Lott’s Lemon

The Senator says his auto salvage bill will protect consumers–so why do consumer groups and 39 attorneys general oppose it?


As he addressed his colleagues last June, Senate Majority Leader Trent Lott made one thing clear: The American auto buyer never had a better friend than he. Or at least that was the story the Mississippi Republican was selling as he introduced a bill entitled the National Motor Vehicle Safety, Anti-theft, Title Reform and Consumer Protection Act.

The bill, Lott said, was designed to protect car buyers from unknowingly purchasing vehicles that had been totaled in accidents and then rebuilt for sale. Besides having chronic, expensive problems, such cars are often terribly unsafe. “We want you to join us in helping to protect the public,” he told the Senate. “The number of victims in the rebuilt salvage vehicle industry is growing and it must be stopped.”

It was no surprise then, when the bill quickly gained bipartisan support, amassing 46 cosponsors in the Senate while a House version promptly gained 102 cosponsors. After all, the bill was about “vehicle safety” and “consumer protection.”

But, as is often the case in Congress, things weren’t what they seemed, says Clarence Ditlow, of the Center for Auto Safety in Washington. “It was announced as a compromise bill with the support of consumer groups, which was completely false,” he says. “If this is a consumer bill, why are all the consumer groups opposed to it? This doesn’t pass the smell test.”

More than 30 state attorneys general agree; they’re urging Congress to halt the auto salvage bill, fearing that it will take away consumer protections. Many say Lott’s bill is worse than no bill at all, since it would actually weaken salvage laws in their states.

Now, as the 1997-98 session of Congress winds down, a combination of selective truths and Orwellian doublespeak have pushed the bill to the brink of passage—and consumer groups find themselves with precious little time to fight a proposal they consider the most consumer-unfriendly piece of legislation this Congress.

Federal government is often about problems on a grand scale, like the tobacco settlement, or the esoteric, like how many parts-per-million of a chemical is dangerous, but the issue Congress is now tackling is one that anyone can understand. Buying a used car can be nerve-wracking; for every buyer, the hope of saving money is pitted against the fear of buying a car that may be in poor condition. And rebuilt wrecks are a major danger for unsuspecting buyers.

Every year 2.5 million vehicles are wrecked in accidents, according to the Consumer Federation of America. And according to most estimates, more than 1 million of those cars are rebuilt and then resold as used cars, often without the buyers knowing the cars have been in accidents. Consumer groups say that every year Americans end up paying $4 billion too much for rebuilt wrecks they buy unknowingly. And although there have been no conclusive studies of the specific perils of driving a rebuilt wreck, it is generally agreed that such vehicles are less reliable—and more dangerous on the road. A 1994 investigation by the State of California concluded that “there is substantial harm being done to unsuspecting consumers.”

At first glance, the bills now in Congress look like a remedy to some of those problems. They promise to inform car buyers when vehicles have been in serious accidents or have been damaged by a flood, by marking the vehicles with words like “salvage” or “scrap.” Furthermore, the bills make it illegal for anyone to “knowingly and willfully” lie about whether a car has been seriously damaged.

In reality, however, those requirements have several qualifications.

First, the law wouldn’t apply to any car more than six years old and worth less than $7,500. A full 60 percent of American cars are over six years old, according to the Consumer Federation of America.

Second, for a car to be marked “salvage,” the damage it suffered would have to exceed 80 percent of the car’s value. Many states already require labeling at much lower damage amounts, around 65 percent, that better benefit consumers.

Third, even though the bills say it would be illegal to lie about a car’s history, they are at best unclear about whether a consumer who bought an improperly marked car could sue. The bills appear to leave the issue of penalties up to the states.

And, most important, the bills would impose a ceiling on consumer protections, not a floor. So even if states attempted to create stronger, more consumer-friendly rules against selling damaged cars, they would lose federal transportation funding—and many states already have stronger laws.

That last provision in particular has raised the ire of dozens of states around the country. Thirty-nine state attorneys general are now urging Congress to stop the auto salvage bill, fearing that it will take away consumer protections in favor of special interests. “Money talks. Strong lobbying talks, and sometimes overwhelms states’ rights and even the good of consumers,” says Bob Brammer, spokesman for the Iowa attorney general. Iowa’s protections would be drastically weakened if the bill became law: There a car is declared “salvage” if repair costs are greater than 50 percent of its value—30 percent lower than the bill would require.

