CAR TITLE FRAUD: ISSUES AND 

APPROACHES FOR KEEPING 

CONSUMERS SAFE ON THE ROAD 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON COMMERCE, TRADE, AND 

CONSUMER PROTECTION 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

MARCH 1, 2006 

Serial No. 109-64 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 2006 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 

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27-254PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION 

CLIFF STEARNS, Florida, Chairman 

FRED UPTON, Michigan 

NATHAN DEAL, Georgia 

BARBARA CUBIN, Wyoming 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas 

 (EX OFFICIO)

JAN SCHAKOWSKY, Illinois 

 Ranking Member 

MIKE ROSS, Arkansas 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

SHERROD BROWN, Ohio 

BOBBY L. RUSH, Illinois 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

JIM DAVIS, Florida 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO) 

(II)
CONTENTS 

Page 

Testimony of: 

Bryant, Robert M.., President & Chief Executive Officer, National Insurance Crime 

Bureau .......................................................................................................................... 12 

Turner, Glenn D., Chief of Staff, Florida Division of Motor Vehicles, on behalf of The 

American Association of Motor Vehicle Administrators ............................................. 14 

Regan, David W., Vice President of Legislative Affairs, National Automobile Dealers 

Association .................................................................................................................... 19 

Fuglestan, Alan, Vice President, Operations and Technology, Experian Automotive ..... 29 

Watson, James, President, Automotive Recyclers Association ......................................... 43 

Weintraub, Rachel, Director of Product Safety & Senior Counsel, Consumer 

Federation of America ................................................................................................... 62 

(III) 

(1) 

CAR TITLE FRAUD: ISSUES AND 

APPROACHES FOR KEEPING 

CONSUMERS SAFE ON THE ROAD 

WEDNESDAY, MARCH 1, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON COMMERCE, TRADE, AND 

CONSUMER PROTECTION, 

Washington, DC. 

 The subcommittee met, pursuant to notice, at 10:08 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman) presiding. 

 Members present: Representatives Stearns, Deal, Bass, Otter, 

Blackburn, Schakowsky, Green, and Barton (ex officio). 

 Staff present: David Cavicke, General Counsel; Andy Black, Deputy 

Staff Director, Policy; Chris Leahy, Policy Coordinator; Will Carty, 

Professional Staff Member; Billy Harvard, Legislative Clerk; Michael 

Abraham, Legislative Clerk; Jonathan Cordone, Minority Counsel; and 

David Vogel, Minority Staff Assistant. 

 MR. STEARNS. Good morning, everybody. The subcommittee will 

come to order. For most Americans, buying a car is the second biggest 

financial decision they will make, next to, of course, buying their home. 

It is a process that many dread, and of course is full of decisions: paint, 

options, stick, or automatic. Unfortunately, because of a small 

percentage of fraudsters in the pre-owned vehicle market, finding the 

perfect car can be even more stressful. The practice of passing off flood 

damaged or salvaged vehicles as ready for the road through cleaning or 

“washing” their titles continues to be a major problem for the consumers 

in America. And the massive number of flood and salvaged vehicles that 

were left in the wake of Katrina only served to highlight a problem that 

reputable car dealers, recyclers, motor vehicle administrators, and law 

enforcement deal with every single day. No one wants to discover that 

the car of their dreams they just drove off the lot spent some time as a 

water-logged submarine, or a twisted wreck, but many folks are duped 

and suffer financial consequences and sometimes physical loss because 

of an unsafe vehicle that has no business being on the road. The fact is 

that vehicle title fraud costs the United States consumer and our 

economy billions of dollars every year. 
2

 A unique vehicle identifier called a vehicle identification number, or 

VIN, as we know it, sometimes called a car’s fingerprint, is an essential 

piece of information for tracking a vehicle’s life, its use or misuse, and of 

course its death. Vehicle title tracking through a VIN allows the 

compilation of vehicle history, fraud prevention, and preventing practices 

like title washing. In theory, cradle to grave vehicle tracking means that 

events such as a flood damage or crashes can be included in the title 

information. Now unfortunately, thieves and other criminals have made 

the traditional titling system less than perfect. VINs have been known to 

be counterfeited, erased, and switched from one road-worthy vehicle to a 

damaged one. Title washing allows a thief to effectively eliminate 

negative title brand such as salvaged and flood damaged from an 

imperfect title so they can pass off an unsafe vehicle to an unsuspecting 

buyer and make considerably more money on the resale. Flood damage 

and severely wrecked vehicles, if allowed back into commerce, present 

real danger to the consumers that unknowingly purchase them, as well as 

for all of us who simply navigate our highways. Critical safety systems, 

like air bags and antilock brakes, can be compromised and fail when 

affected by water or other damage. Unseen damage can also affect the 

structural integrity of a vehicle’s safety structures that are designed to 

protect occupants in case of crashes. Therefore vehicle title fraud is a 

vehicle safety issue as much as it is a consumer fraud issue. 

 What I would like to know is why practices like title washing are still 

a major problem in our world that is networked so well with real-time 

information. I think we can do better. It seems to me that the problem of 

title fraud is one that could be solved, or at least, my colleagues, greatly 

reduced by allowing greater and more immediate access to information 

about a car’s history, including when that car is damaged by floods or 

other means, as well as creating more uniform standards nationwide for 

title branding designations like “salvaged” or “flood damaged.” We also 

should examine whether the 1992 Anti-Car Theft Act mandate for a 

national title tracking system is working, as well as can we involve the 

private sector, the data industry, to make such technology work for us, 

make it better and more accessible so that the consumers themselves can 

be the watchdogs. 

 As they say, data provides knowledge and knowledge, of course, is 

power. As I said, the challenge is empowering the buyers, both the 

consumers and the dealers, with a more uniform nationwide title data 

system. This requires constantly updating VIN data so that all 

consumers and those in the pre-owned vehicle market can make better 

decisions that save everyone money, either through fraud prevention and 

of course ultimately through lower insurance rates. Now, I know in my 

opening statement here, this is an oversimplification of the problem, but I 
3

believe we can do a lot more to make the system work better, including 

trying to engage the private sector, the data industry, and their best 

practices to find better ways to simply inform the consumer better and 

also to protect him. 

 So I would like to thank everybody for joining us this morning as our 

witnesses. I would also like to thank Mr. Glenn Turner, Chief of Staff, 

Florida Division of Motor Vehicles, from my home State of Florida for 

coming. I appreciate your making the journey up here to the cold 

weather from the warm weather. The committee appreciates the panel’s 

testimony today and its assistance in helping all of us here in Congress to 

better understand this important issue. 

 [The prepared statement of Hon. Cliff Stearns follows:] 

PREPARED STATEMENT OF THE HON. CLIFF STEARNS, CHAIRMAN, SUBCOMMITTEE ON 

COMMERCE, TRADE, AND CONSUMER PROTECTION

Good Morning. For most Americans, buying a car is the second biggest financial 

decision they will make, next to buying their home. It’s a process that many dread and 

it’s one full of decisions – paint, options, stick or automatic. Unfortunately, because of a 

small percentage of fraudsters in the pre-owned vehicle market, finding that perfect ride 

can be even more stressful. The practice of passing off flood-damaged or salvaged 

vehicles as ready for the road through cleaning or “washing” their titles continues to a 

major problem for the consumer. And the massive numbers of flood and salvaged 

vehicles that were left in the wake of Katrina only served to highlight a problem that 

reputable car dealers, recyclers, motor vehicle administrators, and law enforcement deal 

with every day. No one wants to discover that the car of their dreams they just drove off 

the lot spent some time as a water-logged submarine or a twisted wreck, but many folks 

ARE duped and suffer financial and sometimes physical loss from an unsafe vehicle that 

has no business being on the road. That fact is that vehicle title fraud costs the U.S. 

consumer and our economy billions of dollars every year. 

A unique vehicle identifier called a vehicle identification number or “VIN”, 

sometimes called a car’s fingerprint, is an essential piece of information for tracking a 

vehicle’s life, its use or misuse, and its death. Vehicle title tracking through a VIN 

allows the compilation of vehicle histories, fraud prevention, and preventing practices 

like “title washing.” In theory, “cradle to grave” vehicle tracking means that events such 

as flood damage or crashes can be included in the title information. Unfortunately, 

thieves and other criminals have made the traditional titling system less than perfect. 

VINs have been known to be counterfeited, erased, and switched from one roadworthy 

vehicle to a damaged one. “Title washing” allows a thief to effectively eliminate 

negative title “brands” such as “salvaged” and “flood damaged” from an imperfect title 

so they can pass off an unsafe vehicle to an unsuspecting buyer and make considerably 

more money on resale. Flood-damaged and severely wrecked vehicles, if allowed back 

into commerce, present real danger to the consumers that unknowingly purchase them, as 

well as for all of us who navigate the highways. Critical safety systems like airbags and 

antilock brakes can be compromised and fail when affected by water or other damage. 

Unseen damage can also affect the structural integrity of a vehicle’s safety structures that 

are designed to protect occupants in crashes. Therefore, vehicle title fraud is a vehicle 

safety issue as much as it is consumer a fraud issue. 

What I’d like to know is why practices like “title washing” are still a major problem 

in a world that is so networked with real time information. I think we can do better. It 
4

seems to me that the problem of title fraud is one that can be solved, or at least greatly 

reduced, by allowing greater and more immediate access to information about a car’s 

history, including when that car is damaged by flood or other means, as well as creating 

more uniform standards nationwide for title branding designations, like “salvaged” or 

“flood damaged.” We also should examine whether the 1992 “Anti-Car Theft Act” 

mandates for a national title tracking system are working, as well as ways we can involve 

the private sector data industry to make such technology better and more accessible so 

that consumers can be better fraud watchdogs. 

As they say, data provides knowledge, and knowledge is power. As I said, the 

challenge is empower buyers, both consumers and dealers, with a more uniform, 

nationwide title data system. This requires constantly updated VIN data so that all 

consumers and those in the pre-owned vehicle market can make better decisions that save 

everyone money either through fraud prevention and lower insurance rates. I know this 

is an oversimplification but I believe we can do a lot more to make the system work 

better, including trying to engage the private sector data industry and their best practices 

to find better ways to inform and protect consumers. 

Again, I’d like to thank everyone for joining us this morning. I’d also like to thank 

in particular Mr. Glenn Turner, Chief of Staff, Florida Division of Motor Vehicles, from 

my home state of Florida for coming. The Committee appreciates the panel’s testimony 

today and its assistance in helping us learn more about this important issue. 

Thank you. 

 MR. STEARNS. With that, the Ranking Member, Ms. Schakowsky, is 

recognized. 

 MS. SCHAKOWSKY. Thank you, Mr. Chairman, for holding today’s 

hearing on car title fraud. As we explore this problem, it is clear that 

consumers may essentially be driving blind when they buy used cars. 

Title washing is when a car’s title cleaned of the car’s actual history, 

such as having been in a bad accident and rebuilt. Fraudsters title wash 

by titling and re-titling cars in various States, each of which sets its own 

standard for branding or notating on titles that a car has been severely 

damaged, hoping that the bad information is lost along the winding paper 

trail. They also title wash by obscuring the information on the title 

before re-titling, for example, using a hole-punch to make the brand 

disappear. The various strength of laws and branding requirements 

between the States has been a boon for title washers. 

 I appreciate the chance to explore this issue which has been deemed 

by the National Association of Attorneys General to be the worse 

problem used car buyers face. Hurricane Katrina, as the Chairman 

mentioned, brings this issue to the forefront, because a number of the 

nearly 600,000 flooded cars which should have had that fact on their 

titles are having their titles washed and are showing up, showing back up 

on the market. This is a financial issue for consumers and industry, but it 

is also a very serious public safety issue. Currently there is no way to tell 

if a car that is on a used car lot should be on the scrapheap instead. 

 Congress created the National Motor Vehicle Title Information 

Systems, a national title database, in 1992, in part to track branded titles 
5

from State to State. However, the system is underfunded and voluntary. 

Thirteen years later, there are only 27 States participating. While some 

may say that is a good level of participation, it only takes one State not 

having their titles on the list, or with weak protections, to start the title 

washing machine. Rehabbed cars are worth more money when damage 

is hidden. Some estimate that cars with clean titles fetch $2,000 more 

than cars with accurate histories. The Kelly Blue Book’s executive 

editor, Charlie Vogelheim, says that the value of a used car with a clean 

title is twice that of one that is branded. Clearly, the incentive to hide 

accidents is great. The problem of improperly titled cars is not merely a 

matter of buyer beware and consumers getting a bad financial deal. The 

very safety of the driver, passenger, and every person who is passed on 

the road is at stake. 

 Although there are rigorous safety testing requirements for new cars, 

there are no requirements for safety inspections of rebuilt cars. When 

consumers are getting behind the wheel of two tons of steel going 60 

miles an hour and have the uncertainties of weather and road conditions 

and other drivers with which to contend, they should not have the false 

sense of security that their cars are in mint condition when they are not. 

Flooded cars, like those from the Gulf Coast, have such unique and 

frightening problems that many car rebuilders and experts recommend 

that consumers avoid them all together. While some say those cars can 

be restored to safe conditions, flooded cars can “literally corrode from 

inside out, causing mystery problems and electrical failures,” as stated in 

an account by Consumer Reports. Those cars could be showing up on 

online auctions sites and used car lots across the country as we speak. 

 My Attorney General in Illinois, Lisa Madigan, has already issued a 

warning to consumers to be on the lookout for Katrina cars. Because of 

the seriousness of the implications of title washing, I think we need to 

work vigorously toward adequate funding for the Motor Vehicle Title 

Information Systems, require participation, and perhaps set national 

standards for the branding of titles. Now is the time to get these hazards 

off the roadway. 

 I would like to thank you again, Chairman Stearns, for holding 

today’s hearing. I look forward to hearing from our witnesses, especially 

Ms. Weintraub, who is here despite feeling so under the weather, about 

what we can do to protect consumers from the hazards of title fraud. 

 [The prepared statement of Hon. Jan Schakosky follows:] 
6

PREPARED STATEMENT OF THE HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF ILLINOIS
7

 MR. STEARNS. I thank my colleague. The distinguished Chairman of 

the full committee, Mr. Barton from Texas, is recognized. 

 MR. BARTON. Thank you, Mr. Chairman. This week Mardi Gras is 

in full flower in New Orleans. It is supposed to be about cutting loose 

and having a good time, but this time it is about returning to normalcy. 

As the pace of rebuilding accelerates, it is impossible to forget the many 

people who lost their families, their homes, and everything that own. 

This hearing is a continuation of the committee’s effort to delve into the 

aftereffects of Katrina and try to find out what has happened and what, if 

anything, we can do to alleviate the pain and suffering. 

 Among the things lost to the storm were hundreds of thousands of 

automobiles and trucks, possibly as many as 600,000. Most of those 

vehicles were damaged beyond usefulness, but it seems inevitable that a 

few bad actors will seek to spread the misery of the hurricane by shining 
8

these vehicles up and selling them to the gullible public in States far 

from the Gulf of Mexico. 

 Most cars damaged by flooding are required to be labeled as such so 

that they cannot be resold to unsuspecting customers. Yet the States, 

which are responsible for the titling of automobiles, do not have uniform 

standards in this area. And it also doesn’t appear that the States receive 

and share the same information about these abused cars. Unfortunately, 

this often leaves the doors open for creative criminals who steal or 

duplicate legitimate vehicle identification numbers and thus are able to 

provide a “clean” title that can then be used to resell a flood-damaged car 

to either a dealership or to an unsuspecting individual. 

 The incentives for criminals are obvious. Cars with clean titles are 

worth much more than those have been marked as damaged or flooded. 

Of course this is not a problem unique to the disaster on the Gulf Coast 

with Hurricane Katrina. But given the number of cars damaged by 

Katrina and by Rita, the scale of which it may affect the automobile 

market is probably unprecedented. While the economic damage to the 

unsuspecting buyer is considerable, the possible consequences of a 

damaged car for the driver and everyone else on that road where that car 

is being driven are even more serious. Anyone who might come in 

contact with an unsafe vehicle is put in harm’s way, and that is a 

concern, a primary concern for this committee. 

 Many of the industry participants and governmental entities that are 

seeking to mitigate this problem with a coordinated effort to track and 

identify the cars ruined by Katrina; that is a good thing. I want to 

commend their efforts. I think that until a consistent and unified system 

exists, a system that is coordinated with the industry, any attempt to track 

damaged and dangerous vehicles is only as good as its weakest link. 

 I want to thank Subcommittee Chairman Stearns for suggesting that 

we hold this hearing, and thank Ranking Member Schakowsky for her 

and her staff’s effort in preparing the witness list for the hearing. I look 

forward to hearing from the witnesses, and with that, Mr. Chairman, I 

would yield back. 

 [The prepared statement of Hon. Joe Barton follows:] 

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 

AND COMMERCE

This week the Mardi Gras celebration comes back to New Orleans for the first time 

since Hurricane Katrina left. Mardi Gras in New Orleans is supposed to be about cutting 

loose, but this year it’s about a return to normalcy. As the pace of rebuilding accelerates, 

it’s impossible to forget the many people who lost their families, their homes and 

everything they own. This hearing is a continuation of this Committee’s efforts to delve 

into the important concerns of all those affected. 
9

Among those things lost to the storm were hundreds of thousands of cars, possibly 

as many as 600,000. While most of these cars are damaged beyond usefulness, it seems 

inevitable that a few crooks will seek to spread the misery of the hurricane by shining 

them up and selling them to gullible buyers, often in states far from Louisiana and the 

Gulf Coast. 

Most cars damaged by any flooding are required to be labeled as such so that they 

cannot be resold to unsuspecting customers. Yet the States, which are responsible for the 

titling of automobiles, do not have uniform standards in this area. Nor does it appear that 

all States receive and share the same information about these cars. Unfortunately, this 

often leaves the door open for creative criminals who steal or duplicate legitimate 

Vehicle Identification Numbers to provide a “clean” title that can then be used to resell a 

flood-damaged car to either a dealership or an individual. 

The incentives for criminals are obvious: cars with supposedly “clean” titles are 

worth much more than those that have been marked as damaged or flooded. Of course, 

this is not a problem unique to last year’s disaster along the Gulf Coast, but given the 

number of cars damaged by those hurricanes, the scale on which it may affect the 

automobile market could be unprecedented. And while the economic damage to the 

unsuspecting buyer is considerable, the possible consequences of a damaged car for the 

driver and everyone else on the road are even more serious. Anyone who may come in 

contact with an unsafe vehicle is put in harm’s way, and that should be the primary 

concern for all of us. 

Many of the industry participants and governmental entities are seeking to mitigate 

this problem with coordinated efforts to track and identify the cars ruined by Katrina, and 

that’s good. I commend their efforts. I think that until a consistent and unified system 

exists, a system that is coordinated with the industry, any attempt to track damaged and 

dangerous vehicles is only as good as its weakest link. 

I look forward to hearing how the situation can remedied as expeditiously as 

possible, and I want to thank all of our witnesses for participating today. Their expertise, 

experience, and continued coordinated efforts to protect consumers are essential. 

Thank you, and I yield back the balance of my time. 

 MR. STEARNS. I thank the Chairman. The gentleman from Idaho, 

Mr. Otter. No opening statement? 

 [Additional statements submitted for the record follows:] 

PREPARED STATEMENT OF THE HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF TEXAS

Good Morning. I’d like to thank Chairman Stearns and Ranking Member 

Schakowsky for holding this hearing today. 

I’m very familiar with this issue because of Tropical Storm Allison in 2001. It was 

only because of Tropical Storm Allison that the Texas Department of Transportation set 

up a data base listing cars that had been Flooded. 

Also, Texas does participate in the National Motor Vehicle Title Information 

System. 

Half a million vehicles were flooded during Hurricanes Katrina and Rita. The Texas 

Department of Transportation hasn’t been able to supply a solid number on how many are 

in the state, but estimates released between the two storms were already around 5 

thousand. 

I’m concerned that many people in Texas and in Houston will be buying used 

vehicles that are unsafe. 
10

When I was in the State Legislature, I helped pass the State’s first Lemon Law in 

1983. This law is designed to protect consumers from buying questionable automobiles. 

This law has been strengthened over the years, but it does not mean that consumers 

are entirely protected from buying cars with “washed titles”. 

I believe we should require insurance companies to provide timely, accurate title 

information so that consumers can know all the facts before they spend thousands of 

dollars on a vehicle. 

It is still too easy for someone to wash the title of a flooded or totaled vehicle, and 

turn around and sell it to an unsuspecting buyer. 

I appreciate those businesses out there that offer title histories such as Carfax. 

However, these services are only as good as the information that is made available. 

If a title has been washed, it appears in the DMV system as a legitimate title. Lag 

times in reporting information on damaged vehicles and the different requirements from 

state to state make it difficult for the consumer to be protected from title fraud. 

I look forward to hearing the testimony of our panel today and hope we can begin 

crafting solutions to this serious problem 

I yield the balance of my time. 

 MR. STEARNS. With that, then, we welcome the witnesses, Mr. 

Robert Bryant, President and CEO of National Insurance Crime Bureau; 

Mr. Glenn Turner, Chief of Staff, Florida Division of Motor Vehicles. 

He is also here on behalf of the American Association of Motor Vehicle 

Administrators. Mr. David Regan, Vice President of Legislative Affairs, 

National Automobile Dealers Association; Mr. Alan Fuglestad, Vice 

President, Operations and Technology, Experian Automotive; Mr. James 

Watson, President, Automotive Recyclers Association; and Ms. Rachel 

Weintraub, Director of Product Safety and Senior Counsel, Consumer 

Federation of America. Welcome, and we will start with you, Mr. 

Bryant, for your opening statement. 

STATEMENTS OF ROBERT M. BRYANT, PRESIDENT & 

CHIEF EXECUTIVE OFFICER, NATIONAL INSURANCE 

CRIME BUREAU; GLENN D. TURNER, CHIEF OF STAFF, 

FLORIDA DIVISION OF MOTOR VEHICLES, ON BEHALF 

OF THE AMERICAN ASSOCIATION OF MOTOR VEHICLE 

ADMINISTRATORS; DAVID W. REGAN, VICE PRESIDENT 

OF LEGISLATIVE AFFAIRS, NATIONAL AUTOMOTIVE 

DEALERS ASSOCIATION; ALAN FUGLESTAD, VICE 

PRESIDENT, OPERATIONS AND TECHNOLOGY, 

EXPERIAN AUTOMOTIVE; JAMES WATSON, PRESIDENT, 

AUTOMOTIVE RECYCLERS ASSOCIATION; AND RACHEL 

WEINTRAUB, DIRECTOR OF PRODUCT SAFETY, SENIOR 

COUNSEL, CONSUMER FEDERATION OF AMERICA. 

 MR. BRYANT. Good morning, Mr. Chairman and members of the 

subcommittee. My name is Bob Bryant and I am proud to lead the 
11

National Insurance Crime Bureau, the Nation’s leading not-for-profit 

organization dedicated exclusively to fighting insurance fraud and 

vehicle theft, crimes that threaten people’s lives, and impose more than 

$30 billion in annual losses on the insurance companies’ policyholders 

and the American public. NICB has more than 300 employees on the 

frontlines every day working to prevent, detect and deter such crimes as 

vehicle theft and the fraudulent sale of undisclosed wrecks to American 

consumers. With support from more than 1,000 member insurers and 

self-insured companies, NICB offers the most complete array of expert 

fraud solutions from any single source anywhere in the world. 

 Hurricane Katrina and other recent national disasters confronted us 

with an unprecedented challenge. NICB and its members promptly 

responded with a new solution. Through extraordinary cooperation with 

our members, law enforcement, and disaster recovery agencies, NICB 

posted on its website a registry containing the vehicle identification 

numbers, or VINs, of tens of thousands of vehicles that are known to be 

destroyed or damaged in the storms. State motor vehicle authorities and 

motor vehicle dealers and the general public may consult the list free of 

charge, and over one million people have done so already. NICB, of 

course, has other initiatives underway to meet the threat posed by the 

rising tide of flood vehicles from Katrina. 

 Unfortunately, NICB cannot solve the problem completely by 

publishing a registry of storm-damaged vehicles. Criminals can still use 

many of those vehicles and their VINs to victimize America a second 

time. We remain vulnerable for one simple reason: some State motor 

vehicle titling procedures are lax, which makes it easy to commit vehicle 

crimes that involve title washing. Car thieves routinely reveal stolen 

vehicles as legitimately owned by simply putting a salvaged vehicle VIN 

plate inside the windshield and obtaining clean paperwork from a State 

DMV. We call this practice VIN switching. The newest form of “VIN 

switching” is cloning. To create a clone, a VIN from one vehicle is 

reproduced and attached to an identical stolen vehicle, usually in another 

State or several other States. Innocent purchasers over the last several 

years have lost millions of dollars due to these types of clones. 

 Another scam is even more frightening. Wrecked vehicles that 

cannot be returned safely to the road get rebuilt to the point of being 

drivable, but not enough to be safe. Air bag compartments stuffed with 

rags; frame damage makes it impossible for the vehicle to stop in an 

emergency; electronic and safety systems corrode slowly from flood 

damage. These rebuilt wrecks can kill owners and anyone in their path. 

 Even without these long overdue improvements in titling procedures, 

NICB and other investigators would have a much stronger opportunity to 

protect the public if all crucial titling information were available 
12

electronically to us and to every dealer and consumer. Congress 

mandated a real-time, nationwide system to provide this and other types 

of information 14 years ago when it passed the Anti-Car Theft Act of 

1992; but the system still has not be implemented in total. Before it can 

address the problem effectively, Congress should identify the 

impediments that have delayed the implementation of the National Motor 

Vehicle Title Information System, or better known as the NMVTIS, and 

consider the major technological changes that have occurred over the 

past 14 years. 

 We are looking forward to working with the subcommittee in our 

joint efforts to protect the lives and pocketbooks of the American public. 

 [The prepared statement of Robert Bryant follows:] 

PREPARED STATEMENT OF ROBERT M. BRYANT, PRESIDENT & CHIEF EXECUTIVE OFFICER,

NATIONAL INSURANCE CRIME BUREAU

Mr. Chairman, Members of the Subcommittee, my name is Bob Bryant. I am proud 

to head the National Insurance Crime Bureau, the nation’s leading not-for-profit 

organization dedicated exclusively to fighting insurance fraud and vehicle theft – crimes 

that threaten people’s lives, and impose more than thirty billion dollars in annual losses 

on insurance companies and their policyholders. 

NICB has more than three hundred employees on the front lines every day, working 

to prevent, detect and deter such crimes as vehicle theft and the fraudulent sale of 

undisclosed wrecks to American consumers. With support from more than one thousand 

member insurers and self-insured companies, NICB offers the most complete array of 

expert fraud solutions from any single source anywhere in the world. 

Hurricane Katrina and other recent natural disasters confronted us with an 

unprecedented challenge. NICB and its members promptly responded with an 

unprecedented solution. Through extraordinary cooperation with our members, law 

enforcement and disaster recovery agencies, NICB posted on its Web Site a registry 

containing the Vehicle Identification Numbers (VINs) of tens of thousands of vehicles 

that are known to be destroyed or damaged in the storms. State motor vehicle authorities, 

motor vehicle dealers and the general public may consult the list, free of charge, and over 

one million people have done so already. NICB has other initiatives currently underway 

to meet the threat posed by the rising tide of “flood” vehicles. 

Unfortunately, NICB cannot solve the problem completely by publishing a registry 

of storm-damaged vehicles. Criminals can still use many of those vehicles and their 

VINs to victimize America a second time. We remain vulnerable for one simple reason. 

Some state motor vehicle titling procedures are lax which make it easy to commit vehicle 

crimes that involve title washing. 

Car thieves routinely reveal stolen vehicles as legitimately-owned by simply putting 

a salvage vehicle’s VIN plate inside the windshield and obtaining “clean” paperwork 

from a state DMV. We call this practice “VIN switching.” The newest form of VIN 

switching is “cloning.” To create a clone, a VIN from one vehicle is reproduced and 

attached to an identical stolen vehicle usually in another state. Innocent purchasers lose 

millions of dollars on these types of crime every year. 

