When Larry Highbloom isn’t running Philadelphia-based VINtek, he’s helping states write legislation aimed at bringing their motor vehicle departments closer to a paperless lien and title system. We sat down with Highbloom to discuss what dealers need to know about electronic liens and titles and how such a system can affect their own eContracting initiatives.
SF: We’ve heard a lot about ELT in recent months. Can you give our readers an overview of the topic?LH: ELT is similar to stock certificates. If you’re as old as I am, you can remember the days when you bought and sold stock and you’d get a piece of paper. 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 works the same way.
SF: Why should dealers be excited about ELT?LH: If I bring my car in as a trade-in, and I have an existing loan outstanding with a lender, the dealer is going to need to pay off my lender. 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 costs the dealership time and money. 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.
SF: How can ELT benefit BHPH dealers in particular?LH: Because ELT is paperless, it’s impossible to lose titles. That’s very important for a buy-here, pay-here store, 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 his car until he gets that title.
The second thing that ELT does for a dealer is create fewer errors. Let’s say Jack Jones Motorcars is the lienholder. The DMV may have recorded that as “J Jones Motorcars” or “Jack J Motorcars.” So Jack Jones gets a title, but it doesn’t correctly identify the lienholder. In this litigious society, if anything is wrong with that title, the recovery agent is going to say, “Sorry, not popping the car.”
Finally, ELT 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 BHPH 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.
SF: I would think that ELT also might help eliminate incorrect
or missing titles.LH: Titling may not always be at the forefront of a BHPH dealer’s thoughts, but it is critical. It’s important that liens be recorded. ELT serves as the notification from the DMV to the lienholder — the dealer, in this case — and helps them spot what we call exceptions. The dealer won’t ever be in that situation where he or she looks through a stack of paperwork at the end of the day only to realize that five or six of the loans still don’t have titles. ELT allows the dealer to identify the exceptions sooner rather than later.
SF: Are there any negatives to the paperless system?LH: The one negative with ELT is that because there’s no physical title, you can’t hand it to a customer who comes in with a shopping bag full of money. Instead, you have to tell the customer you can release the lien instantly, but it will take at least two or three days for the DMV to send the physical paper by mail.[PAGEBREAK]
SF: Where has ELT been implemented?LH: I helped write the law in Pennsylvania, and it went into effect as of July 10. Any dealer who is recording and holding liens in our state must be on an ELT program. South Carolina and Georgia also just switched. Other ELT states include California, Washington, Idaho, Hawaii, Arizona, Florida, Virginia, Ohio, New York and Massachusetts. Together, all those states account for more than 55 percent of vehicle registrations in the United States.
SF: It sounds as if states are moving toward going paperless faster 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 eContracting, eSignatures and all those other processes that are rapidly going paperless.
SF: 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 up on the DMV, but 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 workflow and charges for transactions based on its own costs.
SF: Can you tell our readers a little bit about yourself?LH: I started at 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 large and small lenders to provide a cost-effective ELT technology to lienholders. 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 updating 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. For the dealers, ELT lets them focus on selling cars. For lenders, it lets them focus on credit decisions.
SF: Where can dealers get more information about your product, and can you discuss the cost of your services?LH: Dealers can find us at 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 because 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 sign an agreement and start receiving electronic titles within a couple of weeks.Gregory Arroyo is the executive editor of Special Finance’s sister publication, F&I Management & Technology. E-mail him at [email protected] or visit www.fi-magazine.com.