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Holes in Monitoring System Let Lemons Get Resold
Morning Edition, January 31, 2006 · Thousands of vehicles that sat in
the murky waters left by hurricanes Katrina and Rita are starting to
show up on the used-car market.
Most states require that flooded cars be labeled as such on the title.
But scam artists have found loopholes in the system. They re-register
cars in states with looser title laws -- sometimes two or three states
-- until the warning that the car was flooded is gone. This fraudulent
practice is known as "title washing."
In 1992, Congress passed a law designed to stop the practice of title
washing, but it was never fully implemented. The National Motor Vehicle
Title Information System (NMVTIS) was designed to offer car history
reports, as well as other information not available from commercial
companies -- such as valuable data derived from insurance claims.
Advocates say the program would save both consumers and the government
money -- money that might otherwise be spent investigating title fraud.
But NMVTIS has been crippled. Consumer advocates say one big reason is
opposition from commercial interests that profit from title washing.
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