Another scam is even more frightening. Wrecked vehicles that cannot be returned 

safely to the road get re-built to the point of being drivable, but not enough to be safe. 

Airbag compartments get stuffed with rags. Frame damage makes it impossible for the 
13

vehicle to stop in an emergency. Electronic and safety systems corrode slowly from 

flood damage. These rebuilt wrecks can kill owners and anyone in their path. 

Even without these long-overdue improvements in titling procedures, NICB and 

other investigators would have a much stronger opportunity to protect the public if all the 

crucial titling information were available electronically to us, and to every dealer and 

consumer. Congress mandated a “real-time,” nationwide system to provide this and other 

types of information fourteen years ago when it passed the Anti-Car Theft Act of 1992, 

but the system still does not exist. Before it can address this problem effectively, 

Congress should identify the impediments that have delayed implementation of the 

National Motor Vehicle Title Information System (“NMVTIS”) and consider major 

technological changes that have occurred over the past decade. 

We look forward to working with the Subcommittee in our joint efforts to protect 

the lives and pocketbooks of American consumers. 

 MR. STEARNS. Mr. Turner, welcome. 

 MR. TURNER. Thank you. Good morning, Mr. Chairman and 

distinguished members of the subcommittee. I am Glenn Turner, Chief 

of Staff of the Florida Division of Motor Vehicles, and today I am 

speaking on behalf of the American Association of Motor Vehicle 

Administrators, and thank you for the opportunity to discuss a solution... 

 MR. STEARNS. We need you a little closer to the mic. 

 MR. TURNER. Oh. 

 MR. STEARNS. There you go. 

 MR. TURNER. Is that better? 

 MR. STEARNS. That is better. 

 MR. TURNER. Good. Yes. Thank you for the opportunity to discuss 

a solution that AAMVA and the State DMVs believe will help protect 

consumers from car title fraud. The solution is increased State 

participation in the federally mandated National Motor Vehicle Title 

Information System, or NMVTIS. Congress recognized the consumer 

value of a system like NMVTIS, and in 1992 passed the Anti-Car Theft 

Act. This act directed the States to begin the development and rollout of 

a national online real-time motor vehicle title history system. In 2001, 

Justice Department cost benefits analysis indicated that once fully 

implemented nationwide, NMVTIS has the potential to save consumers 

from $4 to $11.3 billion annually. And the preliminary results from a 

recent DOJ commission study indicated NMVTIS continues to be an 

effective technological solution. 

 Mr. Chairman, I am proud to say that our home State of Florida is 

participating in NMVTIS. As you know, Floridians are often victimized 

by flooding that results from natural disasters. This flooding endangers 

our lives, our homes, and in many cases, it ruins the automobiles we 

drive every day. Flooded vehicles in one State are a problem for 

consumers in every State. Today, the National Insurance Crime Bureau 

has documented over 200,000 potentially flood-damaged vehicles, all of 

which may have been impacted by the numerous hurricanes of 2005. In 
14

January 2006, the Florida DMV branded 305 vehicles as flood damaged. 

This is a 197 flood vehicles more than we saw in January of 2005. That 

is a 182 percent increase. 

 Once a vehicle has been flood damaged, many critical auto safety 

features are compromised. If a consumer unwittingly purchases one of 

these potential road hazards, they are jeopardizing their safety and the 

safety of others. Thanks to Florida’s participation in NMVTIS, we were 

able to crack a car theft ring involving 250 cars worth $8 million. 

Floridians now have a greater protection from economic and safety 

issues associated with flood-damaged vehicles and the detection of stolen 

motor vehicles. States participating in NMVTIS today can detect 

fraudulent titles by verifying paper title data against electronic records; 

identify odometer rollbacks by verifying odometer readings; determine if 

a vehicle is stolen, and view the brand history and carry forward all State 

brands. Although this system is built, some components that Congress 

stipulated are still not realized. Specifically, these include the provision 

of data reporting by insurance companies and junk salvage yards into 

NMVTIS. This function is critical in noting where insurance claims 

have been paid on vehicles being salvaged, totaled, or flooded. If 

reported directly to the system, this vehicle history would be available to 

participating DMVs, as well as consumers, in a timely online manner. 

But due to the lack of funding, today NMVTIS contains data on only 52 

percent of the vehicle population in the United States. 

 Until the objectives set by Congress and the Anti-Car Theft Act are 

fully realized and every State is online and sharing vehicle title history 

data with each other, consumers will not have the information they need 

to make safe and informed purchase decisions. In the absence of Federal 

legislation, many States have enacted additional laws or strengthened 

existing laws governing the titling or branding salvaged motor vehicles. 

In addition, State DMVs participating in NMVTIS have a useful tool that 

helps compensate for the lack of uniform salvage branding legislation. 

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

car title fraud. Please help us do more to ensure consumers have 

complete protection from motor vehicle fraud. 

 Mr. Chairman, thank you for the opportunity to speak before you 

today, and if you have any questions, I will be glad to answer. 

 [The prepared statement of Glenn Turner follows:] 

PREPARED STATEMENT OF GLENN D. TURNER, CHIEF OF STAFF, FLORIDA DIVISION OF 

MOTOR VEHICLES, ON BEHALF OF THE AMERICAN ASSOCIATION OF MOTOR VEHICLE 

ADMINISTRATORS

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

am Glenn Turner, chief of staff, Florida Division of Motor Vehicles and today I am 
15

speaking on behalf of the American Association of Motor Vehicle Administrators 

(AAMVA). 

AAMVA Background 

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

motor vehicle agency administrators, senior law enforcement officials and industry in the 

United States and Canada. Our members are the recognized experts who administer the 

laws governing motor vehicle operation, driver credentialing, and highway safety 

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

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

programs. The Association’s members are responsible for administering these programs 

at the state and provincial levels. As a non-regulatory organization, AAMVA uses motor 

vehicle expertise to develop standards, specifications and best practices to foster the 

enhancement of driver licensing administration and vehicle titling and registration. 

Consumer Concerns 

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

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

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

with life-threatening consequences. It endangers human life by putting unsafe vehicles 

back onto our roads. Title fraud dupes hard-working consumers into buying vehicles that 

look good on paper, but are not safe and reliable. Perhaps the most important issue 

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

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

• Roughly 50,000 to 100,000 vehicles have had their Vehicle Identification Numbers 

(VINs) stolen or cloned. Consumers won’t realize this until after the vehicles have 

been purchased or their numbers have been duplicated. 

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

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

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

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

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

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

resold to the unsuspecting consumer. 

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

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

vehicles will be resold to unsuspecting consumers. 

Addressing the Concerns 

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

Motor Vehicles, believe will help protect consumers from motor vehicle fraud: increased 

state participation in the federally mandated National Motor Vehicle Title Information 

System or NMVTIS and uniform salvage branding legislation. 

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

Anti-Car Theft Act in 1992. To comply with this Act the states began the development, 

and roll-out, of this national online, real-time motor vehicle title history system. 

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

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

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

vehicle salvage which may affect the motor vehicle theft problem. The Advisory 

Committee, which included motor vehicle administrators and other stakeholders, 

developed recommendations in 1994 which AAMVA continues to support. While 

AAMVA realizes that a number of efforts to establish national standards have been 
16

unsuccessfully attempted, the association feels that NMVTIS helps alleviate some of the 

concerns this lack of uniformity presents. While national standards for title branding at 

the time the advisory committee was established were of paramount importance, years 

later, the capability of NMVTIS to communicate a vehicle’s title history between 

jurisdictions helps mitigate the need for identical matches on brands among jurisdictions. 

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

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

implemented nationwide, NMVTIS has the potential to save consumers from four to 11.3 

billion dollars annually. 

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

indicates that: 

• NMVTIS can be used to instantly and reliably verify information on the previous 

state’s title document prior to issuing a new title. During the pilot period, data 

verification occurred 97 percent of the time within the performance requirement of 

7 seconds. 

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

washed from titles when the state that issues the new title does not carry forward a 

brand issued by some previous state. Since NMVTIS maintains brands on a central 

file, they are available to any inquirer and are never washed from titles. Using data 

from the pilot, NMVTIS could prevent approximately 57,000 titles from being 

washed per year. 

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

do not conduct NCIC checks prior to vehicle titling. Pilot data shows that use of 

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

payoffs on stolen vehicles. 

• Law enforcement officials believe that NMVTIS provides significant value as well. 

Law enforcement agencies, such as auto theft task forces, can use NMVTIS to 

investigate thefts and recover vehicles. AAMVA is also analyzing possible 

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

even more assistance to auto theft investigators. 

Mr. Chairman, I am proud to say that our home state of Florida is participating in 

NMVTIS. 

As you know, Floridians are often victimized by the flooding that results from 

natural disasters like hurricanes. This flooding endangers our lives, our homes, and in 

many cases, it ruins the automobiles we drive everyday. It is the last of these threats that 

bring us here today. 

Flooded vehicles in one state are a problem for all consumers in the United States. 

Today the National Insurance Crime Bureau has documented over 200,000 

potentially flood damaged vehicles in its database-- all of which may have been impacted 

by Hurricanes Katrina and Rita in late 2005. 

And in January 2006, the Florida DMV branded 305 vehicles as “flood damaged.” 

This is 197 flood vehicles more than we saw in January 2005. This amounts to a 182 

percent increase in the total number of flood vehicles over January 2005. 

Once a vehicle has been flood damaged, many critical auto safety features have been 

compromised. If a consumer were to unwittingly purchase one of these potential road 

hazards, they would be jeopardizing their safety, and the safety of others. 

Thanks to Florida’s participation in NMVTIS, Floridian’s are experiencing such 

consumer benefits as a reduction in brand washing, the ability to carry forward brands 

that did not appear on the paper title and the detection of stolen motor vehicles. 

States participating in the system today: 

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

• identify odometer rollbacks by verifying odometer readings, 
17

• determine if a vehicle is stolen, and 

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

Although this system is built, some components that Congress stipulated are still not 

realized: specifically, these include the provision of data by insurance companies and 

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

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

directly to the system, this vehicle condition would be available to participating DMVs, 

as well as consumers, in a timely manner, preventing them from becoming victims of 

inaccurate or untimely title information. If this reporting mechanism had been in place 

before hurricanes struck the Gulf, the concerns about the current situation would not be 

as great. 

But due to lack of federal funding, today NMVTIS contains data on only 52 percent 

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

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

history data with each other, consumers will not have the up-to-date information they 

need to make informed purchase decisions. 

Also, consumers need to know how each state defines all vehicle brands, including: 

salvage, junk and flood. Criminals can exploit the loophole created by an absence of 

standardized vehicle brands. In addition, vehicle brands get lost, or washed, when 

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

definitions leaves the consumer at a major disadvantage when purchasing a new or used 

motor vehicle. 

AAMVA has supported a number of efforts to help establish national salvage 

branding legislation. But to date, none have been successful. In the absence of federal 

legislation, many states have enacted additional laws or strengthened existing laws 

governing the titling or branding of salvaged motor vehicles. In addition, state DMVs 

participating in NMVTIS have a useful tool that helps compensate for the lack of uniform 

salvage branding legislation. 

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

titles by continuing to advance its Vehicle Document Examiner Certification Program 

(VDEC). This program provides instruction on: 

• Fraud prevention and employee responsibility, 

• How to effectively examine features of vehicle documents, 

• Alteration and counterfeit detection techniques, 

• Basic interviewing techniques used in customer service, and 

• Recognition of jurisdictional policies and procedures.

This national training program increases vigilance for fraudulent documents among 

title examiners as well as educating them about statutes, policies and procedures. The 

VDEC program provides better service and security in state DMVs and will deter 

fraudulent enterprises. 

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

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

motor vehicle fraud. 

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

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

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

I welcome your questions. 

 MR. STEARNS. Thank you, Mr. Turner. Mr. Regan, welcome. 
18

 MR. REGAN. Thank you, Mr. Chairman and members of the 

committee. My name is David Regan and I am the Vice-- 

 MR. STEARNS. I don’t think you have the mic on. There is just a 

little button right there. 

 MR. REGAN. My name is David Regan. I am Vice President of 

Legislative Affairs for the National Automobile Dealers Association. 

Our franchise dealers sell and service every type of new vehicles, import 

and domestic, from the Mini Cooper to the Mack Truck. Last year, they 

also sold 15-million used vehicles, so they have a direct economic 

interest in the integrity of the titling process and in the availability of 

reliable VIN-based vehicle histories. Each year thousands of wrecked, 

flood and stolen vehicles are sold with clean titles to unsuspecting 

consumers. 

 Fraudulent resellers thrive for three reasons: one, the 51 jurisdiction 

State motor vehicle titling regime is confusing, contradictory and 

incomplete; two, just because an insurance company declares a total loss, 

does not mean that the insurance company is required to obtain a new 

title reflecting that damage; and third, there is no database for total-loss 

vehicles, and dealers and consumers do not have enough timely access to 

DMV data. The insurance companies total five million vehicles each 

year. Unfortunately, the total lost vehicle on a salvage auction lot today 

could be tomorrow’s raw material for a fraudulent rebuilder and title 

washer. 

 The confusing State titling laws, together with the loss mitigation 

model of the insurance companies, work in tandem to the detriment of 

consumers. There is one central truth about the loss mitigation model of 

the insurance companies: the cleaner the title at salvage auction, the 

higher the sales price at salvage auction. Therefore insurance companies 

have a powerful economic incentive to oppose more aggressive State 

titling laws, and to underreport their obligations under existing State title 

laws. Consumers and dealers, however, have exactly the opposite 

economic interest. They want to know if a used vehicle they are 

purchasing has ever been declared a total loss before they make the 

purchase. Unfortunately, if the insurance company fails to report a total 

loss to the DMV, there may never be a public document that exists to put 

future purchasers on notice. To remedy this lack of disclosure, NADA 

believes that Congress should require the creation of a fully accessible 

electronic database for total loss vehicles that would include the VIN of a 

total loss vehicle, the date of declaration of total loss, the odometer 

reading at total loss, and a simple reason for total loss, such as flood, 

salvage, or stolen and recovered. This database should be populated at 

the same time the insurance company cuts the check to the insured for 
19

the payoff. Please note that none of this VIN-based data would include 

any personal identifiers protected by Federal and State privacy laws. 

 There is precedent for such a system. In the United Kingdom and in 

Australia, the insurance companies provide such a system. Also, here in 

the United States, the NICB has, for the first time, started to provide total 

loss data about some of the Katrina cars. NADA applauds this effort, but 

if it is in the public interest to post VINs for hundreds of thousands of 

Katrina cars, it also should be in the public interest to post the VINs of 

millions of vehicles that are salvaged every year because of wrecks. 

 Increasingly, vehicles are totaled because air bags have been 

deployed. Fraudulent rebuilders often replace air bags with false fronts 

rather than install expensive new air bags. This fraud is difficult to 

detect, but a total loss vehicle database could put everyone on notice. 

 What can Congress do to ensure that total loss data becomes available 

to the general public? Congress should require the Justice Department to 

implement the 1992 Anti-Car Theft Act, which requires insurance 

companies to start disclosing total loss data. What else can Congress do? 

Congress should encourage States to carry forward all previous title 

brands when issuing new titles. This will make it harder for criminals to 

wash titles. 

 In conclusion, before making a purchase, dealers and consumers need 

to know if a used car has been totaled. Using today’s technology and the 

existing databases of insurance companies, this is possible. We 

volunteer to work with any interested party to make public access of total 

loss data a reality. Thank you for your time and I would be happy to take 

your questions here or after this hearing. Thank you. 

 [The prepared statement of David Regan follows:] 

PREPARED STATEMENT OF DAVID W. REGAN, VICE PRESIDENT OF LEGISLATIVE AFFAIRS,

NATIONAL AUTOMOBILE DEALERS ASSOCIATION

SUMMARY OF THE TESTIMONY OF DAVID W. REGAN

 The problem – The combination of the confusing 51-jurisdiction state motor 

vehicle titling regime and the loss mitigation practices of automobile insurance 

companies invites fraud. Any unscrupulous rebuilder can repair or refurbish a wrecked 

or flood damaged car (typically a late model car “totaled” by an insurance company) and 

obtain a “clean” or “washed” title in a state with weak title disclosure rules. The new title 

will not reference the damage, leaving the buyer (consumer or dealer) to rely only on a 

physical inspection of the vehicle to expose any damage. The fraudulent rebuilders enjoy 

substantial profit margins because: 1) state motor vehicle titling laws are confusing, 

contradictory and incomplete; 2) insurance companies have a short-term economic 

interest in under-reporting total loss vehicle data; and 3) public and private sectors have 

failed to exploit existing technology to produce timely electronic transparency for motor 

vehicle title histories. DMV’s document transactions after the fact, and vehicle history 

services do not have access to current title information. Worse, DMVs and title history 

services may never get information about vehicles totaled by insurance companies, which 
20

have an incentive to underreport the damage of totaled vehicles to obtain higher prices at 

salvage auctions. 

The solution – More transparency, more timeliness, and more technology to 

provide buyers more complete and reliable VIN based vehicle histories before a sale, 

and penalties for intentional circumvention of disclosure of severely damaged 

vehicles. 

 Transparency: More complete vehicle history data and total loss data is needed. 

Insurance companies should provide VIN-based disclosure for all totaled vehicles. All 

states should “carry forward” prior brands when issuing new titles and states should 

brand registrations as well as titles. States should at least brand vehicles within four basic 

categories to capture the most relevant data on severe damage: salvage, rebuilt salvage, 

flood, and non-repairable. Congress should require the Department of Justice to initiate 

and issue a rule (delineated in the 1992 Anti-Car Theft Act) requiring insurance 

companies, salvage auctions and junkyards to report VIN-based information on total loss, 

salvage, and junk vehicles to the National Motor Vehicle Title Information System 

(NMVTIS). The rule should require private information industry involvement. 

 Timing: More current vehicle data is needed. An essential element to this solution is 

the ability of consumers to access VIN based vehicle data and enhanced access to DMV 

vehicle title data. All states should be encouraged to move to electronic titling of motor 

vehicles, should make existing title data available on a cost structure that reflects 

electronic records rather than paper records, and work with the private sector to reduce 

the timeframe that the data reaches consumers. 

 Technology: More accessible vehicle history data is needed. The information 

industry in the private sector should have access to insurance company information for 

VIN based total loss vehicles and salvage auction sales data. Additionally, DMVs should 

make title data commercially available in bulk on a daily basis to the information 

industry. This information, marketed to consumers by private sector companies, would 

enable consumers to have more complete information to make an informed decision 

before purchasing the vehicle. 

MORE TIMELY TOTAL LOSS DATA AND TITLE DATA ARE NECESSARY 

TO COMBAT TITLE FRAUD 

 My name is David Regan. I am Vice President of Legislative Affairs for the 

National Automobile Dealers Association. NADA’s 20,000 franchised auto and truck 

dealerships sell, service and repair new and used car and trucks, all makes and models 

from the Mini Cooper to the Mack Truck. NADA’s membership penetration is 93% of all 

domestic and import dealerships. The majority of NADA’s members are small, familyowned and community-based businesses, and NADA’s members employ more than one 

million people nationwide. 

Overview of the Title Fraud Problem

 At NADA, we applaud the full committee and this subcommittee for focusing on 

such an important national issue. According to news accounts, flooding caused by the 

Gulf Coast hurricanes last fall damaged more than 500,000 vehicles. Unfortunately, we 

are learning that many of these severely damaged vehicles are being reconditioned and 

sold to unsuspecting buyers. In an effort to put consumers on notice of the nature of the 

problem, NADA’s website (www.nada.org) contains tips on how to spot a flood vehicle. 

However, increased public awareness is only a part of the solution. 

 This problem is not limited to “Katrina cars.” Flooding in New England and North 

Carolina and other areas of the nation has led to countless other flood vehicles. 

Moreover, cars severely damaged in accidents are a major part of the title fraud problem 

as well. Last year, we believe that insurance companies totaled approximately five 
21

million vehicles. Whenever an insurance company deems a car to be “totaled” as a result 

of collision, theft, or fire damage, the vehicle can be rebuilt and given a clean title that 

does not disclose damage. 

 Each year thousands of totaled vehicles are fraudulently sold to unsuspecting 

buyers as undamaged vehicles. These vehicles may then resurface in the classified 

section of your local newspaper, at a wholesale auto auction, in consumer-to-consumer 

sale, or as a “trade in” on the lot of a franchised dealer. The fraudulent rebuilders enjoy 

substantial profit margins because: 1) state motor vehicle titling laws are confusing, 

contradictory and incomplete; 2) insurance companies have a short-term economic 

interest in under-reporting total loss vehicle data; and 3) public and private sectors have 

failed to exploit existing technology to produce timely electronic transparency for motor 

vehicle title histories. 

 Today, I will explain how confusing state title laws and insurance company 

practices benefit fraudulent rebuilders and resellers and suggest some potential legislative 

remedies. 

DISPARITIES IN STATE TITLING LAWS CREATE OPPORTUNITIES FOR 

FRAUD 

 The laws of fifty states and the District of Columbia govern the titling and 

registration of motor vehicles, which creates a systemic lack of uniformity. A motor 

vehicle title documents ownership of a specific vehicle, while a motor vehicle registration 

provides permission to operate a specific vehicle. Although the trend in state titling laws 

has been toward more uniformity during the past several years, the 51 jurisdictions still 

conduct business 51 different ways. Each jurisdiction has created a distinct paper title, 

different computer programs to issue and track titles and registration, and a separate, 

extensive body of statutes and regulations to govern the titling and registration of motor 

vehicles within their respective borders. Additionally, these discrepancies can be 

complicated by the informal policies and procedures used by title clerks, which may vary 

even within jurisdictions. 

 In common usage, a “title brand” is a notation on the face of a certificate of title 

that provides notice to all subsequent purchasers of the damage, condition, or prior 

use of a vehicle. A “brand” is a word, symbol or abbreviation printed on the title itself. 

The 51 titling jurisdictions use a wide variety of brands, such as reconstructed, salvage, 

rebuilt salvage, rebuilt, restored, reconditioned, junk, non-repairable, taxi, police, flood 

damage, fire damage, unsafe, and repaired. The complete list is extensive and confusing. 

 Because 51 jurisdictions title vehicles 51 different ways, many opportunities for 

fraud exist. Under the current system, any unscrupulous rebuilder can repair or refurbish 

a wrecked or flood damaged car (typically a late model car “totaled” by an insurance 

company) and then obtain a “clean” or “washed” title in a state with weak title disclosure 

rules. The new title will contain no reference to the damage, leaving the buyer (consumer 

or dealer) to rely on a physical inspection of the vehicle to expose the damage or rely on 

commercially available title history products, such as Auto Check and CARFAX. 

 The vehicle history products in the market today are helpful, but a clean 

vehicle history report is not conclusive evidence that a vehicle has never sustained 

significant damage. Vehicle history services can only report information to which they 

have access. While title history products have improved in the past few years, the recent 

settlement between State Farm Insurance and the state Attorneys General demonstrates 

the extent to which the title data within a state department of motor vehicles (DMV) is 

incomplete. Many state titling laws do not require insurance companies to obtain a 

salvage title for every totaled vehicle. Moreover, the insurance companies have a 

powerful economic incentive not to obtain a salvage title. Insurance companies receive 
22

higher sale prices for these totaled vehicles at salvage auctions if the titles are not 

branded. As a result, DMV title data does not include all totaled vehicles. 

INSURANCE COMPANY PROCEDURES EXACERBATE THE PROBLEM 

 Every year millions of motor vehicles are “totaled” by insurance companies, 

and many of these vehicles routinely re-enter used car commerce. Typically, an 

insurance company “totals” a vehicle when the projected repair costs are too excessive in 

relation to the fair market value of the vehicle immediately prior to the flood or accident. 

Once the insurance company has totaled a car, the company usually sends a check to the 

insured, takes possession of the vehicle, and sells the damaged vehicle at a salvage 

auction to mitigate loss. Unfortunately, fraudulent rebuilders frequently buy totaled 

vehicles at salvage auction, repair them, and sell the cars as undamaged to an 

unsuspecting buyer, thereby reaping huge profits. 

 The current loss mitigation model used by insurance companies increases the 

likelihood of subsequent fraudulent activity. The attached chart (“How Total Loss 

Vehicles Reenter the Market”) is an attempt to present the interrelationship between the 

state titling laws and the loss mitigation model of the insurance companies. While this 

process may vary from state to state and from insurance company to insurance company, 

the graphic depicts the lack of transparency that increases risk to subsequent buyers. The 

red flags indicate the points in the process where fraudulent activity may occur. 

HOW TOTAL LOSS VEHICLES REENTER THE MARKET 

 Box 1. The process begins when an insurance company declares a total loss on a 

vehicle. 

 Boxes 2a-2d. In step 2, the insurance company determines if the nature and extent 

of the damage requires the insurance company to obtain a salvage or flood title under 

state law. (The fact that the insurance company declares a total loss does not 

automatically trigger an obligation under state laws to obtain a salvage title. Each state 

has specific requirements that control this process.) Under 2a, the insurance company 

permits the consumer to retain the vehicle after receiving a total loss payment. This 

creates a red flag because the consumer could repair and resell without disclosure to the 

unsuspecting consumer in box 5b. In 2b, the company obtains a salvage title, then that 

title should accompany the vehicle throughout the process and surface in the title history 

search. However, when the insurance company does NOT obtain a salvage title, as in 2c, 

the red flag is noted because the vehicle will go to the salvage auction with a clean title, 

despite being declared a total loss. 

 Boxes 3a-3d. Step 3 captures the representative transactions at a salvage auction. 

Reputable buyers at salvage auctions, the recyclers in box 3b, purchase the totaled cars 

for scrap or parts. The potential for fraud still exists, however, as shown in box 3d. 

Unscrupulous resellers will purchase the wrecked vehicle solely to obtain a VIN with a 

clean title. They will then switch that VIN with a stolen vehicle of the same make and 

model. Box 3c depicts the rebuilders purchasing vehicles at salvage auction. 

 Box 4. This step shows that legal and illegal activity may occur after the vehicle is 

rebuilt. In box 4a the rebuilder obtains the necessary title documents and fully discloses 

the nature of the damage when selling to the informed consumer in box 5a. However, in 

boxes 4a and 4b no such disclosure occurs so a red flag is noted. 

 In 4b, even if the rebuilder received a salvage title at auction, the rebuilder simply 

washes the salvage title by obtain a clean title in another state. Then the rebuilder sells to 

the unsuspecting consumer in box 5b without disclosure. The consumer may obtain a 

title history report, but the data in the private sector database may not be current enough 

to assist the consumer before the purchase. In box 4c, the rebuilder does not even have to 
23

wash the title, because the insurance company never notified the DMV of the total loss. 

Moreover, the unsuspecting consumer can find no protection at all in relying on a title 

history because the insurance company has never provided the DMV any information 

about the total loss. 

If the insurance company fails to obtain a salvage title for the totaled vehicle, 

no public document may ever exist to put future purchasers on notice that the car 

was totaled. The insurance company may fail to report the status of the vehicle to the 

DMV because: 

a) The state titling law may not trigger an obligation by the insurance company or 

the original owner to report to the DMV; or 

b) State law may contain a reporting obligation, but the insurance company may 

fail to comply because of administrative oversight. 

 Insurance companies have a powerful economic incentive to oppose more 

aggressive title laws or to underreport under existing laws. A total loss vehicle with a 

clean title is likely to sell at auction for substantially more than the same vehicle with a 

salvage title. In other words, there is a market-based premium for a clean title and a 

market based penalty for a salvage title. 

Consumers have exactly the opposite economic interest – they want to know if a 

vehicle has been declared a total loss. The decision to total a vehicle is based on a 

variety of factors and may vary from company to company and from insured to insured, 

but one fact is abundantly clear – a declaration of total loss is one of the most material 

factors in determining the value of a vehicle. Every subsequent purchaser would want to 

know – prior to the sale – if a vehicle has been totaled. 

THE SOLUTION MUST FOCUS ON PRE-TRANSACTION TRANSPARENCY: 

INSURANCE DATA ON TOTAL LOSS VEHICLES SHOULD BE RELEASED TO

THE PUBLIC AND DMV DATA SHOULD BE ENHANCED AND RELEASED

MORE QUICKLY. 

