National Motor Vehicle Title Information System (NMVTIS)

DEPARTMENT OF JUSTICE

28 CFR Part 25

[Docket No. FBI 117; AG Order No. 3042-2009]

RIN 1110-AA30

National Motor Vehicle Title Information System (NMVTIS)

AGENCY:

Department of Justice.

ACTION:

Final rule.

SUMMARY:

The National Motor Vehicle Title Information System (NMVTIS) has been established pursuant to 49 U.S.C. 30502 and has the participation, or partial participation, of at least 36 states. The purpose of NMVTIS is to assist in efforts to prevent the introduction or reintroduction of stolen motor vehicles into interstate commerce, protect states and individual and commercial consumers from fraud, reduce the use of stolen vehicles for illicit purposes including fundraising for criminal enterprises, and provide consumer protection from unsafe vehicles. This rule implements the NMVTIS reporting requirements imposed on junk yards, salvage yards, and insurance carriers pursuant to 49 U.S.C. 30504(c). This rule also clarifies the process by which NMVTIS will be funded and clarifies the various responsibilities of the operator of NMVTIS, states, junk yards, salvage yards, and insurance carriers regarding NMVTIS.

DATES:

Effective Date:

This rule is effective March 2, 2009.

FOR FURTHER INFORMATION CONTACT:

Alissa Huntoon, 810 7th Street, NW., Washington, DC 20531, 202-616-6500,

www.NMVTIS.gov

.

SUPPLEMENTARY INFORMATION:

Background

The Anti-Car Theft Act of 1992, Public Law No. 102-519, 106 Stat. 3384, required the Department of Transportation (DOT) to establish an information system intended to enable states and others to access automobile titling information. As part of the Anti-Car Theft Act of 1992, DOT was authorized to designate a third party to operate the system. Since 1992, the American Association of Motor Vehicle Administrators (AAMVA) has acted in the capacity of the operator of the system. AAMVA is a nonprofit, tax exempt, educational association representing U.S. and Canadian officials who are responsible for the administration and enforcement of motor vehicle laws. The requirements of the Anti-Car Theft Act of 1992 were amended by Public Law 103-272 and the Anti-Car Theft Improvements Act of 1996, Public Law No. 104-152, 110 Stat. 1384. The Anti-Car Theft Improvements Act of 1996 renamed the automobile titling system the “National Motor Vehicle Title Information System” and transferred responsibility for implementing the system from DOT to the Department of Justice (DOJ). Hereinafter, the Anti-Car Theft Act of 1992 and the revisions made by Public Law 103-272 and the Anti-Car Theft Improvements Act of 1996, codified at 49 U.S.C. 30501-30505, are collectively referred to as the “Anti-Car Theft Act”or the “Act.”

While the overall purpose of the Anti-Car Theft Act is to prevent and deter auto theft, title II of the Act, which authorizes NMVTIS, is intended to address automobile title fraud. Accordingly, the primary purpose of NMVTIS is to prevent various types of theft and fraud by providing an electronic means for verifying and exchanging title, brand, theft, and other data among motor vehicle administrators, law enforcement officials, prospective and current purchasers (individual or commercial), and insurance carriers.

1

Currently, 37 states are actively involved with NMVTIS, representing nearly 75% of the U.S. motor vehicle population. Specifically, 13 states are participating fully in NMVTIS, 14 states are regularly providing data to the system, and an additional 10 states are actively taking steps to provide data or participate fully.

2

States that participate fully in the system provide data to the system on a daily or real-time basis and make NMVTIS inquiries before issuing a new title on a vehicle from out of state and preferably before every title verification, regardless of its origin or reason. Participating states also pay user fees to support the system and the services provided to the state.

1

Brands are descriptive labels regarding the status of a motor vehicle, such as “junk,” “salvage,” and “flood” vehicles.

2

There are currently 13 states participating fully in NMVTIS: Arizona, Florida, Indiana, Iowa, Kentucky, Massachusetts, New Hampshire, Nevada, Ohio, South Dakota, Virgina, Washington, and Wisconsin. Fourteen states are providing regular data updates to NMVTIS: Alabama, California, Delaware, Georgia, Idaho, Louisiana, Nebraska, New Jersey, New York, North Carolina, Pennsylvnia, Tennesses, Texas, and Wyoming. Ten states are actively taking steps to provide data or participate fully: Arkansas, Michigan, Minnesota, Missouri, Montaina, New Mexico, Oklahoma, South Carolina, Vermont, and West Virginia. See

www.NMVTIS.gov

for a map of current participation status.

In 2006, the Integrated Justice Information Systems (IJIS) Institute, a nonprofit membership organization made up of technology companies, was asked by Department of Justice's Bureau of Justice Assistance (BJA) to conduct a full review of the NMVTIS system architecture to identify any technological barriers to NMVTIS implementation and to determine if any potential cost savings was available through emerging technology. The IJIS Institute report found that “the NMVTIS program provides an invaluable benefit to state vehicle administrators and the public community as a whole. Advantages of the program include improving the state titling process, as well as providing key information to consumers and law enforcement agencies.” In addition to this study, the Government Accountability Office (GAO) also found NMVTIS to hold benefit potential for states, and a private cost-benefit study also determined that NMVTIS could provide benefits in the range of $4 to $11 billion dollars annually if fully implemented. NMVTIS and its benefits to states, law enforcement, consumers, and others have been widely touted by motor vehicle or auto-industry organizations including AAMVA and the National Automobile Dealers Association (NADA), by law enforcement organizations such as the International Association of Chiefs of Police and the National Sheriffs Association, by the North American Export Committee (NAEC), and by the International Association of Auto Theft Investigators. NMVTIS's benefits have also been recognized by national consumer advocacy organizations, and by industry-affiliated groups including the National Salvage Vehicle Reporting Program and many others, as identified in the public comments.

NMVTIS is a powerful tool for state titling agencies. Fully participating state titling agencies are able to use NMVTIS to prevent fraud by verifying the motor vehicle and title information, information on brands applied to a motor vehicle, and information on whether the motor vehicle has been reported stolen—all prior to the titling jurisdiction issuing a new title. In order to perform this check, these states run the vehicle identification number (VIN) against a national pointer file, which provides the last jurisdiction that issued a title on the motor vehicle and requests details of the motor vehicle from that jurisdiction. Using a secure connection, states then receive all required information or the complete title of record from the state of record. States can then use this information to verify information on the paper title being presented.

Verification of this data allows fully participating states to reduce the issuance of fraudulent titles and reduce

odometer fraud. Once the inquiring jurisdiction receives the information, a state is able to decide whether to issue a title. For states fully participating through integrated, online access, if a new title is issued, NMVTIS notifies the last titling jurisdiction that another jurisdiction has issued a title. The old jurisdiction then can inactivate its title record. This action allows fully participating jurisdictions to identify and purge inactive titles on a regular basis and eliminates the need for these agencies to conduct these processes manually. This service provides a measurable benefit to states in terms of cost savings. In 2007, over 18.4 million title-update transactions were initiated and over 45 million messages were generated via NMVTIS, which allows states to work and communicate securely and to perform electronic title transactions between states.

NMVTIS also allows fully participating states to ensure that brands are not lost when a motor vehicle travels from state to state. As noted above, brands are descriptive labels regarding the status of a motor vehicle. Many brands, such as a flood vehicle brand, indicate that a motor vehicle may not be safe for use. Unfortunately, motor vehicles with brands on their titles can have their brands “washed” (

i.e.

, removed ) from a title if the motor vehicle is retitled in another state that does not check with the state that issued the previous title and with other states that may have previously issued titles on the vehicle to determine if it has any existing brands not shown on the paper title. Because NMVTIS keeps a history of brands applied by any state to the motor vehicle at any time, it protects individual and corporate consumers by helping ensure full disclosure so that purchasers are not defrauded or placed at risk by purchasing an unsafe motor vehicle. Currently, there are approximately 300,000,000 VINs in NMVTIS with over 40,000,000 brands included. NMVTIS also prevents “clean title” vehicles that are actually a total loss or salvage from being used to generate a paper title that is later attached to a stolen vehicle that is “cloned” to the destroyed “clean title” vehicle. Criminal enterprises seek these “clean title” vehicles, which are low cost to them (because they are destroyed or salvage), because it increases their return when they sell a cloned stolen vehicle. It has been noted that criminal profits in such a case can more than quadruple if a “clean title” vehicle is used for cloning. Even worse, because these cloned vehicles are able to get into the titling systems of the non-participating states, they often continue to be sold to new and unsuspecting owners. There have been cases involving car dealers who had purchased stolen cloned vehicles and resold them to individual consumers. NMVTIS also provides protections from other types of related theft and fraud that ultimately place lives at risk and cost states, consumers, and the private sectors billions of dollars each year. The proceeds from these illicit activities support additional crime and fraud and even serious and violent crime. For more information on the benefits of NMVTIS, visit

www.NMVTIS.gov

.

Discussion of Comments

On September 22, 2008, the Department of Justice published a proposed rule to implement various requirements concerning NMVTIS.

See

National Motor Vehicle Title Information System (NMVTIS), 73 FR 54544 (Sept. 22, 2008). The rule proposed the imposition of reporting requirements on junk yards, salvage yards, and insurance carriers. In addition, the rule clarified the funding process for NMVTIS and the responsibilities of the operator of NMVTIS, states, junk yards, salvage yards, and insurance carriers. The comments and the Department's responses are discussed below:

1. General Comments

Comment:

Several commenters suggested that NMVTIS will deter various types of crime and fraud and suggested that since the passage of the Anti-Car Theft Act, the types of crime and fraud, as well as the methods, have evolved. These commenters noted that the purpose of NMVTIS remains to address these types of crime and fraud.

Response:

DOJ agrees that since the passage of the Anti-Car Theft Act, crimes and crime techniques have evolved. DOJ, therefore, has updated the stated purpose of NMVTIS to be more reflective of the crime and expansive direct and indirect fraud NMVTIS was intended to address and is addressing today.

Comment:

The American Salvage Pool Association (ASPA) commented that junk and salvage yards have an exemption for reporting where and when a non-stolen verification is obtained under 49 U.S.C. 33110, which authorizes a system that has never been implemented. The ASPA commented that this exemption “is telling, however, in linking NMVTIS'[s] statutory purpose to theft prevention, as opposed to brand information.”

Response:

In addition to the fact that title II of the Anti-Car Theft Act addresses fraud, it is clear that brand information can be directly linked to vehicle theft in addition to fraud. Law enforcement investigations have repeatedly shown that “clean title” total loss vehicles are a preferred commodity among car cloning and car theft rings, as they bring a higher return on investment. The Anti-Car Theft Act exemption, which is in 49 U.S.C. 33111, provides that junk and salvage yards are not required to report on an automobile if they are issued a verification under 49 U.S.C. 33110 stating that the automobile or parts from the automobile are not reported as stolen.

2. Effectiveness

Comment:

Several submissions questioned the effectiveness of NMVTIS in eliminating or preventing fraud and theft. Several of these commenters suggested the need for quantitative proof of the system's effectiveness before the law should be followed. At the same time, however, several submissions recognized the value of NMVTIS. As one commenter noted, “NMVTIS would undoubtedly cut down on the number of rebuilt wreck fraud cases.” And the State of Texas Department of Transportation noted that “[t]he system provides numerous obvious benefits to titling agencies, law enforcement[,] and vehicle sellers, as well as consumer protection to the buying public.”

Response:

The Anti-Car Theft Act's participation requirements were established based on analyses presented at the time of the bill's introduction and passing. Further, an extensive cost-benefit analysis and a Government Accountability Office study both have independently determined that NMVTIS will produce a significant public benefit that greatly exceeds the costs of implementing the program. The cost-benefit study found that the system is only as effective as the number of vehicles represented in the system. Non-participating states create “loopholes” where brands can be washed, allowing further fraud in any state—participating or not. Discussions with private-vehicle-history-report providers and ongoing law enforcement investigations at the state, local, and federal levels have shown that non-participating states are targeted for exploitation because their vehicle titling information is not immediately shared with other states and because they have no efficient ability to inquire with all other states that may have previously titled the vehicle.

Feedback from participating states points to other positive outcomes of the program. One state reports a 17%

decrease in motor vehicle thefts; another reports a 99% recovery rate on vehicles identified as stolen; three states have identified cloned vehicles by working together, prior to issuing new titles; and another state reports cracking a car theft ring responsible for cloning more than 250 cars worth $8 million. Aside from these results, it is clear that if all states comply with the Anti-Car Theft Act requirements, brand washing in the way it is most commonly conducted today will be eliminated because there is no other way to title a vehicle other than going through a state titling process. The same goes for vehicle cloning, which would be virtually eliminated if every state participated as required.

Moreover, Experian Automotive reported that in the first six months of 2008 alone, there have already been more than 185,000 titles that initially were branded in one state, and were then transferred and re-titled in a second state in a way that resulted in a purportedly clean title. Given all these facts, we can be sure that NMVTIS will be effective in eliminating this type of fraud, preventing a significant number of crimes, and potentially saving the lives of citizens who would otherwise purchase unsafe vehicles.

In addition to the system's documented value in reducing theft and fraud in protecting consumers, the system also has been shown to create greater efficiencies within the titling process when the inquiry and response are integrated into the states' titling processes.

Comment:

NAEC commented that “the effectiveness [of NMVTIS] can only be truly measured [when] all jurisdictions are participating, because of the holes that are currently in the system due to lack of full participation.” The State of California Department of Motor Vehicles seemingly agreed with this comment when it noted that “these beneficial outcomes can only be achieved when all 50 states and the District of Columbia are participating.” The Virginia Department of Motor Vehicles commented that “the system provides a great value to participating states, and that value will exponentially increase as each jurisdiction begins fully participating.”

Response:

DOJ agrees in part with these assessments. As discussed above, partial participation creates loopholes that criminal organizations exploit, and, therefore, measuring the full benefit of a comprehensive NMVTIS is difficult without participation by all states. However, NMVTIS provides significant benefits to participating states even when state participation is not at 100%.

Comment:

One commenter asked if the information would have much “practical utility,” or whether it would only serve as further documentation of a market that is only broadly related to secondary criminal enterprises. The commenter further noted that “the rule will only spur increased sophistication of organized crime. This increased sophistication must be balanced against the proposed benefits from the small contraction in the secondary criminal market that is assumed to occur under this rule. One of the benefits of the proposed rule is the documentation of salvage pool sales. But this benefit is limited: it will only require criminals to go through more steps, steps that require increased organizational skills. Hence, although the rule may push some criminals out of the market overall (the less sophisticated and organized), it will also indirectly spur increased sophistication and organization of the surviving criminal organizations. Although one of the primary goals of NMVTIS is theft deterrence, there is no data to support the conclusion that this portion of the criminal market will be affected by the proposed rule.”

Response:

DOJ disagrees with these comments. Substantial evidence, statements, and documentation indicate that NMVTIS will impact vehicle theft and fraud.

Comment:

Several commenters, including law enforcement, consumer advocates, industry associations, and state motor vehicle administrators, including California's, noted that NMVTIS is needed and will be effective in addressing the threats of auto theft, cloning, and fraud, and in providing protection for consumers against fraud.

