States Look to Electronic Titles to Cut Costs, Prevent Fraud
To fill the potholes in crumbling budgets, some states are continuing to look for ways to cut expenses.
For at least 16 states, removing paper from the lien implementation process is one way that departments of motor vehicles might potentially save operational costs. One solution gaining steam is an electronic lien and titling system, which digitizes the automotive title process. Instead of a state’s DMV mailing a paper title to a credit union or other financial institution to hold in their vault, an electronic lien or notice is stored.
For some ELT users, stopping fraud may be another advantage, Highbloom said. There are a growing number of instances where perpetrators will go to a financial institution’s website, take a picture of its logo, somehow get ahold of a person’s VIN and send a no-interest letter to the car owner. That letter indicates that there is no longer a lien interest from the lien holder. The perpetrator will then take the letter to the DMV, pay a fee and get a title without a lien. Or, the fake no- interest letter is taken to a title loan store to get a loan against the vehicle. ELT may eliminate these scams because the only way to release a lien is by the credit union sending a transaction directly to the DMV.
Texas has seen its fair share of these bogus transactions, Highbloom said. The state is now looking at legislation that would require all lien holders to move to ELT. Arizona, California, Louisiana and Pennsylvania may be following suit. States with huge financial deficits like California see ELT as a major money saver, he offered. Ironically, ELT got its start in the late 1980s in California. In November 2010, Nebraska stopped issuing paper titles, which in essence forced lien holders to join its ELT network.