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

The new car dealers contacted us and said, we need that bill
killed; because if that happens, we are going to end up buying some
of these, or taking these cars in trade, we are going to oe selling
them to our customers. They are going to find out they have been
wrecked, because for $5 you can get a title history in South Da-
kota; and they are going to bring them back, and we are going to
have to buy them back. We do not want that changed.

And so, that is why right now we are at $2,000; but if they had
their druthers, they would go back to $1,000.

Mr. Blumenthal. I am not here, again, speaking on this issue
for the National Association of Attorneys General. But I would sim-
ply provide my view, my personal view, that perhaps this kind of
limit might be an area where some State discretion might be ac-
corded; and that, perhaps, the Congress might leave some discre-
tion to the States to set those standards.

Senator Pressler. Good. I will address this question to both of
vou. What are your views on an approach that requires a title to
be marked, as under Senator Exon's bill, but also includes a dollar-
based disclosure? Would that provide a consumer with the greatest
amount of disclosure information?

Mr. Blumenthal. My own view is that the important feature of
these measures is that it provides, all of them provide, for a stamp-
ing and branding of title that, as Mr. Gray said, does not go away.
That really is the key feature, in my view, of this bill, of tne State
statutes that have been passed, and hopefully of any measure that
is passed by the Congress.

Mr. Nordstrom. We are totally in favor of carrying any brands
forward from any other State. Because we have total disclosure in
South Dakota; the recycler is working with our department of
motor vehicles, where tne No. 1 thing is to protect the consumer.
And like I said, we have tried percents, we have tried salvage titles
and everything, but what we have got — I may sound proud, but it
works.

Senator Pressler. OK Later, of course, we can get Mr. Cheek's
views on that; but while the attorney general is here, under the
automobile damage consumer protection bill, would a dealer be lia-



29

ble if someone lies on a trade-in about the damage? Further, would
an individual be liable, if he or she forgets to disclose damages
when selling or trading a car?

Mr. Blumenthal. I would need to see the specific wording of
that proposed statute. Senator, with all due respect. I did not re-
view it before coming here. Under certain circumstances, certainly
there could be liability on the part of the dealer, and possibly also
on the part of the person selling it.

Mr. Nordstrom. When the legislation was written, we put into
statute that anyone who intentionally falsified a damage disclosure
was the one that was liable for that disclosure. And it excluded
dealers, unless the dealer had taken a direct vehicle in trade and
fixed it, and put it on the lot and did not tell anybody about it.

Senator Pressler. OK, this is my last question on this round,
and then I will yield to others. And I will have some more ques-
tions for the next round. Let us suppose I have a fender-bender, es-
timated by my insurance company to cost $5,000. Because I can get
my brother to pound out the dents for free, I choose to take the
check from the insurance company and never look back. How would
the consumer be alerted to my actions, under this legislation? Or
how should they be? How would the consumer be alerted, under
the various bills? Or what should be done here?

Mr. Nordstrom. No. 1, it is a little bit of a difficult question to
answer. When I first started, that was brought up a lot; but now
that we have had it since 1988, it is not a problem. Because the
Argus Leader, which is our main paper, has put a statement that
is in the paper all the time, about the disclosure law. And people
that have had damage on their cars, when they go to sell a vehicle
to somebody, they are going to make sure that it is disclosed, be-
cause they do not want anybody coming back after them.

In 1988, we had less than 100 requests to our department of
motor vehicles for title history. Last year, we had 3,500 requests,
and it has just been jumping like crazy since they got something
out and educated the people about it.

Senator Pressler. Thank you. I will take another round of ques-
tions, when we go around again, Mr. Chairman.

Senator Mathews. All right. If either of you have additional
questions for Attorney General Blumenthal, you may want to go
ahead, at this point.

Mr. Blumenthal. I want to apologize that I do have to leave
early. Senator. And I very much thank the committee for giving me
this opportunity to testify on behalf of the National Association of
Attorneys General, and also for your patience and understanding
with my flight schedule. Thank you.

Senator Mathews. Thank you. We appreciate your taking the
time to be here with us, and to share your thoughts with us. Let
me take a moment, Mr. Van Winkle, to ask you a question or two.

