One State at a Time

Oct 4, 2018, 19:08 PM
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September/October 2018

By Katie Pyzyk

What’s in a title? Everything, if it’s the title to a vehicle you’re trying to buy or sell. Sellers must transfer the vehicle’s title to the new owners, and if the new owners are dismantling, crushing, or shredding the vehicle, they must “detitle” it—report to federal and state authorities that the car or truck has reached its end of life.

One-State-at-a-TimeThe term detitling has “become a kind of shorthand for the legislation that’s been put in place” for reporting a variety of end-of-life vehicle information to state authorities, says Steve Levetan, executive vice president at Pull-A-Part (Atlanta). The process ensures that “once the vehicle is scrapped or parted out, the state is … able to remove those vehicles from their database and have their records up to date,” he says.

Detitling laws and regulations exist to protect the public from vehicle fraud and theft. At times, however, these laws create excessive burdens on dismantlers and recyclers. ISRI members have worked for several years to re-examine outdated state titling laws, simplify the data-reporting process, and ensure regulations don’t prevent them from operating their businesses.

The value of vehicle tracking

The Automotive Recyclers Association (Manassas, Va.) estimates that 12 million U.S. vehicles reach their end of life each year, but “there’s not nearly that many taken off the state databases. That’s part of what led to this” push for modernizing state detitling systems, Levetan says.

One reason states want good records of vehicle titles is to prevent “title washing,” in which someone illegally alters a title to conceal the fact that the vehicle was either stolen or severely damaged. Title-washing cases tend to surge after natural disasters like floods or hurricanes, when unscrupulous people attempt to resell vehicles after insurance companies have written them off as a total loss. After last year’s hurricanes Harvey and Irma in Texas and Florida, for example, insurers declared up to 1 million vehicles destroyed, according to Cox Automotive analysts. Law enforcement officials, Consumer Reports, and other consumer advocates issued numerous warnings alerting auto purchasers to the potential for flood-damaged vehicle fraud.

The availability of real-time title information also can help deter vehicle theft. A used car dealer, auto dismantler, or scrap facility can unknowingly purchase a stolen vehicle if it can’t access up-to-date information about the vehicle’s ownership status.

Because each state has its own title and registration system, for years criminals could transport stolen and/or flood-damaged vehicles across state lines, get them re-titled in states that have lenient titling laws, and sell them to buyers unaware of the problems. To end that practice, in 2008 the federal government established the National Motor Vehicle Title Information System, a nationwide database of vehicle identification numbers. Insurance carriers must report the VINs of vehicles they deem a total loss or salvage, and auto dismantlers and scrapyards must report the VINs of vehicles they plan to dismantle, crush, or shred.

Frustrations with the federal system

ISRI supported the creation of NMVTIS—recyclers and dismantlers were just as vulnerable as other buyers to sellers of stolen vehicles across state lines—but members have had two main concerns since the system went online in 2008: the cost of compliance and the lack of coordination between the federal system and each state’s system.

Unless they handle fewer than five vehicles a year, dismantlers and recyclers must report at least once a month the VINs for all whole end-of-life vehicles they purchase. Many upload the information more frequently because of the large number of vehicles they handle. The American Association of Motor Vehicle Administrators (Arlington, Va.), which manages NMVTIS, offers just one free uploading option: Enter the VIN numbers one by one. “It’s somewhat of a headache to do,” says Blake Cloninger, vice president at Biltmore Iron & Metal Co. (Asheville, N.C.). “You’d have to manually type” each 17-digit number, he explains.

Alternatively, AAMVA has authorized three third-party data consolidators to offer batch uploading: Audatex (Irving, Texas), Auto Data Direct (Tallahassee, Fla.), and ISO (Jersey City, N.J.). But each charges a fee, either annually or per transaction. That’s frustrating, Levetan says, because “to put a cost on reporting this data is counter to increasing compliance.”

The other concern is that NMVTIS reporting in most cases does not replace state-by-state detitling requirements and in some instances might create unnecessary double-reporting requirements. “Every state law is different. … That makes it more complicated,” especially for scrap businesses with locations in multiple states, says Danielle Waterfield, ISRI’s senior director of government relations and assistant general counsel.