Response:

DOJ agrees with these comments and notes that the expected benefits and positive outcomes of NMVTIS have been confirmed not only by government and private research, but also by multiple representatives of every stakeholder community affected by the system, including state titling agencies, state and local law enforcement, consumers, insurance carriers, and junk-or salvage-yard operators.

Comment:

The NAEC commented that law enforcement successes to date can validate the benefits and costs associated with NMVTIS and that “the NAEC is solid in its belief that NMVTIS is a fundamentally sound approach to `title washing,' title fraud, vehicle theft[,] and public safety related to the `branding' of un-road worthy vehicles in this Country.” The NAEC provided data from one state that uses NMVTIS and, as a result, has identified and recovered hundreds of stolen vehicles. The NAEC further commented that to suggest that the system should be cancelled “demonstrates a lack of understanding [of] the magnitude of the vehicle theft problem in North America and Public Safety issues surrounding `branded' vehicles.”

Response:

DOJ agrees with the NAEC's assessment of NMVTIS.

Comment:

The State of Illinois Motor Vehicle Administration commented that other services have become available since the Anti-Car Theft Act was passed and that NMVTIS should “be put on hold” while an analysis on the need for NMVTIS can be conducted. The Maine Bureau of Motor Vehicles suggested that NMVTIS was not needed because “consumers have other options for checking vehicle title status prior to purchase.”

Response:

While other fee-based options for checking vehicle title status are available for consumers, the ability of consumers to check NMVTIS for vehicle title status is required by federal law and a federal court order. When fully implemented, NMVTIS will provide assurances that no other option can provide—complete and timely information on all vehicles in the U.S. The Anti-Car Theft Act provided no flexibility for states, insurance carriers, or junk or salvage yards to filter information shared with NMVTIS; thus NMVTIS will be the most-reliable source of information once fully implemented. Several providers of vehicle history information have agreed to make NMVTIS data available as a way of enhancing their products, demonstrating that NMVTIS does have unique value. DOJ is not in a position to put NMVTIS on hold, as recent litigation was based on the complaint that DOJ had waited too long to issue NMVTIS regulations. A court has ordered DOJ to publish these regulations by January 30, 2009.

See Public Citizen, Inc. v. Mukasey

, No. 3:08-cv-00833-MHP, 2008 WL 4532540 (N.D. Cal. Oct. 9, 2008).

Comment:

One commenter noted that “it is beyond the scope of the NMVTIS regulations to reform the process by which insurers assign title designations; however having the sales reported in a timely fashion, and by including appropriate identification of both international, domestic (out of state) and domestic (in state) buyers, it will help the Law Enforcement Community in its effort to control crime and protect the public.”

Response:

It is beyond the scope of NMVTIS and DOJ's intentions to alter insurance carrier policies and procedures in terms of title designations. While transfers of vehicles from insurance carriers to others would

likely be captured in the NMVTIS reporting process due to subsequent reporting by junk and salvage yards, it is unlikely that the names of buyers will be reported or captured in the system because this is not a required data field. Requiring the name of such buyers is of significant value to law enforcement for preventing and investigating automobile theft and fraud. Additionally, as is pointed out elsewhere in these comments, establishing a “chain of possession or custody” is important for effective and efficient law enforcement investigations.

Comment:

One commenter noted that “[a]ccording to Experian Automotive, (PR Newswire August 25, 2008 Experian, Schaumburg, IL), in the first 6 months of 2008 alone, there have already been more than 185,000 titles that initially were branded in the first state, and were then transferred and re-titled in a second state in a way that resulted in a `clean' title. This situation cannot be addressed without much stronger controls and full reporting. There is a great deal of abuse of the title system and we regularly observe severely damaged units that have been given clean title designations to vehicles that have massive damage. As a result, criminals regularly buy these vehicles for the paper, and steal a like vehicle and engage in cloning or VIN swapping.”

Response:

Once all states comply with the law, NMVTIS will protect against these types of abuses by creating a brand history (a record of the various brands associated with a particular VIN) for every vehicle, which will prevent a future title-issuing agent from being unaware of a vehicle's brand history and will eliminate the possibility of a vehicle being titled in more than one state (a common occurrence today).

Comment:

Maine Bureau of Motor Vehicles commented that Maine “already has procedures in place to check for stolen status prior to issuing a title and for carrying forward out-of-state brands.”

Response:

NMVTIS is designed to provide more than a simple stolen-vehicle check. Further, neither carrying forward out-of-state brands based on paper titles presented, nor checking the paper documentation against a third-party data provider, eliminates brand washing. Washed brands may not appear on paper or in third-party databases. Because states are required to report title transactions to NMVTIS and to check NMVTIS prior to issuing a new title, NMVTIS is the only system that can eliminate such brand washing when fully implemented. No state, except those participating in NMVTIS when fully implemented, has any ability to fully verify brand histories and carry forward out-of-state brands without manually contacting every state and the District of Columbia prior to issuing a new title.

Comment:

One commenter noted that “the benefits of NMVTIS are also not illogical simply because concrete figures do not exist concerning its limited implementation.” “Given NMVTIS'[s] [implementation] status, any figures outlining the benefits would prove highly conservative even if found. It is not difficult to imagine though that illegal reselling of salvaged vehicles takes advantage [of] reporting gaps by moving across state lines. Statistics concerning such operations are well-documented even if the benefits of NMVTIS are not.” “Being able to verify the success and results of NMVTIS thus depends critically on the provision of information from all states.”

Response:

DOJ agrees with this comment.

Comment:

The Missouri Department of Revenue commented that the system is only as good as the number of jurisdictions participating, and in light of current participation levels, the state is expending resources for data that may not be inclusive or accurate.

Response:

As of December 2008, NMVTIS includes nearly 75% of the U.S. vehicle population. At the same time, several states are actively working towards participation in NMVTIS, which will take NMVTIS closer to 100% participation. With the inclusion of insurance and junk- and salvage-yard information, and given that many states report to NMVTIS in “real time,” NMVTIS is likely to be as inclusive as any vehicle title history database available, even before 100% state participation. As for accuracy, the system currently includes only data from state motor vehicle administrations, and DOJ is aware of no errors in NMVTIS. As stated in this rule, procedures and safeguards will be put into place to ensure identification and correction of any errors identified. Non-participating states, on the other hand, are expending their resources based on fraudulent information when they issue titles in many situations.

3. Need and Purpose

Comment:

One commenter asked “To what extent is consumer protection and the prevention of fraud in the secondary car market domestically and internationally a high priority for the agency?”

Response:

The prevention of fraud that affects U.S. citizens, whether it be here or abroad, and consumer protection are priorities for DOJ and for NMVTIS. DOJ's Strategic Plan includes in its second goal “Strategic Objective 2.5: Combat public and corporate corruption, fraud, economic crime, and cybercrime.”

U.S. Department of Justice Strategic Plan, Fiscal Years 2007-2012.

Comment:

One commenter noted that states often sell their vehicle history records to private, third-party organizations who then resell the data. The commenter requested that the final rule spell out that the states own the data and that the operator of the system may not resell the data to other providers without authorization of the states.

Response:

While NMVTIS may contain a subset of data on vehicles titled within the U.S., it does not include all of the information a state motor vehicle administration may possess. DOJ agrees that the state-maintained vehicle history databases are the province of the states, and that the intent of the Anti-Car Theft Act was not to create a database of information for bulk resale. The operator of the system, therefore, will not resell the NMVTIS database in its entirety to anyone. Two key goals of the Anti-Car Theft Act, however, are consumer access to the data and a self-funded system. For these reasons, the operator will be allowed to charge consumers for use.

Comment:

The State of Illinois motor vehicle administration questioned how NMVTIS will interface with law enforcement data systems within the state that are used to identify and “flag” stolen vehicles.

Response:

NMVTIS is not expected to “interface” with law enforcement systems within the state. Information in NMVTIS related to a vehicle's “theft status” or history emanates from one of two places—state brands and the theft file of the National Insurance Crime Bureau (NICB), which is derived from the FBI's National Crime Information Center (NCIC). Law enforcement systems will be able to link or connect to the NMVTIS law enforcement access site, however, which will include all NMVTIS information without restriction. NCIC will always be the primary repository of active theft files for law enforcement. Stolen vehicle information in NMVTIS is provided only for state titling purposes for those states that cannot access NCIC or state-based law enforcement systems.

4. Prospective Purchaser Inquiries

Comment:

The Idaho Transportation Department commented that the proposed rules included several data elements in the requirement for prospective-purchaser inquiry responses

or consumer access reports that would effectively eliminate the need for an actual state record to be requested by a consumer or prospective purchaser, thereby reducing state revenues realized from the sale of motor vehicle records.

Response:

At a minimum, NMVTIS will provide the following pieces of information in response to an inquiry, if that data is present in NMVTIS: (a) The current state of title; (b) the brand history of the vehicle; (c) the latest reported odometer reading; and (d) information about the vehicle's reported appearance in the inventory of a covered junk or salvage yard or on any insurance carrier determination of total loss related to that vehicle. There are several reasons, however, why states are likely to continue to experience demand for their full title records. First, states often possess additional information that is not anticipated to be within NMVTIS but that is of interest to many purchasers. This information may include ownership information, lien-holder information, registration information, safety-inspection data, and other details that the states may have but are not required to report to NMVTIS. Second, by providing consumers with the current state of title, NMVTIS actually serves as a nationwide pointer that will result in an increase in requests for state records. And DOJ will direct the operator to ensure that all consumer access portal providers provide consumers with a link to the state's site or to the state's designated vehicle history report access point, enabling consumers to purchase the full state record. Third, states are eligible to become portal providers, thereby capturing an opportunity to increase revenues by providing access to NMVTIS data and to the states' records for a state-determined fee.

Comment:

The State of Nevada Department of Motor Vehicles commented that “Nevada will not allow the unauthorized release of the title data we send to NMVTIS. Nevada statutes limit what data can be released and to whom. Will AAMVA have the capability and assume the responsibility of prescreening those who want to access Nevada title data to ensure the disclosure complies with Nevada statutes? Will AAMVA have the capability of collecting and forwarding the fees currently charged for accessing and receiving Nevada's title records without Nevada becoming a third party?”

Response:

Neither NMVTIS nor the operator will be releasing any state's vehicle title records. The information that will be shared via NMVTIS is not a state's vehicle title record and is generated from the index maintained by NMVTIS, with limited information on the identified vehicle, as authorized and directed by the Anti-Car Theft Act. This federal statute provides the necessary authorization and direction concerning what information will be shared, how it will be shared, and to whom it can be shared. After providing the NMVTIS information in response to a consumer inquiry, NMVTIS, through the third-party portal providers, will offer consumers the ability to be directed to the state of record's Web site in order to purchase the state's full vehicle title record from the current state of record. Once that “handoff” occurs, any decision by consumers to purchase the state's title record will be governed by applicable state statutes, policies, and processes, and by the state's vehicle-history-report provider's policies and processes. NMVTIS prospective purchaser inquiry was designed in this way in an effort to point consumers to state Web sites for state vehicle title histories from that state should they be desired and available, thus enabling consumers to purchase the full record and generating revenues for the states.

Comment:

Several motor vehicle administration agencies and other organizations commented that if personal information is released by NMVTIS to non-government organizations, it may be in conflict with the provisions of the Driver's Privacy Protection Act of 1994 (DPPA). Several of these commenters recommended that this information only be available to law enforcement or government organizations, while others indicated that they would be prohibited from sharing personal information with prospective purchasers.

Response:

According to the DPPA, 18 U.S.C. 2721(b)(2), permitted uses of information protected by the DPPA include “[f]or use in connection with matters of motor vehicle or driver safety and theft; motor vehicle emissions; motor vehicle product alterations, recalls, or advisories; performance monitoring of motor vehicles, motor vehicle parts and dealers; motor vehicle market research activities, including survey research; and removal of non-owner records from the original owner records of motor vehicle manufacturers.” In addition, 18 U.S.C. 2721(b)(3) provides additional authorizations “[f]or use in the normal course of business by a legitimate business or its agents, employees, [or] contractors.” These exceptions include sufficient authorization for states to provide access to personal identifying information, and many commenters agreed. Nonetheless, NMVTIS includes personal information primarily for the benefit of law enforcement agencies, including governmental regulatory and compliance-monitoring agencies that may not have immediate access to such data or to state motor vehicle-history files. NMVTIS will not provide personal information in the NMVTIS central file to individual prospective purchasers and may not provide access to any other type of user without securing DOJ approval of such access.

Comment:

Several commenters, notably from the consumer-advocacy community, encouraged DOJ to “minimize, to the greatest extent possible[,] any cost to consumers for accessing the data base.”

Response:

By statute, the fees NMVTIS charges will not be more than the costs of operating the system. Although NMVTIS does not control what portal providers will charge for consumer access to the data, by making that data available to all potential portal providers at the same price, it will be difficult for any provider to charge too high a premium for access to that data.

Comment:

One commenter noted that NMVTIS will make it possible for users to understand either what a state-issued brand (

i.e.

, statement of the condition or prior use of a vehicle) means or to which state they need to go to understand the brand's meaning. “Even if in some circumstances NMVTIS can say nothing more than ‘branded in jurisdiction X,’ at least the NMVTIS user will know which [state] jurisdiction to consult.”

Response:

Because neither the Anti-Car Theft Act nor NMVTIS creates universal brands, DOJ will direct the NMVTIS operator to ensure that consumer-access portal providers provide a link to brand definitions and any available related explanations, so that consumers can be aware of how brands may be defined. One of NMVTIS's benefits is that it will identify which states have branded a vehicle, informing consumers of which jurisdiction to consult for further information.

Comment:

The State of Alaska commented that neither DOJ nor the NMVTIS operator should be permitted to discount transaction fees for volume purchasers. This commenter stated that not discounting the price will maximize revenue collected to offset NMVTIS operational costs, resulting in reduced rates charged to the states.

Response:

The volume discounts established by the current operator have been more effective in securing consumer-access portal providers than the non-discounted rates. DOJ will continue to monitor the fee structure to

ensure that it is effective in securing participating providers without increasing reliance on state fees. Fees generated through the portal providers will offset the financial impact on states.

Comment:

One commenter noted that the NMVTIS prospective-purchaser inquiry is redundant of similar services that already exist.

Response:

A significant number of consumer advocacy, law enforcement, and other organizations submitted comments arguing that NMVTIS's prospective-purchaser inquiry is not redundant with existing services. For example, NMVTIS receives certain state data more frequently than some of the third-party databases, and the data NMVTIS receives includes information that some of the third-party databases do not have.

Comment:

The Institute of Scrap Recycling Industries, Inc. (ISRI) argued that the law does not give DOJ the authority to expand NMVTIS data collection to further the interests of a particular group of stakeholders. The ISRI expressed concern that certain stakeholders would promise smooth and easy implementation of the rule if DOJ were to demand collection of additional data for NMVTIS.

