Court mandates salvaged car database

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Sixteen years ago, Congress passed a law requiring the creation of a national database of vehicle title information that would allow consumers to determine whether a vehicle had been in a serious accident. It seemed like a great idea, but it was never implemented.

Thanks to a federal court ruling today, however, that should soon be changing.

A U.S. District Court judge for the Northern District of California handed down a decision that requires the federal government to create a database of stolen cars and state, insurance and junkyard title information. Government-supplied data are to be made public by the end of January, with private industry data coming out by the end of March.

The ruling comes after years of pressure from consumer groups, which pointed out that without access to such information, motorists cannot really know whether a vehicle has been severely damaged or ‘totaled.’ That’s a serious safety risk, because badly wrecked cars can be unsafe to drive even if they’re repaired.

The case, against the U.S. attorney general, was brought by Public Citizen, Consumer Action and Consumers for Auto Reliability and Safety. It was filed in February and called on the Justice Department to enforce the statute.

‘It’s pretty much a slam-dunk ruling,’ said Deepak Gupta, an attorney for Public Citizen who litigated the case. ‘Now, with just a VIN number, people will have access to critical data on their cars.’

The Justice Department did not return calls for comment.

The ruling by Judge Marilyn Patel is important because title rules vary by state and because there is no consistent nationwide reporting system. Without broad availability of data, untold numbers of cars and trucks that have been seriously damaged in floods and accidents can be given clean titles by state agencies.

It’s a system that’s ripe for unscrupulous dealings: A 2001 study by the Justice Department estimated that a database would reduce fraud losses by as much as $11.3 billion a year and that about 1.5 million totaled vehicles were put back on the road every year.

In a typical case, a vehicle that has been badly damaged in a wreck is sold by the insurer, with a clean title, to a buyer who makes mainly cosmetic repairs and then sells it as an undamaged used vehicle. Depending on state rules, this practice can be legal as long as the cost of repair does not surpass a predetermined percentage of the car’s book value. According to experts, that percentage can be as high as 100%.

Although final rules have not been written, it’s likely that the database would be accessible via the Internet, according to Gupta and others familiar with the matter. That would allow consumers to use a car’s unique vehicle identification number -- the aforementioned VIN -- to discover whether it had even been in a serious wreck, because the search would turn up police data, as well as state department of motor vehicles, insurance and junkyard information.

Insurers have claimed to be essentially agnostic on the matter of a database they would be obligated to report to, but the industry has had problems with passing bad titles in the past. In 2005, for example, State Farm agreed to pay $40 million in a case brought by state authorities over 30,000 vehicle titles that were not marked as salvage.

Another business potentially affected by the ruling are fee-based background-check services such as Carfax and AutoCheck. Providers of such data claim to be comprehensive, but in February of last year, Carfax settled a class-action suit alleging that the company misled customers in indicating its background searches were complete. State attorneys general who brought the case alleged that Carfax didn’t get data from 20 states, nor did it get information from most insurers.

Carfax charges $24.99 for one report and $34.99 for unlimited reports. A federal database would probably be free or very low cost, Gupta said. A spokesman for Carfax could not be reached for comment.

On Friday, the Justice Department released a set of proposed rules on establishing the database. That proposal was published in the Federal Register today.

The law, the National Motor Vehicle Title Information System, mandated that state motor vehicle administrators, as well as insurers and junkyards, report title information to a central database as well as insurers and junkyards.

Although some states have been reporting that information for years, others have not, among them California and New York. Instead, those states sell their information to private data services, according to Rosemary Shahan, head of Consumers for Auto Reliability and Safety. ‘California and New York get revenue from selling that data,’ she said. ‘They don’t want to just hand it over for free.’

-- Ken Bensinger