Vehicle Total-Loss Disclosure Legislation

ISSUE: 

Each year, millions of vehicles are totaled and thousands of wrecked, flooded, or stolen vehicles are sold without proper disclosure.  The current system for tracking totaled vehicles is outdated and full of loopholes, and a national database is years away from completion. 

While insurance companies collect data on severely damaged vehicles for their shared databases, they are not required to electronically disclose the VINs of all totaled vehicles, to “red flag” these vehicles for the public.

SOLUTION:

Congress can solve this problem by passing Vehicle Total-Loss Disclosure legislation so that consumers can make more informed decisions about vehicle safety and fair market value of used cars.

BACKGROUND:

Many totaled vehicles are resold at salvage auctions, rebuilt, and reenter the market with a clean vehicle title. Consumers suffer because the state DMV system of paper titles does not provide a timely or complete vehicle history.

State vehicle salvage disclosure laws are inconsistent and incomplete. While NADA supports the National Motor Vehicle Title Information System (NMVTIS), a national DMV database established by a 1992 Act -- the database is still far from complete.

The most effective and simple approach to combat title fraud is to give the public more timely and complete access to insurance data on totaled vehicles. Legislation (S. 202/H.R. 1257) would require insurance companies to disclose the VINs of totaled cars to vehicle history providers, such as CarFax and AutoCheck, before the vehicle gets back into the marketplace. (See below: “Tracking Totaled Vehicles for Consumers.)

KEY POINTS: 

• While hurricanes and flooding demonstrate why this vehicle fraud problem needs to be remedied, the issue is much broader and includes severely wrecked vehicles. In 2005, State Farm admitted to reselling at least 30,000 totaled cars without salvage titles which were subsequently purchased by consumers who were unaware their vehicles had previously suffered severe damage.
   
• The current paper trail system of vehicle titles must be replaced with a modern, electronic, and VIN-based system that will make it harder for fraudulent individuals to “wash titles” and hide severe vehicle damage.
   
 
• Total-loss information must be made available in an electronic and commercial format so that vehicle auctions, dealers and the public can track total loss vehicles.  Commercial availability will provide the first line of defense against salvage fraud in used-car commerce in a way that single VIN lookups of total-loss vehicles will never be able to provide.

STATUS: 

A NMVTIS rulemaking that partially addresses insurance company disclosure of salvaged vehicles is complete. However, total loss disclosure legislation is still needed to provide more timely and complete information on totaled vehicles. 

Members of Congress are urged to cosponsor S. 202 and H.R. 1257 to take an active role in promoting legislation to keep unsafe cars off the road.

•  A sample letter urging Senators to support S. 202 (doc). (Click here to find your Senators)

•  A sample letter urging Representatives to support H.R. 1257 (doc). (Click here to find your Representative)

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