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Salvage auction access prompts legislative actions in several states

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Auto recyclers in three states are in the middle of or have just finished dealing with major legislative efforts aimed at changing rules about who can bid on cars at salvage auctions. Two laws recently passed in Florida and Utah have tightened restrictions, while one under consideration in Ohio would open auctions up to almost anyone.

The Ohio Auto and Truck Recyclers Association, representing the state’s nearly 800 licensed recyclers, has been in a pitched battle over Senate Bill 273. The bill introduced in the current session of the Ohio legislature would amend state law to permit people other than licensed salvage dealers to buy cars at salvage auctions.

Proponents of the bill, including automobile insurance companies, say it would result in lower automobile insurance premiums for Ohio drivers by allowing insurers to receive higher prices for wrecked cars sold via salvage auctions. They also say it would ease unemployment, by creating more jobs in the insurance industry.

To Jim McKinney, sales manager at Milliron Auto Parts in Mansfield, Ohio, and president of the Ohio auto recyclers group, these arguments don’t support the law’s passage. The organization’s opposition is based on concerns about licensing, fairness, theft prevention, safety, environmental protection and protecting jobs at the state’s auto recyclers.

“The problem is that it’s unfair for recyclers to have to go through the hoops to be able to buy cars, such as having a fence and meeting EPA requirements, when the average Joe can buy without having the overhead and expense that we do,” McKinney said.

One concern is that because non-licensed bidders don’t have the costs that licensed salvage operators do, the non-licensed bidders will be able to outbid licensed recyclers for the cars. “It makes for an unfair playing field,” McKinney said. “We just want a fair playing field.”

The national Automotive Recyclers Association (ARA), based in Manassas, Virginia, agreed. The organization said in a statement that the bill would create “a competitive disadvantage for licensed recyclers in Ohio who go to great length and expense to stay in accordance with all local, state and federal laws and regulations. It will reduce the available inventory for licensed auto recyclers across the state as these vehicles are sold to unlicensed individuals at inflated prices in Ohio and around the country.”

McKinney said experiences with similar laws in other states suggest that costs for acquiring salvage vehicles could rise 20 to 30 percent. While this would benefit insurers, it would harm recyclers who would be at a cost disadvantage with non-licensed Ohioans who acquire vehicles at auction, as well as recyclers from other states that bar unlicensed bidders from salvage auctions.

Opponents of the bill also cite theft concerns. The original rationale for the restrictions that most states use to keep unlicensed bidders out of salvage auctions is that they curb VIN theft and vehicles being stripped. In that sense, the Ohio proposal is a step backwards to a time when salvage auctions were attended by those with criminal intent, McKinney said. “There’s concern that we’ll end up back in that arena as well,” he said.

Discussions of the prospects for job creation represented by the proposal have taken a confrontational tone. The recycler association points out that maintaining the status quo on auction access would help protect the thousands of jobs at Ohio recyclers. “This bill is going to kill jobs,” McKinney said. “Things are bad enough as it in this industry in Ohio. Yards are struggling. We don’t have room to raise prices or generate that 30 percent somewhere else.”

One insurance industry lobbyist who testified for the bill, however, said that opening up auction access would help create more insurance industry jobs. The lobbyist also said insurance jobs were preferable to jobs at recycler operations, an assertion that particularly rankled McKinney.

The environment is one issue where licensed recyclers would seem to hold the upper hand. “We’re required to track our mercury switches and get rid of oil properly,” McKinney notes. “Not just any Joe Schmoe can do this in his backyard.” The ARA echoed that, stating, “This bill threatens Ohio’s environment as unqualified businesses attempt to handle, dismantle and dispose of environmentally-harmful products and hazardous materials such as mercury, oil and gasoline.”

Vehicle safety might be negatively affected as well, if unlicensed bidders purchased vehicles that had been declared total losses and then returned them to the road after inadequate repairs, the ARA statement said.

Arguments such as those the Ohio recyclers are presenting helped passage of two recent laws in Utah and Florida. Rather than opening up salvage auctions, these laws tightened restrictions. The Florida law was designed to deter metal thieves by making it easier to track purchases of salvage vehicles and sales of scrap metal. The bill that passed had been changed from one version that would have eliminated a requirement that vehicles sustaining 80 percent destruction not be permitted back on the road. Retaining the 80 percent standard was supported by the Florida Automotive Dismantlers and Recyclers Association.

In Utah, a law passed in March directly addressed the bidder requirement issue by restricting auctions to those with state business and tax licenses. In addition, it required reporting salvage purchases to the National Motor Vehicle Title Information System and the Utah motor vehicle enforcement office, as well as setting a standard for total loss vehicles that could not be repaired and returned to the road.

The Ohio legislature is on break until after the November elections. Meanwhile, McKinney has been contacting legislators about the bill, which has passed the state senate and will next be considered by its lower house. He hopes to get a chance to make his case during the session, as bill backers did last summer.

The normal routine would call for opponents, including in this case the recyclers, to testify, followed by a round of amendments. But nothing is certain in the battle of Ohio’s recyclers against the proposed law. “After the election, who knows?” McKinney said, “We’ve been lobbying very hard over the summer and are waiting to see what happens next.”