Bills on Salvaged Cars Heading for a Crash

California Sen. Dianne Feinstein and Senate Majority Leader Trent Lott (R-Miss.) are on a collision course--over legislation dealing with rebuilt wrecks.

Each is sponsoring a bill to stop “title washing” or “lemon laundering”--in which unscrupulous auto rebuilders patch together seriously damaged vehicles in one state, then go to another state to secure a clean title that gives the buyer no clue of the vehicle’s history.

“This is a life or death issue,” Feinstein said. “People can buy an automobile and not know that that automobile has been damaged in a major way and may not be safe.”

California requires that vehicles too costly to repair be listed as salvage on the title, often called the pink slip, even though it is now multicolored. But because other states have weaker laws, or no laws, Californians continue to be victims of title washing.

A 73-year-old Northern California woman was awarded $100,000 in punitive damages last month in a lawsuit accusing a car dealer of selling her and her late husband a used car without disclosing that it had been in a crash.

Feinstein and Lott agree that title washing is a national problem. Each year, more than half the 2.5 million totaled vehicles are rebuilt and put back on the road--often without safety inspections, federal officials say.

Consumers may never know they are buying a rebuilt wreck, or two--one damaged in front and the other in the rear and welded together.

Car dealers are victims as well, said Tom Greene, chief executive officer for legislative affairs of the National Automobile Dealers Assn. In fact, it was a group of car dealers from Lott’s state that first approached the Senate leader about sponsoring legislation.

Lott and Feinstein agree that there should be a uniform national standard to deal with the problem.

Beyond that, their bills are as different as a Lexus and a VW Bug.

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Lott’s bill would classify as salvage any vehicle that sustains damage exceeding 75% of its pre-accident value, but would permit states to enact a lower percentage. It also would require warning labels on rebuilt salvage vehicles.

Feinstein’s bill goes further, requiring the word “salvage” to be stamped on the title of any vehicle with damage exceeding 65% of its value.

It also would require car owners to disclose any damage exceeding $3,000, unless the damage was entirely cosmetic.

Critics of Lott’s bill, including Rosemary Shahan, president of the Sacramento-based Consumers for Auto Reliability and Safety, say it is full of loopholes.

There is no requirement for disclosure of major damage. The owner of a $20,000 car that required $14,500 in repairs would not have to disclose that fact.

Vehicles more than six years old or worth less than $7,500 are not covered by the bill. That excludes about half the cars on the road, said another critic, Sally Greenberg, senior product safety counsel for Consumers Union.

“We think his bill lacks consumer protection and preempts state law in such a way that it would really be worse because there are some good state laws,” Greenberg said.

Critics of Lott’s bill also say that if just one state chooses not to adopt the federal standards, it could scuttle the program.

“A single state that declines to adopt uniform salvage titling measures can provide a safe haven to those who want to conceal the history of salvage vehicles,” according to a memo from the federal Department of Transportation.

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Feinstein’s bill has come in for criticism from auto dealers and other groups as unworkable.

Under her plan, car owners would find their cars worth less because the title of any car with more than $3,000 damage would bear the words “major damage,” Greene said.

“The car was worth $20,000 before the accident. It was repaired. Now it’s worth $15,000,” he added. “States would very much resist passing a law that would depreciate a number of cars of their citizens.”

“In this day, $3,000 damage is very minimal,” said Marcia McAllister, who represents the American Salvage Pool Assn. “Anybody who has had a fender bender can attest to that. It stigmatizes a car . . . when in all likelihood, it has been repaired and put back every bit as good as before.”

Greene said Iowa required anyone selling a car to disclose damage in excess of $3,000, but there was “so much squawking by the citizens because their cars were being depreciated for relatively insignificant damage” that the legislature there raised the disclosure requirement to $5,000.

“You dented your fender, and you got a brand on your title as the car having suffered major damage,” Greene said.

Asked about Iowa’s decision, Bill Brauch, director of the consumer protection division of the Iowa attorney general’s office, said: “We had a lot of problems in this state with people hitting deer, and many of them were legislators.

“The people who are buying cars have a right to know what’s wrong with that car,” said Brauch, who supports Feinstein’s bill. California’s attorney general and the CHP have endorsed Feinstein’s bill.

One would think that a bill sponsored by the Senate GOP leader in a Republican-controlled Congress would have no problem winning approval. But a salvaged vehicle bill sponsored by Lott died last year in the waning days of Congress because of objections made by the Clinton administration on behalf of consumers.

Lott’s latest bill has been approved by the Senate Commerce Committee. But Feinstein said she plans to meet with Lott in hopes of working out a compromise.