Thousands of cars damaged in this year’s record-breaking hurricane season will eventually be returned to the highways as unsafe lemons, insurance agents and industry experts predict.
Hurricanes Katrina and Rita destroyed more than 500,000 cars, and many have been written off as wrecks since the waters subsided.
Larry Gamache, communications director for the title tracking firm Carmax, said he’s expecting about half of that number will be refurbished and rebuilt, and eventually put back on the market for sale as if they suffered no damage at all. About half of the 79,000 cars damaged by Hurricane Floyd in 1999 ended back on the road.
“We face a very industrious group of con artists,” he said. “No matter what the laws are, there are people who will see opportunities.”
Anticipating the problem, the National Insurance Crime Bureau sent industry teams to work with police and insurance agents at Hurricane Katrina and Rita flood sites this year, cataloguing the damaged vehicles in Texas, Louisiana, Mississippi and Alabama to try to keep them off the resale market.
The database the agents are building now contains more than 180,000 car identification numbers and is available for car buyers to search at www.nicb.org. The database also includes hull numbers of hurricane-damaged boats.
Crime bureau spokesman Frank Scafidi said the effort marks the first time the industry has created such a database to combat fraud. He said it is a work in progress and contains information on cars damaged as well as those totaled.
“There’s no way we’re going to capture all of those vehicles, so buyers should always use a bit of caution,” he said. “We do have reports these vehicles are appearing in other parts of the country.”
The National Automobile Dealers Association, which represents more than 90 percent of car dealers in the United States, says title fraud is so prevalent; it’s too easy for unscrupulous car repair operations to “wash” titles and put flooded vehicles destined only for salvage back on the road.
Some 22 states require that the titles of flooded cars that are totaled to be stamped with that information. It’s not illegal for backyard mechanics to fix salvaged cars and sell them as long as the buyer knows it’s a salvaged vehicle. But because salvaged cars sell from 40 percent-to-50 percent lower than cars that have clean titles, there’s a big incentive for chop shops to get a clean title for rebuilt cars.
How they do this is repair them and drive them to another state, where they can change the license and get a new “clean title” that doesn’t contain the adverse information. Some unscrupulous operators just obtain the vehicle information number of a similar car in another state, and forge a new VIN identification and title for the vehicle.
With such a large number of flood-damaged cars likely to be put on the market, car dealers are lobbying Congress for what they say are long-needed reforms in how states title cars. About 15 million cars are sold in the United States each year.
Jack Kain, president of the auto dealers association, suggests one way of stopping the illegal activity is to create a national database where consumers can search a vehicle’s title history. He also wants Congress to give incentives to states to make uniform national standards for vehicle titles, and come to common agreements on defining the meaning of words like flood-damaged.
Congress attempted to do this by establishing the national VIN system in 1984. The VIN system was intended to reduce car thefts and the illicit trade in stolen car parts, and in 1992 Congress urged the states to reform car title laws to make tracking stolen cars easier.
But most states refused to change their titling laws, and the VIN measure has had little effect on car thefts. The FBI reports there were 1.26 million cars stolen in the United States in 2003 _ nearly the same as the 1.27 million cars stolen in 1990.
“There’s a huge underground economy in fraudulent repair of salvaged vehicles,” said David Regan, the auto dealer’s chief operating officer for legislative affairs.
Regan said auto dealers would like to see the insurance industry’s hurricane data base expanded to include a publicly accessible history of every car in the United States recorded under its VIN number, which would provide car dealers, the insurance industry, banks which give out car loans, and consumers with information on the complete history of the car they want to buy.
“We need to put the VIN in the information market,” Regan said, contending consumers need to know if the cars they are buying are reliable and safe.
(Contact Lance Gay at GayL(at)SHNS.com)