Response:

No individual or entity has made such claims or promises, and DOJ has not expanded the scope of data to be collected beyond that which was intended or demonstrated to be necessary to accomplish the program's goals as set forth in statute.

5. Privacy

Comment:

One commenter noted that “[t]here are provisions in law in regards to privacy of individual identity that do not appear to be satisfactorily addressed in this document.” Another commenter noted that it will not send any names to NMVTIS because names do not validate a title and because of concerns over compliance with the DPPA. The Virginia Department of Motor Vehicles commented that NMVTIS was intended as a pointer system, and it is not necessary for that pointer system to include all data fields, particularly private information. AAMVA also recommended against requiring owner name in the NMVTIS central file for privacy and cost reasons.

Response:

DOJ takes these concerns very seriously and agrees that privacy interests must be protected. While names may not be needed to validate a title, names are relevant and necessary from a law enforcement perspective, and in certain other situations. To ensure the protection of privacy, however, DOJ has amended the rule to provide that no privacy fields shall be available without DOJ approval to any NMVTIS user, other than state-titling, law enforcement, or other government agency. Additionally, the operator shall ensure that no individual prospective purchaser has access to any personal information. DOJ will require that the operator of NMVTIS have an approved privacy policy in place that describes how the operator will ensure adequate privacy protections, consistent with the DPPA and other relevant statutes.

Comment:

NAEC noted that data privacy fields should be available for law enforcement purposes.

Response:

DOJ agrees with this comment.

Comment:

The Automotive Recyclers Association (ARA) and ISRI both emphasized that confidential business information, such as the number and type of automobiles processed by individual junk and salvage yards in a given period of time, the sources of those vehicles, and related information, should not be released to the public or other data providers.

Response:

The operator will not disseminate this type of information to any non-governmental entity or individual, and this information will not be available to prospective purchasers. DOJ will closely monitor this aspect of the system to ensure that access to sensitive or personal data only proceeds with DOJ approval.

Comment:

Several commenters requested clarification in the final rule on any liability or immunity for providing data to NMVTIS as the Anti-Car Theft Act requires.

Response:

The Anti-Car Theft Act grants certain immunity for those reporting data to the system. The scope of this immunity is described in the Act at 49 U.S.C. 30502(f) and does not require clarification.

Comment:

Several commenters recommended maintaining provisions for accessing personal information to qualified DPPA commercial consumers, so that entities that currently work with the states to access this information could continue to do so, which would benefit the states and NMVTIS.

Response:

Providing continued access to these entities may facilitate effective and efficient service to the states, but such access may only occur with DOJ approval, and may also require compliance with state application and certification processes and procedures. In most cases, these entities will only use NMVTIS as a pointer to connect with and access the state's data, including personal information, if the state provides for that access.

6. Timely Reporting

Comment:

Several commenters, including several national consumer-advocacy organizations, requested that dispositions by insurance, junk, or salvage sales to other entities be reported at the time of the sale and include the identity of the buyer, which would support law enforcement investigations into fraud and theft. The National Salvage Vehicle Reporting Program also commented that salvage pools should be required to report sales within one business day of the sale in order to reduce fraud and theft.

Response:

The reporting of dispositional information is critical and needs to be timely, but the DOJ cannot require that the reporting be anything other than monthly in accordance with the requirements of the Anti-Car Theft Act. DOJ has added a requirement for such entities to report the name of the primary buyer of such vehicles.

Comment:

ARA and ISRI commented that junk- and salvage-yard operators have an interest in reporting efficiency and recommended that such entities be permitted to report the ultimate intended disposition of the vehicle at the time of initial reporting. ASPA also reported that requiring an entity to continuously report that a vehicle is in its inventory is inefficient and pointless.

Response:

In cases where the ultimate disposition is known with certainty, junk- and salvage-yard operators now will be permitted to report disposition in their initial report. The reporting entity is responsible for ensuring that the vehicle is disposed of in the manner reported or for filing an updated report to account for a different disposition. In response to concerns of reporting inefficiency, DOJ notes that entities report once when the vehicle enters the inventory and are only required to report again on that vehicle if they need to update the record. Should the disposition be known at the time of initial reporting (

e.g.

, “sale”), the entity would only be reporting once on each vehicle.

Comment:

One state motor vehicle administration and other commenters asked that insurance carriers report more frequently. That state motor vehicle administration noted that “if a vehicle is damaged on the 5th day of the month and the insurance carrier has already sent [its] file for the month, the state will not know of the damage until the following month's update.” Several commenters representing nearly every stakeholder group noted that it was important for the reporting into NMVTIS to be timely, ideally in “real time.” Experian Automotive commented

that a monthly reporting requirement would be slower than the current industry practice for insurers.

Response:

The 16-year-old language of the Anti-Car Theft Act is no longer consistent with business practices in an electronic age. Nonetheless, the language of the Anti-Car Theft Act provides no flexibility with regard to this reporting requirement. DOJ does strongly encourage, however, that all reporters provide data to the system as quickly as possible, preferably within 24 hours of acquisition, determination, or other reporting trigger. DOJ expects to highlight such reporting efficiencies and stakeholder participation on its official NMVTIS site,

www.NMVTIS.gov.

7. Third-Party Reporting and Reporting Exceptions

Comment:

Two commenters argued that an exception allowing junk- and salvage-yard reporting to occur through a state titling agency was flawed. One of these commenters suggested that all junk and salvage yards should be required to report directly into NMVTIS. The NADA also commented that allowing this exemption would only serve to create a loophole, particularly in cases of conflicting definitions among the states and between states and the Anti-Car Theft Act. Instead, NADA suggested allowing an exemption in cases where an insurance carrier reports to a third party that has no definitional restrictions, such as the NICB, that can transmit the information to NMVTIS without concern for conflicting definitions.

Response:

While DOJ will take steps to ensure data integrity and quality, it would be unreasonable to prevent third-party reporting. Ultimately, insurance carriers and junk and salvage yards are responsible for their compliance with the Act, including the reporting of required information. These reporters must ensure that they are compliant with the reporting requirements for every vehicle handled. If such reporters cannot be certain of a third party's ability to provide the required information into NMVTIS, the reporter must report through a different third-party provider. Additionally, certain states require this reporting, and therefore, a duplicate reporting structure would continue to exist even if DOJ did not allow junk or salvage yards to report through states. For purposes of clarification, however, the Anti-Car Theft Act does not provide a specific exemption for insurance carriers to report through states, as it does for junk- and salvage-yard operators. Instead, DOJ has provided an exemption for insurance carriers to report to NMVTIS through an identified third party that is approved by the system operator. DOJ and the operator have attempted to identify potential third parties that can report to NMVTIS who already receive this type of information from insurance carriers and junk- and salvage-yard operators.

Comment:

ARA commented that pursuant to the Act, “junk and salvage yard operators are not required to report on a vehicle when they are issued a verification stating that the automobile or parts from the automobile are not reported as stolen.” ARA argued against the exemption's implement on the grounds that the exemption is “completely unworkable” without time limits on the verification and other controls, and because the exemption creates a “significant loophole that could foster additional illegal activity.”

Response:

Pursuant to the Anti-Car Theft Act, a junk or salvage yard that is issued a verification under 49 U.S.C. 33110 stating that an automobile or parts from that automobile are not reported as stolen is not required to report to NMVTIS. Therefore, the Department has retained this exemption from NMVTIS reporting in these regulations.

Comment:

The ARA commented that it appreciates attempts to exempt reporting by junk and salvage yards that already report to a third-party organization that is sharing its information with NMVTIS. The ARA further commented, however, that yards not currently participating with a cooperating third party will need a separate reporting mechanism that is labor efficient and economical in order to report NMVTIS information.

Response:

DOJ agrees. The operator will designate at least three third-party organizations that have expressed a willingness to share with NMVTIS information that they receive from insurers and junk and salvage yards. In addition, DOJ will endeavor to identify a reporting mechanism that is “sector” and “stakeholder” neutral. Third-party providers need to be identified who will provide the information to the stakeholders or allow such third-party providers to charge a nominal fee for collecting and reporting the information on behalf of junk and salvage yards. DOJ hopes to identify providers that do not charge fees, but this is difficult with sector-or stakeholder-neutral providers.

Comment:

Several state motor vehicle administrations commented on the third-party exemptions provided in the proposed rule. One state motor vehicle administration commented that it currently has some but not all of the information required for junk and salvage reporting. The state suggested that it does not have the resources available to accept and report all of the information required from junk and salvage yards. Another state motor vehicle administration made a similar point and stated that the requirements effectively establish an inefficient dual-reporting requirement. Another suggested that the phrase “or cause to be provided on its behalf” be clarified so that it is clear that states do not have a responsibility to report insurance, junk, or salvage information to NMVTIS on behalf of these organizations. The State of New York commented that it receives reports from junk and salvage yards in paper, that it does not process all of the reports received, and that the processing time may be beyond the reporting timeframes required of junk and salvage yards. Another asked that entities reporting to states as their chosen method of compliance be required to certify that they are meeting their reporting requirements by reporting to a specific state or states.

Response:

A state's willingness to make such alterations to accommodate third-party reporting is strictly voluntary. Junk and salvage yards in states that cannot accommodate third-party reporting as required by the Anti-Car Theft Act and the rules will have other options for compliance reporting. While DOJ is committed to avoiding inefficient processes, DOJ is not able to eliminate data fields for the sake of efficiency alone and is not willing to impose additional requirements on the states to expand data collection and reporting on behalf of junk- and salvage-yard operators.

Comment:

ASPA commented that while the proposed rule allows states to share junk and salvage information with NMVTIS, the inclusion of this data in state title information systems would be based on the state's definition of “salvage” and “junk” vehicles. ASPA questioned how the state would report data that it may not have because that state does not require submission of that data.

Response:

The rule requires that junk- and salvage-yard reporting by or through states must include all of the data that junk- and salvage-yard operators are required to report. State definitions of “salvage” or “junk” do not alter a junk-or salvage-yard operator's responsibility to report vehicles in its inventory. If junk- and salvage-yard operators are not reporting all of the required data to the state, or the state is not able to report all of the data to NMVTIS as required of the yard, the junk or salvage yard must report independently of the state.

Comment:

ASPA contended that the provisions of the proposed rule with regard to the direct-reporting exemptions for junk or salvage yards that already report inventories to the states appear to conflict with the wording of the statute that ASPA described as “only requir[ing] the reporting of acquisition” of such vehicles.

Response:

The Act specifically spells out what information is to be reported by junk and salvage yards and requires junk and salvage yards to report more than the mere acquisition of the vehicle.

8. Total Loss Definition/Fair Salvage Value

Comment:

One commenter expressed concern at the reference to “fair salvage value.” Any vehicle with a high salvage value will be totaled with a lower damage appraisal, and any vehicle with a low salvage value will be totaled with a high damage appraisal. The commenter noted that without uniformity as to the assignment of the salvage declaration, consumer protection cannot be guaranteed. The commenter argued for a more uniform definition of total loss that is not driven by the salvage value, noting that “[t]his proposed market assessment of the vehicle value can either make or break the rule.” Others commented positively on the use of a “value-based” definition.

Response:

DOJ used this reference because it was required by the Anti-Car Theft Act. DOJ understands that there are different ways or bases for determining total loss, and that different stakeholders may argue for different standards based on their interests.

Comment:

Nationwide Mutual Insurance Company commented that Congress specifically granted the DOJ authority to collect information from insurers on vehicles that such insurers have “obtained possession of” and determined to be “junk automobiles or salvage automobiles.” Nationwide further commented that “[i]t is not logical that declaring a vehicle a total loss should trigger reporting of the total loss automobiles as salvage and/or junk. The determination of [a] vehicle as a total loss can be based upon other economic considerations not reflective solely on the actual cost of reporting the vehicle. Therefore, we assert that the inclusion of total loss information in the proposed rule is inconsistent with our understanding of the intent of the statute.”

Response:

DOJ disagrees. DOJ is mandated to require reporting of “salvage” vehicles, which DOJ has determined to include those vehicles determined to be a “total loss.” DOJ recognizes that, in certain circumstances, the decision to declare a vehicle a “total loss” may be based on other determinations, such as the fact that a vehicle has been stolen. To address this issue, insurance carriers are strongly encouraged to include with “total loss” reporting the primary reason for the determination. Doing so not only would provide a better position for insurance carriers, but it also would allow the consumer to be aware of the specific circumstances for the determination. DOJ does not agree that “obtained” should be defined in such a limited way to include only ownership.

Comment:

Nationwide Mutual Insurance Company commented that DOJ should clarify the definitions of junk and salvage by requiring insurers to report on those automobiles titled as “junk” or “salvage” under the laws of the state where the insurer obtains title to the motor vehicle.

Response:

DOJ disagrees and notes that not even half of the states require such titles or brands (see Texas's comment below). Such a definition, therefore, would create a significant loophole that would be counter to the consumer-protection intentions of the Anti-Car Theft Act.

Comment:

The State of Texas Department of Transportation commented that “ `Total loss' is not a term used in Texas salvage motor vehicle law and has no bearing on whether a vehicle is determined to be a salvage vehicle. A vehicle can be considered a `total loss' by an insurance company, but not be branded as salvage because the vehicle does not meet the definition of salvage in the title state. * * * Use of this term could be problematic if NMVTIS shows a vehicle as a total loss and the Texas records indicate nothing.”

Response:

The requirement for insurance carriers to report “total loss” information is put in place for exactly this reason—vehicles that are salvage may not be branded as salvage by many states. To resolve this discrepancy, NMVTIS blends reported information from multiple sources so that prospective purchasers are aware of the vehicle's true history and can avoid being defrauded and placed in an unsafe vehicle. The presence of “total loss” information in the absence of a state salvage brand will need to be explained by portal providers, so that prospective purchasers (and others) are aware of what the apparent discrepancy means, and how it occurs. DOJ does not expect states to take any action based on this information that is not authorized in state law and does not believe that it was the intention of the Anti-Car Theft Act to require them to do so.

Comment:

Several insurance-related associations commented that “[t]he statute requires that insurers report junk and salvage automobiles, yet the regulation would require reporting of `total losses,' a term that would include some automobiles that are not junk or salvage. It is axiomatic that a regulation cannot expand the limits of a statute, and especially if in doing so, the regulation imposes added burdens and costs. Not only is such expansion inconsistent with the underlying statute but there is also nothing in the Court's order in

Public Citizen

et al.

v.

Michael Mukasey

that mandates or authorizes any such expansion of the statutory definition of automobiles to be reported.”

These commenters further noted “that the statutory definitions of `junk' and `salvage' in 49 U.S.C. 30501 are not used by most state or insurance carriers. To enable consistency with the existing state laws and data systems and thereby to expeditiously implement NMVTIS, we request that the last sentence of Section 25.55(a) be amended to read in the final regulation: `An insurance carrier shall report on any automobile that it has determined to be a junk or salvage automobile under the law of the applicable jurisdiction.' This approach makes sense because since the Congress enacted this statute in 1992, most states have defined the meaning of `junk' or `salvage.' These state laws represent the best understanding of these terms today. Requiring their use by regulation would implement the spirit of the law in a practical way. Data reported by insurers in this manner will also be consistent with data reported by the states.”

