The Commonwealth of Pennsylvania became the first state in the nation to make use of electronic lien and title, or ELT, by vehicle lien holders mandatory.
The Pennsylvania legislation –known as House Bill 804 – became law July 10, 2006. The Act requires compliance within two years from the date of signing. By July 10, 2008, all lien holders must use the ELT system in Pennsylvania. ELT is also known as a “paperless title” or e-Title.
An electronic lien replaces the traditional paper title with an electronic stream of data. In lieu of mailing thousands of paper titles, (and paying postage for each title), a DMV electronically issues files of data to lien holders who have a lien on a vehicle. ELT technology allows vehicle titles and lien information to be maintained, corrected, and transmitted electronically, much like an electronic stock certificate, to and from state motor vehicle agencies and lien holders, such as fleet management companies. “The ELT programs in operation today are tested, secure, and stable,” said VINtek COO Larry Highbloom, a key player in drafting the Pennsylvania legislation. Highbloom worked closely with the Pennsylvania House of Representatives, State Senate, and Pennsylvania Department of Transportation to help draft House Bill 804. From 1997-2002, VINtek provided data exchange services for Pennsylvania’s voluntary ELT program as its ELT vendor.
DMVs started offering ELT in the late 1980s to offset DMV and lien holder processing costs. Today, 12 states offer ELT programs. However, until the Pennsylvania legislation, use of electronic title was optional to the lien holder. States offering voluntary ELT programs are Arizona, California, Florida, Hawaii, Idaho, Kansas, New York, Massachusetts, Ohio, Virginia, and Washington. These states, along with Pennsylvania, account for 48 percent of all vehicle registration volume in the U.S. Between now and 2008, six additional states are anticipated to permit the use of electronic vehicle titles. They are Georgia, Maryland, New Hampshire, Nevada, South Carolina, and Tennessee. With these additional states, roughly 65 percent of all vehicle registrations in the U.S. will occur in ELT-enabled states.
For lien holders participating in a voluntary ELT system, a state suppresses the printing of a physical paper title. Instead of receiving by mail a paper title to store in its title vault, the lien holder, such as a fleet lessor, receives an electronic transaction stating its financial interest in the vehicle. The “storage” of the title is electronic. Upon release of the lien, the DMV mails a paper title to the recipient designated by the releasing lien holder. Virginia has begun designing a completely paperless title system where the lien, transfer of ownership, and title itself are paperless.
Electronic titles offer a way to eliminate lost paper titles. With an e-Title, vehicle titles are never lost and are immediately accessible. For fleet management companies, title administration cost is reduced. “There is a 75-percent cost savings in title administration with e-Titles compared to paper titles,” said Highbloom. “It accelerates the sale of returned vehicles, which reduces depreciation expense and funding costs of inventory.”
In addition to cost savings, an electronic title reduces fraud by eliminating a document, which could easily be stolen or misused by a third party. In ELT processing, only the lien holder of record can perform transactions on an ELT record while the lien is still active. There isn’t any paper floating around for someone to manipulate. For auctions, the use of e-Titles speeds the sale of consigned fleet units. It provides “just-in-time” title availability that lowers title-processing costs. Another benefit of electronic titles is the reduced the opportunity for odometer fraud since there is no paper title to be altered. One concern about e-Titles has been delays encountered in converting them to paper titles for use in states that do not have an ELT system. However, this is changing. Four states – Florida, Pennsylvania, Ohio, and Arizona – utilize or are currently developing a “fast e-Title to paper” process, which allows the printing of paper titles at auctions or by tag agents.
Other States Will Follow Pennsylvania
Use of electronic vehicle titles by state DMVs will expand. However, the biggest impediment is limited IT resources at state DMVs, which are diverted to other state projects. But, in all likelihood, these are temporary impediments.
“Let’s face it; the whole world is going paperless. It just takes time to get there. You have paperless stock certificates, paperless registration of vehicles by fleet management companies, and the use of paperless liens is growing,” says Highbloom. “Now the first state passed a law requiring electronic titles. Other states will follow because states look at what other states do.” Although speculative, probable candidates to introduce similar legislation mandating ELT are Virginia, Massachusetts, and Florida because of their progressive views toward electronic titles.
The bottom line is that electronic titles save money. States struggling to deal with budgetary constraints will come to view paperless titles as an effective cost-cutting initiative. Ultimately, paper titles will be in the minority. It’s only a question of time. Let me know what you think.