 The type of disclosure advocated is consistent with the Federal and state 

privacy laws that strictly limit the use of personal information obtained in the titling 

process. The Federal Driver Privacy Protection Act and similar state statutes limit the 

distribution of names and addresses included in title databases. The distribution of VINbased title branding data or VIN-based total loss vehicle data would not include the 

personal identifiers protected by those statutes. 

 More transparency, more timeliness, and more technology are necessary to 

provide buyers more complete and reliable VIN-specific data before a purchase. All 

buyers of a used vehicle (consumers, businesses, and even automobile dealers taking a 

vehicle in trade) have the same economic interest – determining fair market value prior to 

purchase. A more complete, near real-time title history would provide a more accurate 

picture of a vehicle’s prior condition/use. The insurance companies should be 

commended for providing some total loss vehicle data for many of the flood vehicles 

from the hurricanes. The VINs for some of these vehicles are now available on the 

website of the National Insurance Crime Bureau, but more should be done. The United 

States should follow the example of the United Kingdom and Australia, which now put 

the VINs of all totaled vehicles in the public domain. A similar effort in this country 

would include the following elements: 

 

• Transparency: More complete DMV and total loss data should be provided. Most 

state DMVs are collecting the necessary title data about damaged vehicles, but there 

are exceptions. The motor vehicle title laws of each should provide a threshold 

level of disclosure to capture significant damage to a vehicle. Also, the states 
24

should move to more uniform classification of title data. Insurance companies 

should provide total loss data (VIN, odometer reading, and date of declaration of 

total loss, and reason for total loss) to the information industry, which could then 

incorporate the data into vehicle history reports. Similarly, salvage auctions should 

provide sales data (VIN, odometer reading, date of salvage auction sale). 

• Timing: DMV data should be released daily and total loss data should be released to 

the general public when the total loss occurs – whether or not the total loss triggers 

a filing under state motor vehicle titling laws. Title histories provide key data that 

dramatically affect fair market value and may raise safety-related concerns. Yet, as 

many as 30 to 60 days may pass between the time a vehicle is damaged and the time 

that data reflecting that damage are publicly available. The DMVs, insurance 

companies and salvage auctions need to work with the private sector to reduce this 

timeframe, because the delay facilitates criminal activity. 

• Technology: The DMVs and the insurance companies should work with the private 

sector information industry to make vehicle history data more accessible to the 

general public. State title agencies exist to document ownership after the 

transaction, so they do not have the sufficient statutory charge or corporate culture 

to obtain, package and market data to the general public. The information industry 

in the private sector should have access to insurance company information for total 

loss vehicles and salvage auction sales data. Additionally, DMVs should make title 

data commercially available in bulk on a daily basis to the information industry. 

This information, marketed to consumers by private sector companies, would 

enable consumers to have more information before buying a vehicle. This level of 

public disclosure would strike at the heart of the economic model of the fraudulent 

rebuilders and resellers. 

Comments about the National Motor Vehicle Title Information System (NMVTIS)

 Congress has recognized that technology should play a critical role in this 

arena. The Anti-Car Theft Act of 1992 authorized the creation of NMVTIS. As 

envisioned, NMVTIS would become the single source for title history data from all 51 

jurisdictions. AAMVA has attempted to link all 51 databases in real-time using a 

combination of federal funds, state funds, and internal resources. The system envisioned 

would provide real-time, title clerk-to-title clerk linkage and then provide third party 

access to title histories. NMVTIS has not been completed because state resources are 

required to reconfigure state DMV systems to communicate with NMVTIS. AAMVA’s 

attempts to design and implement a system to provide public access to NMVTIS have 

failed. 

NMVTIS, in its current form, will not solve the problem. AAMVA should be 

commended for pursuing a national technological solution. Since NMVTIS is a system 

designed for DMVs by DMVs, the system is designed to meet the needs of title clerks not 

the general public. The existing economic model of NMVTIS – relying exclusively on 

public funding – is not sustainable. Unless the system can generate income through the 

sale of data to the general public (VIN-based information that does not include vehicle 

ownership identifiers), the future of the system is in doubt. DMVs are extremely 

proprietary with respect to title data. Also, some states are required to charge the same 

fee for an electronic title history as they would for a paper record. The combination of 

state statutory constraints and the “ownership” mentality of the DMVs will cripple any 

chances that NMVTIS will ever market title data to the general public. 

Private sector information vendors are essential to the distribution of data to 

consumers. Any NMVTIS-based solution must rely on the private sector to package and 

market title histories to the general public. These vendors already buy title data from 

DMVs in bulk, usually every month. If the states simply provided daily electronic 

updates instead of monthly, the private sector could use technology to close the window 
25

for fraud. The end result would be an efficiently administered, up-to-date system that 

would provide consumers with more timely information. The very same technology 

could be used to provide title clerk to title clerk access as well. 

Potential Legislative Solutions

 Congress should require the Department of Justice to implement the 1992 AntiCar Theft Act to require insurance companies to disclose total loss data and salvage 

auctions to disclose sales data. DOJ has existing statutory authority to create more 

motor vehicle title transparency in a matter of months. 49 U.S.C. §§ 30501-30505. 

Congress should compel DOJ to initiate the rulemaking that was originally intended and 

enforce the penalties under existing law for failing to submit data to NMVTIS. The rule 

should: 1) recognize that NMVTIS has been created; 2) require insurance companies to 

submit to NMVTIS VIN-based information on total loss vehicles; 3) require salvage 

auctions and junk yards to submit to NMVTIS VIN-based information for vehicles sold 

at salvage auctions and junk yards; 4) require NMVTIS to engage a private sector joint 

venture partner to market the NMVTIS data to consumers no later than December 31, 

2006; and 5) encourage state DMVs to submit VIN-based motor vehicle title and 

registration data to NMVTIS in electronic batch form every 24 hours. All data marketed 

to the public must comply with Federal and state privacy protection statutes. 

 NMVTIS should be reconfigured to focus on providing consumers 

transparency prior to a transaction. The vast majority of the resources of NMVTIS 

have been used in an attempt to link DMVs so that title clerks can talk to title clerks 

electronically before issuing new titles. Unfortunately, most title fraud occurs before a 

title clerk ever sees an application for a new title. Most DMVs exist to document motor 

vehicle ownership after a transaction has occurred. Moreover, DMVs do not have the 

statutory authority, expertise, or financial resources to package and market VIN history 

data to the public. 

In contrast, there is an active, innovative, and highly competitive information 

industry that could provide more complete, timely and accurate vehicle title 

histories. The DMVs and the private sector must work together more aggressively to 

enhance consumer access to title history data. 

 All states should “carry forward” prior brands when issuing new titles. This 

requirement is one of the first steps necessary to provide a “closed loop” system. Once 

any state brands a vehicle, every subsequent jurisdiction titling and registering that 

vehicle must carry forward all previous brands of all previous jurisdictions. For example, 

if Virginia brands a title as a flood vehicle and the car is re-titled in Kentucky, the 

Kentucky title should carry the notation “VA-FL” (an abbreviation for Virginia-Flood 

Damage). Just as important, this carry forward requirement would require every state to 

carry forward previous brands on duplicate titles issued within the same jurisdiction. In 

short, interstate and intrastate brand carry forward is critical. 

In addition to placing the brands on titles, states should brand registrations as 

well. Owners often do not see a title if the vehicle is subject to a lien, but every owner 

receives a registration document.

Congress should encourage all states to, at a minimum, brand vehicles within 

these four basic categories to capture the most relevant data for vehicle purchasers: 

salvage, rebuilt salvage, flood, and non-repairable. The most significantly damaged 

vehicles are covered by the following brands in most states: salvage, rebuilt salvage, 

flood, and non-repairable. To avoid needless confrontation over the exact wording of 

definitions, the states should retain flexibility in defining these terms. 

All states should make existing title data readily available on a cost structure 

that reflects electronic records rather than paper records. Currently, private sector 

information vendors such as CARFAX and Auto Check buy title history data in bulk and 

aggregate the data from various states to provide title histories to consumers. The states 
26

sell this data in bulk to these vendors and the lag time may be as long as 60 days. The 

laws of some states have not been updated to reflect economic commerce. Congress 

could encourage the states to make title data more available so that data vendors can 

obtain daily downloads of active title and registration and brand files. 

All states should be encouraged to move to electronic titling of motor vehicles. 

If every state DMV issued electronic titles, the benefits to the consumer would be 

significant. Title histories would be more readily available, and the perfection and 

release of liens, an essential element of motor vehicle commerce, would be more 

efficient. An electronic titling regime does not mean the elimination of paper titles, 

because paper titles will be necessary for years to come to facilitate consumer-toconsumer transactions. 

 Any federal remedies must reflect federalism. Motor vehicle titling laws fall 

within the jurisdiction of the states. Federal preemption of this state-based regulatory 

regime could be challenged under the Tenth Amendment to the U.S. Constitution. To 

limit such a challenge, Congress could use incentives (provide grant money) or penalties 

(withhold certain Federal funds) to encourage states to change their respective motor 

vehicle titling laws promptly. 

 

Conclusion

 Any solution to the title fraud problem must be viewed through the pretransaction lens. The technological solution to the problem of flood vehicles – and all 

other title fraud – lies in creating near real-time, pre-transaction access to the vehicle 

history data that DMVs, insurance companies, and salvage yards currently collect. 

 NADA and automobile dealers throughout the country are prepared to assist with 

efforts to eliminate title fraud. Thank you for the opportunity to present our views, and I 

look forward to your questions. 

Vehicle Totaled 

Due to Flood, 

Accident, or 

Theft

Insurance Co. 

Process Claim –

Declares Vehicle 

Total loss

Insurers Sell “Totaled”

Vehicle with Title to 

Salvage Auction

Sold to 

Recyclers

Sold to 

Rebuilder to 

Rebuild 

Salvage 

Vehicle 

If Vehicle has “Salvage” or 

“Rebuilt” Title it Can Be 

Cleaned by: 1) Titled in 

Another State That Does Not 

Recognize Brand; 2) Title 

Can be “Lost” – Titled in 

Another State With No Carry 

Forward Law; New 

Counterfeit Title; or Title 

Replaced With a New VIN.

Unsuspecting Buyer

Consumer/Dealer

Sold to 

Crusher for 

Scrap Metal

State Law Does 

Not Require 

Insurers to 

Disclose VIN 

and/or disclose 

damage for 

Salvage Vehicles 

to DMV. Vehicle 

has Clean Title

State Law 

Requires 

Insurers to 

Disclose VIN 

for Salvage 

Vehicles to 

DMV

Vehicle has 

“Rebuilt Title” and 

is Disclosed to the 

Consumer

State Never Required 

“Salvage” or “Rebuilt 

Title.” Car sold with 

“Clean Title” and Damage 

not Disclosed to Consumer.

Sold to 

Parts 

Dealers

VIN’s With Clean 

Titles Can be Used on 

Stolen Vehicles

Consumer Keeps 

Vehicle. Usually 

Doesn’t Apply for 

Salvage Title. 

Vehicle has Clean 

Title.

Indicates steps where 

fraud can take place

A Vehicle With a Clean Title 

is Worth Significantly More 

Than a Vehicle With a 

“Salvage” or “Rebuilt” Title

How Total Loss Vehicles Reenter the Market

1

2b

2a

3a

2d

3b

2c

3d

3c

4b

4a

5b

4c

*This is intended to be a representative example. The process may vary due to specific company practices and applicable state law. 

February 27, 2006 JCA

Informed Buyer

Consumer/Dealer

5a

 MR. STEARNS. And we put your chart up there. 

 MR. REGAN. Yes, sir. 

 MR. STEARNS. And so I appreciate that. I think that chart gives a 

better overview, too. 
27

 MR. REGAN. Thank you. 

 MR. STEARNS. Mr. Fuglestad? 

 MR. FUGLESTAD. Thank you. 

 MR. STEARNS. Welcome. 

 MR. FUGLESTAD. Thank you. Good morning, Chairman Stearns, 

Ranking Member Schakowsky and members of the subcommittee. I 

appreciate having the opportunity to testify today on behalf of Experian 

regarding car title fraud. I plan to touch briefly on a few topics around 

how private industry is and can help in protecting consumers from car 

title fraud. 

 First, let me give a brief description of Experian Automotive. 

Experian Automotive is a unit of Experian that delivers information 

solutions to the automotive marketplace, including car manufacturers, 

dealers, lenders, insurance companies, and consumers. Our core data 

asset that drives our solutions is our national vehicle database, which 

houses information from a variety of sources, including State 

departments of motor vehicles, auto auctions, police accident reports, and 

salvage yards. 

 One of Experian’s key automotive solutions that is applicable to 

today’s discussion is its AutoCheck vehicle history report. A vehicle 

history report helps consumers and businesses make better vehicle 

purchase decisions by understanding historical events for pre-owned 

vehicles. The AutoCheck vehicle history report is similar to Experian’s 

many other products and services, in that responsible data sharing results 

in compiled third-party information that benefits consumers. These 

benefits may range from expanding consumer access to a wide range of 

affordable services and products to facilitate in detection and prevention 

of fraud and other crimes. 

 Let me move to how Experian Automotive helps prevent vehicle title 

fraud. Today’s consumer faces a number of challenges in ensuring they 

know what they are getting when buying a used vehicle. The challenges 

include the lack of consumer access to or knowledge of vehicle history 

information and differences in title branding and reporting from State to 

State. The recent storms and resulting flood damage to hundreds of 

thousands of vehicles have highlighted the vehicle title fraud problem 

and how significant of an issue it really is. Since the hurricanes of last 

year, we have seen up to a 400 percent increase in derogatory vehicle 

brands such as salvaged, scraped, water or storm damaged, coming into 

Experian’s database from the DMVs of certain hurricane-impacted 

States. 

 We feel there are important steps consumers can take to help protect 

themselves from title fraud or unknowingly buying a damaged car. In 

addition to a physical inspection, one of the most important steps a car 
28

buyer can take is to better understand the history of a car prior to 

purchasing it by obtaining a vehicle history report. This report can tell 

potential buyers if the vehicle has severe flood damage, been branded 

lemon, or salvaged, if the vehicle has been in an accident, where and how 

many times the vehicle has been titled, and the vehicle’s odometer 

history. Because Experian’s vehicle history reports include DMV data 

from all 51 U.S. jurisdictions, the risk of title fraud or title washing is 

reduced when multiple title events occur across States with different 

titling and branding standards. Today, consumers can check a car’s 

reported background by obtaining a history report from the seller or 

dealer or online through our autocheck.com site. 

 In the wake of the most recent hurricanes, Experian wants a 

cooperative effort with NADA to educate dealers and consumers of the 

large number of storm-damaged cars that would be hitting the market 

after these catastrophes. Information was supplied about how to identify 

and recognize a storm-damaged vehicle, and a process was established so 

that dealers and others could report their own vehicles damaged by the 

storms. Experian is now making this information available to dealers 

and consumers at no charge via its AutoCheck storm scan functionality. 

 In addition to these examples of what Experian is doing, there are 

numerous opportunities of how public and private organizations can 

partner to improve titling and brand disclosure. Experian has enjoyed a 

good relationship with the State DMVs and their member organization, 

AAMVA, for many years. We have been in discussion with AAMVA 

for some time about how we may further support their efforts with the 

National Motor Vehicle Title Information System to combat title and 

vehicle fraud. For the past several years, industry, including Experian, 

has developed data assets and solutions for the marketplace that can be 

leveraged to support AAMVA’s vehicle title information system 

initiative. 

 As far as some of the examples of where industry can help, first, in 

providing a comprehensive data repository. Experian receives vehicle 

data from all of the U.S. jurisdictions. A comprehensive national data 

source is imperative to combating title and vehicle fraud. Experian’s 

database currently consists of information on over 530 million vehicles, 

of which over 280 million are still in operation or on the road, and has 

over one billion vehicle registrations, nearly 900 million title and title 

transfer transactions, and 275 million brands. 

 Second, in managing the data, Experian has expended significant 

resources in analyzing and interpreting, validating, standardizing, and 

hosting this data to support our solutions and services. And third, in 

distributing or providing access to this data, Experian has developed 

secure, flexible methods for distributing our vehicle history reports to 
29

businesses and consumers. I would also like to mention that today 

Experian offers AutoCheck services free of charge to law enforcement 

agencies to support their investigative efforts. 

 So overall, Experian welcomes the opportunity to work with 

government and other organizations to provide critical information to 

consumers and business. This does conclude my initial statement, and I 

would like to thank you again for the opportunity to talk today. 

 [The prepared statement of Alan Fuglestad follows:] 

PREPARED STATEMENT OF ALAN FUGLESTAD, VICE PRESIDENT, OPERATIONS AND 

TECHNOLOGY, EXPERIAN AUTOMOTIVE

Description of Experian Automotive 

Experian Automotive delivers information solutions to manufacturers, dealers, 

lenders, insurance companies, and consumers. Experian helps automotive clients increase 

customer loyalty, target and win new business, and make better lending and vehicle 

purchase decisions. Its National Vehicle Database, housing information on more than 500 

million vehicles, meets the industry’s growing demand for an integrated information 

source. Experian technology supports several top automotive web sites including eBay 

Motors, CarsDirect.com, NADAguides.com, Autobytel and Yahoo! Autos. 

One of Experian’s key automotive solutions is its AutoCheck® Vehicle History 

Report. A Vehicle History Report is designed to help consumers and businesses make 

better vehicle purchase decisions by quickly and easily understanding potentially 

significant historical events for pre-owned vehicles manufactured in 1981 or later. Using 

the Vehicle Identification Number (VIN) and depending on the information reported to 

Experian, an AutoCheck vehicle history report can reveal frequency and location of title 

and registrations, past title brands, past accidents, and odometer history. Through its 

joint venture with The First American Corporation (leading provider of mortgage title 

insurance), Experian also offers consumers a vehicle title insurance policy (TitleGuard) 

that covers hidden title defects (e.g., water damage, salvage) with coverage up to the full 

purchase price of the vehicle. 

AutoCheck Vehicle History Reports supply information about pre-owned vehicles 

from a multitude of data sources, including state departments of motor vehicles (DMVs), 

auto auctions, police accident reports, and salvage yards. AutoCheck is the volume leader 

in supplying vehicle history information to the automotive industry. Dealers, consumers 

and manufactures can easily access the AutoCheck information via the AutoCheck web 

site or other integration methods. One example is Experian’s partnership with NADA to 

integrate and market AutoCheck vehicle history information to auto dealers through its 

line of used car valuation products. AutoCheck offers toll-free telephone and email 

support to all clients should they have questions regarding any event in the vehicle’s past. 

The AutoCheck Vehicle History Report is similar to Experian’s many other products 

and services in that responsible information-sharing results in compiled, third-party 

information that benefits consumers. Information sharing: 

• Allows businesses to ascertain and meet customer needs rapidly and efficiently 

• Permits consumers to learn rapidly and at low cost of those opportunities in which 

they are most likely to be interested 

• Promotes market competition 

- by facilitating the entry of new competitors into established markets, 

- by reducing the advantage of large, incumbent firms have over smaller startups, 

and 

- by encouraging business to specialize to meet specific consumer needs. 
30

• Expands consumer access to a wide range of affordable services and products 

• Enhances customer convenience and services 

• Improves efficiency and significantly reduces the cost of many products and services 

• Expands the number of consumers who have access to more credit at better prices 

• Facilitates the detection and prevention of fraud and other crimes. 

 Consumers enjoy many benefits from the responsible sharing of information. This 

sharing also enables economic activity and competition. 

How Experian Automotive Helps Prevent Vehicle Title Fraud

Today’s consumer faces a number of challenges in ensuring they know what they’re 

getting when buying a used vehicle. The challenges include the lack of consumer access 

to or knowledge of vehicle history information and differences in title branding and 

reporting from state to state. 

Vehicle title fraud has existed for years – well before the hurricane tragedies of last 

year. However, the recent storms and the resulting flood damage to hundreds of 

thousands of vehicles have highlighted the vehicle title fraud problem and how 

significant of an issue it really is. Since the hurricanes of last year, we have seen up to 

400% increases in derogatory vehicle brands, such as salvage, scrapped, water damaged 

and storm damaged, coming into Experian’s vehicle database from the DMVs of certain 

hurricane-impacted states. Even if potential buyers are not in an area directly affected by 

a hurricane or flooding, cars often are repaired and shipped across the country in a matter 

of weeks, putting consumers at risk of unknowingly buying damaged, unsafe vehicles. 

There are steps consumers can take to help protect themselves from title fraud or 

unknowingly buying a damaged car. One of the most important steps a car-buyer can 

take is to better understand the history of a car prior to purchasing it by obtaining a 

vehicle history report. A vehicle history report can tell potential buyers if the vehicle has 

severe flood damage, been branded “lemon” or “salvage,” if the vehicle has been in an 

accident, where and how many times the vehicle has been titled and the vehicle’s 

odometer history. Experian’s vehicle history reports include DMV data from all 51 U.S. 

jurisdictions. Therefore, consumers are protected against title fraud or title washing when 

multiple title events occur across states with different titling and branding standards. 

Consumers can check a car’s reported background by obtaining a history report from 

the seller or dealer or online through AutoCheck Vehicle History Reports. Consumers 

can enter a car’s Vehicle Identification Number (VIN) at www.autocheck.com and 

receive a detailed vehicle history report. See the attached examples of AutoCheck 

Vehicle History Reports – one example is a history report for a damaged vehicle and the 

other example is for a vehicle with no major issues reported. Experian recommends a 

thorough vehicle inspection be performed as well. We advocate consumer inspection tips 

from the National Automobile Dealers Association (NADA). 

By taking a few simple precautions when buying a used car, consumers can 

safeguard themselves from the frustration of wasting their hard-earned money on a 

damaged vehicle, or worse, unknowingly purchasing an unsafe vehicle. 

In the wake of the most recent hurricanes, Experian set out on an awareness 

campaign for dealers and consumers. Experian launched a cooperative effort with 

NADA designed to educate its members and build awareness of the large number of 

storm damaged cars that would be hitting the market after these catastrophes. 

Information was supplied about how to identify and recognize a storm-damaged vehicle 

and a process was established so that dealers and others could report their own vehicles 

damaged by the storms. Our goal was to make this information available more quickly 

than the traditional reporting process through state DMVs. Experian is now making this 

information available to NADA members and consumers at no charge via its AutoCheck 

storm scan functionality, which includes three pieces of information: 
31

1. Self-reported information on storm damaged vehicles from dealers and 

manufacturers. 

2. Past vehicle title brands whether or not they are the result of a storm. 

3. Title and registration history that reveals whether the vehicle has been titled or 

registered in areas affected by storm during the previous twelve months. If 

considering a purchase of one of these vehicles, Experian recommends a 

professional vehicle inspection. 

Experian also provided state attorneys general offices with vehicle inspection tips 

and AutoCheck storm scan availability so they may educate their constituents regarding 

the risk of purchasing a storm damaged vehicle. 

Public/Private Efforts to Improve Titling and Disclosure of Brands 

There are numerous examples and opportunities of how public and private 

organizations can partner to improve titling and brand disclosure. 

Experian has enjoyed a good relationship with the American Association of Motor 

Vehicle Administrators (AAMVA) for many years. We are also an Industry Member 

with the ‘sister’ organization, Canadian Council of Motor Transport Administrators. 

Experian supports AAMVA as an Associate Member and through our participation 

in the Industry Advisory Board. We have been in discussion with AAMVA for some 

time about how we may further support their efforts to combat title and vehicle fraud. 

For the past several years, industry has developed assets and solutions for the 

marketplace that can be leveraged to support AAMVA’s National Motor Vehicle Title 

Information System (NMVTIS) initiative. For example, 

• Experian currently receives vehicle data from all U.S. jurisdictions. A 

comprehensive, national data source is imperative in combating title and 

vehicle fraud. 

• Experian has expended significant resources in analyzing, interpreting, 

validating, standardizing, and hosting this data to provide a comprehensive 

national database of vehicle data to be used in solutions and services. This 

process allows the data to be used in a ‘common’ format while retaining the 

specific content of the different sources. 

• Experian has developed secure, flexible methods for distributing our vehicle 

history reports and services based on the needs of our partners and clients. 

Experian offers our AutoCheck services free of charge to law enforcement agencies 

to support their investigative efforts. We support organizations such as the National 

Odometer and Title Fraud Enforcement Association (NOTFEA), the International 

Association of Lemon Law Administrators (IALLA) and the Association of Traffic 

Safety Information Professionals (ATSIP). 

Experian welcomes the opportunity to work with government to provide critical 

information to consumers and business. Whether working with AAMVA, the state 

DMVs or other organizations, having comprehensive vehicle history information 

available at the point of purchase or titling a vehicle, or during an investigation, is critical 

to consumers, businesses, DMVs, law enforcement and others in combating title and 

vehicle fraud. 

Challenges Associated with Acquiring Data 

Experian Automotive has dedicated staff who are researching and analyzing 

potential data sources everyday. We are always looking for important data that can 

impact our AutoCheck report to the benefit of business and consumers. 

Timely access to vehicle data from a broad set of data sources is a key Experian 

goal. There are key challenges in meeting this goal that we address on a continuous 

basis. 
32

The high and unpredictable nature of our data costs from the state DMVs is one of 

our primary risks of doing business. Experian pays millions of dollars annually to the 

states for the right to collect and preserve this data. There are significant differences in 

pricing between the various state DMV organizations, and we’ve seen significant 

increases in pricing from year to year. In addition, in order for the data to continue to be 

useful, it is necessary to store and maintain the information for an indefinite period of 

time. 

Experian provides information solutions based on a national database of vehicle 

information. As a bulk data purchaser, we must aggregate data from all of the DMVs 

prior to offering our services and solutions (and beginning to recover costs). 

To add to the business risk of our data cost, various state and federal laws and regulations 

greatly restrict what we can do with the records we purchase, which limits our ability to 

recover the cost of this data. 

Finally, in addition to the cost of acquiring this data, we also expend significant 

resources interpreting, validating, aggregating, and standardizing the various statespecific file formats for use in our solutions. 
33
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35
36
37
38
39
40
41

 MR. STEARNS. Thank you. Mr. Watson? 

 MR. WATSON. Mr. Chairman, Ranking Member Schakowsky, 

honorable members of the House Subcommittee on Commerce, Trade, 

and Consumer Protection, good morning and thank you for holding these 

hearings. My name is Jim Watson. I am here today as President of the 

Automotive Recyclers Association. I am also a small business owner. I 
42

own an automobile dismantling and recycling business in Blue Island, 

Illinois. My family has owned and employed the business continually 

since 1936. We currently employ more than 50 technicians, sales 

representatives, administration, and support staff. 

 The Automotive Recyclers Association was founded in 1943 and for 

63 years has represented the best interests of the Nation’s quality 

automotive parts recycling enterprises. Our members are small business 

owners who employee many thousands of people in every State, and we 

are very concerned about the issue of vehicle title fraud. In fact, our 

industry, automotive recycling, takes this issue so seriously that ARA has 

drafted legislation that would require that vehicle identification numbers 

of any motor vehicles declared total loss and non-repairable by insurers 

would have to be reported to the National Insurance Crime Bureau and 

permanently retired. This information on these vehicles would then be 

available in an online database available to the general public, law 

enforcement, and business entities at no charge. A copy of the draft of 

this legislation is attached to my written statement and, Mr. Chairman, I 

would request that written statement and its accompanying attachments 

be submitted for the record in its entirety. 

 MR. STEARNS. By unanimous consent, so ordered. 

 MR. WATSON. Thank you. Vehicle title fraud is a growing criminal 

business in the United States that frauds consumers and insurance 

companies of millions of dollars annually. It takes more forms and here 

are a few examples. Katrina cars create huge opportunity for fraudulent 

dealers to take advantage of consumers. These cars can be rebuilt and 

their titles can be washed in certain States in the United States and then 

sold to consumers. Salt water flood vehicles should be crushed or 

otherwise destroyed. Salt water corrosion is an irreversible process 

included on these vehicles in the retired VIN classification. There is no 

reason for the VINs of these vehicles to be available for misuse. 