Seizing the opportunity for change

The NMVTIS implementation has served as an impetus for states to take a new look at their vehicle titling laws. In many cases, “the statutes hadn’t been reviewed since they were first written and are now woefully inefficient, prone to abuse, and in some instances don’t [provide] the necessary legislative authority to get the states into compliance with the federal law,” Waterfield says. “NMVTIS was an eye-opener for the states,” she notes, and now they are revisiting how they need to update state laws to complement the federal system “and help stem the rise in auto theft, VIN fraud, and other crimes involving vehicles.”

When recyclers and dismantlers learned that their states were considering legislative revisions to their vehicle titling and registration systems, they saw an opportunity. “ISRI has helped its members open discussions with state officials and legislators on how to address the industry’s concerns when they open up these 50-year-old statutes for amending,” Waterfield says. States that have modernized their ELV-related legislation to date include Alabama, Arizona, Florida, Georgia, Iowa, Indiana, Louisiana, Mississippi, Nebraska, North Carolina, South Carolina, and Tennessee.

If you’re operating in a state that’s considering changes, get involved early in the process with your state’s Department of Motor Vehicles—as well as with law enforcement agencies—to help shape legislation and regulations as they are being created, Waterfield says. Changing a new law or regulation after it’s been passed is a losing battle, she notes.

DMVs—or the departments of revenue that usually house them—tend to be the leading governmental forces for ELV issues because they oversee vehicle ownership databases. They can be strong partners in creating consensus around what a new law should contain. A good example of how this can work is North Carolina, Waterfield says. North Carolina had a persistent vehicle theft problem, Cloninger explains, so a group of the state’s recyclers and dismantlers “worked with the North Carolina DMV to create a reporting website” that meets the needs of both scrap recyclers and state authorities.

The site is “super easy” to use, Cloninger says: Recyclers enter the VIN number and the vehicle seller’s driver’s license or ID number, and it automatically fills in the name, address, and other information from that ID. With this VTR system in place, “we can buy a car in five minutes or less, and … it takes all the liability away from us as a scrapyard,” he says. Plus, “any vehicle older than 10 years or without a title, we can run [the VIN] through it to see if it’s been reported stolen” and then contact authorities if necessary. Using the system is mandatory, but “what’s awesome about it,” Cloninger says, is “it’s free.”

Nebraska’s legislation is another case study in how to “work with your DMV early on and try to build a good relationship,” says Don Wesely, lobbyist at O’Hara Lindsay Government Relations (Lincoln, Neb.), who lobbies on ISRI’s behalf. DMV officials “were sympathetic” to recyclers’ and dismantlers’ concerns and appreciated that “ISRI testified in support of several bills that funded and authorized the DMV to move forward with this new VTR system,” Wesely says.

Tennessee, whose new VTR system launched in 2016, offers a similar example of cooperation. The push for new legislation “was an industry-driven initiative,” says Kelly Cortesi, Tennessee Department of Revenue director of communications.

Common issues

The primary goal of many states’ ELV-related legislative proposals is implementing or upgrading electronic VTR systems that allow access to the state’s vehicle database in real time “so the dismantler or recycler doesn’t purchase a stolen vehicle … which I understand is a tremendous headache,” says Jay Starling, director of the Motor Vehicle Division at the Alabama Department of Revenue. In Alabama, the legislative updates and new VTR system have “made it easier to update the title record to reflect that the vehicle has been junked,” Starling says. “The process before was all paper.” Switching from paper to electronic reporting sounds simple enough, but state proposals can get hung up on details such as these:

Detitling cars without titles. Digging up titles for aged vehicles often proves difficult. “In an ideal world every vehicle … has a title and owner,” Levetan says, but in reality, owners lose their titles or never get around to updating them to reflect a change in ownership, especially if the transfer occurred among family members or friends. “We’ve got to deal with that reality,” he says.

ISRI and its members have advocated in several states to “amend titling laws so scrap dealers can take a vehicle without a title under certain conditions,” Waterfield says. “We don’t want to buy stolen vehicles … but we have to have some legal method in place to be able to buy these vehicles from the owners without the owners having to go through unnecessary red tape.”

Such laws typically allow recyclers or dismantlers to purchase vehicles above a certain age—generally 10 to 12 years old—without a title but with other documentation. For example, Alabama’s reworked law states that “if the vehicle is over 12 years old, and there’s no lien, and it’s not stolen, you don’t have to provide the title as proof of ownership,” Starling says. Instead, the seller can provide information such as an “affidavit or abandoned vehicle bill of sale.”

