. Thank you, Mr. Chairman, and good morning 

to all the witnesses. Thank you for your testimony. It is a pleasure 

to have you here today. 

I am going to start off with you, Mr. Waldron, if I may. I have 

a couple questions about NMVTIS and how you being somebody 

who is in the business as well and the relationship that you might 

have with that reporting system. What would be the NMVTIS system, what would it do to existing contracts that you have to purchase data from States, salvage yards and insurance companies? 

Mr. WALDRON. At this point we are continuing to work with the 

States and all of those companies and we don’t see a specific difference under NMVTIS itself. The total-loss disclosure, on the other 

hand, would give us the ability if we can get that on a consumer 


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basis, you know, to put that out into our Auto Check Vehicle History Report so that would be very helpful for us. 

Mr. RADANOVICH. I think what you would like to see if NMVTIS 

can be a resource to you, for you to be able to gather the information just as much as you gather the information from the State of 

California or from salvage yards or the like. Is that correct? 

Mr. WALDRON. That is correct. NMVTIS would in doing that 

make a good source of information. We have in the past, you know, 

as you mentioned earlier, filled that void. For example, after Hurricane Katrina we put out a free database so that consumers could 

check to see if their vehicle that they might consider purchasing 

had been in the hurricane zone at the time of the hurricane. That 

was before the States or insurance companies or anybody else could 

do anything. At least we could offer consumers a level of protection 

to say check this for free and see if this vehicle might have been 

here for them to ask more questions. 

Mr. RADANOVICH. Do you view NMVTIS as being a threat to your 

private enterprise or—— 

Mr. WALDRON. As it is written we do not view NMVTIS being a 

threat because we provide a lot more information. Should NMVTIS 

continue to morph into something larger and larger and larger, it 

could certainly become competitive with what we are doing in the 

private sector. 

Mr. RADANOVICH. Very good. Thank you, sir. 

Mr. Whann, a couple of questions. What cost do you or the manufacturer bear for compliance due to State and federal laws, and 

does the consumer bear these costs in the sale price of the vehicle? 

Mr. WHANN. Well, I think any costs obviously that relate to compliance with those type of issues at some point are going to be 

rolled into the cost of doing business. So there are some costs such 

as title and filing fees and some of those type of things that are 

directly passed on to the consumer. When we talk about things like 

documentary fees, most of those are established by State laws except those that don’t have caps and therefore that is like any other 

charge that could be levied—— 

Mr. RADANOVICH. That is a vote call. You can choose to talk 

through it. 

Mr. WHANN. OK. Thank you. 

Mr. RADANOVICH. It goes on all the time. 

Mr. WHANN. So those charges are not passed on but I will tell 

you, with the amount of regulation that has been placed upon car 

dealers in particular, Gramm-Leach-Bliley Act, the safeguards rule, 

the red flags rule, the cost of compliance today is immeasurable. 

You couldn’t go and put a dollar amount on it. Cost of compliance 

is cost of doing business and it is not directly passed on to the consumer but realistically speaking, it is included in the cost of doing 

business. 

Mr. RADANOVICH. Can you give me too a sense of how much the 

consumer pays in State and local taxes and fees in the average 

purchase of a car? Can you give me a ballpark figure? 

Mr. WHANN. It varies across the country. I know that in some 

States documentary fees are less than $100. In probably the vast 

majority if you looked at an average, it may be in the $250 range. 

There are some that don’t cap them and, you know, we have heard 


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some researcher testimony today that it could run as high as $400 

to $700. I don’t have any research to suggest that. You know, taxes 

obviously, the sale tax on the car, and then title and filing fees are 

usually, I will say nominal in the terms of thousands but when you 

are buying a car, every $10 or $20 bill in there if you can’t afford 

to buy the car obviously is significant. 

Mr. RADANOVICH. Thank you, Mr. Whann. 

I have one more question for Ms. Harrington. Is the FTC 

equipped with the manpower to enforce its Used Car Rule or is enforcement better left up to the States? 

Ms. HARRINGTON. Well, as I indicated, the FTC has partnered 

from the beginning with the States and it really depends I think 

on the market and the size of competitors in the market as to 

whether it makes best sense for State and local government to take 

the lead or the FTC. In Chicago, for example, for a long time we 

have partnered with the commissioner of consumer services and 

sometimes with the State of Illinois Attorney General Office’s to 

join forces for Used Car Rule enforcement. 

Mr. RADANOVICH. Last question is, are violations of the Used Car 

Rule a problem of national scope or so widespread in nature that 

it fits into the FTC’s prioritization? 

Ms. HARRINGTON. No. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

Mr. RUSH. There is a vote going on right now. We have 12 minutes and 20 seconds unless we want to proceed to Ms. Schakowsky 

for 5 minutes. The chair does intend to have a second round of 

questions if members would want to return. But there is a vote. I 

think there will be four votes in succession, so the chair will recess 

the subcommittee and then come back for an additional round of 

questions if we don’t complete the first round before we have to depart for votes. 