As I understand it, your home company is located in my home-
town, or your parent company, the Anglo American Auto Auctions.

Mr. Van Winkle. Nashville, TN.

Senator Mathews. It is located in Nashville, TN; and I want to
say a word of special welcome to you. I hope you have the occasion
to visit from time to time.



30

Mr. Van Winkle. I will be down there Thursday evening. I gen-
erally get there about once or twice a month.

Senator Mathews. We are hoping to do the same thing, to be
there before the weekend. The majority leader indicates that we
have one important bill, and if we do not get that passed, we will
not be going home this weekend. We are going to be in a little bit
better frame of mind, or at least I am, after that; let me put it that
way.

You indicated in your testimony that you filed that your company
made a particular effort to trace the title history of automobiles,
and have some information available to the purchasers. What ad-
vantages or disadvantages have you rim into?

Mr. Van Winkle. Well, its good advantage is, we are the only
auction company that is connected on our computer that — we are
with Polk Co. — and we run about every 100 to 150 cars, we run
them again on our computer, and it kicks out if it has had previous
salvage or odometer trouble. But anything is not perfect, and we
would like to see it better. If we had a disclosure act on it, well
then we do not ever have to worry about it. But we miss some. And
some of them, we do not. There are some of them we get; we get
a lot of them.

But I am sure that most of the people think, the dealers think,
that now that we do have it, and we are the only auction that does
have it, they are going to other auctions. Because normally, we will
call the dealer in and tell him that, "Your car has a previous sal-
vage title." Maybe one or two of them will say, "Go ahead and run
it, and announce it"; and the other ones will just say, "Well, pull
it." And we never see the car anymore. So, they are going to other
auctions that do not have what we have.

Senator Mathews. Does your practice, and your having this in-
formation available, make better purchasers out of buyers? Do you
find them more cautious, if they know that this information is
available somewhere?

Mr. Van Winkle. Absolutely. They are tickled to death with it.
They are very much satisfied. We have dealers calling us all the
time, to check to see if it has a previous salvage title on it.

Senator Mathews. Do you find any disadvantages, in terms of
people refusing to bring their cars to your auction? In other words,
are you going to check them?

Mr. Van Winkle. We are losing some business out of it. But we
are kind of happy to lose it, because we do not like the grief that
we have to go through; where dealers get mad at us, thinking we
are the cause of it, and we know nothing about it. So, we have lost
some business, but we are kind of happy about it.

Senator Mathews. All right. Thank you. Mr. Gray, in terms of
your series, what got you onto this particular activity?

Mr. Gray. This story came to us, Senator, through a telephone
call we got from a young man who had just bought a car, and who
discovered that the car was difficult for him to drive at interstate
speeds. He had a wife and a young child. He did not feel com-
fortable having his family in that car. He called us because he
wanted to know what was wrong with his car, and he was curious
as to whether we could help him.



31

We got on the trail of his car, and the more investigation and the
more research we did, the more we found that this was a problem
not only for him, but for a number of other people. And it kept
going and kept going, and that led us to the story that you saw
today.

One thing I might point out is that we were able to do something
that he could not do: We had the time, through the good offices of
Scripps Howard Corp. and their generous coffers, to actually inves-
tigate car titles. And sometimes those investigations took us to at-
tics of State office buildings in Columbus, OH, where we went
through stacks of boxes — the old-fashioned way, looking at slips of
paper — ^for bits of evidence that would lead us further down the
trail of tracing down some of these cars.

In other words, there was no easy system for consumers to fol-
low, to check out the origin of their cars or to find out what the
history of their cars had been. And, as I am sure you can imagine,
not every car buyer — in fact, very few car buyers — would be able
to spend the time in a dusty, moldy old attic in Columbus, OH, try-
ing to find out the history of their car. We were able to do that for
this particular individual, and for several others. And as you saw
in the videotape, when they found out about it, they were quite
surprised.

Senator Mathews. I am sure there are many. But what has
grown out of your series, your investigative series and reporting
here, have you brought about changes in the law? Some of the
things that we are talking about here today obviously emanated
from this type of investigative report work. What positive benefits
do you see today?

