DOT Warns Cash for Clunkers Fraudsters: It's a Federal Beef

Robert Farago
by Robert Farago

The Department of Transportation’s (DOT) is administering the forthcoming Cash For Clunkers (a.k.a. CARS) program. Although the program’s popularity remains to be seen, one thing’s for sure: they’re going in with their eyes wide open. “We’ve spent more time on issues involving potential fraud than anything else,” Spokesman Rae Tyson told us. “If we discover any criminal acts, we’ll hand the cases straight to the Department of Justice for immediate investigation and prosecution.” To that end, the DOT is subcontracting to an as-yet-unnamed third party for an as-yet-unspecified fee to hire an as-yet-unspecified number of “spot checkers.” Hey, you try creating and administering a federal program in 30 days. Truth be told, with just seventeen days left before CARS goes live, the DOT’s still grappling with the basics needed to protect a billion dollars in taxpayer money.

“Congress clearly intended for the vehicles [traded-in] never to be driven again,” Tyson says. “There’s still no decision on the approved method of disposal. We may go with some kind of mechanical disabling, so the parts can be recycled. Or a required change to the vehicle’s title that would prevent it from being re-registered. Or both.” Considering the possibility that the disabled, salvage-titled clunkers could still be shipped abroad (illegally), Tyson said “The crush option is still open.”

Fortunately, the DOT has some experience in these matters. “We salvage a couple of hundred crash test cars a year,” Tyson reveals. Unfortunately, even the DOT has been “stung;” two cars escaped the system—that they know about.

In any case, the new law requires that owners trading in their clunkers for a federal rebate—paid by the feds to the dealer via EFT within ten days—must have held a valid title to the vehicle for at least one year. The vehicle must be driven into the dealer under its own steam (so to speak). The owner must also have proof of insurance—although Tyson says the requirement may fall by the wayside, as not all states require proof of automotive liability insurance (exceptions: Tennessee, Wisconsin, New Hampshire, South Carolina, and Virginia).

The logistics of monitoring as many as 250,000 clunker trades (the program has a limited budget and ends November first) are daunting. Even if the DOT and DOJ manage to keep duplicity to a minimum, you have to wonder if the program could become a victim of its own success, as it has in Germany. Bureaucratic overload, market distortions, consumer fraud; CARS could lead to a multitude of unintended consequences.

“We’re talking to as many people who have experience with this kind of program as possible,” Tyson says. “But you’ve got to remember that this program didn’t even exist a month and a half ago.” Noted.

Robert Farago
Robert Farago

More by Robert Farago

Join the conversation
2 of 9 comments
  • Shaker Shaker on Jul 07, 2009

    Crunch 'em up and reincarnate them as Cruzes. Win-win.

  • AJ AJ on Jul 07, 2009

    With all of the potential fraud, this sounds like another laughable government program. Oh well, us taxpayers will foot the bill for it.

  • Jrhurren Legend
  • Ltcmgm78 Imagine the feeling of fulfillment he must have when he looks upon all the improvements to the Corvette over time!
  • ToolGuy "The car is the eye in my head and I have never spared money on it, no less, it is not new and is over 30 years old."• Translation please?(Theories: written by AI; written by an engineer lol)
  • Ltcmgm78 It depends on whether or not the union is a help or a hindrance to the manufacturer and workers. A union isn't needed if the manufacturer takes care of its workers.
  • Honda1 Unions were needed back in the early days, not needed know. There are plenty of rules and regulations and government agencies that keep companies in line. It's just a money grad and nothing more. Fain is a punk!