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Vol. 16, No. 2

Did You Know?

Features

 

The Federal Car-History Database: NMVTIS

Almost everyone has heard of Carfax and similar car-history databases, but most would be shocked to learn how little protection they provide against the fraudulent sale of previously wrecked and flooded vehicles. Few, however, have heard about the important developing federal car-history database—the National Motor Vehicle Title Information System (NMVTIS)—which holds great promise for solving this problem.

The Secret History of Cars, a Canadian television exposé that aired last year on Marketplace (view it online at http://bit.ly/68d9H), illustrated the extreme defects inherent in Carfax. The report began by documenting that dealers were selling many rebuilt, frame-damaged cars with clean Carfax reports. The reporter then confronted Carfax spokesman Larry Gamache with questions about these cars, including one sold to a consumer named Darren, leading to this exchange:

Reporter: “Darren says he thought the whole point of Carfax was to let him know if the truck he was buying had any problems.”

Gamache: “I’m sorry, he was mistaken.”

It’s my belief—based on 27 years of experience with auto fraud cases; many years of familiarity with Carfax and an awareness of how dealers, auctions, and rebuilders operate; and experience with both governmental and commercial data sources—that the great majority of the time (probably nine times out of 10), when a dealer offers a previously wrecked or flooded car for sale, a Carfax history run at that time will not show the damage.

Why not? The explanation shows both the gaping holes in Carfax and similar databases, and the huge value of the developing NMVTIS:

Incomplete data – As stated in The Secret History of Cars, “Carfax gets no accident claims records from insurance companies in the U.S. except when cars have been totaled.” And it gets total loss data from only a tiny fraction of insurance companies. As Carfax spokesman Gamache admitted to National Public Radio last year, “The big nut for all of us to crack will be insurance claims information, and the insurance industry does not seem amenable to sharing claims information with anybody.” (The exception is NMVTIS, see below; listen to or read the NPR story at http://bit.ly/9wSDt9).

Further, Carfax doesn’t get any accident data from many police or similar government accident-reporting agencies. It gets only limited relevant data from other government and private sources.

Late data – Carfax has repeatedly admitted that it may get information from its limited sources only after considerable delay. It appears that much of the relevant information Carfax receives from governmental sources, for example, arrives months to years after the events at issue—long after wrecks have been rebuilt and resold.

Dealers prescreening cars – Dealers typically make sure damaged cars don’t show up in databases like Carfax or Autocheck before they sell them (though even casual inspection by dealer personnel reveals almost all significant damage to them).

The upshot of all of this is that consumers buying $34.99 Carfax reports are more likely to be cheated when they buy a used car because they rely on the Carfax reports and let their guard down. For now, it’s urgently important that consumers rely instead on inspections by mechanics or body technicians trained to spot previous damage.

Enter NMVTIS. In 1992, Congress passed the Anti-Car Theft Act (49 U.S.C. §§ 30501 et seq.), which included a requirement for the federal government to establish a national car history database. The Act requires all states to provide their car title history data to the database. It further requires insurance companies and “salvage yards” to report salvage cars they handle. And it requires both that consumers be given access to the information in the database and that the access be “instant.”

Unfortunately, there was tremendous foot-dragging by the government about complying with these requirements. Amazingly, the government originally awarded the contract to build the NMVTIS database to the Polk Company—Carfax’s parent. In 1999, encouraged by the Polk Company, then-Senator John Ashcroft obtained a GAO study criticizing the NMVTIS database that the Polk Company was building; he blasted NMVTIS as a government boondoggle. At that point, consumer advocates feared that NMVTIS would never be funded or properly built.

But the Department of Justice, the agency charged with administering NMVTIS, later commissioned a study that showed NMVTIS holds enormous potential both for protecting consumers and for assisting law enforcement in multiple respects. Also, the contract for building NMVTIS was taken away from the Polk Company/Carfax.

Then in 2008, consumer groups Public Citizen, Consumers for Automobile Reliability and Safety (CARS), and Consumer Action brought a mandamus suit to force the DOJ to follow through with building NMVTIS. Not long afterward, the federal court resoundingly ordered exactly that—and on a fast schedule (see Public Citizen, et al. v. Mukasey, Northern District of California, No. 3:08-cv-00833, document number 48, filed 9/30/08). In late January 2009, the DOJ finally published detailed regulations for full implementation of NMVTIS at 28 C.F.R. part 25.

NMVTIS is at long last gaining steam. As it gears up later this year, and increasingly over time, it will have tremendous value. Why?

First, it has broken through the dam of insurance industry secrecy: All insurance companies and “salvage yards” (defined to include all salvage car auctions) must report their total loss cars to NMVTIS. Rebuilders have historically used these cars to make the worst of the rebuilt damaged cars (think rebuilt Katrina cars). None of the private databases come close to this. Second, all states must now provide instant access through NMVTIS to their title history data. All but two states have already started giving NMVTIS access to their data, and it appears likely that all states will be online by the end of this year. This will be a vast improvement on the slow and patchy access Carfax and other databases currently have to state records. Third, NMVTIS is built to provide the broadest and least expensive access possible for consumers, law enforcement, dealers, and other industry businesses. Consumers can obtain online reports for only $4.95 each by going to the NMVTIS.gov Web site. And the more time that passes, the more complete NMVTIS will become.

Unfortunately, Carfax has so far refused to link to NMVTIS, so consumers obtaining Carfax reports will not get the benefit of the NMVTIS data.

There remains one critical, gaping, hole in both the NMVTIS and other car history databases, as identified by Carfax spokesman Gamache: lack of access to insurance data on all damage claims, not just total loss damage claims. For example, insurance companies don’t report a $30,000 car with $15,000 damage to the databases. It’s astonishing that insurance companies share such damage histories freely among themselves via the CLUE database, but refuse to allow the car-buying consumer to have similar access to this critical safety-related data. Another astonishing fact is that most insurance companies do provide all of their damage claims data in Canada to CarProof (a Carfax competitor.) Consumer groups voice exasperation at this insurance industry disparity in treatment between consumers in Canada and those in the United States.

Consumer groups hope to tackle this last gaping hole by bringing pressure to get it closed by legislation or other means later this year, as NMVTIS becomes more complete. For now, NMVTIS is rapidly becoming the best vehicle consumer-protection database. But until the gaping data-access hole is filled, consumers should be advised to have used cars inspected by knowledgeable body technicians prior to purchase.

Bernard Brown concentrates his Kansas City, MO, practice on consumer issues. A founding member and one of the two original cochairs of the National Association of Consumer Advocates, he has won a number of large judgments against unscrupulous auto dealers. Contact him at brlawofc@swbell.net.

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