Mr. Zarchin. Senator, if I could answer? Recently, the Ohio Leg-
islature passed a branding law. They made a law similar to what
we are talking about today effective for Ohio. Part of the problem
is that the neighboring State of Kentucky does not have a similar
law. What we found in our research in doing the story is that, if
your neighboring State does not have a title law, then that State
becomes a dumping ground for the rebuilt wrecks.

Senator Mathews. Thank you. Our chairman has returned. Let
me turn the meeting over, back to him. Chairman Exon,

Senator ExoN [presiding]. Senator Mathews, thank you for filling
in. I had to leave for the floor, and I had to be there for a little
bit. I appreciate your taking over. Where are we, in the line of
questioning? Has everybody had one round?

Senator Mathews. We are going through one round.

Senator ExoN. It would be then my turn to ask questions. Let
me just say first, let me ask you this question, Mr. McCarthy. Do
you have any estimates, ballpark or otherwise, as to what the cost
of this salvage fraud imposes on automobile dealers of the United
States? Have you seen any figures on that? Do you have any esti-
mates?

Mr. McCarthy. We do not have any total figures, Mr. Chairman.
But we know of individual instances where it has cost dealers a
great deal of money, and also consumers; because dealers do, inad-
vertently, take in a rebuilt car that they did not know about, and
sell it. They will always buy it back.



32

I would like very quickly to add here, because I heard Mr. Van
Winkle give good testimony, but he mentioned the word "dealers"
several times, as if they might be involved in this. I represent new
car dealers; they sell used cars. We have even initiated a new serv-
ice, Mr. Chairman, because it can cost dealers lots of money, where
a dealer can call in the VIN number of a car and trace the title
of that car, to see if it has been rebuilt, salvaged, and so forth. This
is very important, because it is costly if a dealer should inadvert-
ently sell one of these vehicles and later have to buy it back.

The legislation that you have offered would add further protec-
tion for this. But individual dealers, in many cases, have had to
buy back a $16,000, $18,000 car, take big losses on these, when
they eventually found out that it was a rebuilt car. No dealer in
this country wants to sell one. Their liability is high; the loss is
great. And we are doing what we can to protect the dealer; and ul-
timately, the consumer.

Senator EXON. It is awfully encouraging for those of us who try
to write these laws in a fair and equitable and workable manner,
to have people who are out there where the rubber meets the road,
so to speak, on the dealer lots — new, used, and so forth — to have
you come in here as a dealer, supporting this concept. I think that
shows the quality of our dealer organization.

Certainly, also, I recognize that it has undoubtedly cost the orga-
nizations and the individual dealers lots of money. Unfortunately,
you know about it, but the average public does not get very much
excited about this until it happens to them. Therefore, the fact that
U.S. dealers are here — ^you know, the average person out on the
street there thinks that, well, you know, somebody in the auto-
mobile business, the new or used car business, they could spot one
of these rebuilt cars.

Well, I suspect that, while you are very knowledgeable of the
product you sell, it is pretty much next to impossible, unless you
put every car up on the rack and do an awful lot of checking
around, for you to make any evaluation. Certainly, I know that Mr.
Van Winkle has had a lot of experience in this. And you are a pro-
fessional. It is pretty easy to fool you, I would imagine, on a rebuilt
car; is it not?

Mr. Van Wiistkle. It sure is. We sell about 65,000 cars a year in
Omaha, and we cannot inspect every car. We can notice, maybe, if
a fender has been repainted or a door has been repainted; but it
is hard to tell, without really inspecting the car.

Senator ExoN. I assume that a high percentage of the used cars
today go through automobile auctions. The used cars that end up
on nonnew car dealer lots and some of them on new car dealer lots,
what percentage of them go through an auto auction? Half of them,
60 percent of them, what is the figure?

Mr. Van Winkle. Well, some dealers do more business with auto
auctions, although the majority of them do a lot of it. But it is pret-
ty hard to figure a percentage. Some dealers operate strictly on
auctions and some of them operate strictly retail, so it is kind of
hard to put a figure on it.