“I’m continually bemused by Republicans who trumpet states’ rights, and then come up with bills like this,” Ditlow says. “And why assign dollar values to the protections? Say you’re a poor or middle-class person buying a used Hyundai; don’t you deserve protection?”

The bills’ supporters argue that its national “salvage” standard will help protect consumers from dishonest dealers. They say that dealers sometimes buy badly damaged cars cheap in a state where salvage rules are tight, like Iowa, and then fix them up to sell at full price in a state where rules are weak, or don’t exist at all—where consumers are unaware the cars are damaged. A national standard will end these practices, the bills’ supporters say.

“But it’s a bad national standard,” says Rosemary Shahan, president of Consumers for Auto Reliability and Safety. The 80 percent standard is absurdly high, she says, and any national standard is pointless if people aren’t allowed to go after dealers who cheated them. “I’ve talked to attorneys general who have really studied this and they believe it would eliminate personal legal recourse on salvage fraud.”

Even those who favor a national standard, like Michael Wilson of the Automotive Recyclers Association, say that the bills need a provision that simply removes dangerously damaged cars from the market. Some cars are so mangled that they should never be rebuilt, he says, because they will never be safe. While Wilson admits his group has its own agenda (if cars can’t be repaired they will be cheaper for auto recyclers to buy), he maintains that the safety concerns are real.

But despite the opposition, the salvage bills are marching on. The House has already passed its salvage bill and the Senate’s version stands poised to pass as well. Why? Critics say it all comes down strong lobby groups and campaign contributions. Supporting the bills are the nation’s largest auto insurer, State Farm, and the National Auto Dealers Association.

State Farm, which has kept a low profile on this issue, is out to lower its liability, says Bernard Brown, a consumer lawyer specializing in car-fraud who testified on behalf of the Consumer Federation of America. After an accident, a car is worth less, even after repairs; in most states, insurance companies must pay car owners for this “diminished value.” Insurers want to keep the definition of “salvage” cars as loose as possible, so that more damaged cars can be sold for full value, taking the insurance company off the hook.

For the bills’ strongest supporters, auto dealers, the bills’ benefits are obvious. Looser standards mean dealers have to reveal less about a car’s history, which means they can sell damaged cars for more money.

Dealers, who attempted to push a similar measure through the 1995-96 session of Congress, are trying to go over the heads of states that have stronger measures, says Jack Gillis of the Consumer Federation of America. And they are doing it with money.

Since 1995, auto dealers have pumped $7.4 million into the Democratic and Republican parties and individual Congress members’ campaign coffers, with roughly 75 percent going to the GOP. And beyond campaign contributions, dealers have powerful friends lending a hand in their quest to enact the auto salvage bill.

At a Senate Commerce Committee hearing on the bill last September, the man who represented the National Auto Dealers Association, R.B. Dossett Jr. of Tupelo, Miss., was introduced as a personal friend of Senator Lott. People familiar with the legislation say Lott, who introduced the Senate bill, has been instrumental in steering it through the process.

Lott’s friend-to-the-consumer floor speech was undoubtedly helpful to his cause, but he was aided by the surprising naiveté of his colleagues. Of the 46 senators that co-signed the bill, several were Democrats who have traditionally received high marks from consumer groups, such as South Dakota’s Tom Daschle, Vermont’s Patrick Leahy and Illinois’ Dick Durbin.

As it stands now, the only reason the bill has not gone to the Senate floor for final passage is that Sen. Slade Gorton (R-Wash.), a former state attorney general himself, is holding it up trying to achieve a compromise between consumer groups, 39 state attorneys general, and business interests. Gorton and Lott reportedly agreed last week to lower the 80 percent damage threshold, but they have yet to announce a new number.

Consumer groups are wary as the end of the session approaches. Congress is eager to pass legislation to show it hasn’t been doing nothing for two years, and logjams have a way of being broken when senators are preparing for election season—particularly on bills in which the majority leader has a personal interest.

And incumbents up for reelection love to have a “consumer-friendly” law to trumpet on the stump—even if it cheats consumers and puts more dangerous cars on the road.