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

chase under the state lemon law.

As another example of the inconsistency, the wording on the brand or notice var-
ies from state to state. Some states merely require the words, "manufacturer repur-
chase." There is no further explanation of what this means. Other states require the
notice to indicate "defective vehicle." While this may put consumers on notice, it
may also be misleading if a complete repair of the defect has been performed or if
the vehicle was repurchased for good-will reasons and was not in any way defective.

Consumers will benefit if the current patchwork of state laws is replaced with a
clear uniform standard. Some states do not have either branding or any form of no-
tice. This, combined with the inconsistency of existing law, means that the consumer
benefits of notice and branding vary considerably from state to state. More signifi-
cantly, the current patchwork of provisions cannot prevent the so-called "washing"
of titles when vehicles are moved from state to state. A uniform federal title brand-
ing provision, preemptive of all state efTorts, would ensure that all vehicles meeting



45

a clearly defined standard will be branded and that the brand will stay with the
vehicle.

Clear and consistent federal preemptive legislation will facilitate better compli-
ance. Having one requirement in this area ratiier than thirty (or fifty) will produce
consistent procedures and cost savings. These benefits ultimately mean lower
consumer costs for new vehicles.

In conclusion, uniform national legislation in this area will benefit consumers and
manufacturers much more than the current patchwork of state laws. Having a
strong preemptive provision in S. 1232 is particularly important.



Letter From John H. Strandquist, CAE, Executive Director, American
Association of Motor Vehicle Administrators

August 18, 1993.

Senator Ernest F. Hollings,

U.S. Senate,

Washington. DC 20510-6125

Dear Senator Holungs: On August 2, 1993, the American Association of Motor
Vehicle Administrators submitted brief comments on proposed legislation scheduled
for a hearing on that date before this committee to address motor vehicle title fraud
problems. At that time, we expressed our regrets that, given the brief notification
which preceded the hearing, we were unable to provide testimony at the hearing,
but would submit additional comments at a later time.

I would at this time offer additional comments on behalf of our members, particu-
larly on S. 1232, which our members had not yet had an opportunity to fully review
prior to the August 2nd hearing.

As noted in our previous comments, AAMVA members recognize the need for uni-
formity in permanently branding motor vehicle titles and records indicating that a
particular vehicle has previously sustained serious damage which could aflfect that
vehicle's safety, performance, or value. In support of this objective, AAMVA has
adopted a policy encouraging all jurisdictions to brand motor vehicle titles, indicat-
ing that a vehicle is "Reconstructed", or "Rebuilt Salvage", and to carry forward
such brands for out-of-state vehicles being retitled in other states.

Of the three bills under consideration by this Committee, AAMVA believes that
S. 431 establishes the best framework for addressing problems associated with per-
manently branding seriously damaged motor vehicles, with the least disruption to
current administrative procedures.

I would again emphasize the fact that while AAMVA members have raised con-
cerns that the time frame set for implementing procedures required by S. 431 are
unrealistic and should be extended to one year or more, and that federal funding
should be provided to help states comply with these new requirements, administra-
tors believe that requirements imposed by S. 485 would be far more costly and bur-
densome.

The new requirements established by S. 485 would also necessitate extensive
reformatting of^ nearly all states' certificates of title and vehicle information systems
to include vehicle damage disclosure diagrams. This would not only impose addi-
tional costs on the state, but would also pose serious technical problems for states
moving toward "paper-less" vehicle title and record systems. Such systems currently
being developed are expected to have a direct impact in reducing auto theft.

One additional concern motor vehicle administrators have with S. 485 and S.
1232, which should be noted, is the requirement that the U.S. Secretary of Trans-
portation establish Federal requirements for the content of motor vehicle titles.
While motor vehicle administrators recognize the need for uniformity in motor vehi-
cle title documents, AAMVA has already taken the lead in establishing uniform title
standards, which have already been adopted by several jurisdictions. Other jurisdic-
tions are expected to adopt these standards as existing supplies of title documents
are exhausted. Accordingly, AAMVA opposes the current provisions of these two
bills imposing new Federal title requirements on the states.