The chair recognizes Ms. Schakowsky for 5 minutes. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

Ms. Harrington, you said in your testimony that the Commission 

will give careful consideration to all comments and suggested 

amendments to the Used Car Rule as it determines next steps. 

Have you heard anything today in the testimony that would suggest that there ought to be changes to the rule? 

Ms. HARRINGTON. What we have heard today I think is reflected 

in the comments that we have received so I haven’t heard anything 

today different than what we have seen in the comments. 

Ms. SCHAKOWSKY. And so what is it that you might be contemplating changing in the Used Car Rule? 

Ms. HARRINGTON. Well, there are questions that we always look 

at when we do a rule review about whether there are changed market conditions that should require consideration of additional provisions in a rule. There are questions about whether the rule is needed, is this the best approach. You know, when we do rule reviews, 

we start with a very basic question about—— 

Ms. SCHAKOWSKY. Well, let us see if there are other concrete suggestions here about changes to the rule so we are sure that if there 

is anything new you have gotten it. 

Mr. Van Alst? 


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Mr. VAN ALST. Yes. Thank you. There are several changes that 

we certainly recommend and we have submitted comments on behalf of our low-income consumers for changes that we think would 

be most effective in the Used Car Rule. You have already heard 

today that there is a very urgent need to make sure that the results of the NMVTIS would be available to consumers at the time 

that they are looking at buying a car and the best place to do that 

is to have it directly on the car. Currently the Used Car Rule 

doesn’t really disclose much about the car other than the existence 

of the warranty and certainly even NIADA previously in its comments earlier back in the early 1980s on the Used Car Rule said 

that there would be a fair balance for dealers to disclose known defects to consumers as part of the Used Car Rule so certainly what 

we see here is a lack of balance of information, things that the 

dealers know and the consumers don’t, and so if we could make 

that a part of the disclosure to make sure that if the dealer knows 

there is a defect with the car they ought to go ahead and disclose 

that at the time that they are selling the car. 

Ms. SCHAKOWSKY. So that seems to be a common theme of what 

information ought to be available on the car, and I imagine a number of the comments include that. Is that something that you are 

considering putting in the rule? 

Ms. HARRINGTON. Certainly. 

Ms. SCHAKOWSKY. Let me ask about other federal issues that we 

could address, minimum standards nationwide, for example, for 

title brands. A State like Arizona might not have a title brand for 

flood damage obviously. It is not a common reason for cars to be 

destroyed in that State. But the absence of a flood brand made 

such States ripe for title washing after Hurricanes Rita and 

Katrina. Let me ask Ms. Shahan, do you believe that there should 

be minimum standards across the States for signing the title 

brands most important to consumer safety? 

Ms. SHAHAN. I think that is a complicated issue, and I wish I 

had a simple answer for you but, you know, the title brand is not 

that helpful for consumers frankly because consumers usually don’t 

see the title before they buy the car. Most consumers are getting 

a loan so the title goes to the lien holder and the disclosure to consumer, really, you know, having it on the car buyer guide is far 

more useful. And what we are hoping is with NMVTIS, since insurers are going to be providing data on all the cars they total, regardless what is on the brand and there are some insurers, you know, 

who have violated the law and not properly branded titles even 

when they are supposed to, if they are captured in NMVTIS anyway, then a lot of these problems about title washing across State 

lines or lack of uniformity get addressed because you have uniformity by virtue of having uniform access to the same information 

regardless what goes on with the brand, and that is one reason we 

felt so strongly about having DOJ issue the rule, and frankly we 

are not really anxious to have DOT and NHTSA get in on the act. 

We believe that properly DOJ should keep that program and keep 

implementing it, and if we want to tweak the law and tighten the 

timeframe for insurers to report the data to NMVTIS, great, let 

DOJ handle that. 

Ms. SCHAKOWSKY. That is helpful. Thank you. 


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Thank you, Mr. Chairman. 

Mr. RUSH. Mr. Sarbanes, you are next. However, we have about 

6 minutes, 41 seconds. If you want to, the chair will wait with you 

for 5 minutes. 

Mr. SARBANES. OK. I will go ahead. I will try to dash over there. 

Mr. RUSH. Mr. Sarbanes is recognized for 5 minutes. 

Mr. SARBANES. Thank you, Mr. Chairman. 

I am most interested in the financing part of the discussion that 

you presented today and I would ask you, Ms. Shahan and Mr. Van 

Alst to maybe describe what you view as the most egregious practices when it comes to the financing of autos. 

Mr. VAN ALST. Sure. I would be happy to. Obviously many of 

these practices are difficult to easily describe but there are a few 

that I think in just a sentence or two I can explain to you. We see 

a lot of the same things happening in car finance that we have 

seen create such problems in the home mortgage industry. We have 

seen when someone goes in to buy a car, there is fraud involved 

in the applications, there is fraud involved in the amount of the 

down payment that is represented to the lender, and the reason all 

this arises is because the incentives are so skewed. The incentive 

for the dealer is to get this deal done and especially if they can get 

a kickback from the lender if they can increase the amount of the 

interest rate, they make more money. They don’t have any interest 

in whether or not the consumer can actually pay for this car. So 

obviously their incentive is to get the deal done and it really hampers any efforts to try to make sure that there is a fair transaction. 

