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Automobile Fraud: 2.3.1 When and When Not to Use Summary Title Reports

A car’s title history can reveal much about the car’s past, including evidence of a salvage history, lemon laundering, an odometer rollback, or misrepresentation of prior use or the number of prior owners. A true title search requires the searcher to trace back to the car’s first title, and to obtain copies of each title and related documents pertaining to the car, which may involve obtaining titles from multiple state departments of motor vehicles.

Automobile Fraud: 2.3.2 Carfax

Carfax131 purchases computer records showing title histories and also registration and other data from all fifty state departments of motor vehicles (DMVs) and from the Canadian provinces. It also obtains odometer readings from some vehicle emission inspections, and registration information that indicates if a car was used as a rental, lease, fleet, or government vehicle.

Automobile Fraud: 2.1.4 Undisclosed Prior Wreck Damage

Often a vehicle’s prior history as a wrecked car is concealed from potential buyers. Even if a car has in fact been repaired so that it is mechanically sound and cosmetically clean, the car’s history of serious damage means that its true market value is dramatically decreased.33

Automobile Fraud: 2.1.6.1 Lemon Laundering Described

Cars often have documented histories of mechanical problems, and dealers may sell such cars either misrepresenting or failing to disclose this history. Perhaps the most egregious example is “lemon laundering.” Because of widespread consumer utilization of state lemon laws, manufacturers are now repurchasing thousands of cars every year.53 Lemon laundering is the resale of these defective used cars to unsuspecting consumers without disclosure of their prior history.

Automobile Fraud: 2.1.7 Misrepresentations About Prior Owners or Prior Use

A typical used car sales pitch is that a car has had only one prior owner who took excellent care of the car. Cars with unusually low mileage may be termed demonstrators or executive cars. In either case, the implication is that the prior owners were happy with their cars and took good care of them.

Automobile Fraud: 3.2.2 Titling a New Vehicle

A new car is issued a manufacturer’s certificate or statement of origin (MSO) at the time of production. Although attempts to use electronic MSOs were begun as early as 1992, under which manufacturers would send electronic MSO data to dealers and to the National Insurance Crime Bureau (NICB),3 paper manufacturer’s certificates of origin remain the standard and in many states are required.

Automobile Fraud: 3.2.3 Obtaining a New Title After Purchasing for Use

Any time someone purchases a car for use (as opposed to for resale), that purchaser must obtain a certificate of title in their own name.5 Consequently, whenever someone purchases a used vehicle from either another individual or from a dealer, that individual is assigned the existing certificate of title on the vehicle, and that existing certificate is presented to the state to exchange for a new certificate in the new owner’s name.

Automobile Fraud: 3.2.4 Title Transfers to Dealers and Others Purchasing for Resale

In most states those obtaining possession of a vehicle with the intent to resell it (for example, dealers) do not have to obtain a new title in their own name, but may do so if they wish. Although it is not usual, there are a number of reasons why a dealer will obtain a new title in its own name. Some are legitimate, such as when state law requires a dealer to obtain a new title when ownership is transferred or when all the assignment lines are filled up on the old title,9 or when state law requires a new title after a repossession.

Automobile Fraud: 3.6.6 Timing Requirements for Temporary Tags and Registrations

If a dealer has not completed the title documents for the transfer of ownership, then issues may arise as to how a consumer can legally drive the vehicle. If ownership remains with the dealer, and the consumer is only conducting an extensive test drive, then the consumer can operate the vehicle using the dealer’s plates. But if ownership has passed to the consumer, the consumer will either need temporary tags and registration, or an immediate transfer of the title document.

Automobile Fraud: 3.7.1 Introduction

In 2019, in a long awaited final rule, the National Highway Traffic Safety Administration (NHTSA) established federal standards for electronic titling and electronic title disclosures.103 The rules came in response to years of growing demands from Congress, the states, industry participants, and others for standards to allow the use of electronic titles and liens by states.

