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CARS Enters Enforcement Phase

August 24, 2010

WASHINGTON – Recent actions by a government agency, which were reported by USA Today over the weekend, could mean the $3 billion Cash for Clunker’s program is entering the enforcement phase.

On Sunday, the newspaper reported that the National Highway Traffic Safety Administration (NHTSA) is investigating at least 20 dealerships it claims violated the rules of last year’s Cash for Clunkers program. Quoting government auditors, the report said that up to $94 million in rebates may be ineligible because they lack the proper documentation.

A NHTSA spokesperson told the newspaper that there’s no evidence of widespread fraud and said the violations are a small fraction of the 18,915 dealers who participated in the rebate program, which attracted 678,418 new-car buyers.

“There haven’t been any suspensions or revocations of dealers …,” Elly Martin, a NHTSA spokesperson, wrote in an e-mail to F&I and Showroom magazine. “There have been 10 notices of violation … Nine are closed and have resulted in $71,500 in civil penalties to date.”

In a report issued last April, Joseph W. Comé, assistant inspector general with the U.S. Department of Transportation, said 3.3 percent of the claims it reviewed, or about $94 million in rebates, were missing paperwork.

“We project that almost 22,000 transactions lacked supporting documentation, such as proof of insurance, in the CARS database at the time of our audit,” he wrote.

He added that some of those transactions his office reviewed could ultimately prove to meet the program’s requirements with additional paperwork, which NHTSA confirmed through its own review.

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