New national VIN reporting regulations anticipated
The United States Department of Justice (DOJ) has
released its preliminary rules for the National
Motor Vehicle Titles Information System (NMVTIS),
which are expected to be implemented in 2009.
The rules are expected to include provisions for
the monthly reporting of VIN (vehicle identification)
numbers, which are key components of the Anti-Car
The preliminary rules have been published in the
Federal Register. The rules will undergo a two or
three month public comment period via an interactive
website in which stakeholders will be able to post
their comments and read those of others. To post
comments, visit the following: http://federalregister.gov/OFRUpload/OFRData/2008-22070_PI.pdf.
Following the public forum, technocrats from the
DOJ will determine the final wording of the regulations.
The process began 16 years ago (1992) with the passage
of the Anti-Car Theft Act, which placed the responsibility
for the regulations with the Department of Transportation.
The Act establishes the NMVTIS and includes a provision
to require recycling or salvage facilities to file
regular reports that must contain an inventory of
all vehicles obtained.
The reporting would include the:
VIN of each vehicle obtained.
Date on which the vehicle was obtained.
Name of the individual or entity from whom
the vehicle was obtained.
Statement of when the vehicle was crushed or
disposed or sold.
If sold, to whom the vehicle was sold.
The Act was updated in 1996 and it mandated the
DOJ to provide the regulations by 1997, but this
mandate was not met and the rules were finally submitted
to the DOJ last spring/early summer through the
Office of Management and Budget.
The regulations will affect the auto recycling,
insurance and salvage pool industries, law enforcement,
and by extension, individual and business consumers.
“There are some significant competing interests
that are likely to come out during the public review
process,” said Howard Nusbaum, administrator of
the National Salvage Vehicle Reporting Program (NSVRP).
“Consumer groups are looking for retention and ready
access to this information so that when a consumer
buys a vehicle, that person is aware of the prior
history of the vehicle. Law enforcement groups also
support NMVTIS, and know that they will find the
ready access to the vehicle history quite useful.”
Other groups may oppose some of the reporting requirements
either on technical grounds or on the basis of perceived
costs or other reasons.
“One of the big things is the Katrina cars – there
are hundreds of thousands of totaled cars that were
taken back by insurance companies,” he adds, “and
there is more than anecdotal evidence that in a
surprising number of cases, vehicles were transferred
and re-titled between States and were later converted
to clean titles in such a way that presumably, if
consumers bought those cars later, there wouldn’t
have been any accident damage and visually the cars
looked fine and they would not have been aware of
the history of the car.”
There have been attempts to create databases to
notify the public about these cars, most notably
a database was made available by the National Insurance
Crime Bureau (NICB) that posted information provided
to them by their insurance company members on the
identity of Katrina flood cars. This database was
created by NICB after seeing the need, but it was
not available until well after the problem had reached
Disclosure regulations would apply to more than
Katrina cars, and while Federal regulations are
not in place, commercial organizations such as Experian
and Carfax are able to provide histories on some
— but far from all — vehicles.
“Presently, it’s very far from fool-proof and there
are whole segments of vehicles that it would never
apply to,” said Nusbaum, noting that this does not
apply to self-insured entities such as rental car
companies, who do not have to report when a car
is damaged nor to individuals that do not have collision
insurance and have their cars repaired following
an accident. “Today, even if there is a branded
title, when vehicles get transferred state-to-state,
that history presently could be erased. This can
best be understood because the title on the vehicle
is only a snapshot of the current condition of the
“Once a vehicle is no longer registered in a State,
the first State purges the information from their
records since the vehicle is no longer on their
books,” he adds. “Unless the vehicle is identified
as a stolen vehicle and is in the NICB database,
there is presently no central resource database
to check for previous history. For example, that
is why Experian just reported that there were 185,000
vehicles this year that had branded titled cars
and got transferred and re-titled in another state
with a clean title.”
The law enforcement community wants a history of
vehicles to deal with auto theft, especially the
cloning of vehicles – where a VIN from a legitimate
vehicle is duplicated and copied to another vehicle
to mask the identity of that second vehicle. This
problem has translated into cars with the same VIN
being exported from multiple ports - all of them
claiming to be the same vehicle.
If a check is done on the VIN, a cloned vehicle
will not show up on a National Crime Information
Center theft report since the first vehicle was
Nusbaum notes that thieves have even taken VIN numbers
from vehicles in parking lots and then forged the
paperwork for other cars that they steal of the
same year and model color.