 VIN swapping is a problem that these measures would address. Auto 

thieves would no longer be able to take a VIN number off of a salvaged 

vehicle and place it on a stolen one, since the VIN would be retired. 

Title fraud also enables other criminal activities to occur, from insurance 

fraud to narcotic trafficking, and the smuggling of undocumented aliens. 

Everyone wants to create a level playing field for legitimate bidders who 

legally process totaled vehicles, and to curtail the fraud, VIN swapping, 

theft, any crime involving motor vehicles. This is why we believe 

Federal legislation is necessary and now. The ARA strongly encourages 

the House Subcommittee on Commerce, Trade, and Consumer Protection 

to aggressively support legislation to prevent car title fraud, theft, and 

organized crime and terrorism activities involving motor vehicles, and to 

level the playing field in the salvage recycling across the United States. 
43

 We also ask the subcommittee to consider seriously the ARA draft 

legislation as an example of what needs to be done. I thank you again for 

the opportunity to testify in support of the subcommittee’s initiatives and 

the ARA VIN retirement legislation. If you do have any other questions, 

I would be happy to answer them. Thank you very much. 

 [The prepared statement of James Watson follows:] 

PREPARED STATEMENT OF JAMES WATSON, PRESIDENT, AUTOMOTIVE RECYCLERS 

ASSOCIATION

One Page Summary of ARA Key Points in Testimony 

On 

Car Title Fraud: Issues ad Approaches for Keeping Consumers Safe on The Road 

• Katrina cars create a huge opportunity for fraud criminals to tae advantage of 

consumers: These cars can be rebuilt, then their titles can be washed in certain 

states in the US then sold to consumers 

• Create a classification of Retired VIN Vehicles: Within two weeks of declaring 

a vehicle a salvage only vehicle ,insurers would alert those who maintained a 

publicly accessible free database, preferable DOT. The VIN of this vehicle 

would be retired and it would not be able to be registered again.

• Create another database to track Total Loss Vehicles: If insurer declares a 

vehicle a Total Loss but determines it can be rebuilt and SAFELY put back on 

the road, this information should also be made available to the public. 

• Give DOT the authority to Make Retired VIN and Total Loss VIN info 

available to the public: Vehicle histories should be transparent to consumers. 

• Salt water flood vehicles should be crushed or otherwise destroyed: Salt water 

corrosion is an irreversible process. Include these vehicles in the Retired VIN 

Classification. There is no reason for the VINs of these vehicles to be available 

for misuse. 

• VIN “swapping” is a problem that these measures would address: Auto thieves 

would no longer be able to take the VIN number off a salvage vehicle and place 

it on a stolen one since the VIN would b e retired. 

• Create remedies for victims of title fraud ... impose penalties and sanctions 

against fraud criminals 

 Mr. Chairman, Honorable members of the House Subcommittee on Commerce, 

Trade, and Consumer Protection: Good Morning! 

 My name is Jim Watson and I am here today as President of the Automotive 

Recyclers Association (ARA). I am qualified to speak to the issue under consideration 

because, with my family, I own a dismantling and recycling business in Blue Island, IL. 

My family has owned and operated the business continually since 1936. We currently 

employ more than 50 technicians, sales reps, administration and support Staff. 

 The Automotive Recyclers Association was founded in 1943 and for 63 years has 

represented the best interests of the Nation’s quality automotive parts recycling 

enterprises. The recycling of quality OEM automotive parts supports the highest pinnacle 

of recycling which is reuse, and through reuse, recycling saves our Nation raw materials, 

reduces the need to manufacture additional and unnecessary brand-new parts, saves 

valuable landfill space and makes available to the con summing public, quality OEM 

used products that are much less costly than brand-new OEM parts. 
44

 Thank you very much for this opportunity to explain ARA’s position in support of 

federal car title fraud legislation as a necessary requirement to protect the American 

consumer in several important ways, which I will address. 

 We appreciate this opportunity to speak to this important issue because vehicle title 

fraud is huge business in the United States. It ranges in the millions of dollars annually in 

the defraud of consumers and insurance companies. It also steals valuable time and effort 

from law enforcement agencies and officials both at home and in the international arena. 

 According to Interpol, the total value of motor vehicles involved in organized crime, 

including car title fraud, exceeds US$19 billion per annum worldwide. 

 In fact, our industry, automotive recycling, takes this issue so seriously that ARA 

has drafted legislation to be introduced within the next week or so that would require the 

Vehicle Identification Numbers (VIN) of motor vehicles declared Total Loss and NonRepairable by insurers would have to be reported to the National Insurance Crime Bureau 

(NICB) and permanently retired. The information on these vehicles would then be 

available on an online database available to the general public, law enforcement and 

business entities at no charge. 

 In addition, the ARA legislation would create a second and separate database that 

would also identify the VIN numbers of motor vehicles declared Total Loss by insurers 

but deemed safe to repair and ultimately are put back on the road. The legislation would 

also create yet a third database that would identify all vehicles destined for export out of 

the U.S. I have included a copy of the ARA draft legislation as an attachment to our 

written submitted statement, as Exhibit A, for your consideration. 

 Many consumers and dealers purchase unsafe and substandard motor vehicles each 

year and the unsuspecting consumer always is the loser because their purchase fails to 

perform properly as the result of sloppy, shabby and minimal repair necessary to jus get 

the vehicle up and running and back on the road. Failure on the part of the vehicle to 

perform safely is the cause of many accidents and, in fact, collisions that often result in 

the unnecessary and avoidable death of innocent people. 

 As licensed automotive recyclers responsible for the safe removal and recycling of 

every end-of-life and collision vehicle, we are keenly aware of the role salvage plays in 

title fraud, organized crime and vehicle theft. 

 Automotive recyclers not only see VIN numbers from declared Total Loss Vehicles 

being used or duplicated to be put on stolen vehicles of the same year, make and model, 

and often the same color, we have to compete for salvage vehicles against thieves who 

bid to purchase vehicles just to get the VIN number so they can put it on a matching 

stolen vehicle to be able to prove ownership of the stolen vehicle. Then, the thief will sell 

the stolen vehicle with its new VIN number and continue to repeat the process over and 

over again; paying whatever it takes to get the next vehicle he needs, for its VIN number. 

 Many of the stolen vehicles are represented to the buying public and to legitimate 

used car and new car dealers as rebuilt salvage vehicles. And worse, and often, the 

thieves will have rebuilt salvage titles washed so they are able to offer those vehicles for 

sale as just other nice vehicles available to the consuming public. 

 We also see VIN numbers used to title non-existent vehicles in insurance claims. 

What happens is that fraudulent stolen vehicle reports are created and filed with 

insurance companies as a loss. 

 Frequently, we also see VIN numbers from Total loss Vehicles being transferred to 

stolen vehicles that are exported from the United States to unsuspecting buyers in foreign 

countries. 

 ARA, as the voice of automotive recycling in the United States, believes that it is 

absolutely critical to take immediate action to remove the use of Total Loss vehicles and 

their VIN numbers out of the tool box of criminals intent on increasing title fraud in the 

U.S. and worldwide. 
45

 To that end, ARA has drafted a National VIN Retirement Bill (VRB) for which we 

hope to have notable Congressional sponsors and co-sponsors when we introduce it. The 

bill will not require the States to introduce any new State regulations for compliance. But 

it will require the retirement of the VIN numbers of legitimate Total Loss, NonRepairable vehicles in every State. Our legislation will prevent the use of retired VIN 

numbers in the United States and it Territories, prevent their use to register another 

vehicle, prevent their use to file fraudulent insurance claims, or to be usefully transferred 

to a stolen vehicle. 

 With, conservatively, more than five million vehicles declared a Total Loss Vehicle 

each year in the United States, with the number increasing each year as more and more 

air bags, which represent an expensive component in new cars, are added to improve 

passenger safety, having these data bases which identify the vehicle VIN numbers retired 

nationwide available to the public would be a gigantic step forward in the effort to reduce 

title fraud in the United States. 

 In addition to the draft legislation attached as Exhibit A, I am also attaching other 

documents I believe are relevant to understanding our position on stopping if possible or 

at least drastically minimizing title fraud in the U.S. The attachment included as Exhibit 

B is an article I wrote for the Power Source magazine which was published in December 

2005. It focuses on the direct impact of the increasing percentage in salvage each year 

that is not available to legitimate automotive recyclers because of Total Loss Vehicle 

declarations. Exhibit C is another article I wrote on the subject that was published by the 

same magazine in January 2006. It explains the two types of Total Loss Vehicles and the 

problem faced by what is going on in the marketplace. Exhibit D also addresses the 

problem of salvage emphasizing the key provisions in the ARA draft legislation to help 

solve the problem. 

 Exhibit E is an article written by reporter Bryan Bender of the GLOBE Staff 

published October 2, 2005 entitled “US Car Theft Rings Probed for Ties to Iraq 

Bombings.” According to that article, car theft in the U.S. alone exceeds $8 billion per 

annum. Exhibit F is a copy of the Issue Briefing on the legislation and Exhibit G is a 

copy of an article by Peter Alexander, a correspondent with NBC Nightly News, dated 

June 9, 2005, which discusses cloning, the problems it creates and how to avoid buying a 

cloned vehicle. 

 In summary, ARA is very concerned about (1) how out of control the disposal of 

Total Loss Salvage has become in the United States, (2) the huge increase in the number 

of Total Loss Settlements versus Repairable Vehicle estimates that are being written 

today and the lack of accountability to track the Total Loss Salvage vehicles or their 

accompanying ownership documents to protect the consumer and business interests, and 

(3) the growing fraud, theft and terrorism issues directly related to declared Total Loss 

Vehicles. 

 The fact that Homeland Security and U.S. Ports Authorities inspect about 5% of the 

inbound freight and a lesser percentage of what is exported only compounds the problems 

and our concerns. Recently, at a Canadian port, as an example, the North American 

Export Committee had a large number of containers searched , I think it was 100, and 

10% of those searched had stolen vehicles in them! 

 In another instance, close to home, the Chairman of ARA’s Salvage Solution 

Committee and a Past ARA President, Herb Lieberman, Vice President, LKQ 

Corporation, recently advised that he personally found fourteen 2005 Nissans that were 

sold in Los Angeles, CA on October 13, 2005 by Auto Auctions, Inc., a public company, 

with Arizona salvage certificates showing salt water damage. All 14 were listed on the 

National Insurance Crime Bureau website as Katrina cars from New Orleans. 

 These cars should never have been put back on the road because of the impact of 

corrosion from being submerged under 20 feet of salt water for several weeks which 

cannot be reversed, and because EPA tested the water in New Orleans and publicly 
46

announced that it contained high level traces of arsenic, lead, chromium and E coli. The 

toxic residue hidden in those vehicles make them a bona fide safety hazard to the 

consuming public. 

 Of the more than five million Total Loss Vehicles sold through salvage pools in the 

U. S. every year, the vast majority ... approximately 70% ... are not sold for the purpose 

of dismantling and recycling. Some are purchased by legitimate rebuilders 

 And others are purchased by rebuilders who embrace questionable safe and accepted 

repair techniques who may also use stolen parts to rebuild or repair vehicles for sale. 

 It is also interesting that 70% of the vehicles sold through salvage pools are insurerdeclared Total Loss Vehicles. This would suggest that these vehicles probably should not 

have been declared Total Loss in the first place. 

 Another problem is that anyone can purchase a salvage vehicle thru a salvage pool 

by going on the internet. The purchaser does not have to have a license to make the 

purchase and such sales may well support a large underground economy that skirts the 

payment of any taxes. 

 Two of the goals ARA is pursuing are to create a level playing field for al legitimate 

bidders whose business is to legally process end of life and collision vehicles for any 

legal purpose, and to curtail the fraud, theft and crime involving motor vehicles. This is 

why we believe federal legislation is needed, necessary and now. 

 Other reasons ARA promulgates the need for federal legislation to prevent fraud, 

theft and criminal activity, and any illegal activity involving motor vehicles, includes the 

following points, which are also supported by the North American Export Committee: 

1) auto theft has been linked to terrorist groups as a funding source, for 

transportation, and as an improvised explosive device; 

2) organized crime has been and continues to be one of the greatest threats to the 

safety and well-being of American citizens on a daily basis and motor vehicle 

theft is a staple in organized crime activities and is a major commodity in global 

trade; 

3) the success to date of law enforcement to quickly identify motor vehicles used 

in criminal activity, including terrorism, has resulted in a demand for “cloned” 

vehicles that cannot be traced back to their owners, hiding the paper trail. Had 

the van used in the first World Trade Center bombing in 1993 been a cloned 

vehicle, to hide its paper trail, law enforcement might not have been able to 

make the arrests so quickly. In London, last summer, when the trains were 

bombed, one of the suspects had a vehicle document on him that led police to 

quickly find a vehicle parked at another train station. It had seven explosive 

devices inside and the evidence collected helped lead to the suspects arrest. Had 

it been a clone, more bombings may have occurred; 

4) title fraud enables other criminal activity to occur, from insurance fraud to 

narcotics trafficking and the smuggling of undocumented aliens; 

5) “Operation Road Runner” in Miami-Dade County illustrated the reach title 

fraud can have. Cars stolen in South Florida were given “cloned” numbers from 

legitimate automobiles, salvage and exported vehicles. These vehicles were 

then distributed to more than 14 States where they were utilized in drug 

smuggling on the eastern seaboard, undocumented alien smuggling in Arizona, 

and funding being sent to Iran from Nevada. In addition, two f the main 

principals in this group were operating out of a federal prison. 

6) law enforcement has found salvage and food vehicles rebuilt without quality 

OEM used parts or workmanship. Some vehicles even have had air bags that 

turned out to contain rags or other debris inside; 

7) car title fraud is a fast-growing issue that affects all U.S. citizens, either directly 

as a victim, or as a consumer paying higher insurance and repair bills; and 
47

8) legislation to fight title fraud is needed along with the full implementation of 

the National Motor Vehicle Title Information System (NMVTIS). 

 ARA strongly encourages the House Subcommittee on Commerce, Trade and 

Consumer Protection to aggressively support the need and initiative for legislation to 

prevent car title fraud, theft, and organized crime and terrorism activities involving 

motor vehicles, and to level the playing field in salvage recycling across the United States 

to protect the American consumer from the perils of not moving to secure federal 

legislation and what inaction imposes on the public and to keep innocent and deserving 

citizens safe on the road. W also ask the Subcommittee to consider seriously the ARA 

draft legislation as a positive and affirmative step in the direction to accomplish what 

needs to happen. 

 Thank you again, very much and sincerely, for this opportunity to testify in support 

of the Subcommittee’s initiative and the ARA VIN Retirement legislation. 

 If we may answer any questions or assist further in any way, please let me know. 

Respectfully submitted, 

James Watson, President 

Automotive Recyclers Association 

March 1, 2006 

Attachments: 

EXHIBIT A 

P R O P O S E D L E G I S L A T I O N - D R A F T 

TO ADDRESS PROBLEMS ASSOCIATED WITH FLOOD AND DAMAGED 

VEHICLES NOT WORTH REPAIRING 

AND SUITABLE ONLY FOR RECYCLING OR SCRAPPING 

109TH CONGRESS 

2ND SESSION 

H. R. _________________ 

 

To protect the public against unreasonable risks of property damage, injury or death in 

incidents with cosmetically repaired but inherently unsafe or salt water flood vehicles and 

against fraud in the sale of these vehicles, and to reduce vehicle theft involving the 

wrongful use of vehicle identification numbers. 

_________________________________________ 

SECTION 101. SHORT TITLE 

 This Act may be designated as the “Vehicle Flood, Damaged, Theft and Anti-Fraud 

Act of 2006.” 

SECTION 102. DEFINITIONS 

For purposes of this Act – 
48

(a) “Automotive recycler or dismantler” means a person or entity engaged in the act 

of acquiring, dismantling, or destroying 12 or more vehicles in a calendar year 

for purposes that may include resale or reuse of their parts for any purpose. 

(b) “Actual Cost of Repair” means the total dollar amount of a comprehensive repair 

estimate of the damage to a vehicle compiled by a professional repair estimator 

and deemed necessary to restore the vehicle to its pre-incident condition. 

(c) “Department” means the Department of Transportation and “Secretary” means the 

Secretary of Transportation. 

(d) “Actual cash value” means a vehicle’s actual cash value immediately prior to the 

incident in which it was damaged (i) as set forth in a current edition of any 

independent, nationally recognized compilation (including automated databases) 

of retail vehicle values or (ii) as determined pursuant to an independent market 

survey of comparable vehicles with regard to condition and equipment. 

(e) “Insurer” means a person engaged in (i) the business of underwriting any type of 

insurance relating to vehicles, including collisions insurance, liability insurance, 

and comprehensive-coverage insurance, (ii) a self-insured business leasing or 

renting out ten or more vehicles, or (iii) a self-insured owner or operator of a 

fleet of ten or more vehicles. 

 (f) “Insurer’s vehicle” or “its [referring to an insurer’s] vehicle” means a vehicle 

with respect to which an insurer has issued or assumed insurance coverage of any 

type as described in subsection (e)(i) of this section. 

(g) “Internet web site” means a web site established and maintained solely for the 

purposes of this Act pursuant to section XXX of this Act. 

(h) “Person” means an individual, corporation, partnership, trust, other private entity, 

or a unit or entity of the federal or a state or local government. 

(i) “Register information” means any or all of the information specified in paragraphs 

(i) through (vii) of section 301(a) and “register” means an organized collection of 

register information for each of a number or grouping of vehicles. 

(j) “Salt water flood vehicle” means any vehicle that has been submerged in salt 

water above the bottom of the passenger compartment. 

(k) “Scrap Recycling Facility” means a fixed location where machinery and 

equipment are utilized for processing and manufacturing scrap metal into 

prepared grades and whose principal product is scrap iron, scrap steel, or 

nonferrous metallic scrap for sale for remelting and licensed for such purposes. 

(l) “State” means a state of the United States, the District of Columbia, Puerto Rico, 

the Northern Mariana Islands, Guam, American Samoa, and the Virgin Islands 

(m) “Substantial damage to a vehicle” means damage that led the insurer to declaring 

or determining the vehicle a total loss. 

(n) “Title” means a certificate of title or other document issued by a state showing 

ownership of a vehicle, or the manufacturer’s certificate of origin if no state has 

issued a document showing ownership. 

(o) “Vehicle” means a vehicle which is (i) driven or drawn by mechanical power and 

manufactured primarily for use on any street, road, or highway (but not a vehicle 

operated only on a rail line) and which (ii) either has (A) a manufacturer’s model 

year designation of or later than the year in which the vehicle was damaged or 

any of the seven preceding years and (B) a fair retail market value greater than 

$5,000. 

(p) “Vehicle identification number” means a unique identification number (or 

derivative of that number) assigned to a passenger motor vehicle by a 

manufacturer or by a state in compliance with applicable laws and regulations. 
49

SECTION 103. SALT WATER FLOOD VEHICLES 

Salt water flood vehicles shall be crushed or otherwise destroyed. None of the parts 

from a salt water flood vehicle shall be sold for the purpose of resale for use in other 

vehicles. Salt water flood vehicles are not subject to Section 301. 

SECTION 201. VEHICLES SUBJECT TO CONDEMNATION 

A vehicle and its VIN shall be subject to condemnation under this Act if (a) the 

vehicle is incapable of safe operation for use on any street, road, or highway and wrecked 

or damaged to the extent that it has little or no resale value except as a source of parts or 

scrap or as a source of a vehicle identification number, or if (b) the vehicle has been 

irreversibly designated by its owner as a source of parts or scrap only, or if (c) the actual 

cost of repair of the vehicle condition equals or exceeds the fair retail market value of the 

vehicle immediately prior to the incident. 

SECTION 202. DETERMINATION AND CONDEMNATION 

(a) As soon as practicable after learning of an incident resulting in damage to one of 

its vehicles, the insurer shall with reasonable care make a good-faith 

determination whether it was substantial damage and, if so, whether that vehicle 

is subject to condemnation under section 201 this Act. If the insurer determines 

that the vehicle is subject to condemnation under any of the clauses of section 

201, the insurer need not make any determination under either of the others. If 

the insurer determines that the vehicle is not subject to condemnation under 

either clause (a) or clause (b) of section 201, the insurer shall make a 

determination under clause (c) of section 201. 

(b) Whenever an insurer determines that a vehicle is subject to condemnation under 

this Act, the insurer shall immediately notify the Department by electronic media 

using the electronic form prescribed by regulation for this purpose and available 

on the internet web site. 

SECTION 203. CONDEMNATION BY DEPARTMENT 

On receipt of a notification under section 202(b), the Department shall immediately: 

(a) issue to the owner of the vehicle a Certificate of Vehicle Condemnation that: 

(i) declares the vehicle, its title, and its vehicle identification number are 

condemned pursuant to this Act, 

(ii) assigns to the vehicle a unique “Condemned-Vehicle Identification 

Number,” which shall also be the number of the Certificate of Vehicle 

Condemnation, 

(iii) includes statements of the effect of condemnation and penalties for 

violation of this Act, and 

(iv) includes a form enabling transfer of the vehicle but only in compliance 

with section 204(b) and (c); 

(b) transmit the Certificate of Vehicle Condemnation to the insurer electronically; 

and 

(c) give notice of the condemnation and of issuance of the Certificate of Vehicle 

Condemnation by posting it on the internet web site and directing it by electronic 

media to the National Motor Vehicle Titling Information System; all state motor 

vehicle administrators, attorneys general, and police department heads; the 

United States Customs Service; and any person subscribing to the notification 

service which the Department shall establish. This notice shall include the 

following information: make and model of the vehicle, vehicle identification 
50

number, state that issued the title, and title number, and Condemned Vehicle 

Identification Number. 

(d) If the insurer is not the owner of the condemned vehicle at the time the insurer 

receives the Certificate of Vehicle Condemnation, the insurer shall promptly 

transmit the Certificate to the person who is the owner. 

(e) States may set other standards by which vehicles titled by their state are to be 

condemned, and any vehicle meeting such standard is to be condemned in the 

same manner as vehicles meeting any requirement of section 201. 

 

SECTION 204. EFFECT OF CONDEMNATION 

Effectively immediately upon the Department’s giving of notice under section 

203(c) with respect to any condemned vehicle, its title, and its vehicle identification 

number: 

(a) It shall be unlawful for the last title owner or any other person to operate the 

condemned vehicle on any street, road, or highway or to engage or seek to 

engage in, or to facilitate in any way, any transaction involving titling or 

registration of the condemned vehicle under any jurisdiction for the purpose of 

its operation on any street, road, or highway. 

(b) It shall be unlawful for any person to transfer the condemned vehicle to any other 

person who is not an insurance company, automotive recycler or dismantler or 

scrap recycling facility, or a person in the business of crushing or otherwise 

destroying wrecked vehicles. 

(c) It shall be unlawful for any person to transfer the condemned vehicle except by 

use of the condemned vehicle transfer form on the Certificate of Vehicle 

Condemnation. 

(d) It shall be unlawful to use the condemned vehicle’s title or vehicle identification 

number for any purpose having any relationship whatsoever to any other vehicle 

or to transportation on any street, road, or highway, except only that the vehicle 

identification number may be retained on parts taken from the condemned 

vehicle by an automotive recycler or dismantler, or scrap recycling facility for 

the purpose of resale for use in other vehicles. 

SECTION 301. DETERMINATIONS REGARDING OTHER VEHICLES 

(a) As soon as practicable after learning that an incident resulted in damage to one of 

its vehicles, if the insurer has with reasonable care made a good-faith 

determination that it was substantial damage but that the vehicle is not subject to 

condemnation under section 201, the insurer shall enter on a register, using forms 

prescribed by the Department for electronic media, the following information 

with respect to the vehicle: 

(i) make, model, and vehicle identification number; 

(ii) state of vehicle registration and registration number; 

(iii) brief statement of the nature and extent of damage sustained in the 

incident; 

(iv) any brand or brands previously assigned to the vehicle, the agency which 

assigned each brand, and the date of each assignment (to the extent this 

information is reasonably available). For this purpose, “brand” means a 

designation assigned pursuant to state law regarding damage to or 

condition or status of a vehicle, including “salvage,” “flood,” 

“nonrepairable,” “nonrebuildable,” “certificate of destruction,” “restored 

salvage,” “remanufactured,” “rebuilt,” “reconstructed,” “junk,” 

“dismantled,” and “frame change”; 

(v) name and address of the insurer; 
51

(vi) name, address, occupation, and employer of the individual or individuals 

who actually made the determination for or on behalf of the insurer; and 

(vii) name and address of any transferee and name and address of any auto 

auction or other agent or representative that may have been involved in 

transferring or otherwise disposing of the vehicle. 

(viii) certification by the insurer that the car will not be transferred to any 

person unless and until all the repairs necessary to restore the car to its 

pre-incident condition have been fully and properly performed, and 

(b) Each insurer shall at all times maintain, in electronic media, a complete and 

current register containing all register information for each and every vehicle it 

has determined is not subject to condemnation under section 201, and each 

insurer shall do so in a manner that ensures instant electronic retrieval according 

to any of the points of information mentioned in subsection (a) of this section. 

(c) Within ten days after the end of each calendar month, each insurer shall transmit 

to the Department, in electronic media, a complete inventory containing all 

register information for each and every vehicle it determined within that month is 

not subject to condemnation under section 201. 

(d) The Department shall maintain all register information received under subsection 

(c) of this section in a manner that ensures instant electronic retrieval according 

to any of the points of information mentioned in subsection (a) of this section. 

(e) Information with respect to one or more or all vehicles of any model year may be 

retired or deleted from the registers prescribed in subsections (b) and (d) of this 

section after twenty years have passed from that model year. 

 (f) Whenever a vehicle is offered to retail sale by a seller required to display a 

Buyer’s Guide on the vehicle, that seller shall also display in the same manner a 

copy of any non-confidential register information about that vehicle. 

SECTION 302. USE OF REGISTER INFORMATION; CONFIDENTIALITY 

Notwithstanding any other provision of law, it shall be unlawful for any person 

within the Department to publish or disclose register information except as follows: 

(a) The Department shall disclose all register information concerning a specific 

vehicle when requested in writing by (i) a person reasonably claiming to have 

suffered any damage or loss in an incident in which the vehicle was damaged or 

(ii) any party to a legal proceeding involving such a claim. 

(b) The Department shall also post on the internet web site all register information 

except the identities of persons referred to in paragraphs (v), (vi), or (vii) of 

section 301(a) or any other confidential business information. This shall be done 

in a manner which ensures instant electronic retrieval by any person according to 

any of the applicable points of information which this register contains. The 

Department shall disclose this same register information in writing when 

requested in writing by any person lacking easy access to the internet web site. 

(c) The Department may use register information for statistical and analytical 

purposes, and for the purpose of preparing, in consultation with the Attorney 

General, an annual report for transmittal every March to the Committees of 

Congress having appropriate jurisdiction, and to the motor vehicle 

administrators, attorneys general, and heads of police departments of the states, 

provided that it shall not, under this subsection, disclose to any person the 

identities of persons referred to in paragraphs (v), (vi), or (vii) of section 301(a) 

or any other confidential business information. 

(d) The Department shall disclose register information to any committee of the 

Congress having appropriate jurisdiction when and as specifically requested by a 

majority of that committee. 
52

(e) The Department shall have no obligation to disclose to any person identified in 

register information the making of any request for information under this section. 

(f) The Attorney General and the chief law enforcement officer of any state shall at 

all times have access to all register information. The Attorney General and the 

chief law enforcement officer of any state shall provide this information as 

necessary or appropriate with state and local law enforcement officers in 

connection with federal, state, or local law enforcement activity, but shall not 

otherwise disclose to any person the identities of persons referred to in 

paragraphs (v), (vi), or (vii) of Section 301 (a). 

SECTION 401. INTERNET WEB SITE 

(Development of necessary software for purposes of this Act; management and 

control of internet web site; interface between DOT and insurance companies; limited 

and “personal” access for insurers; fees for access – when, to whom, and how much?). 