Mr. McCarthy. I would like to add this that might be helpful,
our figures show that more than 50 percent of the used car trans-
actions in this country are from one individual to another. So, some



33

of the safeguards that I am talking about, as is Mr, Van Winkle,
are not available to these individuals. That is all the more reason
why this legislation is important.

Senator ExoN. Gene, let me ask you this question, since I know
you have been in business for a long time. In your opinion, what
are the benefits — if there are benefits and I assume there are
some — of relying on the recommendations of the Federal task force
regarding uniform procedures for titling, branding, and so forth
and so on, as opposed to writing it into legislation as we are at-
tempting to do with our bill? What are the pros and cons of those,
as you see them?

Mr. Van Westkle. Well, they have good merits, all of them do.
Personally, myself, I would like to also see where a title actually
says previous salvage title, because Iowa just started a new law,
they make you put down the actual figure. And we had a car in
our auction a couple of weeks ago, a Lincoln Continental that had
13,000 some odd dollars' worth of damage with it, and we sold that
car.

But the lady that bought the car was from down in southern Ne-
braska, down by Beatrice, and she made a deal with the dealer, the
Iowa dealer that sold it. And he gave her back some money and
she said well, I will keep the car if Nebraska does not put it on
the title. It was not marked salvage so they did not put it on the
title.

Senator ExoN. Well there is a car.

Mr. Van Winkle. That is right. And if it would have been
marked salvage to start with and it was branded from what this
law is for, it would have went right on the Nebraska title.

Senator ExoN. Mr. Nordstrom, could you explain in a little more
detail how disclosure of the previous damage in a vehicles title
could help law enforcement in their efforts to stop the trade of sto-
len automobile parts?

Mr. Nordstrom. Right now all the legislation is geared after the
insurance company cars. I want to just use an example of one car.
Say a 1990 Cadillac was stolen — and I am going to use South Da-
kota because that is where I am from — in South Dakota. OK, law
enforcement can take — this year, next year, whatever, at any time
any other 1990 Cadillac or car close to it that those parts will fit,
law enforcement can pull out of DMV the titles of those cars with
the disclosure because the dollar amount is low enough, and can
go back to find out where they were repaired and where the parts
came from.

All legitimate shops are going to have records. If they go back to
somebody and he says "Well, my neighbor fixed it down the street,"
they might go down to the neighbor and they might have just got
on to a stolen parts ring. A lot of that stuff happens by accident,
but if you go after the cars that the parts are being put on you
have got a better chance of cutting it down.

Senator Exon. Tracing it back; right?

Mr. Nordstrom. Tracing it back, right. I think to the insurance
people themselves, if thieves found out that they are going after
the cars that they are tracing it back on, there would be less vehi-
cles sold and it would save them a lot more money.



34

Senator Exon. Mr. Cheek, do Advocates have any suggestion for
insuring, if we can use that word, that consumers will nave access
to the salvage history of all vehicles, and not just have those that
have been declared totaled by an insurance company? How do you
feel about that?

Mr. Cheek. Well, I would think that the individual department
of motor vehicles would have this information, and it would be
available to any consumer.

Senator Exon. By and large, as representatives of dealer organi-
zations, have you generally found that the motor vehicle depart-
ments of the States have been understanding of and in support of
some type of legislation on this matter that we are considering
here?

Mr. McCarthy. The answer is yes. Jim Lust, our current dealer
president, is from South Dakota and he does brag about the fact
that consumers, for $5, can get the history. Most States are the
same, but we definitely have the problem that was outlined. All
States do not have similar title branding and it is so easy to wash
it in those States that do not, and that is what happens. So, your
legislation will go a long way toward correcting that.

Senator Exon. Other further questions. Senator Gorton.

Senator Gorton. Attorney General Blumenthal came and spoke
about the lemon cars here, and not about the other bills. You have
all spoken about the salvage or the damage disclosure and so on.
I would appreciate the informal views of each of you, and I guess
we can just start with Mr. McCarthy and go across the line, on
whether or not the same set of rules ought to apply to lemon law
cars.

