Auto salvage and S. 431, S. 485, and S. 1232 : hearing before the Committee on Commerce, Science, and Transportation, United States Senate, One Hundred Third Congress, first session, August 3, 1993 online

records may show it salvaged, rebuilt, reconstructed, or junk, or the
State may not record anywhere on the title that the vehicle was
demolished or later rebuilt. It is a Tower of Babel for our industry,
because we handle vehicles from every State. A car's title docu-
ment, often the only warning a consumer may get, may simply say
"S" or "R," without any explanation.

In Nebraska, we are surrounded by States that issue titles for re-
built wrecks without mentioning the previous damage. This prob-
lem is aggravated by the fact that the States usually do not recog-
nize and carry forward salvage brands from other States when they
title a car. Only 12 States will recognize and repeat all title brands
from other States. Nebraska, Missouri, and Nevada have strong
laws, but our proconsumer States still cannot protect us.

The safety inspection program cannot be fully effective because
salvage-related information can be washed off so easily elsewhere.
For example, the CBS program 60 Minutes reported earlier this
year about a youngster in Missouri who was nearly killed in a car
his parents bought for him. Texas issued a salvage title for that ve-
hicle. Kansas then issued a clean title. The car was sold in Mis-
souri with a clean title, so the parents had no idea they were pay-
ing too much for the car, or that their son's life might be at risk.

Nebraska is not only surrounded by States that do not brand ti-
tles, but also by States where it is easy to wash such a warning
off a car title. All a rebuilder has to do is obtain a new title from
one of them for a nominal fee.

Auto auctions are victims in two ways. First, fear of rebuilt
wrecks undermines the foundation of our business. Second, instead
of preventing salvage fraud, everybody just races down to the
courthouse. Disappointed buyers sue the dealers, the dealer sues
the auction, so we are all just chasing our tails. Victims sue other
victims while the guy who rebuilt the car and washed the title goes
straight to the bank.

Our company uses computers to build our own protection against
handling undisclosed salvage, but our system is still imperfect. De-
spite hundreds of thousands of dollars, the only way to fully protect
us and the consumer is to make sure rebuilt wrecks get branded
and stay branded. State motor vehicle titling officials know this
problem cannot be dealt with on a State-by-State basis. They know
that remedial costs are minimal, and they support the passage of
a Federal mandate requiring that title brands be carried forward.

Just 2 weeks ago a Presidential task force including the State ti-
tling officials from all over the country voted to support a
carryforward of all existing title brands. S. 431 is pretty simple. It
requires a State to carry forward salvage brands on car titles. It
tells the Department of Transportation to establish nationally uni-
form procedures as to when the car gets branded after they have
been wrecked.



15

It will take time to get new procedures implemented across the
country, but Senator Exon, you did not let that stop you when you
tackled the related problem of odometer fraud. That problem is
largely fixed, thanks to you and the Truth in Mileage Act. We Ne-
braskans are proud of your leadership on this committee on an im-
portant issue for so many Nebraskans and consumers across the
United States.

I would like to submit some other additional materials for the
record concerning S. 431. I would also be happy to answer any
questions about Senator Gorton's bill, 1232, and Senator Pressler's
bill, S. 485, both of which have some merit.

[The additional materials for the record may be found in the
committee's files.]

Senator Mathews. Thank you, Mr. Van Winkle.

Let me confer with my associates for just one moment here.

While you were voting, we heard three of witnesses. There are
three additional witnesses. And Mr. Gray has a tape that he wants
to show. Is it your will that we go ahead and hear them?

Senator Gorton. Yes, let us go ahead and hear them first.

Senator Mathews. OK, we will hear them all. Very good.

Mr. Nordstrom, welcome to the committee.

Senator Pressler. Let me just interject that I am very proud of
Mr. Nordstrom's work in the South Dakota State Legislature on a
number of issues. He is a citizen from the grassroots truly.

Senator Mathews. Thank you, Senator Pressler. Mr. Nordstrom.

STATEMENT OF ART NORDSTROM, PRESIDENT, SOUTH
DAKOTA RECYCLERS ASSOCIATION

Mr. Nordstrom. If I seem a little nervous, for me, this is a to-
tally new experience. I have never been in a plane in my life, and
I have never been to Washington. I have been a homegrown South
Dakotan, and I am lost. [Laughter.]

Senator Pressler. It is his first airplane ride today, too, so we
are proud of him.

Mr. Nordstrom. It was not bad, either.

One thing I would like to say is that South Dakota did pass a
lemon law this year in the session.

Thank you, Mr. Chairman, for holding this hearing today and for
providing the opportunity for me to testify. I am Art Nordstrom. I
am president of the South Dakota Auto Recyclers Association. My
wife and I own and operate Nordstrom's Auto Recycling in rural
eastern South Dakota. We built the business from scratch, and we
now feed 19 families.

We sell recycled parts and vehicles that can be repaired. We do
not rebuild vehicles. I want you all to understand that when we get
into this testimony. We do not repair vehicles.