Opposing this view, consumer-advocate litigators commented that “[t]he Insurers comment that `any expansion via regulation of the categories of automobiles for which reporting is mandated * * * would be unauthorized. * * *' However, they do not suggest that it is outside the scope of the Department's authority to provide construction for such terms in the statutes. It is obviously the duty and the province of the Department to use its broad discretion in construing these terms.” The consumer-advocate litigators further commented that the rule's enabling of electronic reporting through third parties that may already have access to the data addresses the need for reporting in the least-burdensome and least-costly fashion. These commenters further argued that “[t]he Insurers take issue with the Department's proposal to provide that a vehicle treated as a total loss is deemed

a salvage vehicle. However, it is squarely with the Department's province to make the determination that the fact that a vehicle has been treated as a total loss indeed is evidence that it is a `salvage' vehicle, and that both legally and practically the vehicle is a `salvage' vehicle. Similarly, it is necessary, in carrying out the clear protective purposes of the statutes, that this construction be given to these terms. * * * The Insurers next propose amending the last line of § 25.55(a) to state `An insurance carrier shall report on any automobile that it has determined to be a junk or salvage automobile under the law of the applicable jurisdiction.' Such a change would incorporate the limitation they seek of disregarding total loss vehicles. It also appears to be an attempt to require that state definitions of `junk' or `salvage' be

substituted

for the definitions in the statutes, rather than

additional to

and supplementary of them. That would be entirely improper, of course, defeating the central purpose of providing a national definition of `salvage' that sets a

floor

for reporting, not a

ceiling.

” These commenters further noted the “extraordinary patchwork of state laws regarding title `brands' and even the terms used for labeling `salvage' or `total loss' vehicles. The uniform minimal reporting standard provided by the NMVTIS statutes is of critical importance.”

Response:

DOJ agrees that it possesses authority and responsibility to provide the definition of these terms. Additionally, in order to meet the requirements of the Act with regard to providing prospective purchasers with the information needed to make an informed purchase decision, and in order to inform state title administrations and law enforcement of that vehicle's history, full disclosure of total-loss information is needed regardless of a state's action or inaction on that vehicle.

Comment:

Several insurance-related organizations and associations commented that “[s]ection 25.55(a) states that the insurer must report automobiles that it has obtained `possession of

and

has decided are junk automobiles or salvage automobiles.' The term possession is not clear. To be workable, `possession' should be construed as `the titled owner' as represented on the certificate of title, because insurers would only be able to report on those automobiles to which they are titled owners. Otherwise, they do not record `possession' of automobiles and could not report them.”

The insurance-related organizations further commented that “[r]eplacing `possession' in the regulation with `titled owner' would also be workable and consistent with the remainder of the sentence which requires that insurers must report automobiles which they possess

and

have decided they are junk or salvage automobiles. Both the `possession' and `decision' are manifested by re-titling, which is reportable by insurers in an efficient manner. Therefore, the language would read, `a report that contains an inventory of all automobiles of the current model year or any of the four prior model years, that the carrier during the past month is the titled owner and has decided are junk automobiles or salvage automobiles.' ”

Opposing this view, several consumer-advocate litigators commented that while the term is not clear and needs construction in furtherance of the protective purposes of the statute, they disagreed with the insurers' proposed substitution of “is the titled owner of” for “has obtained possession of” in section 25.55(a). These commenters further noted that the effect of the insurers' comments would be to “eliminate any reporting requirement of salvage vehicles by insurance carriers whatsoever for all but those vehicles that they do in fact actually title in their name. There are innumerable reasons why, and methods by which, they may legally in many instances not obtain titles to salvage vehicles in their names under the existing hole-laden patchwork of state laws. In addition, if this change were made, and if they blatantly violated a state law by failing to get a salvage title issued in their names, they would appear not to be in violation of the federal law by not reporting to NMVTIS, because they would not have been the `titled owner.' The opposite construction of `possession' is crucial. In fact, the very example they provide of a salvage vehicle that comes into their possession but that they do not title shows how NMVTIS

should

work to be effective: They should report such vehicles. If there are multiple reports on the same vehicle, there is no harm done; but if such salvage vehicles are not reported, there is every harm done.” Other consumer advocates commented that “possession” should be defined to include both actual and constructive possession and should include exercising control over an automobile directly or indirectly.

Response:

Limiting insurance reporting to those vehicles owned by insurance companies would create a large loophole through which total-loss or salvage vehicles would remain under “clean title.” Such a loophole was clearly not intended to exist under NMVTIS, and in order to provide consumer protection against fraud, insurance carriers must be required to report on all vehicles that they determine to be a total loss.

Comment:

Several insurance-related organizations and associations commented that “[s]ection 25.55(b) sets forth the mandatory data elements. We believe that applying the following interpretations will allow a reporting system to be put in place that complies with all aspects of the statute, including the `least burdensome and costly' directive and that can reasonably meet the Court's deadline in

Public Citizen

et al.

v.

Mukasey

.

``a. VIN. This can be reported.

“b. The date on which the automobile was obtained or designated as a junk or salvage automobile. Again, interpreting this requirement to mean the date on which the automobile was re-titled `junk' or `salvage' comports with legal and practical considerations and would be most cost effective.

“c. The name of the individual or entity from whom the automobile was obtained or who possessed it when the automobile was designated as a junk or salvage automobile. Again, as set forth above, the only cost effective way for insurers to meet this obligation is to construe it to mean the name of the insurer when the automobile was re-titled. Providing the name of the individual or entity from whom the automobile was obtained does not provide useful information to law enforcement or consumers.

“d. The name of the owner of the automobile at the time of the filing of the report. In most instances, this will be the buyer of the salvage or junk automobile, or the insurance company when the insurance company retains ownership, for instance to crush a junk vehicle.”

Opposing this view, several consumer-advocate litigators commented that the insurers suggest `that the regulations should provide that they do

not

have to report the name of the person from whom a salvage vehicle was obtained. This is directly contrary to 49 U.S.C. 30504(b)(3). The ownership trail of all of these vehicles is critical for law enforcement and consumer investigative purposes, and Congress noted that by writing it into law.”'

The consumer-advocate litigators further commented that “[t]he Insurers also suggest that the `owner of the automobile at the time of the filing of the report' would normally be the buyer of the salvage vehicle, and would only be the insurance carrier if it retained

ownership to crush a vehicle. I submit that it is important that both the buyer and the insurance carrier be identified under the regulations.”

Response:

DOJ agrees with the comments of the consumer-advocacy organizations and has retained the total-loss reporting requirements that were included in the proposed rule.

Comment:

Several commenters, including the NADA, ARA, Experian Automotive, the National Salvage Vehicle Reporting Program, insurance services organizations, consumer advocate attorneys, and others, expressed strong support for DOJ's “modernization and clarification of language found in the Anti-Car Theft Act related to salvage and junk vehicles, to include within this the requirement to report on all total loss vehicles, including those recognized by the state and those not recognized by the state but determined a total loss by an insurance carrier.” Several of these commenters also pointed out that many total-loss vehicles do not receive salvage brands due to varied and unreliable state definitions and criteria. Relying on state definitions of “salvage,” therefore, would be highly inconsistent, would perpetuate fraud and theft, and would fail to accomplish the objective. Comments submitted by Amica Mutual Insurance Co. underscore the need to collect “total loss” data. Such data provides additional consumer protection, potentially decreases fraudulent activity, and reduces the number of unsafe vehicles in the marketplace.

Response:

DOJ agrees with these comments.

Comment:

The NADA, ARA, National Salvage Vehicle Reporting Program, several national consumer-advocacy organizations, and other organizations commented that the proposed rules fail to require insurance carriers to report all vehicles that they declare a total loss, including those retained by insureds. Often, individuals who retain possession of their “total loss” vehicle can avoid disclosure, or they may not apply for salvage titles. The NADA commented that the final rule should be revised to eliminate the concept of possession and instead focus on those insured motor vehicles that the insurance company declares, or the applicable jurisdiction defines, to be a “total loss.”

Response:

DOJ disagrees that the proposed rule puts such a limitation in place. DOJ requires that insurance carriers who declare a vehicle a total loss and allow the insured to retain the vehicle must still be required to report such declarations.

Comment:

The NADA commented that “total loss” should be defined broadly to capture all total-loss vehicles. “The final rule should not define `total loss' in Section 25.52, but rather should define `total loss motor vehicle' as `those motor vehicles determined to be a total loss under the laws of the applicable jurisdictions and those designated as a total loss by each insurance company under the terms of its policies.’ ''

Response:

DOJ appreciates this clarification and agrees that “total loss” includes all total-loss vehicles.

Comment:

ASPA commented that “[w]hen an automobile is classified as a total loss by an insurance company, it does not necessarily mean that the automobile is a `salvage automobile.' On page 54546 of the

Federal Register

, in Section 2 `Insurance Carriers,' the explanation of the Proposed Rule expands the definition of `salvage automobiles' when it states: `For purposes of clarification, the Department of Justice has determined that this definition [salvage automobiles] includes all automobiles found to be a total loss under the laws of the applicable jurisdiction or designated as a total loss by the insurance carrier under the terms of its policies.' ”

“In common usage, `salvage' is not synonymous with `total loss.' There are many circumstances in which an insurance company may declare a vehicle a `total loss,' but the vehicle does not meet the `salvage' definition of the relevant state. If a stolen vehicle is not recovered quickly, the insured may be paid for the missing vehicle. If the vehicle is later recovered in a largely undamaged condition, the vehicle, although a `total loss' due to its late recovery, may not meet the relevant `salvage' definition and, often, is sold by the insurer with a `clear' (

i.e.,

not branded) title. The definition in the Proposed Rule lumps this undamaged theft recovery into the `salvage' definition, thus devaluing the vehicle and, again, creating confusion about the applicability of the laws of the relevant state.”

ASPA further commented that “[m]ore generally, pursuant to 49 U.S.C. 30501(7), `salvage automobile' is clearly defined as `an automobile that is damaged by collision, fire, flood, accident, trespass, or other event, to the extent that its fair salvage value plus the cost of repairing the automobile for legal operation on public streets, roads, and highways would be more than the fair market value of the automobile immediately before the event that caused the damage.' This definition is both clear and unambiguous on its face and, therefore, requires no `clarification.' ”

“In the Proposed Rule, the DOJ is attempting to expand the definition of salvage automobile `[f]or purposes of clarification' to include automobiles determined to be a total loss under the law of the applicable jurisdiction or designated as a total loss by the insurer under the terms of its policies. We contend that this significant expansion of the definition is not necessary, and that the proposed definition actually contradicts accepted custom and usage within the insurance and salvage industries.

“The DOJ's proposed amendment to the definition of salvage automobile would subject many clear title automobiles to the reporting requirements of NMVTIS. This is problematic, and is clearly not what Congress envisioned when it created the definition for salvage automobile. In

Chevron U.S.A., Inc.

v.

Natural Resources Defense Council, Inc.,

467 U.S. 837 (1984), the Court implemented a two-part analysis to determine the appropriate standard of review towards a government agency that attempts to amend statutory language. Here, since the current definition of salvage automobile is not ambiguous, the proposed `clarification' by the DOJ is not based on a permissible construction of the statute and should not be allowed.”

Response:

DOJ disagrees. Total-loss vehicles are just that—a total loss—at the time the determination is made. Total-loss vehicles fall within the definition of “salvage” and must be reported. In response to other comments, DOJ notes that insurance carriers are strongly encouraged by the final rule to report to NMVTIS the primary reason for the determination of total loss, addressing this commenter's concerns specifically and providing much-improved disclosure for consumers.

Comment:

One submission argues for “the necessity of all states to adhere to the Uniform Certificate of Title Act.” “If the state has a different definition of a Salvage vehicle the branding now becomes an arbitrary issue.”

Response:

The Uniform Certificate of Title Act and the benefits of uniform titling procedures aside, the Anti-Car Theft Act does not require States to adopt standard brand labels or definitions. NMVTIS has a process in place to record each state's unique brand label and to relate it to one of the 78 brand types used in the NMVTIS database. The state's brand labels and definitions remain unchanged in NMVTIS.

9. Chain of Custody/Names of Those Who Provided/Those Who Purchased

Comment:

One commenter noted that “[t]he reporting requirement of the junk and salvage yards may need some change. There are many different routes for a vehicle to come into a yard, very often it is not by the `owner of record' or the titled owner. A more definitive approach to recording the information of the entity placing the vehicle into the salvage yard should be taken, more identifying information regarding the entity placing the vehicle into the salvage yard should be captured. * * * How does the system handle this in a manner that will notify the title State of a cancel record and provide a bona-fide chain of events leading to the yard?”

Response:

The reporting requirement for junk and salvage yards applies to every vehicle regardless of what “route” it took into the yard or who brought in the vehicle. Further, it is the responsibility of the junk or salvage yard to provide, among other data, the name of the individual or entity from whom the automobile was obtained. The NMVITIS reporting requirements do not affect existing state-level requirements for junk- and salvage-yard operators to provide states with a notice of title or record cancellation and any data fields required in such notifications. NMVTIS will not issue such notifications to states, but states will be able to view the reported salvage- or junk-yard status of any vehicle at any time. With the cumulative vehicle histories constructed in NMVTIS, states and law enforcement can identify the “chain of events” with reliability once there is full system participation.

Comment:

One commenter noted that “stolen” designations or notifications sometimes are not made when a vehicle is first reported stolen. In these instances, the commenter suggested that law enforcement may receive a false negative response on a stolen check due to this delay. The commenter suggested that the system provide a notification to law enforcement officers filing a report on a stolen vehicle that a prior stop and “stolen” check was made on the vehicle, providing notification and an investigative lead to the reporting officer of where the vehicle was stopped and who made the stolen inquiry. Another commenter noted that stolen-vehicle information is not required to be in NMVTIS, and nothing in the regulations requires a state to check NCIC before issuing a title.

Response:

NMVTIS is not intended or expected to replace the information or services available to law enforcement through NCIC. NCIC is and will remain the primary system used and relied upon by local law enforcement to check the “stolen” status of a vehicle. NMVTIS's capturing of “stolen” status and history information is to inform state titling agencies and others who may not have access to NCIC that a vehicle was at one time reported as “stolen.” Stolen vehicle information is included in NMVTIS via NICB so that states that do not have access to NCIC can be apprised of a vehicle's questionable status before issuing a new title.

Comment:

The National Auto Auction Association commented that “NMVTIS should include lien holder names and license plate numbers” for various reasons.

Response:

While DOJ will authorize the operator to seek additional information for NMVTIS as may be necessary to accomplish program goals, DOJ will not require these data fields to be included in NMVTIS.

Comment:

The National Auto Auction Association commented that DOJ should clarify in the final rule whether data maintained in the NMVTIS central file is to be considered the official legal record of a jurisdiction's data.

Response:

The official record for any vehicle will be determined by the state. However, NMVTIS is expected to be a reliable source of title information that users can rely on to make decisions.