Because of the complex nature of defining the terms for motor vehicles subject to
these three bills, AAMVA believes that the legislation itself should not attempt to
define what constitutes "Salvage", Rebuilt'^'Tleconstructed", or "TVlanufacturer
Buyback" vehicles, but should delegate the authority for developing precise defini-
tions for these terms to the Secretary of Transportation, in consultation with the
task force created by the Anti-Car Theft Act to review this problem.

I would add two additional brief comments concerning S. 1232 which adds Manu-
facture Buyback Vehicles to those subject to title branding requirements. Although
we have been unable to make a precise determination of how many vehicles may



46

be subject to this new branding requirement, preliminary estimates indicate that
the number would not be overwhelming, and could be accommodated by motor vehi-
cle administrators with little difficulty. The windshield sticker requirement of this
bill has, however, raised numerous concerns from administrators related to cost, du-
rability, and fraud. Administrators believe that permanent title branding and in-
cluding such information in the vehicle's title record are sufficient safeguards to ad-
dress consumer concerns in this area.

I hope these comments are of assistance to the Committee as it considers these
bills. If the Committee has any specific questions on any of the issues raised in
these comments, or on any other aspect of this complex issue, please contact either
Mr. Lawrence Greenberg, Director of Vehicle Services, or Mr. Uavid H. Hugel, Di-
rector of Government Affairs.
Sincerely,

John H. Strandquist, CAE,

Executive Director.



Letter From the American Insurance Association

August 4, 1993.

The Honorable J. J AMES EXON,
U.S. Senate,
Washington, DC 20510

Dear Senator Exon: On behalf of the American Insurance Association, rep-
resenting over 250 property/casualty insurers which write 13.75 percent of the auto-
mobile insurance in the United States, we are pleased to indicate our support for
the Committee's investigation of current problems related to auto salvage titling.
We support efforts to bring more uniformity to state auto titles and procedures and
carefully focused measures to assure consumers are informed if a vehicle they are
considering buying has been "salvaged". These objectives can be achieved without
adding significant new costs to the premiums that consumers pay for auto insur-
ance.

The average collision claim costs $1586, according to ISO/NAII Fast Track Data,
used by insurers and regulators to determine trends in auto insurance losses. A sal-
vage definition, or even a disclosure requirement for less than salvage vehicles
which is based on a repair cost of $2000, for example, could trigger costly procedures
for the owners of millions of fully repaired vehicles and a potentially significant loss
of value and concomitant increase in the cost of insurance to pay the claims for the
diminished value. At the same time, consumers would receive nothing of value be-
cause many of the vehicles had minor damage and were safely and routinely re-
paired. This exemplifies the need to avoid any provisions on less than salvage cars
and to establish a definition of salvage to trigger any requirements which turn on
cost of repair exceeding the fair market value.

There are several sources for a workable definition of "salvage auto" for inclusion
in this legislation. Last year, for example, the Congress passed and the President
signed The Anti-Car Thefl Act of 1992. We strongly supported that legislation,
which includes a good definition of "salvage automobile": "any automobile which is
damaged by collision, fire, fiood, accident, trespass, or other occurrence to the extent
that its fair market value plus the cost of repairing the automobile for legal oper-
ation on roads or highways would exceed the fair market value of the automobile
immediately prior to the occurrence causing its damage."

