Consumer Federation of California

SACRAMENTO ‘ Leading consumer groups have vowed to block legislation introduced by Sen. Juan Vargas, claiming it would undermine California’s landmark protections for used car buyers.

The San Diego Democrat counters that his pending measure sponsored by Carfax would merely provide consumers with greater choices and more information before buying.

The two sides will make their pitches to the Senate Transportation and Housing Committee Tuesday.

The debate centers around vehicle history reports that can serve as either a green light or red flag for consumers kicking tires. The records check ‘ provided by companies for a fee ‘ can reveal a troubling past, from accidents to flooding to theft.

These vehicle history reports will take on added financial and legal importance July 1. That’s when California launches a first-in-the-nation law that requires car dealers to post red warning stickers in the window of a used car if the vehicle had been in a flood, sold as scrap, was a lemon buyback or if it had been flagged by an insurance company as previously totaled.

Those records are stored in what’s called the National Motor Vehicle Title Information System maintained by the U.S. Department of Justice. The program is designed to prevent auto theft and fraud by tracking vehicle histories based on mandatory reports filed by insurers, salvage yards and others. The federal website steers consumers to various vendors, including San Diego-based ‘InstaVIN,’ that will do the history search for a fee starting at $2.99.

Under the looming California law, car dealers will pay vendors to search the federal database using the vehicle identification number. A number of vendors provide the service, but not Carfax, and the market is expected to grow more lucrative July 1.

That’s where Vargas’ measure comes in.

His Senate Bill 990 would allow dealers to use Carfax or any other commercial service to provide the required vehicle history reports. Under the July 1 law, only providers associated with the federal database can be used. It costs $6,000 to be part of that system.

‘My legislation is an important fix to better ensure that Californians have the opportunity to receive the best and most accurate information possible when purchasing a used vehicle,’ Vargas said. ‘For many working families their car is their lifeline and it is essential that they are confident that it is safe and free of damage.’

Not so, argues Rosemary Shahan, president of Consumers for Auto Reliability and Safety, who says the Carfax data are limited and questionable given the company reveals few details about its gathering due to proprietary rights. Others opposed include Consumer Action, the Consumer Federation of California and Consumer Watchdog.

Shahan sees it as a turf war. ‘They look at it (the federal database) as competition. They don’t want it utilized. That’s what it’s all about,’ Shahan said of Carfax.

Jim Irish, chief executive officer of InstaVIN in San Diego, said Carfax is motivated to keep its ‘near monopoly’ on the vehicle history market.

InstaVIN opposes the bill, saying it deletes many of the existing consumer safeguards. ‘This change in legislation leaves the door open for scammers,’ Irish said in a letter to the committee. ‘There is huge fraud potential here.’

Carfax denies the allegations swirling over the legislation.

‘This has everything to do with keeping California safe and giving consumers and dealers access to choice,’ Larry Gamache, a Car Fax spokesman, said in an interview.

Carfax charges about $35 for a history search for individuals. But that includes information not part of the federal database, such as air bag deployment data, open recalls and odometer rollbacks. That’s where the safety issues arise, Gamache said.

Gamache said the federal check falls short in other ways. For example, 11 states have not yet submitted data, he said.

He said the initial fee to join the federal database may be $6,000, but the cost of gathering even more information on car histories would run Carfax ‘in the millions of dollars.’ That investment would be foolish given that its reports are ‘equal or superior’ to those gleaned from the federal database, he said.

The author of the July 1 law urges the Senate to reject Vargas’ bid. ‘This bill would gut our first-in-the-nation consumer protection for the benefit of one out-of-state company,’ said Assemblyman Bob Blumenfield, D-Sherman Oaks.

The DMV reports that 1.1 million used cars were sold by dealers between July 1, 2010 to June 30, 2011.