Junker rule could help car buyers

Consumers are a step closer to getting better protection against unknowingly buying flood or otherwise damaged cars.

After more than decade, the Justice Department says it will soon issue a proposed rule that would require insurers and junkyard operators to file monthly reports about cars declared a total loss.

Critical identifying data about the car would be entered into the National Motor Vehicle Title Information System. That database might eventually be available to consumers.

“This is data we’ve been hankering to get for decades,” says Rosemary Shahan, president of Consumers for Auto Reliability and Safety. “This is major progress.”

Word that a proposed regulation is soon to be issued turned up recently on a General Services Administration Web site, www.reginfo.gov. It states that insurers and auto recyclers would be required to say whether a car was crushed or sold or used for any other purpose. The proposal is subject to comments, and no timetable was given for establishment of a final rule.

A complete database listing of salvaged cars could help end the practice of title washing, in which fraudsters relicense a car in a state with loose rules about whether a car was declared a total loss and sold as a salvaged vehicle.

Thousands of cars were declared total losses following Hurricane Katrina and other severe storms. Some are believed to have ended up back in American driveways through the process of title washing.

Congress ordered creation of the national database in the 1990s, but no administration since then has issued the orders to compel participation. Despite that, the database has grown based on voluntary participation.

It has information on about 60 percent of the cars in the United States using data submitted by 35 states, Justice Department lawyer Diane Kelleher stated in a filing in a lawsuit brought by consumer groups to try to force issuance of the rules. Kelleher could not be reached for comment.

“We’ve been in overdrive trying to get this system implemented,” says Jim Burch, deputy director of the Bureau of Justice Assistance. But variables in the way the data are entered and the types of data entered have added to the complexity of setting up the database and resulted in delays.

Because damaged cars can be dangerous, the database has information that could save people’s lives, says Deepak Gupta, attorney for Public Citizen, which brought the lawsuit in U.S. District Court in San Francisco.

“A lot of the salvage fraud takes advantage of gaps between jurisdictions,” Gupta says.

Among the coalition of groups backing Public Citizen is the National Automobile Dealers Association (NADA), which wants quicker action to shore up the vehicle title database and make it available to consumers.

“This is a program that has literally languished,” says Bailey Wood, spokesman for the NADA. “The issues of title washing and title fraud haven’t gotten any better. We have to do something about this.”

Though insurers might have to do more to comply with the requirements of the regulation, the National Insurance Crime Bureau (NICB) supports the database effort, says spokesman Frank Scafidi.

Insurers are about to launch their own service that will let consumers check whether cars have been reported as flooded, stolen or a total loss. The bureau expects to have its system running on its Web site, www.nicb.org, this summer, Scafidi says.

The Automotive Recyclers Association, a trade group representing junkyards, is working on a database, too.