Holding periods. Some states have proposed or enacted a holding period before the purchaser can process an end-of-life vehicle. The rationale is to prevent somebody from stealing a car and selling it to a scrapyard that dismantles, crushes, or shreds it before the owner reports it’s stolen.

North Carolina doesn’t mandate a hold, but “we’ve been discussing that a lot lately” within the state recycling association and with the DMV, Cloninger says. The issue came up when a legislator reported that a friend and constituent had had a vehicle stolen and scrapped. The challenge is agreeing on a “length of time that makes sense,” he says. “The DMV started [by proposing] four days, but most yards don’t have space” for holding vehicles that long. Working with stakeholders, ISRI members “got [the proposal] down to two days,” he says. “Two days should be sufficient for almost all vehicles stolen to be recovered.” He believes the surrounding states require holds of 24 to 48 hours, “but [with] no system in place like ours to check if [vehicles] have been reported stolen.” The issue is on hold, however, as the North Carolina legislature doesn’t have imminent plans to address it, he says.

Third-party reporting. Some recyclers and dismantlers have privacy and security concerns with switching to a fully electronic reporting system at the state level in addition to NMVTIS reporting, even more so when third-party data consolidators are involved. “If [states] want to use a third party, that’s great, with proper protections for the data so that it can only be used by the state for their purposes,” Levetan says.

A lack of enforcement. While some companies are spending thousands of dollars and significant staff time complying with state and federal ELV requirements, they suspect other companies are ignoring some or all of the rules—and getting away with it. Compliance “is only as good as its enforcement,” Levetan says. Enforcing these laws could generate fines, which could fund the state or federal recordkeeping systems and reduce or eliminate fees. Tennessee set up its system so “the state agency gets half of the fine money, and the local law enforcement agency that brought the case gets half,” Levetan says, which creates an incentive for both. 

On the federal side, “unfortunately NMVTIS enforcement is limited because only one person at the [Justice Department] does it,” Levetan says. Some recyclers are seeking revised state laws that meld federal and state requirements “so state law enforcement and local law enforcement are able to enforce the [federal] NMVTIS requirements,” he says.

Linking state and federal reporting. Thus far, only Georgia and Tennessee have integrated their VTR systems with NMVTIS, although Nebraska and Alabama are expected to take up the issue this legislative session. In Alabama, “our scrap system does not provide that information to NMVTIS yet,” Starling says, but that is the goal. In Nebraska, the situation is more complicated.

“One hang-up is how much it’ll cost us, if anything, [for the state to] report to NMVTIS on our behalf,” Wesely says. The DMV argues that providing that service will cost it an estimated $35,000 a year, but recyclers question those costs. The scrap industry worked with the DMV from the start, Wesely says, in part to ensure it designed the VTR to provide data to NMVTIS. If the system had changed significantly since its release, or major software adjustments were necessary to connect with NMVTIS, that would be one thing, he says. But the connection was “built into the system from the design stage on, so how much more can it be to plug in the numbers and send them forward?” Eliminating the hassle of double reporting and saving recyclers and dismantlers money will “be one of our top priorities this session for ISRI,” Wesely says.

Recyclers have had some success eliminating compliance expenses in other states. ISRI members’ advocacy in Georgia is considered a “success story in that the industry agreed to report to the state, and the state, in turn, reports it to the federal database, and there’s no charge to recyclers for this reporting,” Waterfield says.

The issue of double reporting is important enough that some recyclers and dismantlers are reluctant to support new state detitling legislation, like that enacted in Alabama and Nebraska, that establishes state VTRs that don’t link to NMVTIS right away. In Missouri, for example, lawmakers “have not enacted detitling legislation. Not for lack of trying, but because they couldn’t get everyone on the same page,” Waterfield says. “The problems associated with double reporting of VINs are a few of the many factors that continue to stymie a legislative solution,” she says

Despite some lingering obstacles, those on the recycling side and the government side view revisions of state detitling laws largely positively, prompting calls for more states to follow suit. “For the most part, we think it’s been successful,” says the Alabama DMV’s Starling. “The missing component is our ability to report the information [to NMVTIS] on behalf of these reporting entities. … I’m sure our users will be happy if we can get that working.”

Katie Pyzyk is a contributing writer for Scrap.

As states update their vehicle registration systems and related laws, auto dismantlers and recyclers are working to ensure the changes don’t impede end-of-life vehicle buying and processing.
  • 2018
  • Sep_Oct

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