“The original owner would not be aware of the situation
and it is also a concern to the insurance industry
in theory because if a new car has been stolen,
somebody is going to be paying,” he said.
To illustrate this point, he noted that a car theft
ring tied to motorcycle gangs that was broken up
last year in Quebec, had been responsible for stealing
1,500 vehicles per year for five years. The vehicles
were purchased at salvage pools in the United States
to secure legitimate papers. Cars were then stolen
and given new VIN numbers matching the salvage pool
VINs and then both registered in Canada as well
as being exported to other countries.
Jim Watson, Jr., former president of the Automotive
Recycler’s Association, notes that the impact on
both American auto recyclers and vehicle repairers
who compete for these units at the pools is that
these cloning target vehicles can no longer be purchased
by legitimate buyers.
This is because the paperwork on these vehicles
has more value to car theft rings than do the salvage
vehicles themselves in terms of parts, scrap or
for repairing of the salvage vehicle for resale.
“It reduces the amount of raw material that a recycler
has,” said Watson, who said that in addition to
the insurance companies replacing the stolen vehicles,
consumers with leased vehicles who did not have
gap insurance, still had negative equity in the
vehicle in terms of the eventual settlement claim.
It also reduces the opportunity for car rebuilders
to find vehicles worthy of being repaired and restored
to roadworthiness. The loss of vehicles affects
auto repair shops and recyclers who sell parts such
as Auto Zone and Pep Boys.
According to Rosemary Shahan, president of Consumers
for Auto Reliability and Safety, there are some
sectors that benefit from this situation – some
legitimate businesses and some not so legitimate.
“Obviously, the car thieves benefit from this process,”
she said. “Also, unfortunately, so do international
crime and terrorism groups who participate in the
process as buyers or who share in the profits of
the enterprise. Ironically, so do some businesses
that are regarded as legitimate.
“Insurers benefit from the artificially inflated
prices salvage vehicles command when they are sold
for fraudulent purposes,” she adds. “Salvage pools
also make more money because they typically are
compensated based on the sale price of the vehicle.
For example, a vehicle that is worth only $2,000
for legitimate purposes may sell for $7,000 or $8,000
to an unscrupulous rebuilder who will cut corners,
making it cosmetically attractive while leaving
major structural damage unrepaired. Then it goes
back on the road - even though it is grossly unsafe.”
Different states have different types of branded
titles, with some states not having flood titles.
This has resulted in cases where Katrina cars have
ended up in Arizona and have lost their ‘flood’
designation since that is not a valid title brand
in Arizona. The vehicles were then at salvage auctions
without a flood title designation.
Some states, such as Minnesota, have created hazardous
material titles to deal with vehicles that are used
as mobile crystal meth production labs. However,
other states still do not have such classifications.
The auto recycling industry supports state and federal
goals to have vehicles recycled properly and environmentally,
which allows for fluids and mercury switches to
be removed, good parts to be put back into the economy,
for some vehicles to be properly repaired and put
back on the road, and for titling documents and
vehicle histories to be maintained.
“Everybody wins,” said Watson, “but we have examples
of cars with clean titles going at auction, that
are burnt to the ground and there are plenty of
pictures of those things. They are bought, in some
cases, for thousands of dollars. This was made easier
for thieves because the cars are listed with clean
Another problem is that when a vehicle is purchased
from a salvage pool by a foreign buyer, there is
no guarantee that it will be exported. Some of the
largest salvage pool chains report foreign buyers
represent close to 40 percent.
Opening salvage pool auctions to the public also
presents problems. The general public may be unaware
of handling regulations. Watson said that consumer
groups, auto recyclers and law enforcement representatives
share many common concerns.
“The preliminary regulations would be great if it
could help contain the branding of titles – if a
vehicle is fixed, it would have to go through a
good legitimate inspection for road worthiness and
safety,” he said. “If that were to happen, it would
increase the market of quality repaired cars and
with more of such cars, the more value there is
for selling parts to fix those cars. It’s the residual
value of parts that is the prime way that recyclers
make money – buying wrecks and selling parts.”
“Everyone tends to have a bias,” he said, “but if
there is going to be a bias here, I’m more than
hopeful, based on all the interactions that we’ve
seen over the years, that there is a fair level
of confidence at the good intent on the part of