The same way that appraisers, you know, created false appraisals 

in the mortgage industry created such a problem, a lot of the current flaws in trying to get accurate information about these vehicles, whether or not there is damage, creates the same problem in 

this instance. If you buy a car with significant damage that you 

aren’t aware of, well, it is really going to make you either unable 

or less likely to make your payments, you know, six months down 

the line when the car either doesn’t run or you have had an accident because of the frame damage. 

Mr. SARBANES. Who are the financing companies that are doing 

this? Describe some of the financing entities that are in the mix 

here. 

Mr. VAN ALST. There is a range. There are some very large national financing companies which were predominantly the defendants in the class action lawsuits that I mentioned that we had regarding dealer markups and their disparate racial impact where 

they were charging higher dealer markups to African-Americans 

and Latinos but then there are also a number of regional finance 

companies that do a smaller business and then as was alluded to 

earlier, there are also the buy-here, pay-here places where the 

dealer is financing the purchase of the car there on the lot and 

there the business model really is to try to get a down payment 

that is the full price of the car and any payment the consumer 

makes is kind of gravy. 

Mr. SARBANES. Are those finance companies packaging those 

loans and selling them up the line like we have seen in the mortgage industry? 

Mr. VAN ALST. They definitely are. 


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Mr. SARBANES. And where are they selling them? 

Mr. VAN ALST. They are securitized and sold on Wall Street the 

same way that the mortgages are. 

Mr. SARBANES. Have you seen any evidence as we saw in the 

home mortgage industry of people at the higher levels putting pressure, having an appetite for those securitized loans that translated 

into these financing companies going out and looking for more 

subprime borrowers? 

Mr. VAN ALST. That is the business model pretty much, yes. 

Mr. SARBANES. Well, I mean, I am going to cut short my questioning so we can get over to vote but my interest is in the hidden 

hand here, and we can focus a lot on the consumer protections that 

are required for that, you know, on the car lot transaction and 

those are very important, but when it comes to this subprime culture and the predatory lending that goes on, you can trace it back 

or you can trace it up to players who would probably have familiar 

names based on the inquiries we have made into the home mortgage arena, and I am very curious to see where the fingerprints of 

this hidden hand are, and we are seeing it in the auto industry as 

we saw in the home mortgage industry and there is probably other 

places as well and so the inquiries will continue. 

Thank you, Mr. Chairman. 

Mr. RUSH. The chair thanks the gentleman. The chair will invite 

the witnesses if they will remain, we have a series of about four 

votes, and when we come back we will conclude the first round and 

then if there is interest we will have a second round of questions. 

So I would just beg you to please remain with us for a while. 

Thank you so much. 

The committee stands in recess now. We will convene 15 minutes 

after the last vote. 

[Recess.] 

Mr. RUSH. The committee will be called back to order. Again I 

want to thank the witnesses for your patience, and now without 

any further delay, Ms. Sutton, you are recognized for 5 minutes of 

questioning. 

Ms. SUTTON. Thank you, Mr. Chairman. 

Mr. Burch, as I indicated in my opening statement, Ohio is fully 

participating in the National Motor Vehicle Title Information System but under the rules, States aren’t required to fully participate 

until January 1, 2010. Do you expect that all 50 States and the 

District of Columbia to be in the system by January of 2010? 

Mr. BURCH. Yes, ma’am, that is our expectation at this time. We 

had conversations with States and I know that some of the States 

have concerns about meeting that date but we have assured them 

that we will work with them, make it a priority to work with them 

to meet that date. 

Ms. SUTTON. And just so I can get a little bit more clarification, 

there are 10 States described in your testimony as in development. 

Can you just tell me what that means, where things stand? 

Mr. BURCH. Yes, ma’am. In development means that these States 

have established a timeline for establishing their participation either at the data provision level or their full participation. They 

have established a timeline. They have identified resources and are 

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standing is that some of those—I apologize. Are you asking about 

the gray States in development or the 10 States in development or 

the States that are not participating? 

Ms. SUTTON. The 10 States that are in development and then of 

course there are 14 that aren’t participating at all, so I want to 

know about them both. 

Mr. BURCH. OK. So the 10 states in development have identified 

a timeline, they have identified the resources. They are working towards participation. That is my understanding that as soon as— 

within the next 90 days some of those States may have completed 

some of the initial processes and their data may begin to be contributed to the system. In terms of the 14 that are not participating, as I mentioned previously, we have had conference calls 

and meetings with a number of those States and we are now in the 

process of arranging individual conference calls and consultations 

with those States to identify in which ways we can be helpful to 

them in meeting the January 1, 2010, deadline. I also expect that 

some of those States may have submitted a proposal. We recently 

had a solicitation on the streets to provide some funding support 

for States that are not participating to bring them online, and it 

is my understanding that some of those States may have also applied for those funds. 

