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Automobile Fraud: 2.1.3 Undisclosed Flood Damage

Flooding due to storms, hurricanes, and swollen rivers often results in large numbers of cars being immersed in water. Flooding causes extensive damage not only to cars in use or garaged, but also to new and used cars on showroom floors and car lots. The extent of flood damage varies depending on whether the flood involves salt, fresh, or muddy water, the level of vehicle submersion, and the length of time between vehicle submersion and treatment.

Automobile Fraud: 2.1.8 Undisclosed History As Stolen Car

It is fraudulent to sell a consumer a “hot” stolen car. The consumer does not obtain good title to the car, even if the title documents are legitimate.59 Frequently, the vehicle identification number (VIN) from a wrecked car is welded onto a stolen car, and a seemingly legitimate title is issued.60 A car with a fictitious VIN may be subject to immediate impoundment.

Automobile Fraud: 2.1.9 Undisclosed Damage to New Cars

A surprisingly common occurrence is for a new car to be damaged before it is delivered to the retail buyer. The car may be damaged before it leaves the factory, in transit to the dealer, or on the dealer’s lot (for example during test drives or when someone smashes into the car sitting on the lot). The car will invariably be repaired, repainted, and sold as new.

Automobile Fraud: 2.1.10.1 Introduction

Most cars sold in the United States, even if manufactured in another country, are delivered in compliance with United States standards and come with a standard U.S. warranty that facilitates repair work in the United States. Sometimes, though, cars manufactured to be used in another country are imported into the United States, and these vehicles can cause certain problems for purchasers. Some models are imported because they are rare or unavailable in the United States.

Automobile Fraud: 2.1.10.2 Odometer Discrepancies in Canadian Vehicles

One of the most common contributors to the sale of fraud cars involves used cars imported from Canada. Because significant numbers of people move between Canada and the United States on a regular basis it is not surprising that a large number of cars move back and forth too. Because cars built for the North American market are often the same or very similar in terms of safety and emissions, importing cars from Canada is often an expedited procedure compared to the importation of cars from other markets.

Automobile Fraud: 2.1.10.3 Warranty and Other Problems

Another problem with vehicles from Canada and other countries is that they do not carry United States manufacturer warranties and, when the dealer runs the vehicle identification number for warranty work, it will discover the vehicle’s Canadian origin and often refuse to perform work under the warranty. Sometimes the manufacturer will offer goodwill warranty coverage, but some manufacturers are reported to be adopting a stricter policy and refusing all coverage.

Automobile Fraud: 2.1.10.4 Identifying a Vehicle As Not Manufactured for the United States Market

One can tell if a vehicle has been imported from Canada by looking under the hood or on the driver’s door for a motor vehicle safety standards decal. Vehicles manufactured for sale in the U.S. will say “United States” or refer to “federal” standards on the decal. Vehicles manufactured for sale in Canada and then imported into the U.S. will have a maple leaf sticker that says Canada. If neither sticker is found, then the vehicle has been brought in from another country.

Automobile Fraud: 2.2.1 Interview with the Consumer

An attorney’s interview with a consumer client is usually the first step in any investigation. The consumer will typically explain a specific problem relating to the car—either suspicion of car fraud or a problem that might lead the attorney to suspect car fraud. Some indicators that should make an attorney suspect fraud include:

Automobile Fraud: 2.2.2 Stickers and Paperwork Found on and in the Car

Evidence of a car’s history can sometimes be uncovered through documentation found on or in the car itself. For example, stickers found on the driver’s door frame may show mileage at a prior repair, oil change, or inspection. The absence or partial removal of such stickers should be treated as suspicious.

Automobile Fraud: 2.2.3 The Car’s Tires

A car’s tires often provide clues in uncovering a fraud. Tire match and age are an indication of a car’s true mileage and salvage history. Non-original or mismatched tires on a car with lower odometer readings are suspicious because such a vehicle should have the original tires and all the tires should match. For example, a car whose odometer reads 15,000 miles should have tires with 15,000 miles of wear,88 and it should not have brand new tires or very old tires.

Automobile Fraud: 2.2.4.1 Use of VINs in Automobile Fraud Investigations

Although a vehicle identification number (VIN) only occasionally will help uncover fraud, it is one of the easiest things to check on a car. It is also an essential number for any type of title search because most databases are organized by this number. The VIN will be on virtually all documentation for the vehicle, such as the title, registration, certificate of origin, repair orders, and often the bill of sale. The VIN is also physically printed on the vehicle on a small metal plate usually located on the left side of the dashboard visible through the windshield.

