Released: February 06, 2008

Consumer Action joins auto-fraud database lawsuit

Suit cites unreasonable delays by Feds to establish public database

Contact: .(JavaScript must be enabled to view this email address) (202) 544-3088; .(JavaScript must be enabled to view this email address), CARS (530) 759-9440; .(JavaScript must be enabled to view this email address) (202) 588-7741

Consumer Action and Consumers for Auto Reliability and Safety (CARS) have joined a lawsuit brought by Public Citizen against the U.S. Department of Justice (DOJ) over its failure to implement the National Motor Vehicle Title Information System (NMVTIS). In 1992, Congress sought to curb auto fraud by requiring a single, federal database that would provide the public with access to information gathered from states, salvage yards and insurance companies. Before purchasing a potentially dangerous used car, a consumer would be able to check the validity of a car's title and mileage and learn whether it had been stolen or branded as a junk or salvage vehicle. Sixteen years later, consumers still do not have access to this critical safety information. Citing unreasonable delay, the groups are taking legal action to force the federal government to comply with the law. The organizations charge that because of government delays, consumers nationwide are being victimized by salvage fraud. If the NMVTIS existed, these individuals would be able to check the status of their vehicles to avoid financial loss and physical harm.

Purpose of suit

The lawsuit is being brought to spur the DOJ to issue long-overdue rules to require insurers and junkyards to provide data regarding totaled vehicles to NMVTIS. The data will be focused on the vehicles and their condition, and will not include any personal information. What statute requires the DOJ to issue the rules? The Anti-Car Theft Act of 1996, authored by Senator Chuck Schumer. The original statute, the The Anti-Car Theft Act of 1992, required the US Department of Transportation (DOT) to establish the database. However, for 4 years, the DOT failed to act, and in 1996 Congress shifted authority over NMVTIS from the DOT to the DOJ, which has made significant progress. What does the Anti-Car Theft Act of 1996 require the DOT to do? Establish NMVTIS. Issue rules to require insurers and junkyards to provide data on totaled vehicles. Why is a lawsuit necessary?

1. To protect American motorists and their families from unsafe rebuilt wrecks and flood cars, and to curb auto theft and related crimes.
2. A study commissioned by the DOJ found that full implementation of NMVTIS would save the public between $4 billion and $11.3 billion each year. NMVTIS cannot be fully implemented until insurers and junkyards provide the data on totaled vehicles.
3. Twelve years after Congress mandated that the DOJ issue the rules, the DOJ still has not issued them. Last year, the DOJ predicted it would have the rules ready to submit to the Office of Management and Budget by the end of summer. Now, however, the agency indicates it may take until next spring before they are ready to submit to the OMB.

How many vehicles are totaled each year? An estimated 5 million vehicles are totaled each year. (Source—auto industry, auto auctions.) Millions more sustain major damage requiring extensive repairs, but are not totaled. How do insurers profit from salvage fraud? Insurers profit when vehicles are sold with clean titles, and when the titles are easy to launder across state lines. How many states currently participate in NMVTIS? According to the DOJ, “Currently, 25 states are involved in NMVTIS (60 percent of the U.S. vehicle population is represented), with an additional 9 states actively working towards participation (Download a PDF of the NMVTIS Implementation Map) in 2008.” What happens after the rule goes to OMB? The OMB has 90 days to review the rule. The agency can have one 30-day extension. After that, the OMB should allow the rules to be issued by the DOJ. After the rules are issued, there will be a public comment period. Then the rules will take effect. Will consumers have access to the data in NMVTIS? Yes, the law requires that the public must have access to the data in NMVTIS, at cost. However, it may take a while before the public actually gains access. How will NMVTIS differ from Carfax and Autocheck (Experian)? When it is completed, NMVTIS will offer consumers more complete, accurate information than Carfax and Autocheck, at a lower cost. Currently, a single Carfax check costs about $24. (There are discounts available for subsequent vehicle history reports, for a certain period of time.) The Anti-Car Theft Act requires that the data be made available to the public at cost. That is expected to be far less expensive. How often will insurers have to submit data to NMVTIS? Within 30 days of when a vehicle is totaled. This will be more frequently than now, when sometimes the fact a vehicle was totaled doesn’t appear for months. How many used vehicles are purchased in the U.S. each year? In 2006, American car buyers purchased 42.5 million used vehicles. (SOURCE: ADESA Analytical Services) How many vehicles in California are “salvage”? According to a legislative report, approximately 2.5 million vehicles registered in California had a “salvage” title brand. According to the DMV, as of July 1, 2007 the number of vehicles in California with “salvage” title brands was 1,692,535, but that is probably mostly due to an anti-consumer court decision that allows insurers to total vehicles without having to brand the titles as “salvage.” (The decision is Martinez vs. Enterprise.) How many vehicles are stolen in California? According to the National Insurance Crime Bureau, California has the most stolen vehicles of any state. Five of the top ten U.S. metropolitan areas with the highest incidence of vehicle thefts are in California: Stockton, Visalia-Porterville, Modesto, Sacramento-Arden-Arcade, Roseville, and Fresno. The California Highway Patrol reports that in 2006, 247,896 vehicles were stolen in California. The estimated value of the vehicles was approximately $1.52 billion. Note: Thanks to Rosemary Shahan of CARS for the preparation of these questions and answers.