Dirty deeds: Crooks clean up with 'title washing'

Tamara E. Holmes

You can learn a lot from a vehicle’s title, such as whether it has any liens attached to it or has ever been declared a total loss by an insurance company. But if you’re in the market for a used car, beware: Many fraudsters are resorting to title washing, or erasing much of a vehicle’s history from the title, leaving consumers with cars that aren't as safe or valuable as they thought.

Title washing is a big problem, says Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a nonprofit organization in Sacramento, Calif. If you're duped by a washed title, not only could an accident in an unsafe vehicle kill you, but “the vehicle’s not worth nearly what you’re paying for it,” Shahan says.

Title washing can harm car insurance in a number of ways. Unsafe vehicles are more accident-prone, and vehicle safety records affect car insurancerates. Also, title washing can remove a vehicle’s owner history from the record, paving the way for stolen vehicles to be sold; auto theft contributes to higher car insurance rates.

Authorities across the country are cracking down on schemes designed to create "clean" vehicle histories by "washing" car titles.

Catching title washers

To crack down on title washers, federal and local government officials, motor vehicle administrators and insurance professionals often work in tandem to identify and prosecute offenders.

An example is Operation Title Sweep, a joint effort among the FBI, the Texas Department of Public Safety, the U.S. Postal Service and the National Insurance Crime Bureau. The effort in 2010 led to two federal grand jury indictments that charged 19 people from Texas, New Jersey and Arizona in a title-washing scheme affecting about 800 Texas vehicle titles. Both indictments are pending, says Daryl Fields, a spokesman for the U.S. Attorney's Office in San Antonio. Two defendants in the case were sentenced to three years in federal prison in July 2011 and were ordered to pay a total of more than $600,000 in restitution, Fields says.

In another case, two former employees of the California Department of Motor Vehicles and another person were sentenced in June 2011 in a title-washing scheme for fraudulently processing vehicle registration transactions. All three will spend time in prison and collectively be responsible for $1.4 million in court-ordered restitution.

A range of techniques

Title washers use a variety of techniques to remove information from a vehicle’s title. Sometimes it’s as simple erasing the word "salvaged" with correction fluid, Shahan says. “There was one case in Florida after (Hurricane) Katrina where some shysters were using a hole puncher, and they just punched little round holes in the title where it said ‘flood.’” By removing the word "flood," the title no longer reflected that a car was damaged in a flood.

In other cases, pertinent information about a vehicle simply may not be included if a vehicle is retitled in another state, so the history falls off of the vehicle’s official record.

Complicating matters, states don’t brand vehicles the same way. For example, one state might designate vehicles that are recovered from a water disaster as a flood-damaged vehicle when issuing titles, while another state might not have that designation, causing that information to be absent from a reissued title.

To help consumers keep abreast of the true history of their vehicles regardless of what their titles say, the U.S. Department of Justice oversees the National Motor Vehicle Title Information System, an electronic database that tracks vehicle title information. By law, car insurance companies, state motor vehicle titling agencies, auto recyclers and salvage yards must report salvaged vehicles to the federal database. As a result, even if a title is washed or information is inadvertently removed from the title, anyone can check the federal database for information any information that's ever been recorded about a vehicle.

In search of a clean title

Despite the existence of the federal database, title washers have enjoyed success because “most consumers don’t know the database exists,” Shahan says. A simple check of the database would stop many consumers from being hurt by a title-washing scheme.

Another reason thieves sometimes get away with title washing is because there are database loopholes. For example, salvage yards that handle less than five salvaged vehicles a year do not have to report them to the federal database. And just because an organization is supposed to report a salvaged vehicle to the database doesn’t guarantee that it actually does.

“We have reason to believe that some companies are not complying,” Shahan says.

The U.S. Department of Justice estimates information about 87 percent of U.S. vehicles is entered into the federal database. That leaves 13 percent of vehicles that can slip through the cracks.

To reduce your chances of coming home with a damaged vehicle whose title has been washed:

  • Check the National Motor Vehicle Title Information System database before making a purchase.
  • Look into other sources of vehicle information such as Carfax vehicle history reports and the National Insurance Crime Bureau’s VINCheck.
  • Have a mechanic look at the vehicle. “If a seller won’t agree to have the car inspected, then you don’t want that car,” Shahan says.

Free Insurance Quotes