10. Brand Definitions

Comment:

One commenter asked, “[h]ow is the branding procedure determined? Is there a preexisting national standard for what brands exist and how a vehicle is classified under such brands or is the determination made on a state-by-state basis? If the standard is national (which would make sense given the national objective), maybe a list of definitions of the applicable brands should be placed in the rule's definition section.” Another commenter noted that the development of standardized definitions and brands for all states would be extremely beneficial in ensuring that the intent of NMVTIS is fully recognized. Several state motor vehicle administrations pointed out that the definitions of “salvage” and “total loss” in the proposed rule are different from state definitions. Another commenter noted that to add information based on the definitions in the proposed rule will conflict with State definitions of brands, compromise the integrity of the NMVTIS database, and reduce the value of the information in the database.

Response:

NMVTIS does not affect state branding procedures, and the Anti-Car Theft Act did not require a national standard for branding. Although differing definitions may create complexity in deciphering a vehicle's brand history, NMVTIS will accept any official state brand and will share that brand with other states, thereby relating that brand to a brand type or “NMVTIS Brand.” Users of NMVTIS will notice state brands as well as a separate category for insurance, junk, and salvage information, if any is available. The differences in these reporting streams also will be defined so that users will know if a vehicle has been or is a junk or salvage automobile by virtue of a state brand indicating such, or by an insurer's determination that the vehicle was a total loss. Consumers and others also will be advised if a vehicle has been in the possession of a junk or salvage yard. Information is reported by multiple data sources and is reported in a segregated fashion with links for explanations.

Comment:

ASPA provided the following example as evidence of the problems that would be created by the proposed rule: “Michigan's salvage law covers current model year passenger vehicles and those of the preceding five model years. Therefore, a 2002 passenger motor vehicle does not become a `salvage vehicle' or a `scrap vehicle' in Michigan, regardless of the fact that the vehicle has been damaged and `totaled' by an insurance carrier. In this situation, Michigan, when reporting to NMVTIS, presumably would not include the car in the state's branded title submissions. An insurance carrier reporting to NMVTIS presumably would not include the car because it is outside of the age limitations applicable to insurance carriers. However, a salvage yard or junk yard, using the definitions in the Proposed Rule, presumably would report the vehicle as a `salvage automobile' or a `junk automobile,' when reporting to NMVTIS. So, for a state or other inquirer of NMVTIS, NMVTIS will show that the vehicle has a salvage or junk history. This occurs regardless of the fact that the relevant state did not deem the vehicle salvage or scrap.”

Response:

This comment offers an excellent example of how NMVTIS reporting will fill the holes that currently allow salvage or junk vehicles to remain unbranded, creating opportunities for theft and consumer fraud.

11. Brand Washing

Comment:

One commenter asked “if brand information is already collected by states, how exactly would brand `washing' occur? If the retitling state

checks the title of the previous state wouldn't that information be included with the title?” Another commenter recommended that NMVTIS retain a prior state's brand history even when a state does not accept a previous state's brand.

Response:

Brand histories or designations are not always carried forward by the states. Retitling states do not necessarily check with the previous states before issuing a new title. In some states, the paper title from the previous state of record is accepted as the basis for the new title to be issued. Because of the reliance in some states on paper titles as evidence of prior titling history, and because not all states check with the prior states of record, brand washing occurs regularly. NMVTIS will create a nationwide brand history for every vehicle, requiring that all states check with NMVTIS rather than simply relying on paper documentation. Brand washing will be significantly reduced, if not eliminated. A state's decision not to acknowledge a prior state's branding will not affect the NMVTIS brand history.

12. Self Insurers Included in the Definition

Comment:

Several commenters expressed disappointment that self insurers were left out of the rule. One commenter noted that the definitions should encompass a “self insurer,” be it a municipality, lease company, or large corporation, and that this is a current “hole” in the system.

Response:

DOJ agrees that the Anti-Car Theft Act's definition of “insurance carrier” includes entities that underwrite their own insurance, such as certain rental car companies. The definition, however, excludes any organization that does not underwrite its own insurance.

13. Salvage Automobile Defined

Comment:

One commentator noted that the definition of a “salvage automobile” should also include any automobile that an insurance company has taken ownership of in settlement of a claim and any vehicle that a state has issued a title to an insurer for. Another commenter noted that “[t]he responsibilities of the insurance carriers should include, in the area of the reporting, if the insurance company obtained a title from the state in their name, the state in which they obtained it and the type of title.” Several consumer-advocacy organizations commented that every automobile obtained by a salvage yard or junk yard that the salvage yard or junk yard knows, or has reason to know, has come from an insurance carrier, or from any person or entity in connection with the resolution of insurance claims, should be deemed as a salvage automobile or junk automobile and must be reported as such. These commenters suggested that the rules should provide for a presumption that any automobile obtained or sold by a salvage or junk yard, and that has known unrepaired wreck or flood damage, is either a salvage automobile or junk automobile, and that such a vehicle must be reported as such. Similarly, the rules should include a presumption that any automobile obtained or sold by a salvage yard or junk yard, without knowledge as to the automobile's physical condition, is either a salvage automobile or junk automobile, and must be reported as such. This would prevent salvage yards or junk yards from maintaining an “empty head” to avoid compliance. The commenters suggested that “these presumptions (as to automobiles not obtained from insurers) can be overcome if and only if the salvage or junk yard has qualified appraisal personnel employees or others acting solely on its behalf, entirely independent of any other persons or entities, perform a good-faith physical and value appraisal of the automobile and determine that the automobile does not meet the definition of ‘salvage' or ‘junk.’ ”

Response:

Based on the proposed rule, a “salvage auto” is defined as ”an automobile that is damaged by collision, fire, flood, accident, trespass, or other event, to the extent that its fair salvage value plus the cost of repairing the automobile for legal operation on public streets, roads, and highways would be more than the fair market value of the automobile immediately before the event that caused the damage.” 49 U.S.C. 30501(7).

For purposes of clarification, the Department of Justice has determined that this definition

includes

all automobiles found to be a total loss under the laws of the applicable jurisdiction or designated as a total loss by the insurance carrier under the terms of its policies. By definition, this would mean that every automobile obtained by a salvage yard or junk yard that the salvage yard or junk yard knows, or has reason to know, has come from an insurance carrier, or from any person or entity in connection with the resolution of insurance claims, should be deemed as a salvage automobile or junk automobile and must be reported as such. DOJ does not agree that any automobile with unknown damage or any automobile obtained without knowledge of its physical condition should be considered a junk or salvage automobile. DOJ agrees that a junk or salvage yard may be excepted from reporting any vehicle that a qualified independent appraiser determines does not meet the definition of a salvage or junk automobile. This determination by the appraiser must be in writing and made after performing a good-faith physical and value appraisal. Although not required, the Department recommends that junk and salvage yards retain the reports and written appraisals for a period of ten years from the date of the report. Additionally, a salvage auction or salvage pool that does not handle any vehicles from or on behalf of insurance carriers is categorically exempted from this rule until such time as they may handle a vehicle from an insurance carrier.

Comment:

One commenter noted that the lack of common terms will undermine the clarity and usefulness of the information provided: “How will NMVTIS reconcile the differences in law as to what constitutes a ‘total loss?’ How will this undermine or effect achievement of NMVTIS'[s] goals? How will NMVTIS reconcile the differences amongst insurance company policies as to what constitutes a ‘total loss?’ How will this undermine or effect achievement of NMVTIS'[s] goals?” The West Virginia Department of Transportation also commented that the rule should establish a standard for establishing total loss as opposed to relying on the rules of insurance carriers and states.

Response:

NMVTIS will not attempt to “reconcile” differences in definitions. Rather, NMVTIS recognizes that different definitions and criteria are in place within different insurance companies and states. NMVTIS accepts these “native” determinations and notifies users that “X company” or “X state” has made a determination that the vehicle is a “total loss,” “salvage vehicle,” etc. NMVTIS will provide all users with full disclosure and explanation on the differences in definitions and determinations and how this may or may not affect a vehicle. NMVTIS's mandate is to notify users of the determinations made in a vehicle's history, not to make such determinations uniform or conforming.

14. Junk Yard Definition

Comment:

ISRI commented that it objects to the presumption in the rule that vehicle recyclers operate only one of two things, a “junk yard” or a “salvage yard,” and suggests that DOJ clarify the full scope of entities to be included under the general heading of “junk or salvage yards.”

Response:

While DOJ relied upon the language in the Anti-Car Theft Act to describe the category of required entities, DOJ acknowledges that the terms do not adequately reflect the professional and varied nature of the vehicle-recycling industry. In general terms, any entity that owns, controls, handles, or acquires salvage vehicles is included in the reporting requirements of this rule, which is consistent with current business practices. Similarly, scrap-vehicle shredders, scrap-metal processors, “pull- or pick-apart yards,” salvage pools, salvage auctions, and other types of auctions handling salvage vehicles (including vehicles declared a “total loss”) are included in the definition of “junk or salvage yards.”

Comment:

ISRI also requested that new definitions of “scrap vehicle,” “scrap-vehicle shredder,” and “scrap-metal processor” be added to the rule to exclude these entities from the reporting requirement.

Response:

DOJ has clarified the rule, but rather than eliminate the reporting requirements for these entities, DOJ revised the regulations to establish an exemption that would cover prohibitive reporting circumstances that these entities face.

Comment:

One commenter argued that the definition of “junk yard” is too broad and may unnecessarily include used car dealers and others who may rebuild vehicles with the intention of reselling them. The commenter suggested that having such entities report these vehicles into NMVTIS would potentially label these vehicles as “junk or salvage” and preclude the vehicles from being retitled in some states.

Response:

One of the main purposes of NMVTIS is to provide prospective purchasers and others with reliable histories of a vehicle's previous and current condition as it relates to salvage and loss. Vehicles reported as having been in the possession of a “junk” or “salvage yard” may not be viewed in the same way that vehicles with a “junk” or “salvage” brand may be viewed in state titling processes. Each state will continue to make its own determinations regarding vehicle titling based on state law. Although any individual or business engaged in the business of acquiring “junk” or “salvage” automobiles (which includes motor vehicles determined by an insurance carrier to be a “total loss”) generally must by law report such vehicles to NMVTIS, there are two exceptions to this requirement. First, an automobile that is determined to not meet the definition of salvage or junk after a good-faith physical and value appraisal conducted by a qualified independent appraiser is not required to be reported. Second, DOJ has added a clarification that individuals and entities that handle less than five salvage or total-loss vehicles per year need not report under the salvage-yard requirements, which is consistent with existing standards that used car dealers are familiar with.

Comment:

Many commenters, including Iowa Attorney General Thomas J. Miller, noted that the inclusion of salvage pools in the reporting requirements for junk and salvage yards “will help close a significant loophole” and will “further deter fraudulent used car sales, vehicle theft,” and other crimes.

Response:

Requiring salvage pools or auto auctions to report on salvage or insurance claim vehicles will increase the effectiveness of the program, ensuring that consumers and others are not defrauded by sellers who conceal salvage or “total loss” histories.

Comment:

Several commenters, including the ISRI, the Virginia Department of Motor Vehicle Administrators, and other industry associations and representatives, commented that the proposed rules do not clearly indicate that scrap-metal processors, shredders, pull-apart yards, and others who often receive and demolish many end-of-life vehicles are included in the reporting requirements.

Response:

The regulations have been revised to clarify that the definition of junk and salvage yards includes not only salvage pools, but also scrap-metal processors, shredders, pull-apart yards, and others who handle or control total-loss, junk, or salvage automobiles, otherwise described as end-of-life vehicles.

Comment:

ASPA commented that DOJ should recognize that VIN inspections conducted in most states would make a salvage automobile an unattractive choice for criminals, and that cloning a salvage vehicle would result in the cloned vehicle having a “salvage” branded title.

Response:

DOJ recognizes that some states require vehicle inspections upon retitling, and some states place a “brand” on salvage vehicles. In these states, a salvage vehicle may not make an attractive choice for VIN cloning. However, not every state has these requirements, and VIN inspections typically do not inspect or verify hidden VINs. As a result, cloned vehicles go undetected. Even electronic diagnostic modules that would otherwise display the VIN can be defeated, allowing the clone to be virtually undetectable. Most often, the criminal activity that DOJ referred to in the proposed rule is related to total-loss or “end-of-life” vehicles that are purchased because they have a “clean title” that is then fraudulently connected with a stolen vehicle, which “clones” the stolen vehicle to the non-stolen, “clean title” vehicle. Because the non-stolen vehicle was destroyed and sold to an individual, it no longer appears on the road and no notification of its destruction may be made to the current state of title.

Comment:

Copart, Inc. argued that because salvage pools do not own the vehicles sold at salvage pools or auto auctions, and therefore by definition do not “resell” them, they do not meet the definition of salvage yard and are therefore not required to report. Copart further contended that salvage pools should be required to report only those vehicles that they purchase for resale, and that any other interpretation goes beyond the plain language of the statute.

Response:

DOJ disagrees with this interpretation and notes that salvage pools do in fact handle and cause to be resold (on behalf of their current owner, who “bought” the vehicle from another) salvage and total-loss vehicles.

Comment:

Copart, Inc. argued that salvage pools do not typically have access to the information needed to determine whether a vehicle meets the NMVTIS definition of junk vehicle or salvage vehicle. Copart further contended that junk and salvage yards should only be required to report to NMVTIS those vehicles sold on a salvage or junk certificate under applicable state law.

Response:

Allowing junk and salvage yards to report only on vehicles with salvage titles would perpetuate the problems described elsewhere, including fraud and theft. Nonetheless, DOJ has addressed this issue in the definition of a “salvage auto” that now includes exceptions for vehicles that are not salvage, including total-loss vehicles.

Comment:

Copart, Inc. argued that requiring salvage pools to report to NMVTIS is wasteful and duplicative because they function as an intermediary between other entities that are required to report, such as insurance carriers, dismantlers, and scrap-metal processors.

Response:

Criminal organizations exploit salvage-pool services, purchasing total-loss vehicles with “clean titles” to facilitate the cloning and resale of stolen vehicles. To address this issue, law enforcement and other organizations require information on the vehicles handled by salvage pools. Additionally, many if not most vehicles

sold by salvage pools do not end up in a junk or salvage yard, and not all vehicles sold by salvage pools, including those with significant damage, are determined to be a total loss by insurance carriers. For these reasons, it is essential that salvage pools report to NMVTIS.

Comment:

Copart, Inc. argued that DOJ should interpret “junk yard” and “salvage yard” to include all vehicle auction companies so as not to discriminate against “salvage pools” that sell both clean-titled and salvage vehicles.

Response:

All vehicle auction companies should not be required to report on all vehicles handled or in their inventory. Instead, those organizations that handle or resell vehicles on behalf of insurance carriers after a determination of total loss, regardless of salvage title, should be required to report. This should hold true regardless of whether the entity operates as a “salvage pool” or refers to itself as an “auto auction,” “salvage auction,” “abandoned-vehicle auction,” “tow-lot auction,” “scratch-and-dent” sale or auction, etc. As the National Salvage Vehicle Reporting Program noted, “the recommended guideline for determining that an entity is required to report * * * should be if the entity owns or acquires, [or handles] total loss/salvage vehicles in whole or in part.” Under such circumstances, it should be required to report all vehicles to NMVTIS. DOJ will clarify this requirement in the final rule.