Another similar definition of "salvage vehicle" exists in the Uniform Vehicle Code
which provides: "Salvage vehicle" means any vehicle which is damaged by collision,
fire, flood, accident, trespass, or other occurrence to the extent that the cost of re-
pairing the vehicle for legal operation on the highway exceeds its fair market value
immediately prior to damage. The Model Salvage Certificate and Junk Vehicle Act
of the Coalition to Reduce Auto Fraud and Thefl defines "salvage vehicle" in a simi-
lar, but slightly different way: "Salvage vehicle" means any vehicle, other than a
reconstructed or rebuilt salvage vehicle, which is damaged by collision, fire, flood,
accident, trespass, or other occurrence to the extent that the cost of repairing the
vehicle for legal operation on the highway exceeds its fair market value immediately
prior to damage."

Any of the three definitions provided above are much preferable to a definition
which turns on percent of damage or a set dollar amount, because the percent or
dollar amount standards could result in an unnecessarily large number of vehicles
being specially titled and/or tagged for resale. In that event, the values of routinely
repaired vehicles could be unnecessarily and artificially reduced, potentially result-



47

ing in higher auto insurance premiums for consumers to cover the claims for the
artificial reduction in values.

Thank you for the consideration of our views.
Sincerely,

Melissa A. Wolford,

Director, Federal Affairs.
David F. Snyder,
Senior Counsel.



Letter From Thomas H. Hanna, President and CEO, American Automobile

Manufacturers Association

AUGUCT 3, 1993.

The Honorable Richard H. Bryan and the Honorable Slade Gorton,
U.S. Senate,
Washington. DC 20510

Dear Senators Bryan and Gorton: The American Automobile Manufacturers
Association (AAMA) requests your support for preemptive federal legislation for
"title branding" of buy-back vehicles. AAMA is the trade association for U.S. car and
light truck manufacturers. Its members are Chrysler Corporation, Ford Motor Com-
pany, and General Motors Corporation.

In recent years, 33 states and the District of Columbia have enacted legislation
governing vehicles repurchased by automobile manufacturers, under lemon law or
other programs which require that a purchaser be provided with some type of a
written disclosure statement, or that the title of a repurchased vehicle be "branded."
Although these statutes vary, they typically include provisions that require a
consumer to be notified or a vehicle title be branded when a vehicle has been re-
acquired by a manufacturer or dealer pursuant to a state lemon law, court ordered
judgment, pretrial settlement, or by an arbitration procedure. The trend for this
type of state legislation appears to be increasing, as states attempt to respond to
the desire for customers to nave access to relevant information that will affect their
purchase decisions.

As additional states enact new and diiTerent disclosure or title branding legisla-
tion, it will become increasingly difficult for manufacturers to comply with these re-
quirements when selling vehicles in a national market. The administrative burden
of complying with diflering state laws that require manufacturers to provide similar
information in different forms will ultimately be unworkable.

AAMA and its member companies support full and effective disclosure to the vehi-
cle purchaser of important facts known to a seller about a vehicle's history. Uniform
Federal Title Branding legislation applying to manufacturers' buy-back vehicles
would provide motor vehicle manufacturers with one uniform standard and provide
the greatest protection to consumers.

For national legislation to be effective, however, it is critical that it preempt con-
flicting state legislation. Federal preemptive legislation is particularly appropriate
because, under the current system, it is possible for motor vehicle dealers or brokers
to transfer vehicles to neighboring states which have not enacted disclosure require-
ments, thereby evading the intent of home state disclosure laws.

One clear and uniform standard, preempting the patchwork of diverse state re-

2uirements would be in the best interest of both consumers and manufacturers,
lonsumers would be protected and informed in all states, while at the same time
manufacturers could take the measures required to comply with a single standard.
AAMA greatly appreciates this opportunity to comment on this important matter.
Sincerely,

Thomas H. Hanna.



Prepared Statement of the American Association of Motor Vehicle

Administrators

The American Association of Motor Vehicle Administrators is a voluntary associa-
tion representing motor vehicle administrators and highway safety enforcement offi-
cials in the United States and Canada. This year, AAMVA celebrates its 60th anni-
versary of service to its members. Over these many years, AAMVA has played an
active role in promoting highway safety, consumer awareness, and uniformity in
both the Unitea States and Canada.