Mr. McCarthy. We think basically, yes. There is one thing we
feel pretty strong about. Lemon laws cover cars that have been
manufactured with a defect, and we just want to be certain that
the dealer is not required to buy these cars back because the dealer
did not build it.

Mr. Zarchin. Senator, we are here more as reporters than advo-
cates, but I think one of the things that we found in our story is
that anything that can help the consumers get information, any-
thing that will make it easier for them to know what they are buy-
ing and make the decisions for themselves would be helpful.

Senator Gorton. Well, let me stop with the two of you on that
and congratulate you on a great story. Television has a magnificent
ability to educate under those circumstances, and that kind of story
must have dramatically increased consumer awareness in your
market. Do you know of any other comparable stories by other tele-
vision stations, or did any other cities show interest in repeating
the series that you put onr

Mr. Zarchin. After we did our series, 60 Minutes followed with
a similar story which was one of the reasons that it got a lot of na-
tional attention as well.

Senator Gorton. Thank you, in any event, for a real public serv-
ice. But if you will go on now on, I guess, to Mr. Van Winkle.

Mr. Van Winkle. I think it has a lot of good merits. We sell all
the manufacturers. We have GM, Chrysler, and Ford sales. And we
get those arbitrated cars that come back through some of our sales,
and the dealers have to sign a slip and we tell them what was



35

wrong with the car and if it has been fixed or if it has not been
fixed, and then they have to sign a affidavit that thev are buying
the car that way. So, it has some good merits. I think people Hke
to know about it.

Mr. Nordstrom. Well, in South Dakota, of course, we have got
the disclosure law and the low dollar amounts, and they passed tne
lemon law this year. So, they are covered all the way around and
there was no opposition whatsoever. So, the legislation will be fine.

Mr. Cheek. I am going to defer to Ms. Stone on this.

Senator Gorton. Fine, I will be glad to give you an opportunity
to say something.

Ms. Stone. Thank you. Awfully nice to be heard. The reason Ad-
vocates did not include anything about the lemon law issue in our
testimony is because we simply do not have a position on it. It does
not mean that we would not support it. And, indeed, we are very
strongly behind consumer disclosure laws and have been active in
the States in getting bumper strength State laws passed, and I
cannot ima^ne that our board would not support this concept. But
we remain silent on it in the testimony.

Senator Gorton. Now let me ask a question of each of you, and
this will apply to either of these approaches or to both of tnem. We
have dealt, in the testimony here today, almost exclusively with a
notification on the title of the automobile. One aspect of the bill
that I have introduced requires, while the automobile is in a deal-
er's lot, a sticker on the window to indicate and to pass on this in-
formation. Is that an appropriate notification, whether we are deal-
ing with lemon or salvage cars?

Mr. McCarthy, we could start with you.

Mr. McCarthy. The sticker on the window gets a little more dif-
ficult, because on the title, you know, it is a known definition of
defect or title branding, it is on the title. But putting stickers on
windshields, whether they are fixed or not, can cause trouble.
Today with some of the disclosures required on some of the wind-
shields or side windows of cars, it presents a problem. Some of the
cars do not even have back windows and you have to put it on the
passenger side or the driver's side.

We are for disclosure, do not get me wrong. Flatly, we are for dis-
closure. But we question whether stickers on windows on used car
lots is the answer? Candidly, we can see some problems, but we
would like to work with you to figure out how to do it.

Senator Gorton. Fine. Thank you. Do you have a comment, Mr.
Gray?

Mr. Gray. Again repeating what Mr. Zarchin said earlier, just in
our role as observers and reporters, the one thing that we found
repeatedly was that when people went to buy a car they would kick
the tires, slam the doors, dance on the bumpers, toot the horn, turn
on the radio, but they did not look at the content of the title. Even
if the title had been stamped and branded, in very many cases that
stamp, that brand would not have been seen. That would seem to
indicate that perhaps there might be some need for disclosure in
addition to stamping and branding, which is an important step too.

Senator Gorton. Mr. Van Winkle.

Mr. Van Winkle. I think it would be a little hard on the dealers,
from being around the dealers and being in business myself, be-



36

cause a lot of your owners and stuff, your salesman takes in a car