15. Salvage Brand

Comment:

One commenter noted that “[i]f the NMVTIS project is to succeed it would be a reasonable assumption to require a uniform approach to the assignment of the `salvage' brand by any member state. The system is only as good as the data in it, if the data is not applicable to uniform situations there will always be discrepancies.”

Response:

A uniform approach to branding would be advantageous in many respects. The Anti-Car Theft Act, however, does not provide the authority for DOJ to develop or mandate uniform branding, which would be a significant and potentially costly change for states to implement. As each state makes its own determinations, and NMVTIS relates state brands to an aggregated brand or brand category within NMVTIS, the non-uniform approach does not create an insurmountable problem. DOJ will ensure that those who access NMVTIS information have the opportunity to learn about the different state brands that exist and the impact of other reporting on these brands to create greater awareness and understanding of their meaning.

16. Definition of Automobile

Comment:

NAEC argued that the rule should require the inclusion of “trucks, SUVs and other non-automobiles as prescribed by the Federal Anti-Car Theft Act for Parts Marking” because of their popularity with vehicle thieves. Other organizations, including the Idaho Transportation Department, contended that “NMVTIS records should also include all vehicles that a state may title, and not be limited to standard types of vehicles.” The Minnesota Department of Public Safety stated that if it is required to report on all vehicles in its database, “it might well grind to a halt,” and costs would increase considerably.

Response:

Although DOJ cannot extend the Act's definition to include all motor vehicles, it is important to note that many states currently include such vehicles in their reporting to NMVTIS. DOJ strongly encourages this continued reporting practice in light of supporting comments, the value to law enforcement, and the need to protect citizens against fraud and theft. Moreover, it may be more costly or burdensome for states to filter out those vehicles not meeting the statutory requirement than to submit all motor vehicles to NMVTIS.

Comment:

One commenter recommended that DOJ clarify when a vehicle is no longer a vehicle for purposes of reporting, especially in junk or salvage yards that often do not receive a complete vehicle.

Response:

DOJ offers two clarifications in response to this comment. First, a vehicle is thought to be present for reporting purposes when a vehicle frame is present. Similarly, in cases where questions as to the “true VIN” of a vehicle arise, DOJ has determined that the true VIN for NMVTIS's purposes is the VIN on the frame of the vehicle.

State Responsibilities

17. Start Dates

Comment:

In reference to the proposed June 1, 2009, start date for state reporting and inquiries into the system, several states and AAMVA noted that the states would have difficulty meeting this date. One state commented that “[t]he requirement to budget, upgrade and work to complete compliance requirements for NMVTIS cannot be met by this timeline—it is simply not doable even with the political will and funds available. To arbitrarily select a date that is not workable in any manner is unfair and unrealistic.” Other commenters noted that it would take time to accomplish the necessary statutory and regulatory changes that may be required, and that their states had not budgeted for NMVTIS and could not pay NMVTIS fees in light of current economic circumstances. AAMVA further commented that DOJ should establish a process for approving “temporary exemptions from the deadline where a reasonable timeline for compliance is presented and approved by the Department.” The State of California proposed a “phasing in” of participants. The dates proposed by states as alternative start dates ranged from 2010 to “1 year from the date funding is secured” by the state.

Response:

Although DOJ has worked closely with the system operator to reduce the need for state system modifications, and although the requirements of the Act have been in place since 1992, DOJ understands that it will take time for states to implement some provisions of the regulation. To provide relief in this regard, DOJ has elected to extend the compliance date for states not yet participating to January 1, 2010. By this date, all states and the District of Columbia will be required to provide daily title transaction updates to NMVTIS, make inquiries into NMVTIS before issuing a title on a vehicle coming in from out-of-state, and paying any user fees that may be billed by the operator. The Department believes that the states can comply by that date. Similarly, DOJ has decided against a “phasing in” approach to state participation commencement because there is no equitable way of selecting phasing dates and participants in each phase. DOJ points out that most of the provisions required to be implemented by January 1, 2010, are essentially the same requirements that have been a part of the Anti-Car Theft Act since either 1992 or 1996, and states, therefore, have had at least 12 years to implement the provisions of the Act. Thirteen states have already done so without regulations in place.

Comment:

One commenter noted that the proposed start date is just prior to an AAMVA-announced decision to continue as the operator of the system and therefore creates a conflict for states should AAMVA decide not to continue as the operator.

Response:

AAMVA has assured DOJ that should a decision be made in August of 2009 to discontinue its role as the operator, AAMVA will continue to provide transition services and continuity until a new operator is identified and is able to assist states that

rely on NMVTIS in their daily operations.

Comment:

One commenter asked how the proposed start date had been determined and has requested justification for the date. The commented wrote that in the absence of this justification, the date appears arbitrary. The State of Illinois motor vehicle administration maintained that “the proposed timeframe for implementing the NMVTIS program under these rules is unrealistic to the point of being absurd.” Although that Illinois agency conceded that the start date was likely driven by ongoing litigation and a court order, the commenter noted “that [the] order is either currently under appeal and a stay of enforcement should be sought pending appeal, or the Department of Justice [may have] chose[n] not to seek an appeal.”

Response:

The proposed start date was chosen after an analysis of historical timelines to provide batch data to the system, the number of states that currently have implementation funding from DOJ either directly or through AAMVA, the number of states that have indicated previously that they were working towards implementation already, and an expected release of stand-alone access to facilitate title verifications. As noted previously, however, the Anti-Car Theft Act has been in place for over 16 years, and many states have already implemented the provisions beyond the minimum specifications. Finally, the court order does not affect the state-implementation date in any way, and in fact is not even mentioned in that order.

Comment:

Several state motor vehicle administrations asked what penalties are in place for states that do not implement prior to the required start date and what provisions will be made for jurisdictions that are in process or intend to implement at a later date.

Response:

While DOJ will place its priority on supporting state implementation, DOJ would review state refusals to participate to determine the proper response. DOJ also will work with state officials in support of NMVTIS to encourage state compliance. This outreach could include contacts with state legislatures, governors, consumer-action networks, and law enforcement associations.

Comment:

One commenter suggested that DOJ publish a map of participating and non-participating states, so that citizens can observe the participation status of every state.

Response:

DOJ will make this map available on

www.NMVTIS.gov

and also will notify every consumer that accesses the site which states are not participating.

Comment:

The State of Alaska commented that “there should be a process in place that allows states to continue to issue titles when NMVTIS is not operational during states' normal business days and hours.” Alaska recommended that states be permitted to “issue titles when NMVTIS is not operational, hold the inquiries in a queue and submit the queued inquiries when NMVTIS is operational. If a problem is detected with a title, it would be revoked.” The State of Illinois commented that standards of performance should be established to address these issues.

Response:

While NMVTIS is typically only down for various reasons between 1 a.m. and 6 a.m. Eastern Time and one Sunday morning each month, there are processes in place for unexpected down time during state business hours. While specific processes vary by state according to state business processes, there are methods of continuing offline, such as mailing the new title at a later time, issuing a temporary title, etc. DOJ cannot alter the Anti-Car Theft Act's requirement to make a NMVTIS inquiry prior to issuing a new title. Therefore, new titles should not issue when NMVTIS is unavailable. Current system response time is less than three seconds per inquiry, and the number of unexpected system down times has been minimal. DOJ notes that the NMVTIS connection has not been “down” for 30 minutes or more at any time during the last three years, demonstrating that it is a reliable connection and service.

Comment:

A state motor vehicle administration agency suggested that the requirement for an “instant title verification check” is problematic for states that do not issue titles over-the-counter. The commenter suggested that the word “instant” be removed from the final rule.

Response:

Some states do not issue titles “instantly.” The “instant title verification check,” therefore, may take place after the customer has left the title administration agency but before a new title is issued. In these cases, states may make the NMVTIS inquiry when appropriate in the titling process, so long as the inquiry is made and title verified before a new permanent title issues.

Comment:

One commenter asked if a title-verification check would need to be performed on a state title that was being reassigned after being purchased from an out-of-state dealer.

Response:

It is unclear from the comment if the commenter was referring to a title being transferred out-of-state or into the state. States are required to check incoming titles related to vehicles from out-of-state. States are not required to check titles being transferred out of the state. With regard to the need to verify titles during dealer reassignment or the transfer of vehicles from one dealer to another, the Act requires that states verify the title of any automobile coming from another state, which DOJ has determined includes dealer reassignments when involving dealers in different states.

Comment:

One commenter argued that the system should provide state motor vehicle titling agencies with sufficient information to resolve discrepancies during the title-verification process.

Response:

NMVTIS provides state motor vehicle-title administrations with all relevant data in the system and a seamless and secure electronic connection to other online state title records. NMVTIS will make available any additional information within NMVTIS that may be needed to resolve such discrepancies. In the last year alone, the system generated 45 million secure messages and notifications and made 18.4 million update transactions.

Comment:

One commenter noted that information gleaned from a state's “instant title verification,” such as reports of prior removal of a vehicle from the vehicle population by export, destruction, reported existence in a salvage or junk yard, or other indication that the vehicle should not be present, should result in a physical inspection of the vehicle to determine the validity of the title and the vehicle.

Response:

While DOJ agrees that such reports or results will flag for states the title transactions and vehicles that should be further reviewed prior to undertaking a new title transaction, DOJ cannot require such inspections. It is each state's responsibility to institute policies and procedures for resolving such concerns. This comment does illustrate how NMVTIS can “flag” for states those vehicles and transactions that should be carefully reviewed to prevent fraud and theft.

Comment:

One state motor vehicle administration asked how NMVTIS will obtain data from the insurance companies and junk and salvage yards.

Response:

Insurance carriers, junk yards, and salvage yards are required to report the data enumerated in the Act and regulations. The operator will identify more than one reporting mechanism for electronic reporting, in a format prescribed by the operator. AAMVA and DOJ will identify the

official reporting mechanisms and processes via

www.NMVTIS.gov

.

Comment:

The Nevada Department of Motor Vehicles complained that requiring states to provide “the date the vehicle was obtained is an expensive and time consuming process” and that states should be permitted to continue sending the title-issue date instead.

Response:

There is no requirement proposed for states to submit the date a vehicle was obtained. This requirement is in relation to insurance carrier and junk and salvage reporting.

Comment:

The Oregon Department of Motor Vehicles commented that it currently only collects odometer information on those vehicles subject to federal odometer requirements and would be burdened to collect such information on all vehicles. The National Salvage Vehicle Reporting Program argued that states and insurers should be required to include mileage reporting in their data provided to NMVTIS.

Response:

States are only required to provide odometer information on those vehicles subject to federal odometer requirements, 49 U.S.C. 32705, and not on all vehicles unless already recorded by the state. States are required to provide to NMVTIS the most recent odometer reading for such vehicles and any later odometer information contained within state title records. DOJ strongly encourages all reporting entities to include odometer readings where available.

Comment:

One commenter recommended that the final rules spell out what is actually required from the states and how (

i.e.

, in which format) this information is to be provided. Another commenter, the California State Motor Vehicle Title Administration, recommended that the rule be revised to require information that is consistently available across all states and that only information held by state titling agencies be subject to reporting requirements.

Response:

DOJ will clarify what is required of each state and will describe format issues to the extent practical and appropriate. DOJ cannot simply choose to use only information that is available in every state consistently for purposes of populating the system, as doing so would limit the included data and significantly reduce the system's value.

Comment:

One commenter recommended that DOJ require that the operator be responsible for developing at least two approaches for NMVTIS inquiries and that DOJ should prepare a cost study relating to the expenses associated with the fully integrated, online approach to compliance.

Response:

There are already at least two approaches for state compliance with NMVTIS: (1) A fully integrated, online approach, whereby a state's title information system automatically queries NMVTIS, and NMVTIS provides real-time updates to both states involved in the transaction; and (2) a stand-alone approach, whereby title clerks send inquiries to NMVTIS via a web access point, and their state sends daily updates through a batch upload. A third option, serving central site states, entailing a process whereby verifications are performed via batch inquiry, will be explored and may be implemented soon. However, DOJ disagrees with the need to prepare a cost study because an extensive cost-benefit study of this issue already exists, and cost data from other state implementations is already available for estimation purposes.

Comment:

The NADA and at least one state motor vehicle administration commented that DOJ should clarify that states are required to submit all brands to NMVTIS for all automobiles titled within the state.

Response:

DOJ agrees and has clarified this requirement under 25.54(a)(2), consistent with statutory requirements.

Comment:

The Minnesota Department of Public Safety argued that states should be required to provide title numbers, “since it would be nearly impossible to establish the `validity and status' of purported titles without them.”

Response:

Participating states already have access through NMVTIS to observe the full title of record, including the title numbers and other information needed to establish the validity and status of titles presented. However, DOJ encourages the states to voluntarily submit that information to NMVTIS with the approval of the operator and the Department.

Comment:

The Minnesota Department of Public Safety commented that “the proposed rule also would require states to provide [`t]he name of the state that issued the most recent certificate of title' and `[t]he name of the individual or entity to whom [it] was issued' when making an inquiry to NMVTIS. This information is not, and cannot be, recorded in MnDVS' current title information system.”

Response:

This language was taken from the Anti-Car Theft Act to describe what information would be needed in order for states to make an inquiry into NMVTIS. Since the passage of the Anti-Car Theft Act, and with the very recent development of a standalone access model that only requires a VIN to search, these requirements have changed and this information is no longer needed. At the present time, only the VIN is needed to make an inquiry. This update will be reflected in the final rule.

Comment:

The West Virginia Department of Transportation argued that some states exempt vehicles that reach a certain age from the requirements of titling, and that these vehicles should be exempt from reporting.

Response:

The rule requires states to report on all automobiles included in the states' titling systems, regardless of age. However, if state law exempts certain vehicles from titling, those vehicles need not be reported to NMVTIS. The state should make the operator aware of these exceptions, however, so that consumers in the state and in other states are advised of this exception, which they may take into account when checking the history of vehicles through NMVTIS.

18. Unfunded Mandate

Comment:

Commenters argued that the mandate for NMVTIS has not been funded, and that the requirement for compliance has not been applied or enforced for the 15 years of this process. On the other hand, one commenter noted that NMVTIS is not an unfunded mandate in view of DOJ's investment of over $15 million in the system since its inception and in view of DOJ grants to states to support system participation.

Response:

The Anti-Car Theft Act explicitly requires that user fees, rather than federal funding, sustain NMVTIS. Although no funds have been appropriated to DOJ for NMVTIS, DOJ has invested over $15 million in NMVTIS, with a substantial portion going to states to assist them with compliance. The U.S. Department of Transportation previously provided funding during the period it was responsible for the system, which ended in 1996.