SECTION 501. PENALTIES AND ENFORCEMENT 

(a) Civil penalty 

(i) A person that violates this chapter or a regulation prescribed or order 

issued under this chapter is liable to the United States Government for a 

civil penalty of not more than $5,000 for each violation. A separate 

violation occurs for each motor vehicle involved in the violation. The 

maximum penalty under this subsection for a related series of violations is 

$500,000. 

(ii) The Secretary of Transportation shall impose a civil penalty under this 

subsection. The Attorney General shall bring a civil action to collect the 

penalty. Before referring a penalty claim to the Attorney General, the 

Secretary may compromise the amount of the penalty. Before 

compromising the amount of the penalty, the Secretary shall give the 

person charged with a violation an opportunity to establish that the 

violation did not occur. 

(iii) In determining the amount of a civil penalty under this subsection, the 

Secretary shall consider-- 

(A) the nature, circumstances, extent, and gravity of the violation; 

(B) with respect to the violator, the degree of culpability, any history of 

prior violations, the ability to pay, and any effect on the ability to 

continue doing business; and 

(C) other matters that justice requires. 

(b) Criminal penalty. A person that knowingly and willfully violates this chapter or 

a regulation prescribed or order issued under this chapter shall be fined under 

title 18, imprisoned for not more than 3 years, or both. If the person is a 

corporation, the penalties of this subsection also apply to a director, officer, or 

individual agent of a corporation who knowingly and willfully authorizes, orders, 

or performs an act in violation of this chapter or a regulation prescribed or order 

issued under this chapter without regard to penalties imposed on the corporation. 

(c) Civil actions by Attorney General. The Attorney General may bring a civil 

action to enjoin a violation of this chapter or a regulation prescribed or order 

issued under this chapter. The action may be brought in the United States district 

court for the judicial district in which the violation occurred or the defendant is 

found, resides, or does business. Process in the action may be served in any other 

judicial district in which the defendant resides or is found. A subpoena for a 

witness in the action may be served in any judicial district. 

(d) Civil actions by States. 
53

(i) When a person violates this chapter or a regulation prescribed or order 

issued under this chapter, the chief law enforcement officer of the State in 

which the violation occurs may bring a civil action 

(A) to enjoin the violation; or 

(B) to recover amounts for which the person is liable under section 502 

of this title for each person on whose behalf the action is brought. 

(ii) An action under this subsection may be brought in an appropriate United 

States district court or in a State court of competent jurisdiction. The 

action must be brought not later than 2 years after the claim accrues. 

SECTION 502. CIVIL ACTIONS BY PRIVATE PERSONS 

(a) Violation and amount of damages. A person that violates this chapter or a 

regulation prescribed or order issued under this chapter is liable for 3 times the 

actual damages or $5,000, whichever is greater. 

(b) Civil actions.--A person may bring a civil action to enforce a claim under this 

section in an appropriate United States district court or in another court of 

competent jurisdiction. The action must be brought not later than 2 years after the 

claim accrues. The court shall award costs and a reasonable attorney’s fee to the 

person when a judgment is entered for that person. 

SECTION 503. RELATIONSHIP TO STATE LAW 

Except to the extent that State law is inconsistent with this chapter, this chapter does 

not -- 

(1) prevent States from enacting State laws which provide additional protections to 

vehicle purchasers; or 

(2) exempt a person from complying with that law. 

SECTION 601. 

 The Secretary shall have the authority to issue rules and regulations to implement 

this chapter. 

Exhibit B 

powersourse 12-2005 

The number of total loss vehicles has been increasing; in 1997 the total loss rate was 

under 8%, in 2004 the rate was over 13% and that only includes the vehicles for which an 

estimate was written. I have seen statistics which report total loss rates exceeds 17%. 

The ARA Executive Committee had the opportunity to attend a meeting with the 

Vehicle Recycling Partnership in Detroit recently. They indicate that they are putting 

more than 17 million new vehicles in the market each year and can account for 15 million 

vehicles are de-registered. Have you been buying more cars lately? 

The ARA Regional Directors in a May 2005 report stated: “it would seem very 

straight forward that the primary issue is, and for the foreseeable future will be, the 

availability of quality recyclable product. I have seen the statistic that 30% of the product 

sold by the insurance companies is leaving the country.” The report furthermore 

identifies as the number one priority to be the available of quality salvage. 

This issue is not new. Is there a shortage of salvage or is the salvage there and cost 

too much? For some, if we are buying we always want to buy for less so the cost is 

always too high. And some people say just pay more and you can buy all the salvage you 

want. True and we have been doing that for the past few years. Now add in all the 

surcharges, fees and additional transportation costs. It doesn’t matter what you pay for 

the car, the parts are only worth so much. 
54

The competition at the salvage pools and auctions for our industry raw material are 

the out of country buyers, the total loss re-builders and according to a recent FBI report 

thieves. None of these competitors have to comply with any part of the regulatory burden 

of the licensed automobile dismantler. Additionally the individual state governments 

have created a disjointed and ineffectual system of titling laws which are exploited by our 

competition. 

There is a case for letting the market decide who buys the salvage. I realize that 

there is a world market, and emerging markets in Eastern Europe need North American 

salvage vehicles to fuel their fledging economies. The auction companies boast on their 

web sites how they sell the old Ford Probe in California to buyers in Russia. I am told 

that the soft U.S. dollar encourages the South and Central American buyers to enter our 

market buy salvage and take the vehicles back to their home countries. 

What about the U.S. Economy? What about our employees and our contribution to 

our communities? The major problems of total loss vehicle salvage and total loss nonrepairable vehicles availability is created by ineffectual state and federal regulations and 

legislation. We as licensed regulated businesses must be accountable and we must 

comply, where our competition does not. The remedy is a federal legislative imitative to 

create a uniform market for our industry. This has been tried before with limited success 

in 1992. ARA attempted to further the 1992 act on two occasions with help from Sen. 

Lott (R-Mississippi) and Sen. Feinstein (D-California), both attempts were unsuccessful. 

The Automotive Recyclers Association has had a long history in support of 

consumer protection and law enforcement initiatives to combat the use of NonRepairable Total Loss, flood vehicles and the title documents from contributing to the 

crimes of Consumer Fraud, Vehicle Cloning and Auto Theft. The ARA served on The 

U.S. Department of Transportation and The U.S. Department of Justice Advisory 

Committees to report to Congress on key provisions of the 1992 Anti Car Theft Act. 

To act in the interest of the membership the ARA Executive Committee has created 

a legislative task force to take a leadership position on this vital industry problem and 

develop a legislative solution for introduction early in the 2006 to The U.S. Congress. 

The Automotive Recyclers Association recently hosted a meeting of concerned parties 

that addressed flooded and salvage vehicle fraud in October of this year. 

Attendees at the meeting included the Association of American Motor Vehicle 

Administrators, Consumers for Auto Reliability and Safety, GEICO, Locator 

Technologies, the North American Export Committee, and the Institute for Scrap 

Recycling Industries. 

These groups discussed their common interest and ultimate goal: to eliminate 

flooded and salvage vehicle fraud by condemning the Vehicle Identification Numbers of 

non-repairable and exported vehicles. ARA has taken a leadership position on this issue. 

 We have committed resources, we continue to gather additional support from other 

interested industry groups, and we have made contacts on the hill for sponsorship of our 

legislation. We look forward to a real solution in 2006 to this escalating industry 

problem. 

Exhibit C 

Powersourse 02-06 

We as an industry have debated the issue of salvage and total loss vehicles for years. 

We have all complained about the salvage vehicle problems and aside from some isolated 

instances we have not taken action on the issue. There has been some activity regarding 

state legislation, but there has not been a comprehensive solution advanced which would 

positively affect the entire industry. And state by state our opposition, the auctions and 

pools, will continue to open the market to unqualified buyers. 

This issue of salvage vehicles and our ability to purchase them has become for our 

industry intolerable. 
55

I have been told we cannot do anything about the problem. I guarantee that if we are 

not actively engaged in the legislative and regulatory process nothing will happen and our 

situation will continue to worsen. This problem was created by patchworks of ineffectual 

state and federal laws and regulations, the solution must be addressed in the same manor. 

Our short comings in the past have been centered on our failure as and industry to pull 

together and unite around a position which we can all live with. In a recent discussion I 

had with an active and involved ARA member he cautioned me on language which would 

affect less that 2% of the total number of vehicles targeted. The resulting comment was, 

well I would like to buy that 2%. Well, I would like to buy all the cars too! The problem 

is, even if those cars were at the auction our bid would loose out to the thieves and 

fraudsters. Why are we willing to manage or legislate for the exceptions? If we take that 

position we risk loosing the other 98%. And that number is approximately 4.8 million 

total loss cars, of which we only buy around 30%. Solve the problem and there are more 

than enough cars to go around. 

ARA is taking action on the issue of total loss and salvage vehicles. The natural 

disasters of Wilma and Katrina have focused the attention of the press and congress on 

saltwater flood vehicles and in general total loss salvage. The questions of salvage and 

salvage disposal are being questioned. The black market for total loss salvage, exported 

thefts and flood vehicles is providing vehicles for car bombings in Iraq, donor vin 

numbers for to clone vehicles, funding mechanisms for Eurasian criminal organizations. 

ARA has drafted federal legislation to address our concerns. This past February key 

members of the ARA leadership attended a briefing in Washington D.C. on the issue and 

took our message to Congress. ARA members meet with 75 congressional offices and we 

were well received. 

Key Provisions included in the bill include: 

1. Require insurers (per definition) to provide information to a publicly 

accessible electronic database on retired vin vehicles. 

2. Require insurers (per definition) to provide information to a publicly 

accessible electronic database on Total Loss Vehicles 

3. Establish a definition and class of damaged vehicle as “VIN Retired” 

4. Give the Department of Transportation the authority to retire VIN and 

provide public access to the retired vin and total loss vin data. 

5. Protect consumers form salvage related VIN fraud and theft. 

6. Retire the VIN’s of vehicles being exported form the U.S.A. 

For more information on the issue or a copy of the bill visit the ARA website at 

 www.A-R-A.org 

Exhibit D 

There are two types of total loss vehicles. The first total loss class is the vehicle 

which has sustained significant damage, which after careful review by the trained repair 

technician and in consultation with the insurance company representative, who has 

become the secondary customer or primary decision maker, has determined that the 

subject vehicle cannot or should not ever be repaired and put back on the road again. In 

many instances these vehicles have partial estimates or no estimates written on them. 

They are not even counted in the average 13% total loss rate cited in a 2004 study by 

CCC information systems. And rightly so, those vehicles are obvious Total loss. We 

could talk about design for repair or manufacturer training or repairer’s defined 

manufacturing process or speed limits but these vehicles cannot or should not be repaired. 

The second total loss class is the damaged vehicle for which you create an estimate. 

This is the 13% average, or as one insurance company reports on their web site, 17% of 

vehicles that have a claim are declared a total loss. Why? 
56

The total loss vehicle issue has reached pandemic proportion in the automobile 

repair industry. No longer is the problem regional or localized effecting a small but 

significant portion of the industry but this issue is international in scope and affects all 

segments of the automotive repair supply, parts distribution and support network. 

Some of the insurance company comments are: 

Total Loss Vehicle; Property that has sustained damage so extensive that repairing it 

is not reasonable. 

Total Loss Vehicle: Generally, a vehicle is determined to be a total loss when the 

cost of repair exceeds the vehicle’s pre-accident value. 

Total losses do not occur frequently. A 17% total loss rate is not frequent? That is 

money out of your pocket! If these vehicles were not repairable then why are they not 

declared non repairable? Why do you allow these damaged vehicles are pulled from your 

repair facilities and sold at auction to who ever wants to buy them? 

A Comment from a Salvage Auctions; “Many of the vehicles declared to be total 

losses are repairable,” Our and other auto salvage auction companies act as sophisticated 

“recyclers” of vehicles that have been declared total losses by insurance companies by 

finding buyers who will rebuild the cars or use them for parts. Insurance companies don’t 

want to deal with buying and selling cars, so they turn to companies like Ours that 

manage the total loss recovery process. 

Amazing, declared a total loss by an insurance company and they are repairable? If 

the vehicle is repairable then why, was it not repaired? If the vehicle could not be 

repaired by a licensed trained, accountable body repair facility why should it be sold as 

“repairable” by the insurance company to some unknown individual? Each of the 

repairable vehicles, which you have created an estimate for and in essence have taken the 

time and effort to bid to repair, which is taken from your shop and sold at auction, is 

money out of your pocket. 

I sell OEM used auto parts. I and may of my colleagues believe that repairable 

vehicles should not be declared a total loss and those repairable vehicles should be 

repaired at your facility. I do go to those auctions and I do bid and buy some of the cars 

they sell. A huge segment of my industry relies on the total loss vehicle auctions to 

supply our industry with raw material. And we have the opportunity to supply 21% of the 

claims estimates with 13% of the included parts. There is a shortage of good quality 

OEM used parts currently in the market. We believe this is due to the increasing number 

of reparable total loss vehicles at the auctions. These reparable vehicles are sold at 

auction. But not to the OEM used part dealers for disassembly and the introduction of the 

OEM used parts into the part repair stream. These vehicles are sold to individuals who 

are repairing them and removing the OEM used parts from the market place. As you total 

more repairable vehicles you increase the demand for the repairable total loss vehicle, 

then the demand for the second and third tear total loss parts vehicle increases which is 

purchased by the rebuilder to provide the donor parts to fix the primary vehicle. The 

result is increased prices at the auctions for the totaled vehicles and a shortage of quality 

OEM used parts. As the salvage values increases so does the total loss rate for repairable 

vehicles. Salvage recovery value is added to the repair estimate and factored in to 

determining a total loss equation. The solution to the total loss pandemic, repair the 

repairable vehicles at the facilities which have the training, technology, tools and 

accountability to do so and require those vehicles which could not or should not be 

repaired to be disposed of by a federal certificate of destruction through the network of 

OEM used part dealers and Scrap processors certifying those total loss vehicles are used 

for parts or scrap and never titled again. 
57
58
59
60

 MR. STEARNS. Ms. Weintraub? 

 MS. WEINTRAUB. Weintraub, yes. Mr. Chairman, Ranking Member 

Schakowsky and members of the subcommittee, thank you for providing 

me with the opportunity to speak with you today about the hazards 

caused by car title fraud and related scams. I am Rachel Weintraub, 

Director of Product Safety and Senior Counsel at Consumer Federation 

of America. CFA is a nonprofit association of approximately 300 proconsumer groups, with a combined membership of 50 million people. I 

request that written testimony and its accompanying attachments be 

submitted in the record. 

 MR. STEARNS. By unanimous consent, so ordered. 

 MS. WEINTRAUB. Thank you. Car title fraud occurs when a car title 

intentionally does not accurately reflect the title history of the vehicle. 

Car titles can easily be washed of relevant history, or critical information 

can be kept intentionally absent from titles. By far the biggest problem is 

that consumers have no reliable way to know the true history of a used 

car that they seek to purchase, and they are thus hit with the dire safety 

and economic implications when the car they bought is actually seriously 

damaged. Most agree here agree that this is a big problem, but how does 
61

it happen? We actually put together a common sequence of events to 

make this a bit more clear. 

 First, a vehicle is damaged in a flood, crash, or other devastating 

event. Then the consumer files a claim with the insurance company, or 

the self-insured entity decides to have their vehicle sold at auction. The 

insurer inspects the vehicle and declares it a total loss. The insurer pays 

the claim, which is often less than the estimated value of the vehicle prior 

to the crash or flood, and the insurer, at this point, may or may not 

submit the title to the State where the claim was filed in order for the title 

to be branded, if that is required by State law. The insurer may destroy 

the vehicle or send the total loss vehicle to auction with which it has a 

contract. The auction has a contract with the insurer to give the insurer a 

percentage or flat rate per vehicle sold. The auction advertises the 

vehicle as total loss or salvage or saltwater damaged. The title may or 

may not be branded. 

 Dealers, recyclers, rebuilders, or individuals bid on vehicles, 

including online bidding. Legitimate recyclers dismantle vehicles and 

offer usable parts for sale as used parts to consumers, auto body shops, 

and/or mechanics. Unscrupulous rebuilders cut corners and make 

cosmetic repairs that leave the vehicle structurally unsound but appear 

fine. Rebuilders sell the vehicle to another auction or directly to dealers 

or to consumers. If the title was branded, the title may be sent to a State 

where the brand is not recognized or carried forward in order to wash it. 

Dealers or individuals advertise the vehicle as being in mint condition. 

The dealers sell prior damaged cars with the representation on the FTCrequired used buyer guide that the vehicle is being sold with the 

remainder of the original warranty or extended service contract. The 

dealer may provide consumers with a history report which may have 

gapping loopholes, or the dealer may alter the report to erase negative 

information. If the consumer has problems with the vehicle or is in a 

crash or the warranty or service contract is denied. And it is at this point 

that the consumer realizes that they may have been defrauded. 

 Natural disasters such as Hurricane’s Katrina, Rita and Wilma 

resulted in approximately 570 to 600,000 flood-damaged vehicles. Most 

of those vehicles are grossly unsafe and they are beyond proper repair. 

The electronic components will corrode, the air bags may not inflate in a 

collision, the brakes and seatbelts may not work, and they are also prone 

to toxic mold. We know that these cars are, however, being sold by the 

thousands on the auto auction websites. Fraudsters exploit variations in 

State laws to perpetuate their crimes. State laws concerning damage 

disclosure or rebuilding practices and threshold definitions for salvaged 

vehicles differ widely. Cars with salvage titles, as defined in one State, 
62

can be washed of their salvage brand if another State’s law has a weaker 

definition. 

 In order to protect consumers from the consequences of damaged 

auto frauds, we propose the following solutions: Federal legislation is 

needed to require the permanent destruction and removal of flood and 

other excessively damaged vehicles from the roads where they pose a 

severe risk to public safety. Federal legislation should establish a 

minimum national definition for salvage vehicles. Insurers, self-insured 

entities, which is car rental and lease companies and large auto dealers 

and States, must be required to provide information about damaged 

vehicles to a publicly accessible national electronic database on a timely 

basis. In addition, licensed dealers must provide car buyers a copy of a 

vehicle’s title prior to consummating any car deal. Any disclosure made 

to the publicly available database must be posted with the buyers guide 

in the window of a car offered for sale by a licensed dealer. This 

information must also be indelibly affixed to the car itself. 

 Remedies must be provided and must be at least as strong as those 

under the Federal Odometer Act and should be modeled after that act. 

That act created a floor for States and allows States that have been 

targeted by title fraud perpetuators to strengthen protections for their 

citizens. Remedies must include private rights of action for victims, civil 

penalties, criminal penalties, and civil actions for both injunctive relief 

and restitution brought by State Attorneys General. 

 Consumers are under a veil of ignorance when purchasing a used car. 

The free marketplace depends upon consumers making informed 

decisions, but the information most crucial to making an informed 

decision is either missing due to intentional obfuscation of car titles, or 

deliberate title washing, exploiting variations and confusions, and State 

law. Your help and Federal legislation could greatly solve this problem 

and protect consumers. Thank you. 

 [The prepared statement of Rachel Weintraub follows:] 

PREPARED STATEMENT OF RACHEL WEINTRAUB, DIRECTOR OF PRODUCT SAFETY & SENIOR 

COUNSEL, CONSUMER FEDERATION OF AMERICA

 Mr. Chairman, Ranking Member and members of the Subcommittee, thank you for 

providing me with the opportunity to testify before you today to discuss ways to protect 

consumers from the hazards caused by car title fraud. This is an issue that Consumer 

Federation of America has been working on and concerned about for many years. 

 Consumer Federation of America (CFA) is a non-profit association of approximately 

300 pro-consumer groups, with a combined membership of 50 million people. CFA was 

founded in 1968 to advance the consumer interest through research, education, and 

advocacy. 
63

I. Car Title Fraud- Introduction 

 Car title fraud occurs when a car title intentionally does not accurately reflect the 

title history of the vehicle. Car titles can be “washed” of relevant history or critical 

information can be kept intentionally absent from titles by a failure to disclose such 

pertinent information. In addition, the vast variation in state laws which define “salvage” 

or “junked” vehicles create a loophole for car tiles to be re-branded as they move in 

interstate commerce from state to state. To make matters even worse for consumers, there 

is no oversight of state titling procedures. Furthermore, consumers often don’t see titles 

until well after the purchase has taken place. Thus, titles are ineffective as a disclosure 

mechanism to inform consumers of problems with vehicles. To truly prevent salvaged 

vehicles from re-entering the marketplace, we must find other ways to disclose pertinent 

car history information to consumers.

II. The Problem 

 A. Unsafe Cars Re-Emerge on the Roads

 The vast implication for consumers of title fraud occurs with cars that have been 

salvaged, wrecked, or colloquially, “damaged beyond repair.” Many vehicles which are 

deemed severely damaged are destroyed, including being disassembled with the unusable 

parts recycled appropriately. However, each year millions of severely damaged vehicles 

are not destroyed, but rather are sent by unprincipled insurers to auto auctions where they 

are sold to unscrupulous auto dealers and rebuilders.1

 According to Mitchell 

International, one of the three major information service providers to the insurance and 

collision Repair Industry, there are 5 million vehicles which are totaled in the United 

States every year.2

 More cars are being “totaled” than in the past.3 The sale price of 

these vehicles is several times more than the worth of the vehicle since the retail value of 

a salvaged vehicle is diminished by 50% or more.4

 In many instances, unprincipled 

insurers fail to brand the titles as salvaged before they are sent to auction and 

unscrupulous insurers, auctions, rebuilders and dealers perpetuate this fraud, profiting 

from every transaction which ultimately leads to the potentially unsafe vehicle being 

driven by an unsuspecting consumer. 

 

B. Consumers are Unaware of their Car’s History 

 By far, the biggest problem is that consumers have no way to know the true history 

of a used car they seek to or have purchased. Consumers may unwittingly purchase a car 

that superficially appears in good working order but had been previously severely 

damaged by serious collision or flood damage. These vehicles are sold across the nation, 

from state to state, and pose a serious hazard to the American public, especially 

vulnerable consumers such as young, first-time buyers, recent immigrants and members 

of the armed forces. 

C. Used Cars are Affected by Fraud 

 Used cars are predominantly affected by title fraud. Used cars provide tremendous 

value to consumers, especially to low income consumers and first time car purchasers. 

However, without protections at the federal level, consumers will buy excessively 

damaged cars without knowing that they are risking their safety and the safety of their 

families. 

 

 

1

 “Wrecks in Disguise,” Consumer Reports, January 2002, pp. 28-35. 2

 “Salvage Autos on the Rise,” John Yoswick, Fender Bender, February 2006, p. 45. 3

 Ibid. 

4

 “Wrecks in Disguise,” Consumer Reports, January 2002, pp. 28-35.
64

D. How Damaged Vehicles End up in Consumer’s Hands 

 To best understand how title fraud enables unsafe salvaged vehicles to re-enter the 

stream of commerce, it is useful to consider the common sequence of events making up 

these often fraudulent transactions: 

1. Vehicle owner purchases insurance or vehicle is purchased by a self-insured 

entity such as an auto dealer or rental car company. 

2. Vehicle is damaged in flood, crash, or other devastating event. 

3. The consumer files a claim with their insurance company or the self-insured 

entity decides to have the vehicle essentially “fenced” at an auction in an 

attempt to avoid liability and raise privity issues. 

4. Insurer inspects vehicle and declares it a “total loss” and would be more costeffective to buy it and dispose of it via an auction than to pay for repairs. 

5. Insurer pays claim which is often less than the estimated value of vehicle prior 

to crash or flood to the consumer. 

6. The insurer may submit the title to the state where the claim was filed in order 

for the title to be “branded” if that is required by state law. Or—the insurer may 

violate the law and fail to submit the title to be branded. 

7. Insurer may destroy the vehicle or send “total loss” vehicle to auction with 

which it has a contract. Vehicle may or may not carry proper title. 

8. Auction takes possession of vehicle. Auction has contract with insurer to give 

insurer a percentage of the profits based on the sale of the vehicles or flat rate 

per vehicle. 

9. Auction advertises vehicle as “total loss” or “salvage” or “salt water damaged.” 

If the state required the title to be branded, and if the insurer does not violate 

the law, the title may carry a brand. 

10. Dealers, recyclers, rebuilders or individuals bid on vehicles, including on-line 

bidding. 

11. Legitimate recyclers dismantle vehicles, dispose of oil or other toxins properly 

and offer usable parts for sale as used parts to consumers, auto body shops, 

and/or mechanics. 

12. Unscrupulous rebuilders cut corners and make cosmetic repairs that leave the 

vehicles structurally unsound, but not visible to consumers. They lack the 

training, expertise, or desire to perform a proper repair. They tend to be 

unlicensed by any state. Some are based in other countries, including Mexico. 

13. Rebuilders sell the vehicle to another auction, or directly to dealers or 

curbstoners. Curbstoners are individuals who make repairs in their own shops 

or backyards and resell the cars individually to consumers. If the title was 

branded, the rebuilder, dealer, or curbstoner may send the title to a state where 

the brand is not recognized or carried forward, in order to “wash” it. Or they 

may simply use “White Out,” punch holes in the title, or counterfeit the title to 

“wash” the brand. There is a large incentive to commit fraud: a vehicle with a 

clean title can command a far higher price than one with a branded title. 

14. Dealer or curbstoner advertises vehicle as being in “mint condition” with low 

mileage. Typically, consumer does not see title prior to sale. If the consumer 

obtains a loan to buy the car, the lien holder obtains the title. The consumer 

may see the title only years later, when the loan is paid off, or not at all. If 

asked, dealer or curbstoner tells consumer the vehicle has a clean title. 

15. Dealers sell prior damaged cars with the representation, on the FTC-required 

Used Car Buyers Guide, that the vehicle is being sold with the remainder of the 

original factory warranty or an extended service contract. However, when 

problems arise, the consumer is denied coverage, based on prior damage. 

Dealer may well know that the car has been salvaged. 
65

16. Dealer may provide consumer with a Carfax report or other vehicle history 

report. However, such databases tend to have gaping loopholes. Some states 

still withhold information from the databases. Timing is also an issue. The 

vehicle may already have been sold at retail before its damage history is 

obtained by Carfax and entered into the database. Insurers have access to a 

better database, CLUE,5

 which is based on claims filed and is more timely and 

complete. 

17. Consumer has problems with vehicle and gets it inspected, or vehicle is in a 

subsequent crash, or the warranty or extended service contract coverage is 

denied due to prior damage, and at that point consumer realizes they have been 

defrauded. 

E. Natural Disasters such as Floods pose Particular Problems 

 Natural disasters such as Hurricanes Katrina, Rita and Wilma resulted in 

approximately 570,000-600,000 flood-damaged vehicles.6

 Most of those vehicles are 

grossly unsafe and are beyond proper repair: the electronic components will corrode; the 

air bags may not inflate in a collision; the brakes and seatbelts may not work; and they 

are also prone to toxic mold, and can pose a health hazard to anyone who rides in them, 

and also to small business owners and their employees who attempt to repair them.7 The 

economic impact is staggering: title-related car fraud costs consumers up to an estimated 

$11.3 billion each year.8 These cars are, however being sold today on at least one auto 

auction web site.9

 F. State Laws Vary Widely 

 The fact that state laws vary widely helps to provide the loophole that title frauders 

need to perpetuate their crimes. State laws concerning damage disclosure, rebuilding 

practices and threshold definitions for “salvaged vehicles” differ widely. This variation 

in state laws allows cars to go from state to state where cars with a salvaged title, as 

defined in one state, can be “washed” of its salvaged past if another state’s law has a 

weaker definition. In addition, states use different mechanisms to disclose damage of a 

vehicle to consumers, whether it is a specific letter next to the manufacturer of the vehicle 

or a larger notice across the title. The differences in states’ designations of salvaged 

vehicles make deciphering these definitions almost impossible for consumers. In 

addition, it provides a haven for fraudulent people or entities that choose to exploit the 

confusion and choose among different state laws to title a vehicle without a pejorative 

brand.

