Issue of concern within the end of life vehicles sector

Written by: RWW | Published:

Two topics currently receiving the attention of the Motor Vehicle Dismantlers’ Association are the ABI code of practice on the disposal of motor salvage and the Scrap Metal Dealers Act 2013. Chas Ambrose, chairman, Motor Vehicle Dismantlers' Association, reports.

For many years, there have been concerns about the Association of British Insurers (ABI) Code of Practice (CoP), specifically its vagueness in key areas, complete lack of transparency and variability in compliance by insurers.  

And of course there is the suspicion that the financial motives of the key players have led to the wholesale undermining of the CoP. 

However, it would appear that concern is now spreading further afield. 

The whole voluntary system appears now fundamentally flawed and the only question is whether the existing voluntary agreement can be reviewed and renewed in any meaningful way or whether legislation is now necessary.

The problems revolve around how extensively damaged vehicles are handled by insurers. 

The CoP was originally put in place to help tackle vehicle crime particularly ‘ringing’ (when a stolen car has had its identification numbers replaced) and ‘cut and shuts’(a car that has been made by joining the front half of one car to the back half of another), by ensuring that large body sections needed for ‘cut and shuts’ were no longer available from vehicle dismantlers and that vehicles most susceptible to ringing were checked before being allowed to go back on the road. 

Simplified pricing mechanism

But it was quickly adopted as a simplified pricing mechanism, and one which (due to the lack of transparency) appears to have been particularly susceptible to manipulation. 

Furthermore, the voluntary nature of the agreement, the lack of transparency and emphasis placed on compliance by some insurers have meant that even the most basic principles of the CoP are apparently widely ignored.

Most seriously, vehicles which are so extensively damaged that the insurer dictates they must be destroyed (category A & B), namely the most contentious of all ‘salvage’ vehicles, are finding their way back on to the road and can easily be seen on public auction sites such as eBay. 

Work has already been undertaken that highlights a significant shortfall in certificates of destruction (CODs) for these vehicles, but the two key parties apparently remain unconcerned.

Furthermore, as a result of the pricing mechanism used by insurers, based upon the CoP categories, it appears that an increasing number of category B vehicles are being re-designated as repairable category C vehicles in the light of higher monetary values. 

This means that these vehicles can now be purchased by anyone. 

Not only that, but these very substantially damaged vehicles can be repaired by anyone and there is no mechanism for checking the standard of repair before they are sold on to unsuspecting motorists. 

What has also become clear is that many of these vehicles, with the ‘waste controls’ removed, are illegally dismantled with the parts appearing on eBay, or exported without the DVLA being notified.  

Significant costs

These illegal operations avoid all the very significant costs associated with running a legitimate vehicle recycling business. 

In the last 10 years, more than one million insurance category C vehicles have ‘disappeared’.  

And although a shocking figure, this needs to be viewed in the wider context of the 600,000 vehicles that go missing every year in the UK. From this perspective, the contribution of the new Scrap Metal Dealers Act 2013 is to be welcomed.

To date, the insurance industry and government have shown little interest in addressing this issue.  

And, sadly, we are now seeing the results. Earlier this year, three girls were killed when a vehicle they were driving was involved in a road traffic accident. 

Unknown to them, the vehicle had previously been very extensively damaged and classed by the insurer as ‘category B’; namely not to be repaired. However, in the interests of money, the vehicle was auctioned off, control was lost, and instead of being destroyed, someone repaired it and to a poor standard.  

This is now a police matter and it can only be hoped that the police recognise those parties that failed in their duty of care to protect the motorist and hold them to account.

There is no denying that the issues involved are complex. 

But the first step in dealing with these issues is to recognise what everybody else already knows; there is a problem. Then we can work together to ensure we don’t get any more tragic accidents. 

However, neither insurers nor government appear to be at that stage yet. With three deaths already having occurred, one wonders what it will take to get some action.

Scrap Metal Dealers Act 2013

The Scrap Metal Dealers Act 2013 is now in place and settling in.  

The ban on using cash to purchase scrap cars became law on 1 October 2013, as did the requirement to obtain and keep evidence of the identity of the seller. 

This is an important piece of legislation for legitimate vehicle dismantlers, as it could go some way to ‘levelling the playing field’; in theory, at least.  

However, the key factor in determining how effective this legislation will be in combating metal and vehicle crime, and hence the practical implications for our members, will be enforcement. 

And although we need to give time for this legislation to bed in, the early signs are not particularly encouraging.

This legislation will be driven by local government authorities, who will take the primary role in enforcement. Overall, their track record with the motor salvage operator registration scheme is poor. 

But in the main, despite the extraordinarily tight timescales imposed on local authorities by central government, they seem to have coped relatively well with the initial onslaught of applications.

Nevertheless, it has already become apparent that concerns about variable standards up and down the country may be well founded.  

To date we have seen fees ranging from £150 to £1335 for single sites, with some local authorities charging upwards of £2500 for two sites in the same local authority area.  

It would be interesting to see how the licensing regimes of these local authorities can differ so widely, and hence the basis on which this range of fees can be justified. 

It is also disappointing to see that most local authorities are levying lower charges on mobile collectors; often the main source of theft problems, and a much more challenging enforcement target.  

Indeed, one month after the ban on using cash to buy scrap cars became law, nearly every local newspaper is still carrying adverts for ‘cash paid for scrap cars’. 

Has no one thought to tell the newspapers?

Extra industry regulation? 

The need for local authorities and police (whatever their role might be) to engage in extra industry regulation will, I am sure, be particularly welcome at a time when budgets continue to be cut.  

Will this recent flurry of activity die down in the next few months, with Scrap Metal Dealers Act 2013 licensing and enforcement falling to the bottom of the priority list? Or perhaps this new tax on the already compliant business has offered local authorities the opportunity to subsidise
some of their other activities?  

We understand that income generated by the fee can’t be used for enforcement, so it’s difficult to see how confrontational enforcement activities will be welcomed by local authorities. 

The suspicion is that the emphasis will remain on regulating those businesses that stick their head above the parapet.

Having said that, MVDA remains supportive of initiatives to eliminate illegal metal and vehicle dealing, and will certainly work with all relevant parties. 

But we remain sceptical about the ability of local authorities to deliver this. 

We can only hope that we are proved wrong.

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