Comment:

One commenter noted that DOJ's determination that the rule does not meet the threshold cost or burden requirements of the Unfunded Mandate Reform Act of 1995 is not sufficient in and of itself to satisfy the legal responsibilities. Specifically, the commenter noted that “[t]he fact that the Department of Justice (DOJ) has decided that it is a small enough amount of money that the Unfunded Mandate Reform Act of 1995 does not apply, or that the DOJ has determined that per Executive Order 13132, the cost imposed does not provide sufficient cause for a Federalism issue, is not sufficient.”

Response:

The Department of Justice, based on its own analysis, made appropriate determinations based on law and regulation. The White House Office of Management and Budget reviewed and approved this analysis.

Comment:

The City and County of Honolulu Division of Motor Vehicle, Licensing and Permits disagreed with the aggregate amount estimated by DOJ in the “Unfunded Mandates Reform Act of 1995” section of the proposed rule “because their estimate is based on the less expensive standalone web solution which operationally degrades customer service and increases the work of our over-the-counter staff.” The commenter further noted that the aggregate amount should “factor in the development and deployment of the much more costly integrated on-line solution option that will ultimately be the final solution that states will move towards” and should include the additional costs that will result “from the increased load on the system to each jurisdiction when all jurisdictions, insurance companies, salvage yards, consumers, law enforcement, etc. are given access to the system.” The commenter concluded by stating that using this methodology, the aggregate costs will “easily exceed the $100 million resulting in the applicability of the Unfunded Mandates Reform Act.”

Response:

The methodology employed to calculate the aggregate costs of the program uses the minimum requirements for system participation. DOJ sees no purpose in using a level of participation not required by DOJ as the basis for the cost calculations. While states ultimately may move towards an integrated, online solution for efficiency, and although this method of participation does benefit NMVTIS, DOJ does not require it for compliance. It is DOJ's responsibility to determine the least-costly, most-effective way for implementing the solution, and that is the methodology used in the proposed rule. Further, a fully implemented system, with all jurisdictions, insurance carriers, junk and salvage yards, consumers, and law enforcement personnel accessing and reporting, does not translate directly into an increase in costs for states. In fact, it could very well decrease state costs through offset fees.

Comment:

The City and County of Honolulu Division of Motor Vehicle, Licensing and Permits further maintained that because the combined city/county government is a “small” government, it is uniquely impacted by the regulations and is entitled to relief. Additionally, this commenter contended that the operator's requirements for extracting and mapping the required data are burdensome, and that should the operator undertake these responsibilities, batch data submission would be much easier to achieve.

Response:

The Unfunded Mandates Reform Act and 5 U.S.C. 601(5) define “small governmental jurisdiction” generally as rural jurisdictions, those with populations under 50,000, and areas of limited revenues. Based on this definition, the city/county identified by the commenter would not appear to qualify as a “small governmental jurisdiction.” In terms of the operator's requirements and the burden associated with such requirements, DOJ will continue to direct the operator to provide as much flexibility in requirements as is feasible, and DOJ will continue to provide technical assistance upon request to identify alternative solutions where necessary.

19. Inquiring Into NMVTIS Versus Other Systems

Comment:

More than one state motor vehicle administration commented that NMVTIS will not provide a more substantial benefit than checking third-party vehicle history databases which some states already check. One state motor vehicle administration suggested that the law was unclear as to whether the Anti-Car Theft Act required states to check NMVTIS or another third-party database, stating that “[t]he previous intent was to provide a system that a state may utilize to verify title before titling a vehicle. This left open the use of other systems, such as Carfax, to research titles. The requirement to mandate use of NMVTIS to verify titles is unrealistic, unworkable and unfair. The intent of the process is to protect citizens against fraud. NMVTIS is not the only system that supports this intent. Limiting research to this system could also lead to misinformation and misapplication of process.”

Response:

The Anti-Car Theft Act requires states to verify titles through NMVTIS. No other system, public or private, can provide the same level of assurance as NMVTIS once full compliance is reached. DOJ also points to comments submitted by several organizations that highlighted concerns with the reliability of third-party databases. States wishing to provide increased protections for consumers are encouraged to continue to check such private databases in addition to making the NMVTIS inquiry as required by federal law.

Comment:

One commenter noted that “the fully implemented system * * * will also provide consumers with a source of comprehensive information. Current services such as Carfax have partially filled the need for information, but these providers do not offer as current and complete titling information as the proposed NMVTIS system.”

Response:

NMVTIS provides a unique service in terms of the source of its data, its comprehensiveness, and its timeliness. Services such as CARFAX will continue to provide information to the public that is not intended to be included in NMVTIS, such as vehicle repair histories, etc. For this reason, these private services will continue to offer unique and beneficial services.

20. Time Lags

Comment:

Several commenters noted that allowing states to upload data (

e.g.

, batch uploading) may create a “time lag” that could impact law enforcement investigations and impede the ability of the system to accomplish its goals. One commenter suggested that it would be better to wait until states secure the necessary funding before proceeding with implementation.

Response:

DOJ has examined this issue closely with the system operator and with third-party vehicle-history providers. While many third-party databases experience lag time of several weeks or months in getting state updated data, NMVTIS is designed to significantly reduce or eliminate the lag time entirely to provide reliable information to users. For this reason, states choosing the stand-alone method of participation and batch uploads will be required after initial set-up to establish batch updates

at least

every 24 hours. This requirement will greatly diminish the possibility of exploitation of lag time and provide a more up-to-date vehicle history check than is currently available. States do have the option of implementing in fully online mode where data transmission is in real time. DOJ does not have the flexibility to delay implementation until states have funding to implement the fully online mode. Pursuant to a federal district court order, DOJ is required to have the rules published and system available by January 30, 2009.

Comment:

One state motor vehicle administration noted that when using the stand-alone method of making inquiries before issuing a new title on out-of-state vehicles, an impact on customer service is expected. Specifically, the commenter stated that an additional “three to five minutes of processing time” is expected due to the fact that title clerks in this administration are using a mainframe that does not allow simultaneous internet access, and that to make such

a check, the clerk would have to log out, make the NMVTIS inquiry, and log back in to the mainframe for each out-of-state title transfer.

Response:

The lower cost stand-alone method of participation is not as timely as the fully integrated online method. DOJ is committed to working with states and the operator to identify new alternative methods to reduce or eliminate such inefficiencies, such as dedicating one internet-capable PC that could be available to all clerks with the NMVTIS page continuously running. With system response time currently at three seconds or less, this alternative may impact customer service less. Ultimately, however, although the stand-alone method of making inquiries is far less costly for states to implement, it may be less efficient than the fully integrated, online method.

Comment:

One state motor vehicle administration recommended that “all surrendered titles should be verified when being transferred[,] and the rule should not limit this requirement only to ‘purchased’ vehicles. Without verifying all surrendered titles it is not known whether the title surrendered is the latest title issued[,] and there are many reasons titles are transferred other than through a sale.”

Response:

DOJ agrees with this recommendation and notes that the final rule clarifies that the requirement to make verifications pertains to any title or vehicle coming in from another state, including transfers. States are also strongly encouraged to perform such verifications on every title transaction, which is most effective when implementing via the online, integrated approach.

Comment:

One state motor vehicle administrator asked if manufacturers' certificates of origin (MCOs) must be verified as well.

Response:

Because MCOs are not vehicle titles per se, states are not required to verify MCOs in NMVTIS. However, DOJ strongly recommends that state motor vehicle administrators make inquiries on all title transactions, including initial registration of an MCO, to identify and eliminate fraud and to protect consumers.

Insurance Carriers

21. Reporting on Recent-Year Vehicles

Comment:

One commenter asked “[w]hat is the reason to require insurance carriers to report only vehicles manufactured within the past five model years that they consider junk or salvage? If these vehicles will always go directly to junk or salvage yards, won't the vehicle be reported there anyway? Conversely if there is an opportunity for other disposal of the vehicles, shouldn't the insurance carriers be required to report all vehicles since the VINs could still be stolen for swapping?” Other commenters noted that vehicles older than five years are often involved in consumer fraud and encouraged provisions for the database to cover the same ten-year age range as is used for odometer reporting.

Response:

The Anti-Car Theft Act only required insurance carriers to report vehicles in the current and four prior model years. DOJ is not able to reverse or alter this limitation by increasing the reporting parameters. Junk and salvage yards later may report some vehicles that insurance carriers are not required to report. The Department, however, encourages insurance carriers to report older vehicles.

Comment:

ASPA commented that section 25.55(b)(3) of the proposed rule requires insurance carriers to report “the name of the individual or entity from whom the automobile was obtained or who possessed it when the automobile was designated as a junk or salvage automobile,” which would seem to be two different individuals or entities in most cases. Further, ASPA notes that it is unclear if the insurance carrier would know the name of the owner when it files the report.

Response:

Although the proposed rule required reporting of the name of the individual or entity either from whom the automobile was obtained or who possessed it when the automobile was designated as a junk, salvage, or total-loss automobile, the Anti-Car Theft Act specifically states that both names are required. Reporting both names is necessary to establish a “chain of custody” and for other law enforcement and consumer-protection purposes. DOJ changed this language in the final rule to require both names pursuant to the Anti-Car Theft Act. In reference to the concern that insurers may not know the name of the owner, most carriers do possess this information, as this would be the owner of the automobile at the time the vehicle was determined a total loss, salvage, or junk.

Comment:

Farmers Insurance commented that the “trigger” for insurance-carrier reporting should be when the insurance carrier sells the vehicle or when the customer determines it will retain ownership of the vehicle, because such dispositions may not be known for as much as 90 days after the loss occurs.

Response:

Because disposition may not be known at the time of initial reporting, this rule allows the insurance carrier to file a supplemental disposition or update. Many comments emphasized the importance of timely reporting, even when the named owner in the initial report is the insurance company.

Comment:

Farmers Insurance suggested that a 12-month grace period should be granted for insurance reporting to begin in light of “proper system upgrades” that may be required.

Response:

DOJ is not able to provide a grace period, as the court has ordered the reporting to begin by March 31, 2009. Additionally, because DOJ aims to enable third-party reporting through organizations that may already receive such data from insurance carriers, the burden of any system changes should be minimal.

22. Non-Required Data

Comment:

One commenter argued that “[t]he proposed rule overstates the benefits provided to consumers. Particularly, the fact that insurance carriers are only `strongly encouraged to provide * * * other information relevant to a motor vehicle's title' undermines the broad benefits implied by the rule.” “The type of information not reported includes the reason why the insurance carrier may have obtained possession of the motor vehicle—flood, water, collision, fire damage, or theft.” The NADA further recommended that the rule should require insurers to report the reasons they obtained possession of the vehicle to prevent brand washing and fraud. Additionally, this information would assist in cases where a vehicle is considered a total loss for purely economic reasons (

e.g.

, theft). Several insurance-related organizations contended that for any voluntary reporting that may be contemplated, immunity provisions must apply to this voluntary reporting as well.

Response:

DOJ disagrees that the rule overstates the benefits of NMVTIS. DOJ does agree, however, that the reason for the total-loss or salvage designation by insurance carriers may be of importance to a prospective purchaser and to others. Not only does this protect the consumer's interest, but the additional reporting criteria also benefit insurance carriers. Therefore, the Department strongly encourages insurance carriers to report this data element.

Comment:

AAMVA commented that unless the rule requires “junk and salvage dealers” to report the percentage of damage sustained by each vehicle in their inventories to the states, the states would not be able to consider applying a state junk or salvage brand on these vehicles.

Response:

States will not be in a position to make such judgments based on junk- and salvage-yard operator reporting. Insurance carriers have ready access to this information, which is the typical basis for a state's designation. Although the reporting of junk- and salvage-yard inventories was likely not intended to support state-branding decisions, reporting of junk- and salvage-yard inventories may be helpful to states in making brand decisions, but likely not conclusive. Although such vehicles may not end up branded by the states, consumers and other states have the benefit of knowing that the vehicle was in the possession of a junk or salvage yard and therefore may wish to inspect the vehicle or to require an inspection before making purchase or titling decisions. DOJ is not in a position to require reporting of the percentage of damage. However, insurance carriers and others are encouraged to report this information.

Comment:

One commenter asked “[h]ow will DOJ know which states, junk, salvage, and insurance companies are reporting information and reporting all the information that is required? Will someone audit their reports? I recommend that the system operator and the DOJ both make a list of who is reporting and publish that list * * * and audit reporting compliance.” The commenter also suggested that DOJ require entities to report the company name, address, and phone number for any reports submitted. Another commenter asked who would inform insurance carriers and junk and salvage yards of the requirement to report information to NMVTIS, and who would identify those organizations required to report.

Response:

DOJ will instruct the operator to publish and maintain a list of the entities reporting information to NMVTIS. The list will include the name of the reporting entity, city and state of the reporting entity, the date that data was last submitted by the entity, and any contact information for the reporting entity. With regard to who would inform reporting entities of the requirements, DOJ will work with the operator, state-licensing authorities, and affected associations and advocacy organizations to ensure proper outreach and education.

Comment:

Several state motor vehicle administrations argued that DOJ should limit what non-required data the operator could ask for and receive (

e.g.

, address of the vehicle owner). Another believed that the value of encouraging non-required data is unknown, and that reporting may only increase the number of discrepancies or errors. ISRI contended that DOJ should limit the ability of the operator to request additional, non-required data, because the current operator would be encouraged to request additional information that would generate revenues to the benefit of the association and its members, creating a conflict of interest. The Minnesota Department of Vehicle Services (MnDVS) argued that the provisions of section 25.53(c), which allow the providers of non-required data to query the system if beneficial in addressing motor vehicle theft, “exceeds the authority conferred by Congress, is overly broad, and as such represents an arbitrary and capricious exercise of rulemaking power.” Other commenters, however, reported that other data may be needed for specific purposes and argued in support of this flexibility.

Response:

It would be difficult to describe what data the operator is restricted from asking for or accepting, other than social security number, dates of birth, and addresses. DOJ points out that states need not provide data that is not specifically required in these regulations or the Act, and DOJ will need to approve the acceptance of non-required data. Moreover, the non-required data that is readily available would add great value to some consumers, to law enforcement, and to others (

e.g.

, NICB flood vehicle database, vehicle export data, other North American vehicle history records, NICB theft file, etc.). While more data always increases the chances of discrepancies, DOJ does not want to discourage this voluntary reporting. While the current operator does have the best interests of its membership in mind, however, it also has expressed concern for others affected by the rule and will represent the concerns of all stakeholders, not as a trade association, but as the operator of a DOJ system. In response to MnDVS's comment, DOJ is of the opinion that if not in violation of the Anti-Car Theft Act or other federal privacy statutes, such cooperation is necessary and not arbitrary or capricious.

Comment:

Several commenters, including at least one from the state motor vehicle administration community, encouraged the inclusion of lien-holder information in the data provided to NMVTIS in light of the difficulty of obtaining this information on out-of-state titles and the associated budget impact on states. Other commenters, including insurance-related organizations, Assurant Solutions, and the NADA, suggested that additional data (including lien-holder information) will provide a crosscheck of information, close up loopholes, and improve NMVTIS.