 States also can not easily share title information with one another. The National 

Vehicle Title Information System (NMVTIS) was established by the Department of 

Transportation by the Anti Car Theft Act.10 NMVTIS is a computerized database 

designed to provide information about histories of vehicles to law enforcement and 

consumers. However, NMVTIS has been plagued with problems such as lack of funding 

and 15 years after it was established, twenty seven states are submitting data and 

consumers do not have access to the database. 

 

5

 CLUE is a registered trademark of Choicepoint, Inc. 

6

 Jeff Brady, “Katrina and Recovery, Holes in Monitoring System Let Lemons Get Resold,” National 

Public Radio, February 1, 2006, available on the web at 

www.npr.org/templatesstory/story.php?storyID+5173717 

7 National Motor Vehicle Titling Information System Cost Benefit Analysis, Project Report, prepared 

for National Institute of Justice, U.S. Department of Justice, by Logistics Management Institute, June 

2001. 

8

 Ibid. 

9

 https://www.iaai-bid.com/hotpicks.aspx?type=flood 

10 Pub. L. 102-519, 102nd Congress, October 25, 1992. 
66

 In 1999, the GAO recommended that the Department of Justice perform a life cycle 

cost-benefit analysis to determine if additional federal investment in NMVTIS was 

justified. The analysis, completed in June 2001 by the Logistics Management Institute 

was prepared for the U.S. Department of Justice and concluded that it would cost $22 

million to establish NMVTIS and would save car buyers as much as $11 billion per 

year.11 The study found that seven states are participating in NMVTIS on a pilot basis.12 

The study found that if NMVTIS were fully implemented by all 50 states and the District 

of Columbia, it could achieve benefits in the range of $4 billion to $11.3 billion annually. 

The study also found that the present net benefits of NMVTIS would be substantial, 

ranging from $.06 billion to $9.5 billion. Further, the study found that the original cost 

estimates to implement NMVTIS in states and to establish a central management and 

coordination function were reasonable. 

 In addition to the difficulty in sharing title information, some state laws to not 

permit states to recognize each other’s title brands and carry them forward on new titles. 

Further, the variation in definitions makes it difficult to determine equivalents among 

state laws’ definitions making this even murkier for consumers who were able to obtain 

access to their car’s accurate title history. 

G. Damaged Vehicles Are on the Road and Posing Hazards 

 Each year, approximately 5 million vehicles become a total loss, or “salvage,” due to 

damage in crashes, floods, or similar incidents. As indicated above, many of these cars 

are sold by insurers at auctions. Unscrupulous insurers fail to accurately brand the titles 

as salvaged vehicles.13 Unscrupulous rebuilders cobble them together so they appear 

pristine, but in fact they are structurally unsound and may not offer protection in a 

subsequent collision.14 

 H. Other Entities That Profit from Rebuilt Wreck Frauds 

 Unscrupulous insurers, auto dealers, auto auctions, and rebuilders pocket billions in 

ill-gotten gains from the fraudulent sales of prior damage autos — at the public’s 

expense. 

 1. INSURERS 

 Some insurers appropriately destroy vehicles that are not repairable and brand titles 

of “salvaged” autos. But others engage in fraud by selling these unrepairable vehicles to 

auction without the accurate title brand.15 The incentive for this fraud is that insurers 

recoup more than the vehicle is accurately worth. The consequence is that these unsafe 

vehicles end up in the hands of consumers and on our roads posing a severe threat to 

public health and safety as well as posing severe economic restrains on the unwitting 

consumers who purchased them. 

 State Farm Insurance, for example, in 1998 settled a case brought by the Attorney 

General of Indiana, which argued that, “State Farm sold, exchanged, or transferred 

salvage vehicles it had acquired without obtaining salvage titles. . . . People who 

 

11 National Motor Vehicle Titling Information System Cost Benefit Analysis, Project Report, prepared 

for National Institute of Justice, U.S. Department of Justice, by Logistics Management Institute, June 

2001. 

12 Arizona, Florida, Indiana, Kentucky, Massachusetts, New Hampshire and Virginia. However 

Florida and Massachusetts have not fully implemented NMVTIS. This was finalized in 2001, 

therefore information is accurate as of that time, but may have changed. 

13 “Insurers split on fate of Katrina cars: What Insurers are doing,” Arlena Sawyers, Automotive 

News, October 31, 2005.

14 “Wrecks in Disguise,” Consumer Reports, January 2002, pp. 28-35. 15 “Insurers split on fate of Katrina cars: What Insurers are doing,” Arlena Sawyers, Automotive 

News, October 31, 2005.
67

purchased these vehicles did so without knowledge of the damage, safety, reliability and 

true value of these vehicles.”16 Late last year, State Farm settled another case with 49 

state attorneys general and the District of Columbia. State Farm admitted that it had 

resold between 30,000 and 50,000 totaled vehicles without appropriate salvage titles.17 

 2. CURBSTONERS 

 Curbstoners are individuals who purchase salvaged vehicles from auctions and 

personally repair them, often in their own backyard repair shops. These repairs can be 

deminimus at best and could cover up severe damage caused by collisions or floods. 

Once the cars are superficially or cosmetically repaired, these individuals will sell them 

to another individual, often an unsuspecting consumer with no knowledge of the car’s 

history. 

 3. NEW CAR DEALERS AND AUTO RENTAL COMPANIES 

 While used cars are by far the main victim of title fraud, some new cars may also be 

affected. New cars that would be affected would most likely be those in areas devastated 

by hurricanes and flooding. For example, new car lots located where flood waters rose 

may have hundreds of new cars under water. These vehicles could be transferred, by 

unprincipled dealers to other likeminded dealers without any indication of their flood 

histories. Thus, it is possible that consumers who perceive that they are purchasing a new 

vehicle may end up purchasing a vehicle with significant electronic and other problems. 

Manufacturers may not honor the car’s warranties since they know of the car’s history 

while the consumer does not. 

 4. DEALERS- CERTIFIED USED CARS 

 Unscrupulous dealers may sell “certified used cars” to unsuspecting consumers 

without representing that the used car has been salvaged. “Certified used- cars” are sold 

at a premium to consumers because of the more rigorous inspection required. However, 

sometimes the inspections either knowingly or unknowingly fail to identify a salvaged 

vehicle. Consumers are thus hit extra hard by having paid a premium for what they 

thought was a more thorough inspection but then end up with an unsafe car with a 

warranty that is void due to prior damage. 

 I. Data Bases- Existing Technology 

 Existing databases offered by such private entities as Carfax and Experian are 

seriously deficient in helping consumers avoid flooded and rebuilt wreck cars because the 

most important information is not provided to them. Flooded and rebuilt vehicles often 

don’t make it into their databases. Insurance companies have their own data bases which 

are not available to the public and withhold their damaged claims data from Carfax, 

Experian and consequently to the public.18 If the databases do receive data, it is often too 

late because the vehicles have already been sold to consumers. 

III. The Solution 

 In order to protect consumers from the consequences of title fraud, we propose the 

following solutions: 

 

16 “Attorney General Modisett, State Farm Settles Salvage Motor Vehicle Title Case,” News 

Release, State of Indiana Office of the Attorney General, July 28, 1998. 17 “State Farm Violated Agreement on Selling Totaled Cars,” St. Louis Post Dispatch, January 24, 

2005. 

18 CLUE is a registered trademark of Choicepoint, Inc. NMVTIS has never received data from 

insurance companies in part, because the Department of Justice has not yet written the rules for how 

this information is to be provided. 
68

1. Federal Legislation. 

A. Federal legislation is needed to require the permanent destruction and 

removal of flood and other excessively damaged vehicles from the roads 

where they pose a severe risk to public safety. The destruction of 

salvaged vehicles must involve the responsible disposal of such vehicles. 

Complete removal of severely damaged vehicles from the stream of 

commerce is necessary to adequately prevent these vehicles form being 

handled by unscrupulous entities, willing to prioritize profit over 

consumer health and safety and compliance with the law. 

B. Federal legislation should establish a national definition for salvage 

vehicles. 

 

 2. National Electronic Database. Insurers, self-insured entities — such as car 

rental and lease companies and large auto dealers and states must be required to provide 

information about damaged vehicles to a publicly accessible national electronic database 

on a timely basis. This information already exists but is exclusively for the use of 

insurers, manufacturers, lenders and car dealers. Since such information already exists it 

should be relatively easy to make it available to consumers, Such information is critical 

for consumers to make an informed decision about the car they seek to purchase. 

 Do to the fact that buyers typically don’t see the title during the purchase; any notice 

on the title (“title brands” such as “salvage” or “flood vehicles”) is not effective as a form 

of consumer disclosure. Such disclosure must exist in an accessible and affordable data 

base. In addition, licensed dealers must provide a copy of a vehicle’s title prior to 

consummating any car deal. 

 3. Public Disclosure. Any disclosure made to the publicly available database must 

be posted with the Buyers Guide in the window of any car offered for sale. The 

information must also be indelibly fashioned to the car itself. Since 1985, the Federal 

Trade Commission has required that a disclosure form called a “Buyers Guide” be posted 

in the window of every used car offered by a licensed dealer to the public. According to 

the National Academy of Science (NAS), on-vehicle disclosures are the most effective, 

leading to the NAS recommendation adopted by the National Highway Traffic Safety 

Administration to require crash test ratings to be posted on vehicles.19

 4. Remedies. Remedies must be at least as strong as those under the Federal 

Odometer Act and should be modeled on that Act. The Federal Odometer Act, which has 

existed since 1972, created a floor for states (not a ceiling) and allows states that have 

been targeted by title fraud perpetuators to strengthen protection for their citizens. 

Remedies under the Odometer Act include: private rights of action for victims, civil 

penalties imposed by the U.S. Department of Transportation and enforced by the U.S. 

Attorney General, criminal penalties enforced by the U.S. Attorney General, and civil 

actions for both injunctive relief and restitution brought by state attorneys general. 

 

19 As part of the Department of Transportation and Related Agencies Appropriations Act of 1995, 

Pub. L 103-331; September 30, 1994, Congress provided NHTSA with funds “for a study to be 

conducted by the National Academy of Sciences (NAS) of motor vehicle safety consumer needs and 

the most cost effective methods of communicating this information.” The NAS study was 

completed and released to the public on March 26, 1996. It is titled, “Shopping for SafetyProviding Consumer Automotive Safety Information,” TRB Special Report 248. Based upon its 

findings, the study makes recommendations to NHTSA on ways to improve automobile safety 

information to consumers. 
69

IV. Conclusion 

 Consumers currently act under a veil of ignorance when purchasing a used car. The 

free market place depends upon consumers making informed decisions, but the 

information most crucial to making an informed decision is either missing, due to 

intentional obfuscation of car titles or deliberate title washing exploiting variations and 

confusions in state laws. Cars are often one of the most expensive items a consumer 

purchases and motor vehicles are a source of transportation to work and school and, thus 

livelihoods. Unsafe vehicles are a threat to the consumers who unwittingly purchase 

them and to everyone else sharing the roads with them. Federal legislation removing 

salvaged vehicles from the market, providing a mechanism for publicly available 

information disclosing vehicle histories, and providing meaningful remedies for 

consumers who are harmed by violations of the law, as well as meaningful penalties 

against those who violate it, are essential to protecting consumers from the consequences 

of title fraud. 

Attachments: 

1) Letter sent by Coalition of Consumer Groups to House and Senate Commerce 

Committee members on February 22, 2006. 

2) “Washed Up Cars Trickle to Market, “Andrew Martin and Andrew Zajac, Chicago 

Tribune, Reprinted in Los Angeles Times, December 30, 2005. 

3) Information from the IAII web site offering flood vehicles for sale. 

https://www.iaai-bid.com/hotpicks.aspx?type=flood 

4) “Wrecks in Disguise,” Consumer Reports, January 2002, pp. 28-35. 

5) Summary, National Motor Vehicle Titling Information System Cost Benefit 

Analysis, Project Report, prepared for National Institute of Justice, U.S. Department 

of Justice, by Logistics Management Institute, June 2001. 

6) “A Dealer’s Guide to the Used Car Rule,” Federal Trade Commission 

ATTACHMENT # 1 

CARS (CONSUMERS FOR AUTO RELIABILITY AND SAFETY) • 

CONSUMER ACTION • CONSUMER FEDERATION OF AMERICA • 

NATIONAL ASSOCIATION OF CONSUMER ADVOCATES • 

U.S. PUBLIC RESEARCH INTEREST GROUP (U.S. PIRG) 

February 22, 2006 

Re: URGENT: Federal auto Katrina flood car/salvage fraud legislation 

Dear Member of Congress: 

 As consumer organizations dedicated to protecting consumers’ health, safety and 

financial stability, we would like to provide you with information about auto salvage 

fraud and offer our suggestions for protections that should be implemented at the federal 

level to better protect consumers from this pervasive and serious problem. 

 Auto salvage fraud is the worst problem America’s used car buyers face.20 People 

riding in rebuilt wrecks have been killed and maimed. These vehicles are sold across the 

nation and pose a serious hazard to the American public, especially young, first-time 

buyers. 

 

20 Source: National Association of Attorneys General 
70

 Hurricane Katrina and other recent storms have the potential to dump hundreds of 

thousands of flood-damaged cars on the market. Used cars provide tremendous value to 

consumers, but without protections at the federal level, consumers will buy excessively 

damaged cars without knowing that they are risking their safety and the safety of their 

families. Federal legislation is URGENTLY needed to protect buyers from purchasing 

these unsafe vehicles, which have already started to enter the automotive marketplace. 

While some insurers have crushed flood cars, others are sending to auctions, knowing 

they will eventually be sold to unsuspecting car buyers. 

 Here is a brief overview of the impact that auto salvage fraud has on American 

consumers: 

• Approximately 570,000-600,000 vehicles were flood-damaged in Hurricanes 

Katrina, Rita, and Wilma.21 Most of those vehicles are grossly unsafe and are 

beyond proper repair. The electronic components will corrode. The air bags may 

not inflate in a collision. The brakes may not work. They are also prone to toxic 

mold, and can pose a health hazard to anyone who rides in them, and also to small 

business owners and their employees who attempt to repair them.22

• Title-related car fraud costs consumers up to an estimated $11.3 billion each year. 23

• Each year, approximately 2.5 million vehicles become a total loss, or “salvage,” due 

to damage in crashes, floods, or similar incidents. Of those, an estimated 1.5 

million are rebuilt and eventually purchased by consumers for use as transportation. 

These vehicles may appear pristine, but in fact they are structurally unsound and 

may not offer protection in a subsequent collision. They endanger the lives of 

anyone riding in them, as well as other drivers who share the roads. 

• Unscrupulous insurers, auto dealers, auto auctions, and rebuilders pocket billions in 

ill-gotten gains from the fraudulent sales of prior damaged autos — at the public’s 

expense. The nation’s largest insurer, State Farm, has admitted it sent between 

30,000 and 50,000 total loss “salvage” autos to auction without obtaining a 

“salvage” title, as required by law. 

• The illicit sale of non-repairable and “salvage” vehicles contributes to serious 

crimes including vehicle theft.24

• Existing databases offered by Carfax and Experian are seriously deficient in 

protecting consumers from flooded and rebuilt wreck cars. Flooded and rebuilt 

vehicles often don’t make it into their databases. Insurance companies withhold 

their damaged claims data from Carfax, Experian and the public. Dishonest sellers 

and insurance companies manipulate titles and launder them to conceal the 

vehicles’ true histories. 

 The salvage car problem is urgent considering the hundreds of thousands of cars 

damaged in last year’s severe hurricanes. Given the seriousness of the problem, our 

coalition has developed four recommendations that must be included in any legislative 

solution. We urge you to incorporate these vital protections in legislation as it moves 

forward: 

 

21 Carfax, many news reports 

22 Trade associations for small businesses that provide auto repairs 23 Source: National Motor Vehicle Titling Information System Cost Benefit Analysis Project Report 

June, 2001, prepared for the National Institute of Justice, U.S. Department of Justice, by Logistics 

Management Institute. In 1999, the GAO recommended that the DOJ perform a life-cycle costbenefit analysis to determine if additional federal investment in NMVTIS was justified. The report 

concluded that NMVTIS would cost $22 million to establish and would save car buyers as much as 

$11 billion per year. 

24 See the Anti Car Theft Act of 1992, Public Law 102-519.
71

1. Destruction of Flood and Excessively Damaged Vehicles. Federal legislation is 

needed to require the destruction of flood and other excessively damaged vehicles. This is 

an urgent matter—these vehicles must be taken off the road to prevent death and serious 

injury. 

Auto salvage auctions are already advertising flood cars on their websites, and 

both new and used flood cars have been shipped from Mississippi, Louisiana and 

other Gulf region states, to other states. There is NO legitimate purpose for 

allowing a vehicle that has been submerged in salt water to re-enter the 

marketplace. 

2. National Electronic Database. Insurers and self-insured entities — such as car rental 

and lease companies and large auto dealers — must be required to provide information 

about damaged vehicles to a publicly accessible national electronic database on a timely 

basis. 

Since buyers typically don’t see car titles during the purchase, any notice on the 

title (“title brands” such as “salvage” or “flood vehicles”) is not effective as a 

form of consumer disclosure. 

3. “Buyers Guide” Disclosure. Any damage disclosure made to the publicly available 

database must be posted with the Buyers Guide in the window of any car offered for sale. 

Since 1985, the Federal Trade Commission has required that a disclosure form 

called a “Buyers Guide” be posted in the window of every used car offered by a 

licensed dealer to the public. 

According to the National Academy of Science (NAS), on-vehicle disclosures are 

the most effective, leading to the NAS recommendation adopted by the National 

Highway Traffic Safety Administration to require crash test ratings to be posted on 

vehicles.

4. Remedies. Remedies for violations of these provisions must be at least as strong as 

those under the Federal Odometer Act and should be modeled on that Act. 

The Federal Odometer Act, which has existed since 1972, created a floor for states 

(not a ceiling) and allows states that have been targeted by scammers to strengthen 

protection for their citizens. 

Remedies under the Odometer Act include: private rights of action for victims, civil 

penalties imposed by the U.S. Department of Transportation and enforced by the 

U.S. Attorney General, criminal penalties enforced by the U.S. Attorney General, 

and civil actions for both injunctive relief and restitution brought by state attorneys 

general.

 While the U.S. Senate Commerce Committee Subcommittee on Consumer Affairs, 

Product Safety, and Insurance held a hearing on this topic last November 16, 2005, where 

all the participants expressed agreement there was an urgent need to act to protect the 

public from hundreds of thousands of grossly unsafe flood cars, the Congress has yet to 

act. Meanwhile, as reported in various major news reports, the flood cars are starting to 

enter the marketplace. 

 We ask that you support legislation to protect consumers from the safety and 

economic ramifications of owning a flood damaged or rebuilt salvage auto, and that you 
72

urge any of your colleagues who take the lead on this issue to act on an urgent basis. We 

look forward to working with you to ensure that such legislation adequately protects 

consumers. 

 If you should have any questions about this letter or our position in this matter, 

please call Rachel Weintraub of Consumer Federation of America, our designated contact 

person, at 202-387-6121. 

Sincerely, 

Rosemary Shahan 

President 

CARS (Consumers for Auto Reliability and Safety) 

Linda Sherry 

Director, National Priorities 

Consumer Action 

Rachel Weintraub 

Director of Product Safety and Senior Counsel 

Consumer Federation of America 

Ira Rheingold 

Executive Director and General Counsel 

Bernard Brown 

Member, Board of Directors 

National Association of Consumer Advocates 

Paul Brown 

Consumer Advocate 

U.S Public Research Interest Group (U.S. PIRG) 

ATTACHMENT # 2 

Reprinted by Los Angeles Times.com: National News December 30, 2005 

THE NATION Washed-Up Cars Trickle to Market # Police and insurance officials 

are trying to keep thousands of vehicles damaged by Hurricane Katrina from being 

resold. 

By Andrew Martin and Andrew Zajac, Chicago Tribune 

 ST. BERNARD PARISH, La. As the vast vehicular wreckage wrought by Hurricane 

Katrina is carted away, law enforcement and insurance officials are anticipating the 

arrival of tens of thousands of those vehicles on used-car lots across the nation. 

 Already there is anecdotal evidence of flood-damaged vehicles turning up on lots in 

Florida, Arizona, New York and Oklahoma, authorities said. Two months ago, at least 

seven 2005 Nissans listed in the National Insurance Crime Bureau database as hurricanedamaged were sold at an auction in Los Angeles. 

 A task force of insurance investigators and Louisiana law enforcement officials is 

building a database of flooded cars to try to prevent vehicles from being spruced up and 
73

foisted upon unsuspecting used-car buyers. The database at http://www.nicb.org lists 

more than 205,000 vehicles. 

 On a brisk afternoon this month, Tim Boucher stood in the median of a four-lane 

road in St. Bernard Parish checking the paperwork of truck drivers hauling away Katrinadamaged vehicles. 

 Boucher, a special agent with the National Insurance Crime Bureau working on the 

database, said: “It’s really going to be incumbent upon the consumer to check.” 

 As he spoke, sport utility vehicles with an inch of mud and straw on the floor, 

minivans with seats cracked and puckered by water, and one car after another with the 

rank smell that comes from being submerged in muck were towed away. 

 Four months after Katrina swamped New Orleans and pounded the Mississippi 

coastline, thousands of vehicles remain on streets or buried under wreckage. Thousands 

more have been towed away into the murky and lucrative world of salvage cars. 

 Though most experts agree that cars that have been submerged in saltwater should 

never be driven, they also agree that as many as half of the vehicles that were damaged 

by Katrina probably will be rebuilt and resold. 

 About half of an estimated 500,000 vehicles that were damaged by the storm 

weren’t covered by comprehensive insurance, and with no insurance money to buy a 

replacement, the owners may be enticed to clean them up and resell them. 

 Another factor encouraging resales is loopholes in the nation’s system for tracking 

vehicles that have been totaled. If a flood submerges a vehicle, many states require that 

the title reflect the damage by listing the car as “salvaged” or “flood-damaged.” But 

experts agree that it is relatively easy for a rebuilder to buy a flood-damaged vehicle at 

auction, fix it up and “wash” the title of any evidence of the flooding by obtaining a new 

title in a state where title laws are weaker. 

 “What the smart individual who wants to be deceptive will do is take that title to 

another state like Arkansas, do a title washing and then take that car to Illinois as an 

Arkansas vehicle with no salvage on the title,” Boucher said. 

 Herb Lieberman, an automotive recycler based in Santa Fe Springs, Calif., and a 

board member in the Automotive Recyclers Assn., is among those in the salvage industry 

who hope that the Katrina disaster gives some momentum to a long-stalled effort to 

complete a nationwide database of vehicle identification numbers. 

 With a database, state officials could easily track an automobile’s state-by-state 

lineage before issuing a new title; currently, about half of the vehicles in the nation are 

listed in an identification number registry. 

 Salvage dealers also are drawing up proposed federal legislation that would create a 

national standard, a “certificate of destruction,” for cars that are totaled. 

 Under the proposal, when a licensed mechanic or insurance adjuster determines that 

the cost to repair a car exceeds its cash value, its identification number would be 

permanently retired. That would mean the vehicle’s owner couldn’t obtain a new title in 

another state, or slap the number of a totaled car onto a stolen auto of similar make, 

model and year. 

 Without such legislation, said Jim Watson, president of the Automotive Recyclers 

Assn., “We’re going to see these [flood-damaged] cars in the market for the next three or 

four years.” 

 Such legislation has previously been opposed by the insurance industry because 

rebuilders pay more for salvaged cars than scrap companies do. 

 The removal of flooded vehicles is part of a broader effort, overseen by the Federal 

Emergency Management Agency, to clear debris that stretches for 100 miles along the 

Mississippi coastline and into the New Orleans metropolitan area. 

 Because there is a thriving market for stolen vehicles, autos are being handled 

differently from the rest of the debris. Identifying and tracking the hurricane-damaged 

vehicles not only prevents fraud but makes it easier for the vehicle’s owner or the 
74

insurance company to recoup some of the vehicle’s value by selling it to a rehabber or for 

scrap. An analysis by the consulting firm Towers Perrin estimated that insured losses 

from damaged automobiles ranged from $1 billion to $2 billion. 

 Experts warn that a car that has sat in saltwater is bound to have problems, even if it 

is repaired. Saltwater corrodes metal parts, gums up joints and damages electrical and 

computer systems, potentially ruining air bags, among other things. Another problem is 

that the water could leave behind traces of mold, chemicals or E. coli bacteria in the 

vehicle’s interior. 

 “To me, the biggest concern about cars that are sitting in brackish water is air bags,” 

said Lt. Allen Carpenter, head of the Louisiana State Police insurance fraud section. 

“You’re dealing with a corroded sensor that may or may not work.” 

 To create a database of vehicle identification numbers from flood-damaged cars, a 

plan was devised in which local governments would tow vehicles to designated lots, 

where state police and insurance investigators would jot down the numbers and plug 

them into the database. 

 But the plan didn’t work because most of the parishes were too overwhelmed with 

other problems. 

 In Louisiana, the state police, along with the National Insurance Crime Bureau, took 

over the task Sept. 30, a month after the storm hit, and they have been trying to catalog as 

many as 350,000 damaged vehicles in the New Orleans area since. Besides the 

checkpoint in St. Bernard Parish, police and insurance investigators are going street by 

street in New Orleans and writing down vehicle identification numbers. 

 The challenges they face are evident in the Lower 9th Ward, which was devastated 

by a levee rupture. On a recent tour of the neighborhood, there were demolished cars 

scattered on streets, pushed up against trees and crushed beneath houses that were lifted 

off their foundation. 

 “When you start hearing estimates of 350,000 cars and there are 28 of you, and as 

many [insurance bureau] agents, that’s a lot of cars,” said Louisiana State Police Sgt. 

Gary Bridges. “It’s a huge job?. You tell the guys, ‘This has never been done on this 

scale.’ 

 “It’s kind of hard to pump them up because you don’t know how long you’re going 

to be doing this,” he said. “You just have to keep your sense of humor.” 

 Andrew Martin reported from Louisiana and Andrew Zajac reported from 

Washington. 
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 MR. STEARNS. I thank the gentlelady. I will start with my questions. 

Mr. Regan, the chart that you have is the chart that I thought I would use 

and start from left to right, where the first green box--I wonder if we 

could put it up. Yes, it says vehicles totaled due to flood, accident, or 

theft. How many vehicles a year fit into that green category, the total? 

 MR. REGAN. We understand that insurance companies total 

approximately five million vehicles a year. We don’t have breakdown 

beyond that of how many would be flood, how many would be salvage, 

how many would be stolen and recovered. 
110

 MR. STEARNS. Mr. Bryant, do you confirm that, five million a year? 

 MR. BRYANT. I don’t know. 

 MR. STEARNS. You don’t know. So then, Mr. Regan, five million a 

year is a large number, but you can’t break that out in terms of theft, 

total, or flood damage? 

 MR. REGAN. That is correct, and the reason that we can’t break that 

out is, as I said in my testimony, it is a 51-jurisdiction titling regime, and 

also there is no central database for all totaled vehicles. If there were a 

central database for all totaled vehicles, and a simple statement of why 

each of those vehicles was totaled, then the data would be readily 

available. 

 MR. STEARNS. If we in Washington set up a total database, the 

Justice Department could have it, how would you suggest we get the 

States to comply? 

 MR. REGAN. Well-- 

 MR. STEARNS. The States can do it now voluntarily. 

 MR. REGAN. Yes, sir. I think-- 

 MR. STEARNS. And I will ask you, Mr. Turner, what you think of it. 

 MR. REGAN. What we are proposing, quite frankly, is more out of the 

box than simply relying on the various DMVs. We are proposing a 

separate database, which is total loss, separate and distinct from an 

insurance company’s obligation to report directly to the DMV. We are 

saying the day that a total loss check is cut, send that information to this 

central total loss database. Then it becomes in the public domain. 

 MR. STEARNS. And the VIN number is-- 

 MR. REGAN. That is right. VIN, date of total loss, reason for total 

loss, and odometer reading at total loss. Then that is a red flag that is 

forever in the public domain regardless-- 

 MR. STEARNS. Okay. 