Fair Debt Collection: 1.3.1.1 Overview

As used in this treatise, consumers are individuals who borrow money or purchase goods or services on credit for personal, rather than business debts.

Americans owe large amounts of money for consumer debts.52 In the first quarter of 2021, the Federal Reserve Bank of New York reported that Americans owed $4.15 trillion in non-housing debt and $10.49 trillion for housing debt.53 However, only a portion of this outstanding debt is delinquent.54

Fair Debt Collection: 1.3.5.2.4 Types of debts collected

In a 2019 study of third-party collection tradelines, the CFPB found that the most common tradelines furnished by collection agencies to credit bureaus in 2018 were medical (66%), telecommunications (17%), and retail (11%).291 However, in a 2019 study of the credit card market, the CFPB reported that financial services is the largest share of third-party debt collection revenue, noting that credit card issuers may be issuing this information directly to credit bureaus.292

Fair Debt Collection: 1.3.5.2.5 Check diversion programs

“Check diversion” programs consist of a partnership between a collection agency and a district attorney. Typically, the collection agency sends consumers who have written a check that was dishonored by their bank a letter on the district attorney’s letterhead, threatening criminal prosecution and jail time if the consumer does not pay the check plus high fees and tuition for enrolling in “financial responsibility” classes they may conduct. The fees they demand may exceed a small check by more than $150.

Fair Debt Collection: 1.3.6 Collection Attorneys

In 2019, the CFPB estimated that there were “1,000 law firms in the United States that either have as their principal purpose the collection of consumer debt or regularly collect consumer debt owed to others.”301 Searching Martindale for “creditors rights” as an area of practice returns 6604 law firms and 13,475 attorneys.302 Separately, the National Creditors Bar Association (NCBA) states that its membership consists of “over 500 law firms and individual members, totaling approximately 2000 att

Fair Debt Collection: 1.3.7 Consumer Locating Services, a.k.a. “Skip Tracers”

Some businesses, known pejoratively312 as “skip tracers,” specialize in locating consumers’ contact information when the consumer has changed addresses, employment, or phone number. They will try to match the information they are given—such as Social Security number, name, former address, employer, etc.—to try to locate consumers for creditors, collection attorneys, and collection agencies.

Fair Debt Collection: 1.3.8 Consumer Reporting Agencies

Consumer reporting agencies are businesses that maintain files of information relevant to consumers’ creditworthiness, employability, and insurability and disseminate that information to businesses dealing with consumers. A delinquent debt on a consumer’s credit report lowers the consumer’s credit rating making it harder to get worthwhile credit.

Fair Debt Collection: 1.3.9 Debt Relief Services

There are legitimate credit counseling organizations that provide help to financially distressed consumers. However, there are also a wide variety of predatory debt relief scams.316 Although the details differ, debt relief scams typically prey upon consumers by claiming that they can provide debt relief to financially distressed families and then failing to deliver any meaningful assistance, often at great cost to the consumer.

Fair Debt Collection: 1.4.1 Overview

This section provides a brief overview of some typical collection practices by different parties. Unless otherwise specified, this section is discussing the collection of unsecured credit card debts. The collection of secured debts like automobile loans and home mortgages involve a number of different practices.319 The collection of other types of unsecured debts can have a number of important distinctions.320

Fair Debt Collection: 1.4.2 Credit Reporting

Creditors and other collectors sometimes turn to consumer reporting agencies (CRAs) to obtain information such as a consumer’s current address or to assess the collectability of their claim.321 Some CRAs also offer monitoring services to debt collectors.

Fair Debt Collection: 1.4.4.1 Collection Prior to Charge-Off

In the Consumer Financial Protection Bureau’s survey of large credit card issuers,337 almost all respondents engaged in targeted outreach to high-risk accounts that were current or past the due date, but not yet delinquent.338 Outreach might include “softer” contact strategies like email or text reminders.339