48

Most notable among these efTorts in recent years has been AAMVA's role in as-
sisting the states in implementing the Commercial Motor Vehicle Safety Act of 1986
and the Truth in Mileage Act of 1986. In both efforts, AAMVA actively participated
in the rule making process by submitting members' comments to the Department
of Transportation and by conducting numerous training programs to acquaint its
members with the requirements of these laws.

Just this past year, AAMVA has worked closely with staff members of the House
Judiciary Committee to develop the concept of establishing a National Motor Vehicle
Title information System. This system will aid in deterring auto theft and motor ve-
hicle related consumer fraud. This concept is a key component of the Anti Car Theft
Act of 1992, now Public Law 102-519.

Congress recognized that the establishment of this system provides the vehicle for
transmitting title information, but does not ensure that the information being ex-
changed is uniform. This legislation directs the Department of Transportation to es-
tablish a task force to review problems related to the uniform titling of junk and
salvage vehicles. The task force is to report to Congress and the President with ap-
propriate recommendations for solving problems that are identified.

The Act further directed that a representative of AAMVA, as well as five state
motor vehicle administrators, serve on this task force. These representatives have
been appointed, and have played an active role in the first meeting of the task force
held two weeks ago at the Department of Transportation. The lively debate focused
on defining "salvage," "rebuilt," or "reconstructed" vehicles and emphasized the com-
plexity of this issue. It also marked the beginning of an ongoing dialog between the
diverse parties concerned with this issue. AAMVA and its members serving on this
task force will continue to participate in task force meetings to identify and address
the numerous motor vehicle title fraud issues.

Motor Vehicle Administrators recognize the need for uniformity in permanently
branding motor vehicle titles and records indicating that a particular vehicle has
previously sustained serious damage. AAMVA has a committee of state vehicle reg-
istration officials that has been reviewing this issue for the past few years, and has
made recommendations for accomplishing this objective.

AAMVA regrets that the brief notice provided on the scheduling of this hearing
does not provide adequate time to present testimony here today on the three bills
under consideration. The following brief comments, however, are offered at this time
and further detailed comments on all three bills to the Committee will be submitted
in the near future.

Of the two approaches to the title branding issue proposed in S. 431 and S. 485,
motor vehicle administrators generally favor the framework for addressing the prob-
lem of permanent branding established in S. 431. They believe it could be more eas-
ily implemented, at less cost and with the least disruption to current administrative
procedures. Having received a copy of S. 1232 less than two weeks ago, our mem-
bers have not had an opportunity to fully review and comment on this legislation.

There was concern that the time frame set for implementing these procedures was
unrealistic and should be extended to one year or more. It was also thought that
federal funding should be provided to help states comply with these new require-
ments. The general sentiment of administrators is that S. 485 would be considerably
more costly. It would require extensive reformatting of nearly all states' certificates
of title and vehicle information systems to include vehicle damage disclosure dia-
grams. It should also be noted that adding a diagram to vehicle titles and informa-
tion systems would pose serious technical problems for states moving toward
"paperless" vehicle title and record systems. TTiese systems are expected to have a
direct impact in reducing auto theft.

Another factor for motor vehicle administrators favoring the S. 431 approach to
addressing the title fraud problem is the bill's recognition that the many complex
issues affecting this problem cannot be adequately addressed in legislation. This bill
directs the Secretary of Transportation to consult with the task force reviewing this
problem before promulgating regulations to implement this law. As a member of the
task force, AAMVA believes this to be a prudent approach in determining the man-
ner in which states signify that a vehicle has previously sustained major damage.

As previously stated, AAMVA regrets that it could not testify at this hearing, but
will submit more detailed comments on these three bills in the near future. In the
mean time, if you have any questions, please contact either Mr. Lawrence Green-
berg, Director of Vehicle Services, or Mr. David H. Hugel, Director of Government
Affairs.



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