Ms. SUTTON. And what about California, who is providing data 

to the system but not allowing it to be shared with the public? 

Mr. BURCH. That is something that we are working on on a daily 

basis right now with the point of contacts in the California Department of Motor Vehicles. I think it has been mentioned already, this 

is the subject of a federal district court order that requires us to 

work together with California and with the plaintiffs in the litigation to try to resolve these issues. Right now our timeline is to have 

these resolved by the end of this month. 

Ms. SUTTON. OK. And if I could just move quickly, Ms. Harrington, I am a bit perplexed by some of the answers that you have 

given to questions earlier in the discussion. Following up on Ms. 

Schakowsky and some other things that I have heard here, the 

Used Car Rule does not require the disclosure of the condition or 

history of the vehicle even if the dealer is aware of specific defects, 

correct? 

Ms. HARRINGTON. Right. 

Ms. SUTTON. OK. And last year the FTC sought public comment 

regarding the Used Car Rule, and in your testimony you state that 

the Commission is currently giving careful consideration and you 

restated that here again when you were asked about if you heard 

anything here today, and of course then Mr. Van Alst gave us a 

lot of information here, whether or not you heard anything here 

that would change or add to your determination, and I didn’t really 

understand your answer. You just said we consider a lot of things, 

and I guess I am just perplexed about, you know, the comment period closed 4 months ago. What is your timeframe for making a decision? 

Ms. HARRINGTON. This is a rule review. It is not a rulemaking. 

Ms. SUTTON. OK. 

Ms. HARRINGTON. The timeframe, I would expect that there will 

be a recommendation for the Commission shortly. The requireVerDate Mar 15 2010 04:51 Feb 04, 2012 Jkt 067097 PO 00000 Frm 00216 Fmt 6633 Sfmt 6633 E:\HR\OC\A097.XXX A097

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ments for rulemaking under the Federal Trade Commission Act are 

not the same as the requirements for rulemaking that most agencies use under the Administrative Procedures Act. The Federal 

Trade Commission Act has very cumbersome and slow procedures 

in it and so I can’t give you a timeline if the Commission should 

commence a rulemaking because—— 

Ms. SUTTON. OK, but when are you going to make decisions 

about the comments that you received? 

Ms. HARRINGTON. Well, as I said, the staff should have a recommendation for the Commission I would think within the next 

month. I am not the Commission so I can’t say when it will make 

decisions. But what I want to caution on is that the provisions in 

the Federal Trade Commission Act that govern rulemaking are 

such that, for example, in the original rulemaking under the Used 

Car Rule, that went on for years because interested parties have 

a right to request hearings, and then the Commission has to conduct hearings in numerous locations and make available for crossexamination all interested parties. 

Ms. SUTTON. And Mr. Chairman, I know I am out of time but I 

am hoping that we will have opportunity to follow up. Thank you. 

Mr. RUSH. There will be a second round of questioning. 

The chair now recognizes the gentlelady from California, Ms. 

Matsui. 

Ms. MATSUI. Thank you, Mr. Chairman, and thank you very 

much for calling today’s hearing. I would like to thank today’s panelists for sharing their expertise with us today and I especially 

would like to welcome Rosemary Shahan to our panel. She comes 

from Sacramento, and her organization, Consumers for Automobile 

Reliability and Safety, is well respected and widely viewed as one 

of the country’s leading voices on car condition issues, and I am 

really happy she is here today. 

One of the questions I wanted to ask was about subprime car financing. My home district of Sacramento is among the hardest hit 

cities by home foreclosures, and unfortunately, like many of our 

homeowners, California car buyers are also victim to predatory car 

financing loans. Many consumers were steered into subprime car 

loans. I understand that some auto financing practices closely resemble the predatory lending practices that have affected so many 

homeowners. Thus I think this is a good opportunity to shed light 

on how these issues are intertwined. 

[The prepared statement of Ms. Matsui follows:] 


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Ms. MATSUI. Ms. Shahan, what are the parallels between the 

problems we have been seeing in the mortgage industry and the 

auto loan financing industry? 

Ms. SHAHAN. Thank you very much. There are many parallels 

between home mortgage lending practices and car lending practices, and one of the biggest things that they have in common is 

that there is an incentive to get consumers into loans that aren’t 

really in their best interest or don’t appropriately reflect their credit worthiness and there is a disparity very often in auto loans between the rate that consumers should get, which is the buy rate 

for the car, the rate that they actually qualify for based on their 

credit, versus the rate that they are given because there is a hidden undisclosed charge for the consumer in the form of what is 

known as the dealer markup and it is very similar to what you 

seen in home mortgage lending where the brokers have an incentive for raising the interest rate, and the dealers have actually 

made this a major profit center for them, and part of why it is such 

a problem for consumers is that it is not disclosed and the Federal 

Reserve found that even when there is some form of disclosure regarding this, that it is confusing to consumers, it doesn’t work. We 

would like to see it just flat out prohibited because there is a conflict of interest there that consumers don’t perceive, and very often 

they are led to believe that this is the best rate they could qualify 

for and they are sometimes flat out told we shopped you around for 

credit and this is the best rate you could get when it is not. 

