Driving through loopholes
Katrina Cars. Rita Wrecks. However they’re tagged, the half-million or so vehicles damaged by the 2005 Gulf Coast hurricanes continue to haunt the automotive industry.
Sen. Trent Lott (R-Miss.) is trying to drum up support for a bill that would require insurers to supply information to a national database whenever they declare a car or truck a total loss. Rep. John Campbell (R-Irvine) is co-sponsoring a similar bill in the House.
Although more than 5 million vehicles were totaled in the U.S. in 2005 for reasons such as theft or accidents, the appearance on car lots around the country of vehicles damaged in the Gulf Coast hurricanes has been the catalyst for change.
Lott, whose Mississippi home was destroyed by Hurricane Katrina, is concerned that motorists unknowingly are buying flood-damaged or destroyed vehicles -- taking on possible safety problems in the process.
At a recent committee hearing, Lott urged consumer advocates and other backers of the bill to push for its passage before Katrina became a distant memory and momentum stalled.
The bills are the latest attempts to make sense of the crazy quilt of state laws that govern vehicle titles in the U.S.
A vehicle is generally considered a total loss when the cost of repairing it exceeds its market value or it meets a state-mandated damage threshold.
After issuing a check to the owner, an insurer takes possession of the vehicle and sells it at auction, where it is purchased by a dismantler, rebuilder or recycler.
Vehicles that can be repaired often find their way back to car lots, where they can be legally sold to customers. Most states require such “total loss” cars and trucks to have so-called salvage titles informing buyers that they were at one time declared complete wrecks.
What bugs dealers and consumer advocates is that the tangle of state laws makes it possible to move a vehicle across state lines and apply for a “clean” title that makes no mention of its checkered past. The fact that some states don’t even require salvage titles stretches the loophole even wider.
“Because we don’t have consistency between states, there’s a tremendous amount of title washing,” said Herb Lieberman, who owned an auto recycling company in Santa Fe Springs. “That defrauds the consumers and car dealers.”
Safety is a big concern. In California, rebuilt salvage vehicles are inspected for stolen parts but not for safety. Buyers who are unaware that a used car was wrecked and rebuilt won’t know to check for signs that the job was done right.
“You shouldn’t have to worry that a car you’re putting your teenager into has a bent frame or no air bag,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety in Sacramento.
A national database of totaled vehicles would enable motorists to uncover a car’s past by using the vehicle identification number. In theory, at least, even a once-totaled vehicle with a washed title could be found out because its salvage title would still be on file under the VIN.
Because the information would come from insurers, the database would be more up-to-date than those of vehicle-history services that get data from state motor vehicle bureaus, said Peter Welch, president of the Sacramento-based California Motor Car Dealers Assn.
Big car dealers, which buy vehicles at auctions, like the idea of a national database that would help them identify salvaged cars.
“My guys don’t want these things on their lots -- period,” said Bailey Wood of the National Automobile Dealers Assn.
The insurance industry supports the concept of a national database but not the Lott bill as currently written, said Melissa Shelk, a lobbyist with the American Insurance Assn. in Washington. She said aspects of the bill needed to be clarified, such as defining precisely what constitutes a totaled vehicle.
Insurers and dealers are wary of a bill in Sacramento that would make it illegal to bring into California a car that had been submerged in saltwater.
“Saltwater causes irreparable damage to electrical systems and air bags,” said Ray Sotero, spokesman for the bill’s sponsor, state Sen. Jenny Oropeza (D-Long Beach). “They’re time bombs.”
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For tips on how to spot a flood-damaged vehicle, go to
www.carconsumers.com /flood_car_tips.html.
