When Larry Highbloom isn't running his 17-year-old, Philadelphia-based company, he's helping states write legislation aimed at paving the way to the industry's e-contracting future. This month the president of VINtek talks about the spread of Electronic Lien and Title (ELT) among states, and how it fits into the e-contracting equation.
F&I: I've heard a lot about ELT in recent months. Can you tell our readers a little bit about it?
LH: ELT is very similar to stock certificates. If you're as old as I am, you can remember the days when you bought and sold stock that you'd get a piece of paper. It had all these pictures and numbers on it, and when you sold your shares you had to send it to your broker. Nowadays, you can buy and sell shares all day long over the Internet and you won’t get a single piece of paper. ELT is the same process, and it is between the DMV and the lien holder who receives the lien that is recorded by the dealer selling the vehicle.
F&I: So why should dealers be excited about ELT?
LH: If I bring my car in as a trade-in and have an existing auto loan outstanding with a lender, the dealer is going to need to pay off my lender. When he pays off that lender, the lender will release its lien. If the dealer's not in an ELT state, the lender will pull the title from its vault and mail it to the dealer. All that action takes time and costs the dealership money because it can’t sell the vehicle without the title. ELT benefits the dealer because he gets titles faster from the lender because it comes directly from the DMV. In fact, speed is so important to the dealers in the state of Massachusetts that they are trying to force all lenders to join the ELT program.
Another benefit is, since ELT is paperless, it's impossible to lose titles. This is very important for a buy-here-pay-here franchise, especially when it comes to delinquencies. In the old days, if you were looking for a paper title and it was missing, you had to run to the DMV to apply for a duplicate. A dealer can’t repossess the car until he gets that title.
ELT also eliminates the need for a storage room or a vault. Paper titles are like bonds. They're valuable. You have to keep them safe from fire and theft. If you have warehouse financing from a lender to operate a buy-here-pay-here operation, your lender may come in and audit your physical inventory to validate that you have liens. With paperless electronic archives, the lender can do audits remotely.
F&I: I'm sure ELT will make things more accurate. I know big problems can arise from mistakes.
LH: Exactly. Unfortunately, mistakes do happen at the DMV. If a lien holder’s name is misidentified and the dealer gets a title, he can’t use it to repo the vehicle because it doesn’t correctly identify the lien holder. In a litigious society like ours, if anything is wrong with that title, the repo agent is not going to pop the car.
F&I: There has to be some negatives with ELT.
LH: The one negative with ELT is since there's no physical title, you can no longer hand over a title to a customer who comes in with a shopping bag full of money asking for his or her title. Now you have to tell the customer you can release the lien instantly, but it will take at least two to three days for the DMV to send the physical paper by mail.
F&I: Where is ELT being implemented and are there any special dates coming up that dealers should remember?
LH: I'm glad you asked, because in Pennsylvania ELT is now the law. By July 10, any dealer who is recording liens and being a lien holder must be on an ELT program. If they are not aware of this, they could have an ugly morning on July 11 when their title works start getting rejected. Most importantly, the law is being considered by other ELT states across the country.
F&I: ELT states? Those are states that have implemented voluntary programs, correct?
LH: Right. There are two states that have just turned on ELT, which are South Carolina and Georgia. Other ELT states include California, Washington, Idaho, Hawaii, Arizona, Florida, Virginia, Ohio, New York and Massachusetts. These states make up more than 55 percent of vehicle registration volume in the United States.
F&I: It sounds like states are moving a lot quicker toward going paperless than the industry is.
LH: Clearly they are. ELT is the sister to ERT, or electronic registration and title. ERT connects the dealer to the DMV to record the owner when a vehicle is sold, and it issues plates and a registration sticker to the consumer immediately. ERT is operable in more states than ELT. So, like stock certificates, paper is going away, which is in line with e-contracting, e-signatures and all those other processes that are quickly going electronic.
F&I: Wow, I think a lot of our readers will be surprised to hear the DMV is ahead of the curve on this.
LH: Everybody likes to beat on the DMV, but it is very supportive of going electronic. They want to go paperless. They don't enjoy processing the same deal over and over again because of simple errors. They don't make money doing that. Remember, the DMV runs much like any other business. It staffs in accordance with its expected work flow and it charges for the transaction based on what it thinks it’s going to have do.
F&I: All of that sounds great, but are states at least consulting with the industry to ensure their move is beneficial to everyone involved?
LH: Well, I actually wrote that law in Pennsylvania.
F&I: That's good to hear. Can you tell our readers a little bit about yourself?
LH: I started VINtek 17 years ago. I came out of the auto industry as a controller at a franchise dealership. Before that I was a CPA for an accounting firm in Philadelphia.
I've always been intrigued by paper processes between dealers and lenders and sought to automate that. That's what VINtek was formed to do. We work with the largest lenders and the smallest lender, and our role is to provide a cost-effective ELT technology to lien holders. We're connected to every state, which is important to note because dealers or lenders may think they can build ELT processes themselves. The problem is states are continuously changing their ELT programs.
VINtek's role is to sit between its customers and the DMV to facilitate the exchange of information, as well as advocate change for the client base to be able to continue to drive costs down and get information faster. This enables everyone to do their job. For the dealers, it lets them focus on selling cars. For lenders, it lets them focus on credit decisions.
F&I: Where can dealers get more info about your product, and can you discuss the cost of your services?
LH: Dealers can find us a at www.vintek.com. Our product works similar to a pay-as-you-go program. There’s hardly any upfront cost for a dealer to do ELT, especially since most dealers already have computers. We do assess a charge per title, and there are some other fees associated with our services. However, those costs really depend on what the dealership wants to do. They can literally sign an agreement and within a couple of weeks receive electronic titles.