California slaps red tags on wrecks

New state law ignites talk of a national program

A new California law requiring dealers to label salvaged vehicles with red warning stickers is shaping up as a test for consumer advocates who want to make it a federal program.

Beginning in July, new- and used-car dealers must affix a red warning label to any used vehicle flagged in a federal database -- the National Motor Vehicle Title Information System -- as junked, salvaged or flood-damaged.

If the warning system works in the nation's largest car market, consumer advocates intend to use the California law to try to persuade the Federal Trade Commission to require such labeling nationally.

"It makes sense to give it a test drive and see how happy everyone is with it," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety in Sacramento. "It's got to benefit honest dealers who don't want to traffic in salvaged vehicles."

But the National Automobile Dealers Association opposes such a national mandate by the FTC.

"Title brands should be more uniform, branding systems should be accurate and databases should be complete," said Brad Miller, NADA associate director of legal and regulatory affairs, in a 23-page comment to the agency. "Pursuing these goals via a window sticker is an outmoded concept that makes little sense. Instead this type of information should be gathered, maintained and made available to consumers in a uniform electronic format."

NADA supports improving the National Motor Vehicle Title Information System database as a long-term remedy.

No leverage
There's another reason consumer advocates aren't moving immediately to pass the measure in other states. They don't have the leverage elsewhere that they did in California.

Dealers supported the legislation there because they wanted something for themselves, namely an increase in the state's cap on document fees.

In California, the maximum documentation charge will jump from $55 for sales and $45 for leases to $80 for both. The increase is meant to cover any added costs for dealers to comply with the new requirement that they use electronic registration for all car sales starting next July.

The red-tag mandate won't be a problem for franchised new-car dealers, said Steve Snyder, chairman of the California New Car Dealers Association.

"There's not a new-car dealer in the state of California who would knowingly sell a used car with a branded title," said Snyder, also a Chevrolet-Subaru dealer in Auburn, Calif.

Database critics
Though consumer advocates and dealers were aligned in favor of California's changes, the required use of the federal database drew criticism from companies that sell vehicle-history reports to dealers and consumers.

Both Carfax, owned by R.L. Polk, and AutoCheck, owned by Experian, lobbied to amend the legislation to give dealers the option of using an alternative vehicle-history report.

Representatives for each company told Automotive News they generally support the California measure.

But "we do think dealers and consumers should have a choice in the vehicle-history provider they choose," said Carfax spokesman Larry Gamache.

Snyder said the answer to that concern is for companies such as Carfax to incorporate the National Motor Vehicle Title Information System database into its report.

Shahan says use of the federal database doesn't undercut companies like Carfax; dealers can still pull their reports for additional history.

That doesn't work, Gamache said, because Carfax already tracks vehicles for problem titles and thinks its own data are better.

Whether the criticism will go further is unclear. Gamache and an Experian spokeswoman said they don't know what further action, if any, the companies might take.

Shahan said she expects that lobbyists for the two companies will try to get the law amended before it takes effect in July.

She said: "I anticipate we're going to have an ongoing battle with them."