Ms. MATSUI. Well, thank you. 

Mr. Van Alst, I understand that some are suggesting that the 

government create a data collection system to track for auto financing loans. What uses would such a system serve? 

Mr. VAL ALST. Numerous uses. One of the problems we have, as 

Rosemary Shahan pointed out, is that consumers don’t realize 

when this happens to them. They don’t know that they are the victim of a consistency between the lender and the dealer, and also 

those of us that are trying to combat this practice and trying to 

make sure that minorities aren’t especially harmed by this practice 

by even higher dealer markups, it is very difficult to do that. In 

fact, I mentioned earlier that NCLC had been involved in some 

cases regarding this very issue and I would point out, those were 

the first sort of private enforcement cases regarding disparate impact under the Equal Credit Opportunity Act in 30 years, and the 

reason we don’t see that happen more often is because it is incredibly difficult. You can’t just have sort of anecdotal evidence and 

show that there is a discriminatory impact. You actually have to 

have statistically significant evidence. In our case, there is over $1 

million up front that people had to put to get all this information 

together and get it analyzed, and it involved a lot of sort of very 

tenuous, well not really tenuous but very difficult connections 

drawing the lines between the loans that were made and then looking at States where there is racial information on driver’s licenses 

and things like that so trying to connect all those points with the 

information we have presently is almost impossible. As I pointed 

out, you know, the FTC and the DOJ are certainly charged with 

enforcing the Equal Credit Opportunity Act and this would be a 


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tremendous tool for them and for others who are interested in 

these issues. 

Ms. MATSUI. Well, could I also ask you, are there any markedbased solutions that can properly address some of these subprime 

car loans and car condition abuses? 

Mr. VAN ALST. There are real efforts. There are some tremendous organizations. Opportunity Cars is sort of an overall blanket 

organization that has a lot of member organizations that provide 

cars to low-income folks at reduced and subsidized rates but that 

is not going to do it if we look at the scale of the problem across 

the country. Credit unions, the direct loans to their members used 

to be sort of the credit union’s bread and butter, and what we have 

seen in the past 10 or 20 years is a huge shift where they are now 

predominantly making these loans indirectly through the dealerships, and these loans are much worse than the direct loans that 

the credit unions made previously. 

Ms. MATSUI. Thank you. I will follow up in my next round. 

Thank you. 

Mr. RUSH. The chair thanks the gentlelady and now recognizes 

himself for a second round of questioning for 5 minutes and each 

member who wishes will be given 5 minutes on this second round. 

Mr. Van Alst, you highlighted earlier a litany of financing abuses 

that used car dealerships employ to fleece consumers, yoyo sales, 

markups, et cetera, et cetera, et cetera. Does empirical evidence 

show that such predatory practices are widespread and also on the 

rise, and in your opinion, how has the FTC handled these abuses 

and what suggestions do you have for mitigating any problems or 

abuses in the future? I know you might have answered that before 

but I want to give you a chance to expound on it a little bit. 

Mr. VAN ALST. Thank you, Mr. Chairman. It is sort of a multipart question. I would be happy to try to answer all of those. I 

think there is, there definitely is empirical evidence as to the disparate impact that these markups have on minorities, and the empirical evidence we have comes primarily from those cases I was 

mentioning earlier that we were able actually to review hundreds 

of thousands of these transactions to show what was taking place. 

Unfortunately, I can’t answer whether or not that something that 

is increasing or anything else about it because that really is information that is not available to people absent one of these very 

large, difficult sort of litigation efforts and it is not something that 

you can find out without going through that process. That is one 

of the real problems, and certainly I think that is one of the reasons that maybe there has not been as much enforcement by the 

FTC and the DOJ of protections regarding disparate impact is because you can’t really get a handle on it without that information. 

We have got a wonderful tool that the FTC does use the Home 

Mortgage Disclosure Act looking at issues such as this in the mortgage arena. Unfortunately, they don’t have that same tool in the 

arena of car finance and so while I think that there are failings on 

the part of regulatory agencies to perhaps enforce some of these 

laws, it is understandable when it is difficult to track and difficult 

to really combat these issues with the tools we have available right 

now. 


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Mr. RUSH. Ms. Harrington, do you feel as though the Home Mortgage Disclosure Act is a model that could be adapted to disclosing 

information relative to automobile purchases and discrimination 

and exploitation in the automobile retail industry? 