We deal with a lot of insurance companies from across the Unit-
ed States and we see many different types of titles. We have had
the South Dakota Damage Disclosure Law since 1988, and it is
working great. A lot of the things that you guys have been talking
about here, we have already got a handle on it in South Dakota,
and with later questions I will try and explain it to you.

We believe the consumer has the right to know. Our law protects
the person selling a damaged or repaired vehicle because he is dis-



16

closing the damage at the time of sale or trade. Before our law, we
had salvage titles and percent to determine the salvage. It was not
protecting the consumer. We kept hearing stories of consumers get-
ting surprised by finding out the new or used car they had just
bought had been wrecked.

Marilyn Volz, my sister-in-law from Anchorage, bought a newer
used Suburban 4x4 and thought there was something that was not
quite right with it. They came out of a restaurant one day and saw
a young man looking at it, and he told them it was his father's,
and it had been in a major wreck and had been repaired and he
sold it. Marilyn bought it and was never told anything about the
damage.

I had my own experience with my own never-damaged 1985 Pon-
tiac. I traded it in on a new 1987 model. My trade sat on the lot
for two months, and then it was gone. A week later a man called
my wife, asked her all about the car and how we like it because
he had bought it. She told him we loved it, but it was a four-door
and we wanted a two-door. He asked her about the paint overspray
under the front end. She told him we had never had an accident
and to check with the dealer.

Come to find out, a lady had tried out our car and, in pulling into
the lot, hit the gas instead of the brake, hit a parked car, pushed
it into a Jeep. My car and the Jeep were repaired. The dealer sold
it to the man and never told him. I suppose to this day the guy
thinks that my wife lied to him.

That is when I realized there had to be a better way. These in-
stances are an example of how salvage and percent laws will miss
major damage. Often an insurance company will have severely
damaged vehicles repaired for their customers because they owe
too much to total it and it would miss being branded. Other types
are uninsured vehicles, self-insured vehicles, rent-a-cars, leased ve-
hicles, law enforcement autos, new cars with just an M.S.O., demos
and bank repos, and there are others.

That is why I thought up the idea of a disclosure at time of title
transfer. It is a simple system to require a circle of a car picture
and a yes and no to reveal damage, repaired or not. It is required
on all vehicles 9 years or newer, just like the Truth and Mileage
Act. Once a vehicle has had damage or has come from another
State with damage, a disclosure would be on the face and stay on
the face of the title forever.

There is a penalty for anyone that intentionally falsifies a disclo-
sure to a dealer or a consumer. I have enclosed a copy of the title
with my testimony, and I have another one here if anybody would
like to look at it.

For a fee of $5, anyone can receive a complete title history fi-om
our department of motor vehicles. Any previous brands are carried
forward on the title to prevent title washing in South Dakota.
Right now, there are a lot of flood cars in the Midwest. We have
just handled a lot right in our own area. We sold quite a few back
out to be repaired.

Ours are all marked with a disclosure, but in other States, if it
does not go through an insurance company, it can be covered up
and the consumer frauded. This law will also give law enforcement
a new tool to help stop the trafficking in stolen parts. If a certain



17

type of vehicle is reported stolen, the law could use the disclosure
to locate other vehicles of the same kind that had damaged marked
at the time of title transfer. This would allow them to trace back
where it was repaired and where the parts came from. Legitimate
businesses would have receipts.

Thieves will never know when a disclosure might pop up on a
title transfer, whether this year or 9 years from now. And that is
also one of the reasons we have the low dollar amount. If you get
too high, it will not work.

I realize that this is a different concept, but it will work, and I
want to read a statement from Deb Hillmer, our director of motor
vehicles.

Deb said: "A salvage branding law" — this is in the Congressional
Record, by the way, too — ^"A salvage branding law was in effect
which put our office in the position of determining whether or not
a vehicle met the definition of salvage. One of the problems we ex-
perienced with our previous salvage law was the misconception of
a total loss. An insurance company may total a vehicle for reasons
other than damage to the vehicle. Because of this, it was very dif-
ficult to determine the actual damage to the vehicle, and not hav-
ing a staff with expertise in automobile repair, we were at a real
disadvantage. With our present damage disclosure law, total loss is
not an issue."

Since the intent of all salvage laws is to protect the consumer,
our present method of disclosing damage is a very effective means
of informing the public of a vehicle's condition. In addition, it is ex-
tremely easy to administer in that it does not require that the
State make any type of determination as to the condition of the ve-
hicle, but still provides the consumer with vital information.

If more States would adopt this legislation, we may eliminate
title washing, while providing the consumer with relevant informa-
tion about the vehicle.

I thank you for this time. And I also have a videotape that we
made, which if I cannot explain it today, it is free to anybody that
wants it. Senator Pressler will have them over there in the office.
It is 22 questions which help answer a lot of the questions that get
brought up on the disclosure. It is a new concept, and I know there
are a lot of you saying $1,000 or $2,000 and all vehicles. Well,
there is a reason for all of it, and we have had it since 1988 and
it works.

Thank you, Mr. Chairman.

[The information referred to follows:]



18




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DISCLOSURE STATEMENT IF A VEHICLE BEING TRANSFERRED IS LESS THAN TEN (10) YEARS OLD AND WEIGHS LESS THAN 16.000 POUNDS.

