WASHINGTON, D.C. The U.S. House of Representatives Committee on Energy and Commerce’s Subcommittee on Consumer, Trade and Consumer Protection held a hearing March 5 to discuss “Consumer Protection in the Used and Subprime Car Market.”
The Honorable Bobby Rush (D-Ill.), chairman, said in his opening remarks, “While the mortgage and home foreclosure crisis has garnered much deserved attention in Congress and in the media, there has been much less focus on similar problems in the purchase of automobiles … Evidence suggests that fraudulent practices with regard to both the condition and financing of used cars are on the rise. When it comes to the condition of vehicles, consumers are too often unaware of previous damage inflicted on the vehicle.”
Rush specifically mentioned abusive financing schemes and frauds related to the purchase of automobiles and described the National Motor Vehicle Title Information System (NMVTIS), which he said, “will eventually be a very valuable tool to aid consumers in obtaining information about the condition of their vehicles by establishing a database in which states and other stakeholders share their title information.”
Witnesses Eileen Harrington, acting director, Bureau of Consumer Protection, Federal Trade Commission (FTC); James Burch II, acting director, Bureau of Justice Assistance, Department of Justice; Rosemary Shahan, president, Consumers for Automobile Reliability and Safety; and John Van Alst, staff attorney, National Consumer Law Center, testified in support of improving information accessibility and efficiency dealing with automobile titles.
Harrington discussed the FTC’s request for public comments on the effectiveness and impact of the Used Motor Vehicle Trade Regulation Rule (Used Car Rule). The Used Car Rule requires used car dealers to disclose on a window sticker (the Buyers Guide) whether they are offering a dealer warranty, and if so, its basic terms and conditions. Harrington said the results showed that the majority of those surveyed find the Used Car Rule useful as is, while others suggest minor changes to the existing rule.
The FTC believes that an online database such as the NMVTIS is useful, but worries that the “digital divide” those with convenient access to the Internet vs. those with limited or no access will perpetuate any potential challenges of the used car market for lower-income families.
Burch described the NMVTIS in depth: Implemented Jan. 30, the NMVTIS provides a national database of vehicles compiled from state, salvage and insurer reporting. It requires insurance companies and salvage yards to report vehicles that are severely damaged or totaled, and provides consumers with access to such information as odometer readings and theft records. Data is predicted to be more comprehensive, up-to-date and less expensive than some private sector reports. Burch said this electronic exchange between states will hopefully provide a synchronization of automobile titles, and will be more effective in protecting states and consumers from unsafe vehicles.
Shahan’s two main issues are reliability and safety, pointing out that more buyers are now starting out with used cars as opposed to new cars in previous years. She emphasized the importance of quality in the transaction of purchasing a used car for two reasons. First, she argues that in this financial crisis, people depend on quality vehicles to deliver them safely and on-time to work. If a purchase proves to be unsatisfactory, it can set a consumer back in a number of different ways. Second, Shahan discussed the number of used car dealers going out of business. This is also a risk for potential buyers.
Van Alst emphasized that while some cars are sold as high quality, those that are sold fraudulently, along with loan abuses, are hurting not only the car buyer, but also the honorable car dealers.
The Automotive Service Association (ASA), as a member of the Salvage Auto Fraud Reform (SAFR) Coalition, sent a letter to the members of the U.S. House of Representatives and the U.S. Senate advocating that the current system for tracking totaled vehicles is untimely, incomplete and inconvenient for the public to access. The letter states, “Progress with the National Motor Vehicle Titling Information System (NMVTIS) database for identifying totaled vehicles is a valuable first step, but must be supplemented with more modern technology from the private sector to provide increased transparency for used car buyers.”
The letter asks members of Congress to support committee consideration of the bipartisan legislation that has recently been introduced providing used car buyers an important tool for making better decisions about vehicle safety and fair market value.
ASA supports legislation that requires insurers to make additional total-loss data available to the public, thereby “red-flagging” the vehicle forever, and putting consumers on notice of a vehicle’s serious damage history.
To review testimony from the hearing, visit ASA’s legislative Web site, www.TakingTheHill.com.