Ms. HARRINGTON. Mr. Chairman, I don’t know what the implications of requiring disclosures by lenders in the car finance area 

would entail fully. I think that the network of lenders and finance 

companies involved in auto finance is larger and in many instances 

operates on a more localized basis than much of the home mortgage financing does. So I can’t say with confidence what would be 

involved in putting a broad disclosure requirement on all entities 

involved in auto finance the way that the Congress did with the 

Home Mortgage Disclosure Act. I will absolutely agree with Mr. 

Van Alst that without the HMDA data, we would have a very difficult time finding evidence, getting the data that we can analyze 

to determine whether there are Equal Credit Opportunity Act violations in home mortgage lending, and you know, we don’t have a 

good source of data in the auto finance area. 

Mr. RUSH. I thank you. 

The chair has concluded his questioning. The chair now recognizes the ranking member for an additional 5 minutes. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

I have a question again for Mr. Whann, if I might, on the issue 

of cram down or court-forced lowering of loan principals. If that 

were to come into effect in the auto industry with the people that 

you represent, the auto dealers and those wanting to sell cars and 

nine times out of 10 you have to arrange financing for the people 

that are buying the cars, if cram down were in effect in the automobile industry, what kind of effect might it have on your auto 

dealers and if you have an opinion on the banks that provide auto 

loans as well for the consumers? 

Mr. WHANN. Well, speaking on behalf of the auto dealers, you are 

going to take something essentially a receivable that they are going 

to collect and it is going to be worth much less stretched out over 

time and the industry adjusted. Given that this primarily affects 

not the average used car dealer but somebody in the buy-here, payhere industry, that would probably upset their business model and 

it would likely put them out of business. Now, hopefully when they 

are engaging in these types of loans, you hope the portfolio is—it 

is your own money that is in the street and based upon the research I have seen in the buy-here, pay-here industry, the average 

consumer puts down roughly $1,000 and the average cash in deal 

for the dealer is somewhere between $4,000 and $4,500. So if in 

fact the dealer who is already paying tax on the income before they 

receive it so the dealer essentially has an interest-free loan to nobody, they are going to pay tax on the income, and then if in fact 

somebody for whatever winds up in bankruptcy through no fault of 

their own or not and the loan is crammed down, that dealer is 

going to be squeezed on both ends. 

Mr. RADANOVICH. In your opinion, do you think banks would be 

less or more likely to lend if court-ordered cram down was in effect 

in that industry? 

Mr. WHANN. I would say that they are probably less likely but 

I will tell you, based upon a lot of the testimony I hear today, I 


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obviously am experiencing something different than maybe some of 

the other people who are testifying because in the industry that we 

have with the independent dealer, we are having trouble getting 

lenders, so our biggest challenge right now is having lenders who 

will finance a transaction. We don’t have finance reserve that is 

going to be eight points or five points. If there is finance reserve, 

it is a point and a half or two. We feel very strongly that service 

contracts are something of value at a fair price because the consumer doesn’t have the money to be able to pay for the car if something goes wrong. A gap product may be there. But beyond that, 

we don’t have anything to sell to the consumer. You have the front 

end of the deal, the profit from the car sale. You have got the back 

end from the finance and insurance process. Our biggest challenge 

is getting banks to want to do business, not to work so hard to 

have a customer come in and get them financed and have them 

leave to bring them back for some sort of false circumstances. That 

is not my experience. 

Mr. RADANOVICH. I understand. Thank you very much and I 

yield back, Mr. Chairman. 

Mr. RUSH. The chair now recognizes the gentlelady from Ohio, 

Ms. Sutton, for an additional 5 minutes of questioning. 

Ms. SUTTON. Thank you, Mr. Chairman. 

Ms. Shahan, in your testimony you note that members of the 

armed forces are particularly vulnerable to deceptive financing, and 

I would like to talk a little bit more about that. Mr. Chairman, I 

would like to enter into the record an American Foreign Press 

Service article from July of 2000 written by an Army reservist who 

also works for the FTC. This article details many of the same 

harmful lending practices we have heard about today and the 

shameful frequency with which they seem to target military personnel. 

[The information follows:] 


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Ms. SUTTON. Ms. Shahan, based on your testimony, it appears 

that little has changed in the 9 years since the article was written. 

Can you explain why car dealerships or how car dealerships are 

targeting military personnel? What makes these individuals particularly vulnerable to yoyo financing and other practices? 

Ms. SHAHAN. Yes. Thank you for asking. This is a problem that 

is really near and dear to my heart. I was married to a Navy JAG 

for 20 years and it is actually why I got involved in working on 

auto issues instead of being a college English teacher. I had a personal experience, and the reality is that when you are in the military a lot of times you are young, you are away from home for the 

first time. This is the first time you get a major paycheck. You are 

on your own and you are also vulnerable because a lot of times you 

have a security clearance that dealers will threaten and they will 

say we, you know, put you into this car, the financing didn’t go 

through, we want you to come back and sign another contract on 

worse terms, sometimes a bigger down payment, higher interest 

rate or both, and if you don’t agree to this, then they will say to 

you, we will report you to your command and we will make you 

lose your security clearance, and this is a serious problem for our 

troops. When there was a hearing in California before an assembly 

committee, members of the armed forces came and testified regarding financial readiness issues in our State where more troops are 

deployed than from any other State. More are stationed in our 

State and deploy from California than anywhere else. And it is a 

disgrace that they are being treated the way they are and that 

there aren’t better protections there for them. And they testified 

that yoyo financing is one of the worst problems that our troops encounter, that auto sales are the single worst financial readiness 

problem that they encounter. The Navy Relief Society and others 

also back that up with their testimony. 