Response:

This comment demonstrates the importance of allowing the operator of the system to request and accept additional information beyond the NMVTIS requirements. While states and others are not required to comply, there may be good reason to do so that would result in cost savings among the stakeholders. In terms of lien-holder information, while DOJ is not in a position to require that lien-holder information be included in the central file, DOJ notes that the existing secure network could be used in conjunction with the NMVTIS central-file information to query the current state of record and to access lien-holder information in that state's title record through the secure network provided by the current operator. Queries of and access to the actual state records should only be permitted when a state has agreed to provide such access, when any state application or certification procedures are completed, and when such access is in conformance with the Anti-Car Theft Act, the DPPA, etc.

Comment:

One commenter suggested that DOJ include registration information in the list of required data as a means to ensure accurate tracking of vehicle ownership.

Response:

Including registration information is beyond the scope of NMVTIS. Although it may be useful, DOJ cannot require such information.

Comment:

The National Salvage Vehicle Reporting Program commented that insurance-carrier reporting should commence on or before March 31, 2009, as required by the federal district court, and that initial reporting by all covered entities should include historical data to the extent available, so that NMVTIS is complete beginning on March 31. Several insurance-related organizations or associations reported that “[t]he start date for insurers should be clarified. We believe the best approach is to provide that the system applies to automobiles declared junk or salvage on or after April 1, 2009, [and that] the system must be established by March 31, 2009. However, we prefer that more time is provided for insurers to comply.”

Response:

DOJ will require that all vehicles declared junk or salvage (including “total loss”) on or after April 1, 2009, be reported to NMVTIS. However, DOJ strongly encourages insurance carriers and junk- and salvage-yard operators to provide data on vehicles that were declared junk, salvage, or total loss before that date and as far back as 1992, if such data is available.

Comment:

The National Salvage Vehicle Reporting Program commented that “NSVRP strongly endorses the inclusion in the rules of 3rd party enhanced standards that allow for data generators to report to NMVTIS more completely and more frequently than minimally specified in the rules.”

Response:

While DOJ is not in a position to articulate data-reporting requirements or standards regarding data that is not statutorily or otherwise required, DOJ notes that the National Salvage Vehicle Reporting Program has worked with nearly every stakeholder group affected by NMVTIS to develop standards for voluntary reporting to NMVTIS that would benefit states, law enforcement, consumers, and others. DOJ applauds the National Salvage Vehicle Reporting Program and strongly encourages the operator to adopt these standards as suggested voluntary compliance standards. While the standards cannot be mandated on any reporting entity, those entities that adopt the standards and report voluntarily in a manner that is consistent with the standards will be providing a significant public benefit.

Comment:

The National Salvage Vehicle Reporting Program commented that NMVTIS must support the electronic MCO process and should serve as a catalyst for implementation of the electronic MCO system nationwide.

Response:

DOJ is in favor of supporting an electronic MCO process as a way of eliminating and preventing fraud and reducing theft. In addition to NMVTIS, the use of the secure AAMVAnet communications network for states would likely be necessary, and it would be AAMVA's responsibility to authorize its use for this purpose.

Junk Yards and Salvage Yards

23. Salvage Pools

Comment:

Several law enforcement and related commenters strongly agreed with the assessment that Salvage Pools are one of the most significant sources used by criminal groups as a source of paperwork and as a way to fund their operations. These commenters agree that Salvage Pools must report vehicles to NMVTIS both when they receive vehicles for sale, and when they sell those vehicles. These commenters further noted that such salvage pools have sophisticated technological capabilities and should not have any problem meeting the reporting requirements. Several of these commenters noted that in some cases, individuals purchase severely damaged units at or via these pools and then steal a similar make and model for cloning purposes. For this reason, these commenters also recommended reporting the buyer's name for these vehicles. Several national consumer-advocacy organizations also supported the constructive definition including salvage pools and the requirement to add buyer name in the reporting requirements.

Response:

DOJ reaffirms its determination to include “salvage pools” and “salvage auctions” in the definition of junk or salvage yards, thereby requiring them to comply with the corresponding reporting requirements. The name of the buyer is not reported elsewhere despite being very valuable for law enforcement and other purposes. DOJ, therefore, added the name of the buyer as required data to report. Because many of the purchasers are reportedly international buyers, some of whom have been linked to fraud and theft rings that purchase such vehicles for clean paper to use on stolen vehicles in the U.S., DOJ also will add to the requirements an indication whether the vehicle is intended for export.

Comment:

The Nevada Department of Motor Vehicles commented that by statute, Nevada requires wreckers and salvage pools to apply and transfer their salvage titles, junk certificates, and non-repairable certificates within 10 to 30 days. Nevada suggested that these organizations should be exempt from reporting because the DMV already sends this data to NMVTIS.

Response:

Junk and salvage yards, including salvage pools, are not required to report data to NMVTIS if the state already reports the required junk- and salvage-yard information to NMVTIS pursuant to this regulation.

Comment:

One commenter asked whether “the definitions of junk yard and salvage yard, which include even a single individual, [are] a substantial overstep?” Several consumer-protection organizations also suggested that, with respect to the definition of “in the business of,” junk and salvage yards should be defined as any entity or individual meeting the description in the definition that acquires or owns five or more salvage or junk automobiles within the preceding 12 months, which is analogous to other similar reporting standards.

Response:

DOJ modified the final rule consistent with the comment from the consumer-protection organizations. The qualifier of five or more vehicles is taken from federal odometer law, and its definition of “car dealers” from 49 U.S.C. 32702(2).

Comment:

One commenter (CARS of Wisconsin) argued that “information about who owned the vehicle prior to it being junked is unnecessary.” The Wisconsin Department of Transportation contended that requiring junk and salvage yards to report the name of the vehicle supplier is unnecessary, as is the disposition of such vehicles. Wisconsin DOT commented that because these vehicles are scrapped or destroyed by these entities and cannot be returned to road use, it is unnecessary to report this information.

Response:

Comments from law enforcement entities on the proposed rule demonstrates that this information is of significant value. Additionally, even when a vehicle cannot return to the road, the VIN can be used to clone a stolen vehicle. In states that do not have the same junk-branding requirements as Wisconsin, a junked vehicle can “live on” through a cloned stolen vehicle, which will only cease once NMVTIS is fully implemented.

Comment:

The Virginia Department of Motor Vehicles expressed concern that the proposed rule seemed to encourage junk- and salvage-yard operators to submit data via FTP or facsimile that potentially would include personal identifying information.

Response:

DOJ encourages all reporters to report electronically whenever possible. In cases where electronic reporting is not an option, DOJ will direct the operator to identify a reporting procedure to accommodate the situation. Regardless of the reporting method, DOJ and the operator will ensure that all possible safeguard measures are taken, including secure FTP wherever possible.

Comment:

One commenter requested that DOJ require the operator to accept junk- and salvage-yard data from any junk or salvage yard directly or through a third party on their behalf to minimize administrative burden.

Response:

DOJ has provided the operator with flexibility in identifying the specific methods of reporting to NMVTIS. It is not in the system's best interest for all required reporters to report directly into the system, due to technical and business reasons. The operator is expected to identify three or more different methods of transmitting information to NMVTIS and will make this information available via its Web site, as will DOJ via

www.NMVTIS.gov.

Comment:

Several commenters have noted that, similar to insurance-carrier reporting, junk and salvage reporting of vehicle presence in inventory on a 30-day basis leaves a significant amount of time for fraud and theft to occur. These commenters recommended that DOJ require reporting of not only presence in

inventory, but also disposition of the vehicle. The recommendations for the revised reporting timeline varied in the recommendations from immediately to several business days.

Response:

The Anti-Car Theft Act defines the reporting timeline, and, therefore, DOJ can only require reporting on a monthly basis. DOJ does strongly encourage all reporters to report data as soon as possible or on a daily basis.

Comment:

ASPA commented that “while ‘salvage pools’ were not included by Congress in the ‘Anti-Car Theft Act of 1992’ as an entity with reporting requirements, the DOJ sweeps our industry into the group which has these reporting requirements. * * * The salvage pool industry wants to be helpful in combating vehicle theft, but we want to insure that any reporting requirements imposed on our industry are reasonable, in light of the fact that Congress did not specifically place reporting requirements on salvage pools.”

Response:

DOJ appreciates ASPA's declaration and will work to ensure that reporting requirements on every industry are reasonable. The reporting requirements proposed for salvage pools are the same requirements placed on salvage yards, which also handle salvage vehicles. Because a salvage pool is in the business of acquiring (constructively defined to include handling or controlling on behalf of) salvage automobiles for resale, it fits well within the statutory definition of salvage yards.

Comment:

ASPA commented that because salvage pools generally serve as “agents” for insurance carriers, salvage pools should only be subject to the reporting requirements of insurance carriers as they relate to the age of automobile to be reported.

Response:

DOJ disagrees with this recommendation because salvage pools are included in the definition of salvage yards, as opposed to insurance carriers.

Comment:

ISRI and the National Salvage Vehicle Reporting Program both suggested an exemption from reporting for vehicles acquired from an entity that is obligated to meet the reporting requirements of the Act and rule. They argued that this exemption is necessary, not because of the burden of double reporting, but because, in the case of the scrap-metal-recycling industry, many vehicles are acquired after being flattened or crushed to an extent that a VIN cannot be reasonably obtained.

Response:

Many scrap-metal processors and shredders do receive flattened and bundled vehicles and vehicle parts. In those cases, recording a VIN for every vehicle is nearly impossible. Both ISRI and the National Salvage Vehicle Reporting Program assert that such entities are at the “end of the line” in handling end-of-life vehicles, and almost always receive vehicles from those who are required to report on the vehicle before it is crushed or bundled. Additionally, with scrap-metal processors and shredders, there is no possibility that the vehicle will be subsequently purchased for operation on public roads by an unsuspecting consumer. However, cloning and destruction of stolen vehicles remain a threat. For these reasons, DOJ created an exception for reporting to NMVTIS in cases where a scrap-metal processor or shredder confirms that the vehicle supplier reported the required data to NMVTIS. Scrap-metal processors and shredders that receive automobiles for recycling in a condition that prevents identification of the VINs need not report the vehicles to the operator if the source of each vehicle has already reported the vehicle to NMVTIS. In cases where a supplier's compliance with NMVTIS cannot be ascertained, however, scrap-metal processors and shredders must report these vehicles to the operator based on a visual inspection, if possible. If the VIN cannot be determined based on this inspection, scrap-metal processors and shredders may rely on primary documentation (

i.e.

, title documents) provided by the vehicle supplier.

Lenders and Automobile Dealers

Comment:

Iowa Attorney General Thomas J. Miller supported the DOJ proposal that lenders and auto dealers have access to NMVTIS in order to further NMVTIS's goals of reducing crime, especially fraud.

Response:

Commercial consumers will have access to NMVTIS.

Comment:

Assurant Solutions argued that lenders and dealers need not only the ability to query NMVTIS for information, but also need the ability to communicate and electronically exchange motor vehicle information to achieve greater efficiencies in title processing, and to limit the number and type of paper-based transactions as a strategy to significantly decrease fraud. Specifically, the commenter suggested that lenders and dealers communicate errors or changes to NMVTIS.

Response:

Communication to and from NMVTIS is currently facilitated through the use of the current operator's secure and proprietary network, AAMVANet. This network is not a component of NMVTIS

per se

, and therefore the operator governs use of this network for communication between NMVTIS and its users. In terms of providing lenders and dealers with the ability to make corrections and changes, DOJ notes that it has concerns with authorizing any user other than a state motor vehicle administration or its agents (where applicable) to make corrections directly or changes to NMVTIS data. However, DOJ directed the operator to develop a process for reporting possible errors and requesting changes that may also be used by lenders and dealers.

Responsibilities of the Operator of NMVTIS

24. Consumer Access Methods

Comment:

One commenter argued that “[t]he Web-based access should be open to private individuals who wish to check the status of a prospective purchase.” And the NADA supported the provisions in the proposed rule allowing dealers to access NMVTIS as prospective purchasers, which is likely to help thwart motor vehicle-title fraud. A consumer-advocate attorney commented that if this information becomes widely and readily available, the vehicle-fraud industry will be significantly reduced.

Response:

Prospective purchasers (including dealers who purchase vehicles for resale) are required to have access to information necessary to make an informed purchase decision, and DOJ will require that consumer access be available by January 30, 2009.

Comment:

Experian Automotive argued that DOJ should not overlook the significant costs involved in marketing and distributing vehicle-history information, and suggested that these costs are beyond what the operator can provide.

Response:

These costs are significant. Under the model of third-party portal providers (as opposed to a single, operator-provided consumer access model), the third parties, not the operator or DOJ, will bear the most significant marketing and distribution costs. It is partly because of these costs that the third-party model was selected.

Comment:

Experian Automotive argued that NMVTIS is not chartered to provide the level of information and support that Experian or other private vehicle-history report companies provide.

Response:

DOJ has no intention of competing with private vehicle-history-report companies. Those private services possess data that NMVTIS does not intend to provide (

e.g.

, vehicle repair and service histories). NMVTIS is simply intended as a government-sponsored service to verify the title and

brand history of a vehicle reliably, thereby preventing fraud and theft.

Comment:

Several motor vehicle administrations and one services organization argued that the operator should not be permitted to sell bulk vehicle data from any state, which would effectively allow private information resellers to bypass contractual agreements and seek the state's database from the NMVTIS operator. Additionally, at least one state motor vehicle administration suggested that the operator should conduct regular program and security audits and should screen potential access providers.

Response:

The operator will not sell the NMVTIS central file or any particular state's dataset (

i.e.

, all VINs from a particular state). All information provided will be in response to VIN queries, except in cases of law enforcement queries, which could include searches of NMVTIS by reporting entity name, names associated with reports, location, etc. Data provided to NMVTIS will remain in the possession of the operator and any contractors supporting the operator (

i.e.

, data center hosting or backup). Consumer-access providers are restricted from downloading and storing bulk NMVTIS data for resale or reuse and must use data in accordance with the Anti-Car Theft Act. Any entity using NMVTIS data in a manner inconsistent with these regulations may not be covered under the Act's immunity provisions. The operator shall conduct regular reviews and audits of security arrangements and program compliance and shall work with DOJ to establish access-provider standards to ensure that the access providers are professional and reputable, and that information and access are provided according to the Act.

Comment:

One commenter argued that “[t]he responsibilities of the operator of the NMVTIS system are confusing in subsection (b)(3) and (b)(5), [as] they appear to have the same meaning and impact.”

Response:

These subsections describe what the operator of NMVTIS is statutorily required to provide to users of the system, including information regarding a vehicle's current or past status as a junk or salvage vehicle. In other words, NMVTIS will make information about vehicle history available to consumers, state titling agencies, law enforcement, and others through an electronic (

e.g.

, Web-based) inquiry. Although subsections (b)(3) and (b)(5) overlap somewhat, it is possible that the operator may have information indicating that a vehicle has been branded a junk or salvage that did not arise from a report submitted by a junk or salvage yard or insurance carrier.

Comment:

One commenter noted that “[w]ith the expected low implementation costs for this consumer system, there are major benefits to centralizing the system within a govern

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