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The U.S. Department of Justice (DOJ) plans to require insurance companies, junkyards and salvage yards to provide information on totaled vehicles for the National Motor Vehicle Title Information System (NMVTIS) by the end of March. The DOJ is moving forward on NMVTIS after a federal judge ordered the department to provide public access to total loss information.
NMVTIS was established under federal law more than a decade ago to provide a way for state motor vehicle bureaus to share title information in an effort to curb the movement of stolen vehicles from state to state, and to prevent title fraud. While a number of states already provide data for the system, full compliance has lagged, in part, because of a lack of funding.
In February 2008, three consumer advocacy groups — Consumers for Auto Reliability and Safety, Public Citizen and Consumer Action — filed a lawsuit against the DOJ, claiming that the government’s failure to implement the provisions of the law put consumers in jeopardy. The lawsuit asked that the court set a timetable on implementation.
In September, Judge Marilyn Hall Patel, a federal judge in San Francisco, ordered the DOJ to provide public access to an electronic database that includes information on vehicles that have been declared a total loss by insurance companies. Shortly after the ruling, the department issued a notice of proposed rulemaking on NMVTIS that calls for insurance companies, junkyards and salvage dealers to provide VIN-based information on totaled or salvage vehicle vehicles by March 31, and update the information every 30 days.
When fully implemented, NMVTIS is expected to be more complete and less expensive than commercial services such as Carfax, Experian AutoCheck and VINCheck, and could help prevent “title washing,” the practice of moving a totaled or stolen vehicle across state lines and receiving a new title for the vehicle that omits any previous damage.
Because many states don’t check the title history of a vehicle when issuing a new certificate, information on the vehicle’s true condition can be hidden. In some cases, wrecked or flood-damaged cars are superficially repaired and resold to unwitting consumers. The lawsuit against the DOJ cited several instances of people being seriously injured or killed in subsequent accidents because they were driving these structurally unfit cars.
“The fact is that junk and salvage vehicles are being rebuilt and repackaged, and are being sold with ostensibly clean titles to consumers who have no idea that they may be driving a death trap,” says Deepak Gupta, the attorney for Public Citizen.
Bob Redding, Washington, D.C., representative for the Automotive Service Association, says that a national approach to the problem of title fraud will be good for both the repair and insurance industries.
“These kinds of things only make our industry better,” Redding says. “These vehicles and titles are moved across state lines on a regular basis. This state-by-state approach to insurance regulation has hurt the consumer and it’s hurt repairers, and this is one more move that helps create a more level playing field for the industry, for our customers and for insurers.”
The court ruling ordered the DOJ to finalize its implementation plan by Jan. 30. The system will include information on whether a title is valid, reported mileage, where the car was previously titled, and whether it was ever reported as a junk or salvage vehicle. Each state is required to perform a title verification check before issuing a new title.
Insurance carriers will be required to provide NMVTIS with the vehicle identification number of every vehicle declared a total loss, along with the date of the declaration and the name of the owner. The rule also clarifies the system’s funding.
Insurers, however, have complained that the reporting requirements would duplicate existing state record keeping, and that there are so many inconsistencies among state laws regarding salvage vehicles that the system would not eliminate the problem of title washing. In a release that seemed to generally support the idea behind NMVTIS, the Property Casualty Insurers Association of America (PCI) pointed out that insurance companies already provide this data to state titling agencies, making the new reporting requirements redundant.
“The overall purpose to gather and share title information between state titling organizations is one that we support. It would go a long way to solving the title washing issue,” says Bob Passmore, director of personal lines for PCI. “But each state has a salvage title law, and the most complete source of information on those vehicles is the state agency that issued the title. Asking us to report that information is duplicative.”
In fact, the proposed regulations would exempt salvage yards from the reporting requirements if they have already submitted vehicle data to the state motor vehicle bureau.
Passmore also points out that certain types of damaged or older vehicles would not turn up in insurance company records. “There are salvage vehicles out there that have nothing to do with an insurance claim,” Passmore says. “There are older vehicles that are exempt in some states from the salvage title law, or may not have physical damage coverage. There are also vehicles that have just reached the end of their useful life and are not suitable for resale. You will never get that information from insurers because they don’t have it.”
Slow adoption
Although NMVTIS was established under the provisions of the Anti-Car Theft Act of 1992 and the Anti-Car Theft Improvement Act of 1996, implementation has been delayed several times, despite the fact that a 2001 cost-benefit study by the DOJ found that NMVTIS could produce savings of $4 billion to $11.3 billion per year for consumers.
The purpose of NMVTIS is to provide an electronic means of exchanging title, brand and theft data among motor vehicle agencies, law enforcement, insurance companies and consumers. Currently, 33 states are involved in the system, with 13 fully participating, 12 regularly providing data, and eight more that are “actively taking steps to provide data or participate fully.” A number of state motor vehicle officials, though, have blanched at the cost of participating (states pay a fee to fund the system), and have questioned its effectiveness.
NMVTIS is currently operated by the American Association of Motor Vehicle Administrators.
There are other electronic initiatives underway to help disseminate total loss information, including a free public database set up by the National Insurance Crime Bureau (NICB) that launched in June 2008. NICB, an insurance industry-funded, not-for-profit organization set up to prevent insurance fraud and vehicle theft, offers total loss information via its online VINCheck service. The service only includes data from participating NICB members.
In 2006 and 2007, former U.S. Senator Trent Lott (R.-Miss.) and Rep. Cliff Stearns (R-Fla.) introduced legislation that would have provided consumer access to total loss information. The bills, which were drafted in response to the resale of flood-damaged vehicles after Hurricane Katrina, were never passed.
Redding said that once implemented, NMVTIS will be a powerful consumer protection tool. “Some private sector services have attempted to help with this issue, but the level of post-Katrina flood vehicles really added a new dimension to title fraud,” Redding says. “We’re not resolving problems like the titling issue on a state-by-state basis. It’s just not happening.”