Ms. SUTTON. Can you explain what financial readiness means? 

Ms. SHAHAN. It means that the troops are expected to keep their 

financial house in order in order to be ready to serve our Nation, 

and we have an obligation to them obviously to protect them while 

they are protecting us, and we have situations like in Arizona at 

Fort Wachuca in Tucson where the fort actually had to resort to 

determining some dealers were off limits because they were preying on the troops. In every military base in the United States, 

there are rings of payday lenders and schlocky car dealers and, you 

know, it is a really serious problem that affects morale and readiness and their ability to accomplish their mission. 

Ms. SUTTON. I thank you for that answer, and if I could just, Ms. 

Harrington, I sort of see you weighing in. Can you tell me, I mean, 

I know that the FTC has a military sentinel program that is supposed to help members of the armed forces and their families who 

are facing financial problems even as they serve our Nation. What 

actions is the FTC taking against auto dealers for these kinds of 

scamming practices? 

Ms. HARRINGTON. Most recently we have gone after payday lenders, which as Rosemary indicated also ring bases. We get very few 

complaints about car dealers and car finance. We got 1.2 million 

consumer complaints last year, and 2,400 of them were about car 

financing. I would venture to say probably none of them or few of 


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them came from military members. They don’t complain. We have 

been out trying to encourage the service offices on bases to please 

get the complaints to us. We send our regional staffs out to work 

on military installations, both on education but also again to encourage complaints, but we don’t get them, and I think some of the 

reasons are ones that Rosemary mentioned, that sometimes there 

is a culture of not complaining and not coming forward, and, you 

know, I know you know from your experience legislating in other 

issues that getting people to come forward when they are victims, 

when there is a culture that discourages that is really a challenge. 

Ms. SUTTON. Well, I appreciate that. The reality though is of 

course I am coming forward on their behalf, and the fact that the 

Judge Advocate General stated that auto purchasing is the single 

worst financial readiness problem facing troops in California and 

we know it is probably not isolated there, we need to find a way 

to address this in a more effective manner. Thank you. 

Mr. RUSH. The chair now recognizes the gentleman from Florida 

for 5 minutes of additional questioning. 

Mr. STEARNS. Thank you, Mr. Chairman. 

Just to start off, this question is for Misters Burch, Whann and 

Waldron. It may be just a commentary on NMVTIS. As I understand, NMVTIS, which was enacted or created in 1992 as an AntiCar Theft Act, right now it does not specifically track damaged vehicles that have had airbags deployed, and as I understand it, it 

does not cover individuals who are self-insured owners that are required to provide information to NMVTIS, and I guess the question 

is, in the overall scheme of things, title washing and other acts of 

fraud, is there a better way of doing it, perhaps through NHTSA, 

than NMVTIS? This might just be a general question. Mr. Burch? 

Mr. BURCH. Thank you, Congressman. I think we are working 

diligently to analyze now where the gaps are in the information 

that we are preparing to collect but I think in looking at where we 

are headed and looking at what the rule allows us to do, we know 

that there are some gaps now but we expect that by January 1, 

2010, when we have all States on board, we have all junk, salvage 

and insurance carriers reporting to the system and we include certain self-insured entities will also be required to report. You are 

correct in that we don’t have—— 

Mr. STEARNS. You don’t have title washing now, right? 

Mr. BURCH. I am sorry, sir? 

Mr. STEARNS. You don’t have title washing? You don’t keep track 

of title washing and other acts of fraud? 

Mr. BURCH. The system does address title washing, and Title II 

of the Anti-Car Theft Act I think focused on preventing fraud and 

in particular this issue of brand washing or title washing and so 

that is something that the system is currently protecting against, 

and as we get additional States on board and additional providers 

sharing information, we will address that issue even more comprehensively than we do today. You are correct in that we don’t collect damage estimates. We do collect total-loss determinations, so 

if an insurance carrier makes a total-loss determination or if a 

State titles a vehicle as salvage, we will have that information in 

NMVTIS. 

Mr. STEARNS. OK, but you don’t have it now. 


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Mr. Whann? 

Mr. WHANN. Unfortunately, we face many of the same issues 

today that we faced back when the Anti-Car Theft Act was enacted. 

I think back to when Dick Morris convened the advisory group 

after the passage of that, and when myself and Gary Dickinson did 

an educational session for them on titling and title washing and we 

had the same problem then that we have today. 