 MR. REGAN. --of what Glenn’s people do, regardless of whether the 

insurance company notifies the DMV, regardless of whether it ever gets 

into another database, it is out there forever. 

 MR. STEARNS. Now, that seems to be the crux of this. If we had a 

Federal or a mass database in which, when Equifax gives me something 

on a car, I sometimes asks them, well, how can I be sure that this is not a 

car that has been salvaged? They can’t really provide that insurance 

because there is no master database. 

 MR. REGAN. That is correct, and the current vendors only receive 

database that the DMVs receive. 

 MR. STEARNS. Yes. 

 MR. REGAN. And as I said in direct testimony, if the insurance 

company never obtains a title for the damaged vehicle, there is no 

evidence in the public domain that that vehicle was totaled. 
111

 MR. STEARNS. Mr. Turner, do you have anything to add to that? 

 MR. TURNER. Well, I think, basically it is-- 

 MR. STEARNS. Just put your mic on if you could. 

 MR. TURNER. Oh. Basically to be able to say that the primary 

purpose for NMVTIS was to be able to have a source or a database to be 

able to put this information in. Being that this database is real time, one 

of the issues that we have is to be able to, and hopefully, maybe you 

could help us, is to get a rule written to provide that insurance companies 

would provide this data to the national database and also the junk and 

salvage yard data as well. That way that information is available to not 

only the States, but it is available to the consumers as well. 

 MR. STEARNS. I understand that there are about 18 States that don’t 

comply here, 14 I am told by staff, that really don’t comply. I guess the 

question is why doesn’t every State comply? Is there a reason why they 

are not compling in the sense of providing all of this information. 

 MR. TURNER. Through the national database? 

 MR. STEARNS. Yes. 

 MR. TURNER. One of the key reasons there, of course, is funding and 

that is why we are back at the table. And we are forever appreciative of 

the funding that we have gotten so far. 

 MR. STEARNS. So without Federal legislation, it would be a carrot 

and a stick. We would have to say, okay, you cannot get Federal funds 

unless you do this, or provide more funding to the States that do it, is 

what you are saying. 

 MR. TURNER. Basically to provide the funding to do that and that is 

why we had estimated $13-and-a-half million over the next five years 

will allow us to get the other States in. You know, it may be noted that 

we do have 52 percent of the Nation’s data on the national database right 

now. We are targeting four key States right now to be able to bring that 

figure up to 81 percent, the State of Illinois, the State of New York, the 

State of Michigan, and the State of California. We are working closely 

with these four States to get them on, and that would give us 81 percent. 

 MR. STEARNS. Okay. Mr. Bryant, you know, when I look at this 

chart and I see the insurance company processes the claim, but you 

know, I had a 1990 Buick LeSabre, and I gave it to my son, and he got in 

an accident and the insurance company wanted to total it, but I got in the 

car and drove it around, and it seemed to drive fine, except the front end 

was bashed, and I could get the front end fixed, but the insurance 

company said they wanted to total it. So they wouldn’t give me the 

check unless I agreed. So can’t the insurance company, since they are 

the ones that are most involved, couldn’t we get them more compliant to 

take care of this instead of the States, or is that a total different issue? 
112

 MR. BRYANT. Well, I think that is what happened with the Katrina 

database, Mr. Chairman. I mean, the insurance companies, after 

discussions, they agreed to put the VINs of the vehicles which they paid 

damage on, they put it in this database and that is how it was created. 

 MR. STEARNS. Okay. Okay. 

 MR. BRYANT. And that is where the insurance companies are really 

trying, and NICB, were trying to do the right thing here. 

 MR. STEARNS. Okay. We are going to do a second round here, so I 

will yield back as my time has expired. Ms. Schakowsky? 

 MS. SCHAKOWSKY. Does everyone here agree that there ought to be 

a national database? Is there anyone who disagrees, there ought to be a 

national database of some--okay. So however we do it, at least we all 

definitely agree on that. I wanted to ask Mr. Regan, does your 

association do anything to police fraudulent sellers? 

 MR. REGAN. Our association is constantly engaged in best practices, 

educational material, and workshops for our members. And on this 

specific issue, one thing we have done is to impress upon the trade-in 

managers at dealerships, the due diligence that they have to do on 

vehicles when they come as trade-ins. Anecdotally, our incoming 

chairman from Kansas received a call from law enforcement a year or 

two ago, saying that a vehicle that he had inadvertently sold had been a 

stolen vehicle. He asked if he could go with law enforcement so that law 

enforcement could take the vehicle back and that he could offer the 

consumer, in essence, restitution for the original purchase price. We 

encourage our people to be engaged in this process, to work with law 

enforcement to try to correct these problems. 

 MS. SCHAKOWSKY. Mr. Watson, what do you do about fraudulent 

recyclers? 

 MR. WATSON. Fraudulent recyclers? We have no idea how they are 

fraudulent or not because there is no database. If we were active in the 

Department of Justice Stolen Parts Committee in 1992, after the 1992 

Anti-Car Theft Act, we were working with them to create a database of 

stolen parts and that, just like the NMVTIS program, it never went 

anywhere. 

 MS. SCHAKOWSKY. Mr. Bryant, the charge was made that really the 

insurance industry has a lot to gain by cleaning titles, and I am looking at 

how State Farm, which is actually headquartered in Illinois, the Nation’s-

-I am reading, State Farm, the Nation’s largest auto insurer, continued to 

resell thousands of vehicles nationwide without disclosing they had been 

in wrecks, even though the company had agreed years earlier to stop the 

practice. The company announced this month that it would pay $40 

million to owners of thousands of totaled vehicles that State Farm had 

sold without State salvage titles as required by law. Actually, this article 
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goes on to say, for many consumers, that settlement is actually a pretty 

bad deal, in fact. So we are talking about huge amounts of money that 

can be laid at the feet of the insurance industry itself. Apparently, State 

Farm admitted to about 50,000 vehicles being fraudulent re-titled and 

sold in this agreement. I mean, don’t we have to change the incentives 

here? 

 MR. BRYANT. What do you mean? 

 MS. SCHAKOWSKY. Well, I mean if you total loss a vehicle and then 

the insurance company wanting to make up as much money as possible, 

would have an incentive to conduct what State Farm has done. 

 MR. BRYANT. Well, I believe, just from my own experience, which I 

have been in this business for about six years from another career, but 

from what I have seen and particularly with the Katrina database, State 

Farm is one of the major contributors. And so this settlement that you 

are speaking of, I think if there were a national database issue here, title 

washing and some of these things would go away, and certainly it would 

be a financial benefit to the industry and certainly to the public. 

 MS. SCHAKOWSKY. Well, how would it be a financial benefit to the 

industry? It seems like the industry has a financial advantage in actually 

engaging in this kind of practice. 

 MR. BRYANT. Well, I think if title washing, selling cars, cloning, and 

some of these issues were eliminated, I think that would be to the 

advantage of the public and to the industry. 

 MS. SCHAKOWSKY. Ms. Weintraub, can you give us examples of 

some of the differences in State laws that make it difficult currently to 

police this kind of practice? 

 MS. WEINTRAUB. Sure. Well, some States have different definitions 

of what salvage is, which vary by the percentage of the total loss of the 

vehicle. For example, some States may say a car is totaled if 80 percent 

of the value of the car has been damaged, and States vary. I think there 

is one State that has 65 percent and it goes up, up the scale from there. 

There are also different actually definitions of junked, salvaged, and 

severely damaged, so those differences in actual definitions mean that a 

car in one State that would, let us say, have a 75 percent threshold, it 

would go to a State that has a different threshold. 

 MS. SCHAKOWSKY. Does it make sense to have some differences, for 

example, if the body is really damaged by hail, for example, and it looks 

totally trashed, but in fact could be improved to run. I mean, are those 

differences including in definitions? 

 MS. WEINTRAUB. Well, I think it has to do with the actual value. For 

example, air bags are very expensive, so a car may be in a collision and 

the most expensive damage may actually be to the air bags, but because 

they are so expensive and they are such a large percentage of the value of 
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the vehicle, then it would be totaled. Also because of the differences 

between new cars and older cars, you know, the percentage would have a 

very big significance. 

 MS. SCHAKOWSKY. There is value and safety always the same thing? 

Do you know what I am saying? 

 MS. WEINTRAUB. Right. It is a very interesting question and I think 

it is a complicated equation. 

 MS. SCHAKOWSKY. Thank you. 

 MR. STEARNS. The gentleladys time has expired. Mr. Barton? 

 MR. BARTON. Thank you, Mr. Chairman. How many of you think 

that the Congress should act in this issue? Just raise your hand. So 

nobody thinks that we should leave it to the States? Now, I think--yes, 

sir. Did you want to say something? 

 MR. WATSON. Mr. Barton, to comment on that, the State is the 

problem and that is why we are in this mess to begin with now. There is 

no consistency. There is a patchwork of inconsistent laws and rules, and 

these thieves and fraudsters are finding ways to circumvent the rules. 

The State Farm issue, a perfect example. There is law in place. They 

circumvented the law. It has to be Federal. We have to act now. And 

because the States cannot do it, because they have had ample 

opportunity, it is the responsibility of the Federal Government to step in. 

 MR. BARTON. Okay. My opening statement indicated that as many 

as 600,000 vehicles have been totaled. Is that a good number, totaled in 

Hurricane’s Katrina and Rita? 

 MR. WATSON. The last number I saw was 570,000 total loss. 

 MR. BARTON. We are pretty close. 

 MR. WATSON. Yes, sir. 

 MR. BARTON. Okay. One of you suggested that we create an entire 

new database for totaled vehicles. Do the others agree with that? No. 

The gentleman who shook his head no, why do you not agree with that? 

 MR. TURNER. Glenn Turner representing AAMVA from the State of 

Florida. Basically because the NMVTIS system will handle that now 

with that information going into it. Right now there is no rule from this 

governing body that would require that information to be put in the 

NMVTIS system. 

 MR. BARTON. Okay. The gentleman who suggested it, what is your 

response to that? 

 MR. REGAN. Yes, sir, Mr. Chairman. Our problem with the current 

NMVTIS system is that it may provide information between title clerks, 

but we cannot get the information that the title clerks have. 

 MR. BARTON. Who is “we?” 

 MR. REGAN. Dealers, consumers, anybody in the private sector. We 

just don’t have access to that information now. And unless and until that 
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information can be packaged and marketed to the general public in an 

effective way, then the NMVTIS program just doesn’t work, because the 

DMVs document transactions after the fact. We want to totally 

reconfigure this model so that purchasers have available information 

before they make a purchase decision. 

 MR. BARTON. Mr. Turner, what is your response to that? 

 MR. TURNER. Of course, do understand, this is a love fest down here. 

We all work closely together and help each other out. Basically, the-- 

 MR. BARTON. Like us in Congress. 

 MR. TURNER. Absolutely. Yes, sir. 

 MR. BARTON. The same principle. 

 MR. TURNER. The issue here, of course, is that the NMVTIS system, 

and AAMVA with 52 percent of the data available now, and with the 

four States, bringing them on and having 81 percent, we are pushing out 

new efforts to be able to put this system out to the public and to the 

dealers. We have talked with Mr. Regan many times. We know the 

value that this information would have to our dealers nationwide. 

 MR. REGAN. Mr. Chairman, one additional point. We have worked 

long and hard with AAMVA to try to make this happen, but the States 

are creatures of statute. The DMVs are executive branch agencies. They 

can only act pursuant to legislative grants of authority, and they have 

very strict limits in some States on how they can market this date in 

general. 

 MR. BARTON. Well, if we accepted your concept of creating this 

brand new database, who would manage it? Where would it go? Who 

would be the repository, the overseer of that? 

 MR. REGAN. There are two ways to do that. One, you could put it in 

a national registry that would be accessible. 

 MR. BARTON. But somebody has to manage it. Somebody has to 

actually monitor it, control it, upgrade it. 

 MR. REGAN. Absolutely. And we think that the vigorously 

competitive private sector information industry is fully capable of doing 

that today. 

 MR. BARTON. But who? Do you want me to do it? 

 MR. FUGLESTAD. Mr. Chairman, Mr. Chairman? 

 MR. BARTON. Or do you want the young lady down at the end to do 

it? Do you want Chairman Stearns-- 

 MR. FUGLESTAD. Mr. Chairman? 

 MR. BARTON. --Mrs. Schakowsky? I mean, just somebody has got 

to actually be responsible. 

 MR. FUGLESTAD. Representing private industry, I think what Mr. 

Regan is alluding to is companies like Experian that have this kind of 

experience. I mean, we do right now host a national database of vehicle 
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information. The NMVTIS system, there are differences. We have 

worked with AAMVA in trying to supplement-- 

 MR. BARTON. But now you are a for-profit operation, right? 

 MR. FUGLESTAD. Correct. 

 MR. BARTON. So you would charge a fee to do it. 

 MR. FUGLESTAD. Well, we would have additional trade-offs and 

such on information that would supplement what we currently have. But 

yes, we are a for-profit organization. 

 MR. BARTON. Ms. Weintraub, you have got a comment? 

 MS. WEINTRAUB. Yes, I do. Thank you, Mr. Barton. We believe 

that the Department of Transportation should manage a separate 

database. While the private sector has gone a long way in providing 

information, there are a lot of loopholes, but we think that the private 

sector, Experian, CARFAX, as well as States and insurers, should report 

this information to a publicly available, accessible, and affordable 

database. 

 MR. BARTON. Mr. Regan, do you oppose that? 

 MR. REGAN. Our concern is, how soon can a consumer get the 

information; how soon can a dealer get the information? If we were 

dependent upon a Federal agency, we are not going to get it as fast as if 

the private sector is allowed to leverage that information, manage it, 

interpret it, and send it back out. The private sector’s business is just 

that. Again, the NMVTIS system, as originally intended, is not a system 

that would give this information to consumers. It was originally intended 

that a private sector partner would leverage that information and sell it at 

a cost-effective rate to the private sector. 

 MR. BARTON. My time has expired. Mr. Chairman, could I ask one 

more question? 

 MR. STEARNS. Absolutely. Go ahead. 

 MR. BARTON. You folks are all for some sort of a federalization of 

this issue. Who is not here that would oppose it? There is bound to be 

somebody. 

 MR. WATSON. The insurance companies. 

 MR. BARTON. The insurance companies. Why would they oppose 

it?. 

 MR. WATSON. Money. 

 MR. REGAN. Right. 

 MR. WATSON. They get more money if they can mask the identity of 

the vehicle. It has been testified here already that a vehicle that does not 

have a brand is worth more than a vehicle that does have the brand. So if 

the vehicle does not have a brand and you know, witnessed also by State 

Farm Insurance Company selling vehicles with no brands. They are 

fraudulent selling these vehicles. 
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 MR. BARTON. Ms. Weintraub, do you agree with that? 

 MS. WEINTRAUB. In large part, yes. Also the insurers have their own 

databases. There is one called Clue, for example, that consumers do not 

have access to. I think some other private entities do. So the information 

already exists, but it is not being leveraged. The insurance industry has 

not provided information to NMVTIS yet, and it is in large part because 

DOJ hasn’t written the rules yet to figure out how to ask and how to 

obtain that information. 

 MR. BARTON. Well, Mr. Chairman, my time has expired and I 

appreciate your hospitality. I would encourage you to work with Mrs. 

Schakowsky. I will touch base with Mr. Dingell, and I think we maybe 

should pursue a legislative draft and put it out for review. It looks like 

this is an issue that something needs to be done on. 

 MR. STEARNS. I thank the Chairman. 

 MR. BARTON. I thank the committee and I thank the witnesses. 

 MR. STEARNS. I think the point is well taken that at least a database, 

at the very minimum, should be established so that we can have an 

understanding of what the problem is, and that is what you are 

suggesting. The gentleman from Texas, Mr. Green. 

 MR. GREEN. Thank you, Mr. Chairman, and I am glad the Chairman 

and--well, thank you and the Ranking Member for holding this hearing. 

We let the Chairman talk about some type of legislation, because I have a 

district that I represent in Houston and Texas really didn’t change our 

State law until after the Allison experience, and that was mostly in the 

district I represent, but now we have a half a million vehicles flooded 

with Katrina and Rita, and both Mr. Barton’s district and those of us in 

Texas and I guess Alabama and Georgia will also see those vehicles. 

That is why I am glad everyone voted and that we will see some 

legislation, because that is important. 

 Mr. Bryant, in your testimony you mentioned that Congress should 

identify impediments implementing the National Motor Vehicle Title 

System. What are some of the impediments you see in your work with 

the National Insurance Crime Bureau? Is it mainly the States not 

cooperating? 

 MR. BRYANT. Well, you have 51 different systems and-- 

 MR. GREEN. Yes. 

 MR. BRYANT. --frankly, when you have a good titling system in 

some States and some they are not, and it is just that some are very lax, 

and so this encourages a criminal to wash titles or cars or whatever. I 

mean, just the inconsistency is the harm here. 

 MR. GREEN. Mr. Turner, your website says there is 27 States that 

participate in the National Motor Vehicle Title Information System? 
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 MR. TURNER. Yes, sir. Actually, that is just updated to 28. And I 

think it is important to know how those 28 or when those 28 came on. 

There is somewhat of a stigma out there that in 1992, the funding began 

and it has been a 14-year process and not many people have gotten on 

board. But understand that the funding came in in 1996, and then the 

database was built by 1998. We had a GAO audit after that for some 

kind of efficiency that stopped it. Then we had Y2K, which I know 

Texas, because my friends out there, we all stopped doing anything a 

year and a half before Y2K, and then after that it was 9/11. So if you 

look at 2001 and 2002, when we only had seven jurisdictions on board, 

and we have gone from seven to 28 jurisdictions in just four years, the 

actual time frame in which this has been done has been very quick. The 

States are really excited about this and want to come on board, but it 

does take some funding. 

 MR. GREEN. Well, I notice, and unless it is updated, 17 States are 

participating right online information and 10 provide batch information, 

so it looks like you have, if 28 only out of the 50 or 51, I guess, we still 

have a ways to go even though, you know, you had problems with Y2K 

that everyone had. 

 MR. TURNER. Well, could I interject something? 

 MR. GREEN. Sure. 

 MR. TURNER. As one thing we have said, we are working closely 

with Illinois, Michigan, New York and California. Bringing those four 

States on will bring us up to 81 percent of the Nation’s data on that 

system. 

 MR. GREEN. Okay. 

 MR. TURNER. And it just-- 

 MR. GREEN. Yes. I was going to ask you how many urban States 

and population, because that is important. And I know Texas is one of 

those is that is the batch State where they provide it. In your testimony 

you mentioned salvage companies and insurance companies should 

provide information to the information system. Would this prevent title 

washing? 

 MR. TURNER. Well, this is what Mr. Regan was referring to. If there 

was a database to where insurance companies were reporting salvaged 

vehicles at the time that they declare it salvaged, and junkyards and 

salvage yards were reporting their data into the system, not only would 

we have other States’ information, but we would have their information 

on a nationwide real-time online system. 

 MR. GREEN. And my last question is for Ms. Weintraub. I know the 

Chairman asked how would we force, or maybe the Chairman of the 

committee asked how would we force the States to do it. Congress has a 

history of saying to the States, since it is related to motor vehicles, either 
119

you do this or you don’t receive highway funds. And having served 20 

years in the Texas legislature, typically, we didn’t want to lose the 

hundreds of millions of dollars that we received, but I didn’t like it as a 

legislator anymore than I like making it mandatory now as a Member of 

Congress, but I would hope there was a way to encourage States to do 

that. And you know, obviously, we have some voluntary compliance, 

but again, if we could get to the major States. But there is bound to be a 

way we can have a carrot and stick. So thank you, Mr. Chairman. 

 MR. STEARNS. Thank you. The gentleman from New Hampshire is 

next, Mr. Bass. Mr. Bass passes. Mr. Deal is recognized. 

 MR. DEAL. Thank you, Mr. Chairman. Mr. Chairman, after listening 

to the testimony and the questions and responses, I am very concerned 

that we have given a very distorted picture of what is going on out there 

and some very misleading information, and I would like to try to clear 

some of it up. First of all, with regard to the State Farm insurance 

lawsuit, my understanding is that State Farm did exactly what they were 

authorized to do. They settled their claim with their insured. What they 

were ultimately held responsible for was because somebody in the chain 

from that point forward did something improper to be able to clear the 

titles up. Now, State Farm, for example, does a very good job in my 

State. They will not allow claims to be rebuilt, titles to be issued for 

rebuilt cars. In many cases, they require that the cars that would 

otherwise be rebuildable under our law be classified as parts only, which 

is a classification. My State, I think, does a very good job. If somebody 

rebuilds a car in my State, the State department of revenue has State 

inspectors who go back and inspect and make sure that the vehicles is 

road worthy before it is put on the road and a title is issued showing that 

it is a rebuilt vehicle. 

 Mr. Regan, I am going to use your chart here. My concern is what is 

happening now with an insurance company who settles a claim with their 

insured and the insured elects to keep the vehicle and goes to one of your 

people and has it repaired. And it may have been a total loss claim that 

was paid, but if they go to your people and they don’t go through the 

normal rebuilding channels, they go to one of your body shops and they 

have the automobile repaired, and then they sell it to an unsuspecting 

third party, does anything ever show up on that? 

 MR. REGAN. Under your example, the answer would be no, and that 

is why we are proposing that the minute that insurance company pays the 

total loss to the insured, they put that data in the database so that nobody 

can ever sell it without some public knowledge of that fact that it has 

occurred. 

 MR. DEAL. And I agree with you. 

 MR. REGAN. Nobody. 
120

 MR. DEAL. That is one of the big loopholes that is currently existing, 

even in States like mine that do, I think, a very good job of trying to keep 

a handle on the issue. 

 MR. REGAN. And if I could follow up. If this system had been in 

place five years ago, there would have been no State Farm settlement. 

 MR. DEAL. Well, with regards to the insurance company, once they 

settle with their insured and they dispose of the remaining vehicle 

through a salvage, parts only or whatever, and they comply with the law 

of the State in which that transaction takes place, I don’t think they 

should be held responsible. Now, what happens in these class action 

lawsuits is that somebody disposes of that vehicle down the chain 

improperly and violates or has the title washed or whatever. And then, 

as we all know, in a class action lawsuit, you start going back up the 

chain to find the doctrine of the deepest pockets takes it effect. 

 MR. REGAN. And in that going back up the chain, the buck stops at 

my members’ door. That is why we are here and that is why-- 

 MR. DEAL. Right. 

 MR. REGAN. --we want the information out there. We are in the 

phonebook. Even if we never have seen the repair facility, we have no 

knowledge about this, but we inadvertently take that into inventory and 

resell it, we get burned. 

 MR. DEAL. And I have no problem whatsoever with disclosure. I 

think the disclosure factor is the part we all ought to be able to agree to. 

My concern is that if we go much further in Federal legislation, we begin 

to undo what States like mine who have done a very good job of 

monitoring it, and we will displace that with something that I think may 

very well be less effective. That is my real concern. 

 MR. REGAN. Our approach is disclosure-based. Our approach would 

leverage the good work that you are doing in Georgia. It would not 

circumvent that. 

 MR. DEAL. I agree with that and I would support that kind of 

approach. Mr. Watson? 

 MR. WATSON. Please. Thank you. In support of State Farm, in the 

State of Illinois, I have had discussions with State Farm estimators and 

they are actually applying for non-repairable titles on many vehicles that 

they are selling at auction, those vehicles which an individual can look at 

and say this vehicle should never go back on the road again. They are 

actively engaged in that. That is positive and it supports the activity of 

this committee. It also supports the fact that just because, in the State of 

Illinois, we have non-repairable title that the insurance company 

determined, it should not be put back on the road again. It should never 

be rebuilt. It should be parts only or scrap. The vehicle can leave the 
121

State of Illinois or the vehicle may not even leave. The title document 

leaves. 

 MR. DEAL. Right. 

 MR. WATSON. It goes to another State and it is washed. 

 MR. DEAL. And that is where, once the insurance company has done 

what they are legally obligated and are authorized to do, they are still 

being held responsible for what somebody else further down the chain 

does illegally. 

 MR. WATSON. Yes, sir. 

 MR. DEAL. And that is not correct and that is not proper in my 

opinion. Yes, Mr. Turner. 

 MR. TURNER. Yes. If I can respond to that, too. Of course, being 

from Florida, we work close with our good friends in Georgia. 

 MR. DEAL. Right. 

 MR. TURNER. So the issue there is, I know, in Florida as in many 

States, when an insurance company declares it salvage, they basically 

have taken the title from that individual and they file that title with us. 

We brand it as salvage and that goes on the NMVTIS system. 

 MR. DEAL. Right. And I know I am over my time, but let me just 

conclude with this, and that is Mr. Regan’s chart. That one arrow that 

goes up there where the owner retains it. What we are finding and 

hearing now in our State is, there are folks out there who are going to 

these insureds before the claim is settled and saying, hey, if you let the 

insurance company declare this a total loss and they take the vehicle and 

they dispose of it, you are not going to come out nearly as well. You 

settle with them, get what you can and we will buy your vehicle from 

you, and they thereby circumvent all of the branding of the title that takes 

place, and that is a dangerous thing that is happening, even in States like 

mine that are trying to do a good job. 

 MR. WATSON. True. In legislation that-- 

 MR. DEAL. May she respond? My time is up. 

 MR. WATSON. The legislation that we have actually drafted and is 

part of the written record actually identifies that as one of the databases 

created to, when the insurance claim is paid, there is a record and that 

record is public. 

 MR. DEAL. I think that is important. 

 MR. STEARNS. Yes, I encourage the gentleman that we are going to 

have a second round if he wants-- 

 MR. DEAL. Can she respond? 

 MR. STEARNS. Sure. Absolutely. Go ahead. 

 MS. WEINTRAUB. Thank you. Just one further point, that while the 

database which would definitely take consumers out of their current 

darkness with information is very important. Some are actually 
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destroying the vehicles and getting them out of the stream of commerce, 

because once the vehicles are out and destroyed, then all of the many 

steps and many levels of fraud that harm consumers in Georgia and 

Florida and everywhere in the country-- 

 MR. DEAL. Well, that is a judgment the State makes. In my State it 

says three major components and that qualifies. Other States may go to 

judgments on that. 

 MR. TURNER. I know you are out of time, but can I respond to that? 

Mr. Chairman, basically, you know we brand these vehicles differently. 

If it is a salvaged vehicle and it is under 80 percent or whatever, it is 

salvage rebuildable and that goes on the NMVTIS system. If it is over 

80 percent, it is a parts only salvage unrebuildable. So that is notified 

and consumers would be able to see it. And as I was saying, if Mr. 

Regan’s shop gets it in Georgia to repair that vehicle, that title will have 

already been branded because the insurance company did send it in. 

Georgia did brand it. So anybody that tries to sell it will see that that is a 

branded vehicle. 

 MR. STEARNS. Yes. 

 MR. REGAN. And one clarification. Our members have gotten out of 

the collision business over the last several years because some of our 

members still are engaged in collision repair, but the body shop business 

is much more highly regulated and the equipment required to do it 

properly is much more capital-intensive today than it was several years 

ago. A lot of my members no longer even have collision facilities. 

 MR. STEARNS. I thank the gentleman. The gentlelady from 

Tennessee. 

 MRS. BLACKBURN. Thank you and I apologize for being up and 

down during the hearing, and thank you all for being here and 

participating in this today. When I was listening in the back and 

listening to your answers to the questions, I want to address this to each 

one of you. I think that what I am hearing from you basically is, in order 

to get the States coordinated and freely willing to release this 

information, you feel like it is going to require Federal legislation. Am I 

understanding that right from each of you? Mr. Turner? 

 MR. TURNER. Basically, you know, many have already done that and 

they are willing to do it. The issue is funding for programming, to be 

able to program to be able to tie into the NMVTIS system. 

 MRS. BLACKBURN. Okay. So you consider it primarily a funding 

issue, from your perspective? 

 MR. TURNER. From our perspective it is a funding-- 

 MRS. BLACKBURN. You think the reticence is funding. 

 MR. TURNER. Pardon? 
123

 MRS. BLACKBURN. You would say their hesitation is based on 

funding. 