Automobile Fraud: 2.2.5 Cursory Physical Inspection of the Car

It is often quite easy to spot a fraud just by examining the car. Although an expert’s testimony may eventually be necessary, this first visual inspection does not require an expert. It can be performed by someone in the attorney’s office, by the consumer, or by almost anyone else. This initial physical inspection involves checking features of the car that most retail buyers lack the knowledge to evaluate but that are readily apparent once a person knows what to look for.

Automobile Fraud: 2.2.6 A Haywire Odometer

Almost all odometers are now digital. Tampering with such odometers requires different techniques than altering a mechanical odometer. Less sophisticated personnel may try to alter the readout of a digital odometer without fully altering the computer chip itself. In that situation, the computer chip will eventually override the readout and strange readouts will result.

Automobile Fraud: 2.2.7 Checking the Odometer History with a Franchised Dealer

There are at least two ways that a franchised dealer can help a consumer check a car’s odometer history. If the odometer reading indicates a car is still under warranty, the consumer can usually find out the odometer’s accuracy simply by taking the car for repair service to a franchised dealer. That dealer is likely to automatically check the manufacturer’s computer records to determine if the car is still under warranty and will inform the consumer if the odometer is inaccurate.

Automobile Fraud: 2.2.8 Checking a Motor Home’s Engine Hour Meter

Some motor homes contain a meter that indicates the number of hours the home has been driven. An approximation of the number of miles driven can be derived by multiplying the number of hours driven, as indicated on the meter, by an average speed at which such a vehicle is usually driven.107

Automobile Fraud: 2.2.9.1 Finding an Expert

In lieu of or as a follow-up to a lay inspection, one can have the car inspected by an expert. Mechanics typically have more expertise with vehicle drivetrains and those that work on the frame and body might have more insight regarding prior wreck or other structural damage. Depending upon the case, an expert might need to be well versed in both areas.

Automobile Fraud: 2.2.9.3 Inspection Procedures and Techniques

In any case of automobile fraud, but particularly in the case of odometer tampering, the expert should treat the car as a crime scene. Disassembling the odometer to inspect it will probably obliterate the signs that someone had disassembled the odometer previously. Each step should be documented and photographed. Small details, such as pry marks, fingerprint smudges on the roll numbers or elsewhere, scratches on the face of the numbers, marks on screw heads, and dust disturbances should be photographed with magnification.

Automobile Fraud: 2.2.9.4 Defense Inspections

Often, after litigation has begun, the opposing party requests the opportunity to perform its own inspection of the vehicle. In lemon law litigation, this provides an opportunity for an unscrupulous party to correct defects in the vehicle, and many attorneys insist on strict ground rules as a condition of the inspection.116 By contrast, if the problem is that the vehicle is a rebuilt wreck or has a rolled-back odometer, surreptitious repair is not likely to be a concern, as these defects are not repairable.

Automobile Fraud: 2.2.10.1 The New Title

The consumer’s title will be held by the consumer, by the consumer’s lienholder, or by the state department of motor vehicles (DMV). This title will be in the consumer’s name. When the consumer purchased the car, the vehicle’s prior title was assigned to the consumer, and this old title was turned into the DMV to obtain a new title.

Automobile Fraud: 2.2.10.2 Other Documents Relating to Title

The consumer usually will not retain a copy of the old title transferred to the consumer. In most cases the original old title is sent to the registry of motor vehicles to obtain a new title. Nevertheless, sometimes the dealer provides the consumer with a copy of the old title, or with an extra copy of an odometer disclosure. When a vehicle transfer involves a power of attorney, the consumer must receive a copy of the power of attorney.119

Automobile Fraud: 2.2.10.3 Repair Documents

A vehicle’s recent repair history may be useful in indicating possible lemon laundering, salvage history, or an odometer rollback. Certain mechanical problems that normally occur only when a car has more mileage than the odometer presently reads might indicate a rollback. A chronic repair problem may indicate a defect that was unaddressed and resulted in a manufacturer buyback. Certain other repair problems, such as steering issues, may indicate a salvage history.

Automobile Fraud: 2.2.11 Used Car Pricing Guides

A number of commercially sold used-car pricing guides are available in libraries, banks, credit unions, and on the internet. Examples are the Kelley Blue Books or Red Books and the National Automobile Dealers Association (NADA) Official Used Car Guide.

Automobile Fraud: 2.2.12 Advertisements

Locating any advertisements for the vehicle can lead to additional claims. An advertisement that represents a rolled-back vehicle as “low mileage,” or that misrepresents any other information, such as the car’s make, model, year, VIN, or transferor, gives rise to a claim under the federal odometer statute.126