Mr. STEARNS. And here we are 17 years later and we are still 

talking about it. 

Mr. WHANN. Exactly. We still have—I think it is probably safe 

to assume we are not going to have a national title so if we are 

not going to have a national title because we have 50 different 

ways of doing this, what we have to make sure we do is that we 

capture title brands and that we carry them forward State to State, 

because if we don’t do that, the system is only as good as the information in there. Self-insured information needs to be tracked, and 

of course, any safety item is critical. We can debate what is frame 

damage on a unibody car but we know when an airbag has been 

deployed. If that could be tracked and passed on, we can make sure 

it has been repaired properly. 

Mr. STEARNS. Mr. Waldron. 

Mr. WALDRON. We actually do have that title and registration information across all of the 50 States and have had it for a number 

of years, and within that data we do track for title washing, and 

one of the things that we do is that we have all 50 States and we 

have a giant grid of every brand in every State, understand how 

those work, you know, and which one is what and those brands 

once they are put on the vehicle will always carry with the vehicle 

in our Auto Check Vehicle History Report, so they carry across 

today. So we do do that. We do not have all of the total-loss information as we spoke of earlier so that obviously would be a big help 

if that comes in the commercial realm and we also have many, 

many accidents. I do not claim that we have 100 percent of the accidents in the United States. No one has that. But we have a significant number of the important or major accidents in the United 

States across all of the different States that we pick up from many 

sources, government and non-government, and we report those and 

those always stay with the history of the vehicle. So that is why 

we think it is so important to look at something in a comprehensive 

basis. We do have that today but we do not have in the NMVTIS 

is real time going back and forth. Sometimes that data is today, 

sometimes it is a day ago or up to like a week ago but we do have 

data from every single State. 

Mr. STEARNS. Mr. Chairman, is this the second round of questions? 

Mr. RUSH. This is the second round. 

Mr. STEARNS. Is it possible I could have additional time since I 

only asked one? Could you give me an additional 3 minutes? 

Mr. RUSH. No, I won’t give you 3 minutes. The Chair will give 

you an additional minute for another question and I will offer that 

to any other member who wishes to take advantage of it. The witnesses have been here for a while now. 


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Mr. STEARNS. This is for Mr. Waldron. There is a lot of talk 

about the importance of total-loss disclosure for buyers. What happens to a shopper when he is just coming across a car? Should this 

information be available to the shopper before even getting to the 

buying process? 

Mr. WALDRON. We think that is very important. There was a lot 

of conversation today about when somebody is actually buying the 

vehicle and you are fairly far down the path when you are looking 

at that. What we talk about with Auto Check is that you can use 

this thing in the shopping mode. You can buy an unlimited number 

of reports for $25 and use it for 60 days to look at as many vehicles 

as you want to look at and therefore you can sort out vehicles that 

have title problems or other issues that you find unacceptable 

while you are in the shopping process. We think that is absolutely 

critical. 

Mr. STEARNS. Yes, because lots of people would be in the buying 

stage if they saw this information when they were shopping. 

Mr. WALDRON. Correct, and that is why we offer it in the way 

that we do and we also, we want to shift the cost burden as much 

as we can to the retail channel to the dealers as part of what they 

do and it makes sense, and dealers buy from us oftentimes all the 

reports on all their vehicles, expose them all the time, both online 

and in the dealership, and one of the things we say to consumers 

is, if the dealer won’t give you one of our vehicle history reports, 

walk or run away. 

Mr. STEARNS. Thank you, Mr. Chairman. 

Mr. RUSH. Thank you. The chair now recognizes Ms. Sutton for 

an additional minute of questioning. 

Ms. SUTTON. Thank you, Mr. Chairman. 

I would just like to give Mr. Van Alst a chance. In your statement you touched briefly on the cumbersome rulemaking process at 

the FTC. Do you want to just take a moment and elaborate on 

that? 

Mr. VAN ALST. Yes, there is and certainly as we have heard 

today, the current process which the FTC has to use to do a rulemaking is difficult and cumbersome and time consuming, and we 

would certainly not oppose, you know, a regular APA rulemaking 

for the FTC. However, I think if that were to be the case, there 

would certainly come with that ability to have such a rulemaking 

the responsibility to use that rulemaking effectively and to try to 

go ahead and move on these issues that we recognize have been 

with us for years and years and we haven’t really effectively ended 

yet. So while we certainly think that that rulemaking would be 

helpful, we would like to make sure that that rulemaking is used 

effectively and really combats some of these practices we have discussed today. 

Ms. SUTTON. Thank you. 

Mr. RUSH. The chair really thanks the witnesses for your invaluable testimony here. You have been a superb group of witnesses 

and again, we are sorely indebted to you for your time and participation. And we want to just note that the members will be given 

additional time to submit written questions, and please be prepared to answer these questions should you receive them. 


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So we again want to thank you so much for your time, and this 

committee now stands adjourned. 

[Whereupon, at 1:00 p.m., the subcommittee was adjourned.] 

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