 MR. TURNER. Hesitation is on funding and of course, as their 

legislators meet, there are other priorities to implement as well, so 

sometimes it is a timing issue as well. 

 MRS. BLACKBURN. Okay. All right. In preparation for the hearing, I 

went to our Tennessee website and I thought it was interesting. There is 

an icon. Click here to identify hurricane damaged vehicles, and I think 

that, Mr. Regan, what you are saying is once that title is branded, it 

would show up in an icon like this. 

 MR. REGAN. In a perfect world, we would like someone to sit at a 

computer desktop, or we would like a trade-in manager on our members’ 

lot to have a handheld device where they could punch in a VIN and see 

on that screen that the vehicle had been declared a total loss, and also see 

on that screen what the title history of that vehicle is from Mr. Turner’s 

members. That is what we want, pure and simple. And that is not 

available today because the insurance companies do not share total loss 

data separate and distinct from their reporting obligations under the State 

title branding laws. And the State title branding laws are confusing at 

best and incomplete at worse. 

 MRS. BLACKBURN. Okay. All right. So what you are saying is my 

Tennessee State website that clicks there to go to the National Insurance 

Crime Bureau, that it is incomplete? 

 MR. REGAN. That is the first time that the insurance industry has 

posted data on totaled vehicles to our knowledge. 

 MRS. BLACKBURN. Okay. Mr. Watson? 

 MR. REGAN. And those are specifically about the hurricane vehicles, 

but that does not cover the five million vehicles that were totaled last 

year-- 

 MRS. BLACKBURN. All right. 

 MR. REGAN. --because they were wrecked. 

 MRS. BLACKBURN. Okay. Mr. Watson, you wanted to add-- 

 MR. WATSON. We would hope, in our draft legislation that the 

Federal Government would require the insurance companies to report. 

Let the States continue doing what they do and do best, but let the 

insurance companies do their reporting to the Federal Government 

Department of Transportation or whoever you would like to manage that 

database. To report the VIN numbers of Katrina cars, that is inadequate. 

So all you are going to do is you are going to find consumers that could 

probably least afford these cars, that probably see it is a super great deal, 

only to find out a year or two or three down the road what they truly did 

buy, cars that the brake systems are destroyed, the electrical systems are 

falling apart, all the solder is corroded. You have to protect the 
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consumers now. You cannot just post the data in the hope that they buy 

it, because these are the people that can least afford it now. 

 MRS. BLACKBURN. Okay. Ms. Weintraub? 

 MS. WEINTRAUB. Thank you, Ms. Blackburn. There is a problem in 

that consumers often don’t see the title of the vehicle they are purchasing 

until after it has been financed. Often, they will receive the title months 

and months after they actually purchase the vehicle. So what we are 

recommending is that the relevant information on the title be posted on 

the car itself. The Federal Trade Commission requires specific 

information which is set forth in their used buyers guide, and that is 

posted on the vehicles’ windows before purchase. It is on the lots. And 

we think that this relevant information should also be posted right next to 

it. 

 MRS. BLACKBURN. Okay, thank you. Mr. Bryant, let me come down 

to you. Since you are there with the Insurance Crime Bureau, you 

mentioned that we need to identify the impediments that have delayed 

the implementation of the Vehicle Title Information System. So what 

would you say are those impediments? Do you have a list of five? Do 

you feel like you know some that we don’t know or we need to know as 

we look at this? Do you want to-- 

 MR. BRYANT. Well, the first one is the Department of Transportation 

and then the Department of Justice has had responsibility for this statute 

which was passed 14 years ago. And the other issue is that it has not 

come to fruition. The issue there is, I think, as Mr. Turner points out, is 

money. There are a lot of legacy systems and there are 51 different 

systems with different types of computers and that type of thing. And so 

I would say the impediment I would suggest to you is money. 

 MRS. BLACKBURN. Okay. Well, it seems like, Mr. Chairman, we 

repeatedly hear the same thing. It is an overgrown bureaucracy that 

doesn’t work and doesn’t respond and they always want more money to 

solve their problems. So with that, I will yield back. 

 MR. STEARNS. I thank the gentlelady. Let us see, Mr. Otter was 

here. I guess he has stepped out. I will continue with the question. Yes, 

Mr. Turner. Sure. 

 MR. TURNER. May I respond to that? 

 MR. STEARNS. Sure. Go ahead. 

 MR. TURNER. I know that is the nature of the beast, but you know, 

one of the things we would say is that we know that this system will be 

totally self-sufficient in 2011, and with a little bit more funding to be 

able to do that and to be able to see in the more recent years how the 

majority of the States have come on board, we have seen success, are 

seeing success, and everybody knows the problem and we want to go 

there as quickly as possible. 
125

 MR. REGAN. If I could jump in there one minute. 

 MR. STEARNS. Sure. Go ahead. 

 MR. REGAN. What we would like to see happen is for the 

shareholders of companies, like Mr. Fuglestad, bear the risk of building 

out this system, not the taxpayers. We think that is possible. We think 

the technology is in the private sector today. We think the capital is in 

the private sector today. We think the ingenuity is in the private sector 

today. We would like that leveraged with the data that they collect to 

document transactions after the fact. 

 MR. FUGLESTAD. Can I respond, too? 

 MR. STEARNS. Sure. Go ahead. 

 MR. FUGLESTAD. Thank you, Chairman. And you know, we are 

talking about a national database. There is a lot of discussion on who 

should host this and what is this national database. Frankly, in order for 

it to be national, in my estimation, it needs to be fed from all the different 

jurisdictions. So we have a ways to go on that. We know that. We are 

doing that today. Now, it is not real-time data, but we do have the broad 

scope of data in our database and it is being hosted today. There is 

another difference on how we process or manage this data versus what 

the NMVTIS system is doing, is basically, we are accepting data, I will 

say, as is from the different State DMV organizations, meaning, we are 

going to take that data, standardize it, interpret it, analyze it, validate it 

and put it into a form that can be used in these common reporting 

services, if you will. 

 And the other comment that was made here is that we are a for-profit 

organization. Yes, we are. However, there are creative ways of 

partnering with companies or organizations, such as AAMVA, in the 

creation of a robust data set. I mean, some of the objectives of NMVTIS 

are very important to our clients, customers, and consumers in general. 

So if we can supplement these rich data sources, if we can start 

supplementing what we have to our clients and consumers, in exchange 

for providing the broad depth of data that we have to an organization like 

AAMVA and to use their NMVTIS system, there is not necessarily 

heavy funding associated with that. So there are creative ways of 

looking at this other than just, you know, charging consumers for these 

reports in the end. 

 MR. STEARNS. I thank--the gentlelady? 

 MRS. BLACKBURN. Mr. Chairman-- 

 MR. STEARNS. Sure. Go ahead. 

 MRS. BLACKBURN. --that was going to be in my second round. If I 

can, I will just finish with my second round now with Mr. Fuglestad. So 

do you think it is necessary to have a legislative fix, or do you think the 

private sector and the demand for this information, with the knowledge 
126

that the technology to do this is available, do you think that the public 

demand for it will drive the fix or that it needs a legislative fix? 

 MR. FUGLESTAD. I think there are certain areas that need a 

legislative fix. 

 MRS. BLACKBURN. Right. 

 MR. FUGLESTAD. We are talking about the insurance data, which 

isn’t available-- 

 MRS. BLACKBURN. Okay. 

 MR. FUGLESTAD. --to us today, or the NMVTIS system. There are 

differences when we talk about State DMV data. As I have stated, we do 

have it. I know AAMVA is looking for funding to pursue the remaining 

States and such for NMVTIS. However, like I say, we do have that data 

today; it is not real time. So that is the benefit that a system like 

NMVTIS will bring on. It takes approximately four to six weeks for a 

transaction, a titling or registration or a branding transaction when it hits 

the State DMV organization, to get it to us and in our data repository. So 

there is a timing issue and there is no doubt that fraudulent activity could 

happen in the interim. So that is one of the major differences or major 

benefits we see for a system like NMVTIS. And then supplementing our 

data broad and deep repository with some real-time data I think would be 

very valuable to our customers. So there are some areas that legislative-- 

 MRS. BLACKBURN. And how long would it take you to get a system 

like that in place? 

 MR. FUGLESTAD. We have a system today. We have our national 

vehicle database in place today that supports our AutoCheck vehicle 

history reporting. So we can provide vehicle history reports based on 

data from all 51 DMV jurisdictions. Today we can do that. 

 MRS. BLACKBURN. Okay, thank you. 

 MR. TURNER. May I respond to that? 

 MR. STEARNS. Sure. Go ahead. 

 MR. TURNER. We are working and have worked with Experian and 

other companies who have these databases to be able to do that. And 

what he is saying, it is true and the crooks know it, too, that they are 

three or four weeks out from getting the data, where NMVTIS is realtime online and it is instant, within seconds of entering it into the system. 

And this is an issue that we have been trying to figure out different ways. 

The beast just had its hand out. We basically reduced our cost and will 

continue to reduce them by a couple of million dollars over the next year 

and a half. We have gone to the jurisdictions that are online and they 

have agreed to pay full fees starting 2008, even though there is not 100 

percent of the data there. Several efforts are going on within the States 

to try to help and fund. We have agreed to send programmers or 

whoever we need to send to those States that aren’t online to be able to 
127

help them program and do whatever we can. So we are not just standing 

with our hands out. We are working very fervently to make this happen 

no matter what. 

 MR. REGAN. One other comment, if I could add, Mr. Chairman. The 

four to six-week delay is critical. That is a critical part of the problem, 

because that is how long it takes our members under the best 

circumstances. If a total loss vehicle is branded with a title, it goes to 

Mr. Turner’s office and then it goes to Mr. Fuglestad’s office before it 

ever gets to us. That four to six weeks is a window of opportunity for 

fraud, to rebuild and to put that vehicle back in the market. If, on the day 

the total loss is declared, the insurance company would simply say total 

loss and put that information on day one into the public domain, then 

there is no window of opportunity for fraud. 

 MR. STEARNS. I will start the second round here. We won’t keep 

you too long here. Mr. Bryant, when a car is totaled and the insurance 

company says, we will give you a check, they take the car. You can’t 

keep the car and get a check, too, can you? 

 MR. BRYANT. There is such a thing as owner-retained salvage, and 

wherein there is a certain payment made and it is the value of the vehicle, 

the salvage value is deducted from the amount of the payment. And so 

in the case we talked about earlier, the owner-retained salvage is an 

issue. 

 MR. STEARNS. So, Mr. and Mrs. John Public has a car and it is 

totaled, the insurance company says, we will give you X dollars for it, 

you can still keep the car? 

 MR. BRYANT. You have to pay back what the salvage value is. 

 MR. STEARNS. And what percent of that generally is that? 

 MR. BRYANT. Well, it just depends. I mean-- 

 MR. STEARNS. Is it much of an incentive for them to keep the car? 

 MR. BRYANT. I actually must yield to Mr. Regan on that. 

 MR. STEARNS. Yes, Mr. Regan. 

 MR. REGAN. I mean my knowledge is anecdotal on this. 

 MR. STEARNS. Yes. 

 MR. REGAN. But my impression is, this varies State to State, 

depending on what the law of the State titling laws are. Some States 

have attempted to address this problem. I understand, in Ohio, they have 

instituted a requirement recently, that in order for a consumer to retain a 

salvage vehicle, before they can receive the payment from the insurance 

company, they have to demonstrate that they have obtained a salvage 

title for that vehicle. 

 MR. STEARNS. Mr. Turner, what do we do in Florida? 

 MR. TURNER. Well, you know, one of the things in addressing this 

issue that we found, and I get the calls quite often from individuals that 
128

want to keep the car, even though the insurance company has bought that 

vehicle, generally, these are vehicles of low value. 

 MR. STEARNS. Right. 

 MR. TURNER. And so by getting that money back, the $1500 for the 

vehicle, it was better for them to keep the vehicle, get it repaired and 

keep driving it. It was far more costly for those individuals to go get 

another car. 

 MR. STEARNS. Yes. Something from the get-go that I should have 

asked: we keep talking about the serious problem here, but do we have 

any statistics of how many people have been killed because of vehicles 

that came through flood damage or vehicles that were totaled and then 

rebuilt? I mean, do we have any firm statistics on this to know how big 

this problem is, or it is just a problem that we think is a problem? 

 MR. TURNER. Well, I don’t think there are any statistics out there to 

break it down that far. I do know that in looking at Florida’s statistics, 

that in 2004 we had 78,000 auto thefts. In, you know, 2003 we had 81.5. 

In 2002 we had 89. So there was an 11 percent difference by being on a 

NMVTIS system that brought the theft down. So when you start taking 

the bad vehicles off of the market, it has got to help put the better 

vehicles on the road. 

 MR. STEARNS. So if a person steals a vehicle, it doesn’t necessarily 

mean that that vehicle is not going to be safe? 

 MR. TURNER. It does not necessarily mean that. 

 MR. STEARNS. So your statistics don’t imply that there is any danger 

to the public because they lost the vehicle, but the fact that they resell 

them to somebody else and they still work. 

 MR. TURNER. Really, the only point is, is that the NMVTIS system is 

working. 

 MR. STEARNS. Okay. 

 MR. TURNER. So it is taking those vehicles-- 

 MR. STEARNS. But there is no one here on the panel who can say to 

me, including you, that so many people are dying per year because of 

cars that have been salvaged from a flood or cars that have been totaled 

and have been fixed and the air bags don’t work. So we don’t even know 

how serious a problem it is. Is that true? 

 MR. TURNER. That is true. I think one of the issues that we are 

seeing more and have most statistics on is also that the individuals are 

complaining about having a bad vehicle and paid a higher price for it, so 

it is a consumer protection issue as much as maybe a safety issue, but no 

figures either way. 

 MR. STEARNS. You know, depending upon the mechanic, if I gave 

him a car from New Orleans and it was in a flood, this guy might be 
129

pretty apt. He might get the car back in pretty good shape. So you 

know, I am just trying to understand. 

 MR. TURNER. There are some very good mechanics out there and 

body rebuilders. There is no doubt about that. It is always the few. It is 

the ones that replace the rubber cover on the brake-- 

 MR. STEARNS. Yes. It gives us a level of safety and security if we 

know all this information and we are sure that the salvaged vehicle or the 

totaled vehicle is not resold, but then again, depending upon who repairs 

it, I have seen a lot of repair people do excellent jobs, you know. Yes. 

 MR. REGAN. Excuse me, Mr. Chairman. On the safety-related issue, 

I think we need some more statistics on air bags and the extent to which 

the deployment of an air bag triggers a total loss. It is very expensive to 

replace air bags. That factors into the economic equation that the 

insurance companies engage in to determine whether or not to declare a 

total loss. That is separate and distinct from whether you get a branded 

title. But when the air bags are deployed and those vehicles are sold as 

salvage, that provides a fraudulent rebuilder with an economic incentive 

for future profit if you buy the vehicle and instead of repairing the air 

bag, you just cap it. It is very difficult to determine if an air bag has been 

deployed, or it is expensive to determine whether an air bag has been 

deployed or not. 

 MR. STEARNS. Yes. 

 MR. REGAN. And as more of these vehicles get into market with the 

air bags, I think the safety-related issues are going to become much more 

important. 

 MR. STEARNS. Yes, I would think, here in Washington, we should 

try to get better statistics on this, too. My last question-- 

 MS. WEINTRAUB. If I may? 

 MR. STEARNS. Yes. 

 MS. WEINTRAUB. In terms of safety, while we don’t have accurate 

statistics about the number of crashes and collisions that have occurred 

because of cars being a rebuilt wreck or salvage, it is unmistakable that 

cars that have been salvaged and then rebuilt do not have the same 

integrity as a car that doesn’t, and there are many, many instances, 

whether it is a flood car that literally will rot from the inside out, with 

electronic components completely failing to work or with the failure of 

air bags. There are vast safety implications. But I think, because 

everyone is under such a huge veil of ignorance, that consumers may not 

know whether the car that they just crashed in and hopefully weren’t 

killed in but could be seriously injured in, they may not know whether 

that car was salvaged. I think that is one of the main reasons why we 

don’t have that type of data. 

 MR. STEARNS. The statistics. 
130

 MS. WEINTRAUB. And also because of the different variations in 

State laws as well. But it is, I think, undisputed that cars that have been 

declared a total loss and salvaged do have-- 

 MR. STEARNS. Well, I think that is-- 

 MS. WEINTRAUB. --safety implications. 

 MR. STEARNS. --absolutely true. But the question is, if you have the 

database, then no one would get hurt because everybody would know 

they are buying a car that was totaled or salvaged or was in a flood. But 

right now we just don’t know how many people are buying these and 

how many people are getting hurt or injured because of it. 

 Mr. Fuglestad, I guess what I am hearing is that the insurance 

companies have a pretty good database, or at least they seem to have a 

better database than perhaps other folks, but the question we have is this 

database is not public. And so what do you think of the idea of making 

some of this public? 

 MR. FUGLESTAD. Yes. And first off, I am here representing 

Experian Information Solutions Company. 

 MR. STEARNS. Yes. 

 MR. FUGLESTAD. Mr. Chairman, you are right on. We have talked 

about creative ways of how we can make this data available through a 

system like NMVTIS with AAMVA. So there are opportunities where 

we can exchange data or provide the vast data that we have too. 

 MR. STEARNS. I mean, the Justice Department could work with you 

and maybe get an idea of what your database looks like, but would you 

work with the Justice Department on this? 

 MR. FUGLESTAD. Sure we would. 

 MR. STEARNS. Yes. 

 MR. FUGLESTAD. And the other thing that I would like to mention, I 

have said it a couple of times, but the data management I think is key to 

this. The variety of different implementations, the differences in 

technology and how data formats are transmitted, it is extreme out there. 

It is tough to get all of this together. That is what we do. That is what 

we interpret. We get all of this together in a standard common format 

versus publishing a standard. We don’t have that luxury with the State 

DMVs to say this is what you must abide by. We take the data from 

them as is and we translate it, we interpret it and get into these standard 

formats. It is a big impediment, I would think, for getting this common 

national database together which we have today. 

 MR. STEARNS. My time has expired. The gentlelady-- 

 MS. SCHAKOWSKY. I wanted to go back, just for a moment, to the 

State Farm settlement, because it was said that it was a good one, a 

proper one, but I wanted to ask Mr. Regan, I know that in that settlement, 

to get settlement money, consumers had to first agree not to sue State 
131

Farm, but it doesn’t protect, my understanding is, car dealers who bought 

the wrecks and you still would be subject to lawsuit, is that true? 

 MR. REGAN. That is correct. Some of our members have been sued. 

After State Farm notified the ultimate consumer that the vehicle that they 

had purchased had in fact been totaled, some of those consumers are now 

suing the dealers who unknowingly sold them those vehicles. And I 

might add also that we understand through press accounts that the 

original negotiations with the AGs, or those original negotiations with 

State Farm were triggered when a dealer notified the AG of the problem. 

 MS. SCHAKOWSKY. I wanted to ask about this Clue database. I don’t 

know if that is what you were referring to before, Mr. Fuglestad. I don’t 

know, but you had mentioned that, Ms. Weintraub, that there actually is 

this database that insurers use. Who has access to it other than insurers 

right now? Does anybody know? 

 MS. WEINTRAUB. I don’t know. 

 MR. FUGLESTAD. That is not our database. That is the insurance 

industry database. We have a national vehicle database of vehicle title 

and registration and brand information. 

 MS. SCHAKOWSKY. Okay. This internal insurance industry database, 

I mean, it is really too bad we don’t have a representative of the 

insurance industry here to help us with this. I mean, so many things go 

back to them and start with them, end with them, but I am just 

wondering, if there does exist the kind of database of total loss that we 

are talking about and it is just a matter of making it a public one, and also 

then wanted to ask Ms. Weintraub-- 

 MR. STEARNS. Would the gentlewoman yield just for a second? I 

would point out that we invited the insurance company. 

 MS. SCHAKOWSKY. Right. 

 MR. STEARNS. They declined. 

 MS. SCHAKOWSKY. It is becoming more obvious why. I am just 

wondering, though, if there is in existence such a database and if that is 

essentially what we would want for dealers and consumers to have 

access to. Do you know that, Mr. Bryant? 

 MR. BRYANT. I am not sure. There is an all claims database, but I 

don’t think there is a total loss database, but I am a little unsure. 

 MS. SCHAKOWSKY. Okay. 

 MR. TURNER. Can I respond? 

 MS. SCHAKOWSKY. Yes. 

 MR. TURNER. That was the purpose for requesting the rule. And 

basically, if the insurance companies were to report the total loss to the 

NMVTIS system, which is online real time, then we would have national 

information available for anybody to look at right now, if they started 

reporting today. 
132

 MS. SCHAKOWSKY. Okay. So we know, obviously, they do have 

that, but is it compiled in a data system that is available to them? No? 

 MR. TURNER. No, I don’t think so. 

 MS. WEINTRAUB. The insurance industry has not reported to 

NMVTIS. 

 MS. SCHAKOWSKY. No, I know that. 

 MS. WEINTRAUB. Yes. 

 MS. SCHAKOWSKY. But they have it available internally. 

 MS. WEINTRAUB. Yes. 

 MR. REGAN. The question is, do they share the data among 

themselves, and if they do, for what purpose? We would appreciate the 

committee’s inquiry of them on those variations. 

 MS. SCHAKOWSKY. Okay, so we don’t know that. All right. I 

wanted to ask Ms. Weintraub, though, the advantage of a system that is 

publicly administered by NTSA or the FTC or somebody, as opposed to 

a private sector database. 

 MS. WEINTRAUB. Sure. Well, I think there are inherent benefits to a 

public versus a private database. First of all, with a public database that 

would be created through Federal legislation, there would be many 

things that could be controlled by its authorizing statute, which would be 

beneficial that we may not be able to control if there is a private 

database. Also, in terms of accessibility and affordability, and really the 

integrity of the data if, I think, there is a public domain for this 

information, it could be much more beneficial to consumers. Also, I 

mean, my sort of question is, if there is this idea to do this privately, why 

hasn’t it happened now? And unfortunately there are limitations to 

existing private databases such as CARFAX and Experian, which by far 

do help consumers in a very large measure, but there are limitations. So 

I think, in order to pull all of the best data together, the best way to 

leverage that would be with a public database. 

 MS. SCHAKOWSKY. Let me just say for the record that it seems to me 

that it is very important for individual consumers themselves to be able 

to access this information in addition to anyone else up the line. You 

know, if we are going to make consumers be aware, then that 

information has to be available. And if I could ask one more question, 

Mr. Chairman. But beyond that, which everyone seems to agree with 

however it is formulated, the existence of a national database, Ms. 

Weintraub, I wonder if you had other suggestions. 

 MS. WEINTRAUB. We did. 

 MS. SCHAKOWSKY. And I wonder if you could just briefly review 

those. 

 MS. WEINTRAUB. Sure. Well, first we think--and I have tried to 

mention this a few times--that in order to really quash this fraud that is 
133

harming consumers financially and in terms of public health, these 

vehicles which pose vast threats need to be taken off the market and 

destroyed in a responsible way so as not to harm the environment. There 

are ways to responsibly dispose of these vehicles. 

 MS. SCHAKOWSKY. And just a follow-up on what the Chairman has 

said. Mr. and Mrs. Jones, who get a settlement, they could, in fact, also 

try and resell that car. 

 MS. WEINTRAUB. Exactly. Now they could. 

 MS. SCHAKOWSKY. Yes. 

 MS. WEINTRAUB. And with the Chairman’s paradigm, my concern is 

less with the individual, though an individual may be a bad actor, but it is 

more with what the insurer then does. We don’t know exactly what they 

do, but we know from the State Farm case that there are unscrupulous 

insurers and unscrupulous entities throughout the line which create this 

chart and you know, we sort of formulated a verbal or a written flow 

chart as well. So the question is if the insurer does declare these vehicles 

a total loss, and I don’t know the exact number, but I would think the 

vast majority of them, the consumer does not retain the vehicles. What 

does the insurer then do with the vehicles? If the vehicles are destroyed, 

it would really eliminate many avenues for fraud, deception, ill-gotten 

profits and harm, both financial and economic, to consumers. 

 MS. SCHAKOWSKY. Those are the two things. 

 MS. WEINTRAUB. That is two. And we also agree that there should 

be a publicly accessible national electronic database. We also think that 

licensed dealers must provide a copy of the title to consumers before 

consummating a car deal. Because, as I mentioned as well, consumers 

don’t see the title, so a title as a source of information is not very useful, 

because consumers don’t see it until after the transaction or the leasing 

agreement or the financial agreement has actually taken place. 

 We also think that public disclosure, because of the failure of the title 

to act as the source of information for consumers, public disclosure is 

very important, and we already have a very good model with the FTC 

user/buyer guide, and that on the window of vehicles that consumers 

purchase, there is a whole bunch of information. I think we are all 

familiar with what that looks like. We may not realize that the FTC 

required that. But we think that this information should be right next to 

that, because consumers have been sort of socialized to look for relevant 

information there. 

 We also think that the information should be placed indelibly affixed 

on the car itself so that, you know, if the car is in a transaction that is not 

with a licensed dealer, for example, that information can be tracked with 

the car. And the other aspect of Federal legislation is remedies, which 

we think should track the Federal Odometer Act. 
134

 MS. SCHAKOWSKY. Thank you. 

 MR. TURNER. Could I give a point of clarification? 

 MR. STEARNS. Sure. Go ahead, Mr. Turner. 

 MR. TURNER. Just as far as when a vehicle is determined 

unrebuildable and salvage, basically it is good for parts only. When we 

brand that title, all you can do is sell it for parts if you want to keep it, so 

it does go away. It no longer can be used as a single vehicle. It can no 

longer be registered or receive a license plate in a State for doing that. 

And also, just to reiterate again, AAMVA-- 

 MS. SCHAKOWSKY. That is in Florida. 

 MR. TURNER. That is in Florida and in most States. I mean, once it 

is unrebuildable, it is parts only. Now, we brand differently. That is 

where we need some uniformity in our rules, but we brand a little 

differently. But NMVTIS does provide us the avenue that, say, when we 

get a title from Illinois, and Mr. Chairman, we are right at 700,000 

individuals moving from other States into Florida a year, and Illinois is 

one of them, some of them, and I imagine we have some going to you, 

but when we get that title in and exchange that and turn that into a 

Florida title, if it has any kind of branding on it, we go to your statutes 

and we look at what your definition is. And because we were bounced 

off of your system, we saw it was salvage; we go and look at your law, 

then we brand it according to how our law that matches up with the 

Illinois law, and so there is a means out there. And also, I just wanted to 

say that AAMVA has a priority issue to make this available to the public, 

now that our volume of information is growing rapidly. 

 MR. STEARNS. I thank the gentlelady. I will conclude. I think we all 

know the story. Archimedes was in the tub and he said, eureka and had 

this great idea. I just had a great idea that would solve this problem. It is 

imaginative, innovative, and this is it. We all know what RFIDs are. 

They are little radio frequencies and they can give you an electronic 

readout of what happened to the car. You could set up an incentive 

program where the manufacturers of automobiles would put an RFID in 

every car so that if it got into an automobile wreck or if it was in a flood 

or it was stolen, it would have a record of this that you could read out 

and the automobile dealer would say, Cliff, if you want to buy this car, 

you got to pay a little more money for it, maybe $100 or $50. Then the 

incentive would go to the insurance company to get a lower rate, if that 

RFID could be read out and it was accurate. 

 Isn’t it a possibility that the RFID would keep an electronic record of 

whether the water hit the car, whether it was in salvage, a wreck, or 

something like that? These RFIDs are being used today and we have had 

a hearing, I believe, didn’t we counsel? We have had a hearing on this 

and they are being used. So now, the people who are concerned about 
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privacy are a little concerned about this, because their automobile then 

has a record that they had an automobile wreck somewhere, where they 

weren’t supposed to be, perhaps, but that is another side of the story. But 

there is a technological solution to this and I leave you on that sort of a 

nice note. And with no further questions, I will conclude the hearing. 

 [Whereupon, at 11:58 a.m., the subcommittee was adjourned.] 

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