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Senator Mathews. Thank you, Mr. Nordstrom. Thank you very
much. Mr. McCarthy.



STATEMENT OF FRANK McCARTHY, EXECUTIVE VICE
PRESIDENT, NATIONAL AUTOMOBILE DEALERS ASSOCIATION

Mr. McCarthy. Thank you, Mr. Chairman.



20

My name is Frank McCarthy, and I am the executive vice presi-
dent of the National Automobile Dealers Association.

NADA is the national trade association representing over 19,000
independent franchise new car and truck dealers, and they hold
over 35,000 separate franchises. The primary business of our mem-
bers is the retail sale and service of new and used vehicles
throughout the United States, both foreign and domestically pro-
duced.

On behalf of our membership, I would like to thank you for the
opportunity to testify here on S. 431 and similar bills. I heard the
word odometer several times here. I would like to add that we are
very proud at NADA that we initiated the draft odometer bill with
this committee. It came back several times to strengthen the provi-
sions. And it does seem to be working.

This type of legislation, we think, falls in the same category. A
lot can be done to protect consumers and, basically, we are here to
support that.

We commend Senator Exon and the subcommittee for addressing
the matter of salvage and rebuilt vehicles. The majority of States
presently have some indication on their titles that a vehicle has
been salvaged or rebuilt. However, as vehicles are retitled in other
States, which we have heard before, it is fairly easy to wash out
any notification that a car has been rebuilt or salvaged.

This eliminates valuable information to both dealers and ulti-
mately to consumers that would greatly assist these people in eval-
uating the safety and also the value of the vehicle.

Congress recognized this problem and established a task force in
the Anti Car Theft Act of 1992 to examine the matter and to report
back to Congress with recommendations. We also are proud that
one of our very good dealers, Ed Biagas, is serving on this commit-
tee and attended the first meeting. The task force is directed to
consider the advisability of requiring uniform title brands on all
certificates of title, indicating that a given vehicle is salvaged, re-
built or reconstructed.

We applaud Congress for establishing this task force and we
think that they will accomplish their task, this coming year. We be-
lieve that its recommendations will serve as the basis for legisla-
tion which will guarantee uniformity among the States in branding
its titles. However, it is reasonable to assume that if such require-
ments are enacted into law, it will not become effective for several
years, or at least it is going to take some extended period of tirne.

There are things that can be done presently to provide potential
used car buyers with information regarding the history of vehicles
which would be extremely important in evaluating that vehicle.
These small steps could be taken without encroaching upon the du-
ties and responsibilities of the task force, but it could be a stopgap
measure that would really save a lot of people from buying unsafe
products and hopefully save a lot of lives.

S. 431 identifies the steps which should be taken immediately.
It established very simple and nonburdensome requirements on
State departments of motor vehicles, which would provide dealers
and consumers valuable information. As we understand the bill, it
would simplv require that all States indicate on their titles wheth-
er the vehicle was previously issued a title with a salvage, junk or



21

rebuilt brand, and to designate which State first issued such a
title.

As far as what the nomenclature will be, as I understand it, we
would leave that up to the task force and that will be handled
later.

We believe this can be accomplished by using no more than one
or two lines of space on a certificate of title. A short question on
the title such as, "Has the vehicle previously been branded?" Yes
or no. "What was the State in which that vehicle was branded?"
This would seem to fill the requirements and objectives of this bill.

With this information on the title, a consumer can walk away
from the vehicle or engage in additional inquiries to determine the
extent of the damage if one is so labelled.

Under the dealer point of view, this information is also extremely
valuable. When dealers purchase for their used car inventories —
and used cars are a big part of a new car dealer's business — they
often do not have the time or ability to conduct a detailed inspec-
tion of each vehicle. The title information required by the Exon bill
would be very helpful to the dealer in determining the value and
commercial acceptance of the vehicle and, in turn, protect the
consumer.

Once, again, this can all be accomplished without any appre-
ciable burden to the States. This bill would not supersede the work
of the task force. It does not attempt to define the types of vehicles
that should be branded, nor does it attempt to specify the terms
which States would be required to use in branding their titles.
These matters are left to the task force for their deliberation.

This bill merely requires that States indicate on their titles
whether another State has previously branded the vehicle. We
think this is very clear and straightforward and very necessary.

The next paragraph in our testimony is in the record. It is just
a technical matter that we wanted to bring to the attention of the
committee, and we think that can be handled that way.

We would like to point to the last paragraph of our statement.
I will summarize it. We believe that the passage of this legislation
might be jeopardized by delegating to the Secretary of Transpor-
tation the authority to enact into law by rule the task force's rec-
ommendations. The reason I bring this up is that there is a similar
bill on the House side. We have talked to several people over there,
and they have expressed some concern about that.

So, we hope you would coordinate that and possibly still leave
this in Congress' hands, and not delegate all this authority to the
Secretary of Transportation.

Again, we appreciate the opportunity to testify on S. 431 and re-
lated bills, and we will assist the committee and subcommittee in
any way on this matter.