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Main story: What we learned from Hurricane Floyd

Cars submerged by Hurricane Floyd
may be coming to a car lot near you

Auto salvage fraudWhen Hurricane Floyd flooded homes in eastern North Carolina last September, it also soaked more than 75,000 cars in water awash with motor oil, fertilizer and other contaminants.

Even though the cars were written off as total losses by their insurers, some of them will be repaired and sold to unsuspecting customers all over the nation.

They aren't the only losers you could wind up driving: Vehicles totaled in wrecks or cars that have been officially declared lemons may also wind up on a used car lot.

But you can minimize the risk of becoming a victim of this practice known as title washing or lemon laundering.

Crossing the line to cleanliness
The key factor is the state line.

The Floyd cars, the rebuilt wrecks and the lemons will go on sale in another state. As part of their movement they will get a clean title, one which shows no signs of their unfortunate history.

Do your homework before
you step onto the car lot

Here are some steps you can take before plunking down cash for that used car:

  • If you can, get the car's vehicle identification number. There are a number of companies that offer access to a national vehicle identification number database for a fee. Every vehicle manufactured since 1981 has a 17-character number (VIN), which identifies the year, make, model, body style, engine size, restraint system and place of manufacture of any given vehicle. We did a search and found a number of sites. Be careful to check the legitimacy of these companies with the Better Business Bureau or another consumer protection agency.
  • On the Kelley Blue Book site, you can do a free search to find out which vehicle identification numbers have been cited for things such as flood damage or odometer fraud. A more complete history report of these cars costs $19.50. Carfax has a similar service and car shoppers can order car history reports for $19.95.
  • At the car lot, ask to see a copy of the dealer's warranty before you buy.
  • Ask for the car's maintenance record from the owner, dealer or repair shop.
  • Use your state's lemon laws to your advantage.

States have lemon laws and consumer legislation that can help some victims. But even lemon laws have their limits when it comes to these rebuilt bombs.

There is no federal law to stop the practice. That could change with bills brought before Congress by two powerful senators, Sen. Dianne Feinstein, D-Calif., and Sen. Majority Leader Trent Lott, R-Miss.

A mind-boggling number
The cleaned-up Floyd cars floating onto the market are just a surge in a steady flow of junk onto used car lots.

The number of damaged cars being resold is staggering: Of the approximately 2.5 million vehicles involved in accidents last year and so badly damaged they were declared a total loss, roughly 40 percent were rebuilt and put back on the road, according to the National Association of Independent Insurers.

"It's a dirty practice and with everything else you need to worry about when buying a used car, this lack of disclosure only ends up burning the consumer," says Sally Greenberg, senior product safety counsel for Consumers Union, a watchdog group based in Washington and publisher of Consumer Reports.

Dirty lemons also roll over state lines and come up clean.

"It is possible that car dealers can ship lemon cars across state line after they've been reported in one state," says Amy Mall, deputy state director for Feinstein's Los Angeles office. "That's the loophole.

"There's really no federal standard on the books that can stop that dealer from applying for a new title in another state. (The consumer) may have no idea he's buying a lemon even if the title is clean and clear."

Squeezing the lemons
States such as Florida and California have seen widespread title washing even though strict lemon laws are in place to protect consumers, says Janet L. Smith, assistant attorney general for Florida's Lemon Law Arbitration Program. In Florida alone, an investigation of 20 manufacturers of rebuilt cars found that 88 percent of these vehicles were being resold to dealers and in turn to customers without the required lemon disclosures.

Sen. Feinstein is sponsoring the Salvaged and Damaged Motor Vehicle Information Disclosure bill, which would provide nationwide written disclosure, with every sale, of previous salvage and major damage. Cars, motor homes, pickup trucks and motorcycles would be protected.

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"We have seen case after case in which serious physical and financial losses were inflicted on innocent victims who unknowingly purchased a vehicle that had sustained major damage," Mall says.

Feinstein's own legislative director was a victim of title laundering in 1996 when he purchased a used Saturn in Virginia, only to discover that the car had been in a flood in Pennsylvania, where it was originally purchased. "He probably never would have known the car's history if his mechanic had not run the car's vehicle identification number for him," Mall says.

Lott is sponsoring similar legislation but some consumer groups argue his bill is flawed because it allows states to opt out of having to disclose a vehicle's history.

"It really defeats the purpose of having a federal law in place if states can chose not to mandate it," Greenberg says. "You would think all 50 states would want to protect car shoppers."

You can urge your member of Congress to back these efforts and you can follow the progress of the bills.

Related information:
Understanding the lemon laws
Protecting yourself before and after disaster
More auto loan news
Auto loan rates
The basics: Auto loans

-- Posted: Nov. 19, 1999


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