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Fraud Rampant in Body Shops

Times Staff Writers

State investigators found billing fraud in nearly half of the auto body repair jobs they inspected during a two-year study, with an average of $811 in overcharges for parts or labor not received, according to a report to be released today.

The report comes as the auto repair industry is pushing to restructure the Bureau of Automotive Repair, a move that consumer groups say would gut one of government’s most effective watchdog efforts.

For the record:

12:00 AM, Sep. 11, 2003 For The Record
Los Angeles Times Thursday September 11, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 64 words Type of Material: Correction
Body shops -- A headline in Wednesday’s California section referred to “rampant” fraud in California body shops. In the state study discussed in the story, vehicles were inspected only if owners requested a check through a toll-free hotline. So, while 42% of those checks revealed fraud, the study did not contain any finding about the prevalence of fraud in the industry as a whole.

Criticizing the bureau for maintaining a poor working relationship with those it regulates, industry representatives want to turn over some of its authority to an appointed commission. Four of the nine commission members would be from the industry.

But consumers say such a move would severely weaken the state’s ability to curb fraud in the sprawling collision repair industry.

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“The bureau does an incredible job of cracking down on some very powerful schemers, and the industry knows it,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a nonprofit advocacy group best known for pushing California’s “lemon law” of 1982. “They want to turn a watchdog into a little spaniel.”

The investigation of auto body shops was authorized by the Legislature in 2001 in response to years of complaints about the industry. Concerns about automotive repair work rank as the No. 1 gripe received from the public by the state Department of Consumer Affairs, which oversees the bureau.

During the study, a total of 1,315 vehicles with at least $2,500 worth of repairs were inspected at no charge for consumers who requested a check through a toll-free hotline. The program received national attention, as the bureau, known as BAR, earned a reputation as the only government agency that made house calls.

Some of the cars inspected had hidden damage that required partial disassembly to determine if the repair actually took place. More than 550 vehicles, or 42%, had parts or labor listed on the invoice that were not actually supplied, the study found.

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Charging customers for repairs they do not receive is illegal, and BAR referred 46 cases to district attorneys for possible civil or criminal action. In addition, 48 cases were turned over to Atty. Gen. Bill Lockyer for possible suspension or revocation of a body shop’s operating license.

Finally, mediation between BAR and shops identified as having defrauded consumers produced $536,000 in refunds, bill adjustments or additional work.

State Sen. Jackie Speier (D-Hillsborough), who carried the bill that launched the study, praised BAR’s efforts and said she would urge the Legislature to step in and take further action on the problem.

“It’s chilling to think 42% of the auto body repair work done in this state may have some level of fraud associated with it,” she said. “It underscores the system that exists today is inadequate.”

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Kevin Meadow of Encino agreed. After an accident left his 1999 Ford Explorer severely damaged, he took it in for major repairs that totaled an estimated $9,000.

“After they put the car back together, it was never right,” Meadow recalled. He requested an inspection by BAR, and investigators found hinges coming off doors, peeling paint, a roof that wasn’t repaired properly and a front fender that was not a factory-supplied part.

In all, inspectors found that Meadow had been overcharged about $3,300 for parts or repairs that were not provided.

Regulators and insurers estimate that auto body fraud in California totals about $500 million annually, but industry representatives deny charges of widespread abuse. Marty Keller, executive director of the Automotive Repair Coalition, called the BAR report “skewed to people who have self-identified as having a problem.”

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“It’s a terrible thing if anyone gets ripped off,” Keller said. But out of the huge number of repair jobs performed in California, he argued, the amount of fraud detected seems small.

Others, including state Sen. Bill Morrow (R-Oceanside), attacked BAR as overly aggressive in its enforcement efforts -- in his words, “an out-of-control bureaucracy.” Morrow last week requested a legislative hearing on what he called BAR’s “reckless disregard for the due process rights of businesses in California.”

Specifically, Morrow criticized BAR for joining with the attorney general to take legal action against a Caliber Collision Center in San Marcos, a city he represents. BAR investigators say that center, along with two other Caliber outlets in Los Angeles and San Bernardino, charged more than $4,500 for parts or services that were not provided.

Morrow said BAR’s move against the company amounts to a “public pillorying” based on unfounded allegations: “There is no innocent until proven guilty,” he said.

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Mike Luery, a spokesman for the Department of Consumer Affairs, said the evidence against the San Marcos shop is clear and that the attorney general “would not act based on something he thinks is frivolous or without merit.”

In the last five months, he added, legal action has been taken against seven other Caliber outlets around Southern California, with a total of $25,000 in overcharges documented.

Such actions come as industry officials are pushing to replace BAR with a nine-member oversight commission that would include four industry appointees and five public members. The plan has been outlined in auto body trade publications and industry lobbyists have been testing the waters to see if support for such a move exists in the Legislature.

Keller said the change is needed because “there is little working relationship” between BAR and those it regulates.

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“It seems to have a cavalier attitude over the issues we raise,” Keller said. “We just think it’s an old structure that’s ... unresponsive to the marketplace.”

Although there has not yet been a bill drafted to accomplish the switch, consumer advocates fear that a bill will be produced this week during the final, chaotic hours of the legislative session, a time when controversial proposals often are slipped through. But Keller said there are no plans to propose such a measure now.

Consumers are alarmed because of BAR’s diligence in pursuing fraud, a record that has made California leader of the pack when it comes to policing its automotive repair industry.

“No other state comes close,” said Shahan of Consumers for Auto Reliability and Safety. “I’m very worried when the industry beats up on an agency that’s doing its best to protect us.”

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BAR, with a budget this year of $116 million, gets its money from licensing fees paid by the auto body repair industry. The two-year pilot program cost $2.6 million, including costs of car inspections and attorney general staff time to process cases.

The insurance industry spends about $3.2 billion annually for auto body repairs in California, industry figures show.

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Times staff writer Evan Halper contributed to this report.

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