Car Titles Finally Going Full Digital

Digitized Car Titles
We’ve covered this in some other videos before, but our membership and participation in eart, which is a coalition of major companies trying to get car titles to be digitized, along with companies like DocuSign, CarMax, and Carvana, is starting to pay off. Look at this news story—California DMV has put 42 million car titles on the blockchain. They’ve digitized vehicle titles. This is a great development and all part of the push to make vehicle titling more modern, where you don’t have to worry about paperwork, documents, and signing forms.

California Leads the Way
This is huge progress, and California, being the largest state in population, will lead the rest of the country. So, what does this mean for people with titles? By digitizing 42 million titles using blockchain technology, first of all, it’s going to prevent fraud. Most importantly, it will smooth the car title process, so it’s not going to be quite as bureaucratic. It’s not going to be quite as much of a nightmare to deal with the DMV.

The Convenience of Digital Titles
You’ll be able to get vehicle titles through a mobile app. Think about that—think about what you have to go through now to get a vehicle title. How much paperwork, hassle, and runaround do you have to deal with? How great would it be just to do it with an app?

Lean Releases and Transparency
The other part is going to be lean releases. First of all, it’ll block lean fraud, but it’ll also provide a transparent record of property ownership. When you pay off your car or pay off your lean, you won’t have to go chasing that lean holder to release your lean because it’ll be something you download on your phone. Your lean release is already right there.

Timeline and Opt-Out Option
It may take a little bit of time. They say that you’ll be able to access your digital car title starting early next year, so less than 12 months. It’ll also be something that you can opt out of. If you don’t want to have your title on your phone, you can still go paper if you want to.

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Export Controls On New Vehicle Titles

Exporting Vehicles
We get a lot of calls in our car titles division about people who want to export vehicles. Sometimes the business model is they want to buy a new vehicle in the United States and export it to another country. Why would you want to do that? Well, there are some vehicles that are not sold in other countries. Some Highline vehicles, like Land Rovers, especially, are not sold in places like China or India, and there are wealthy people in those countries who are willing to pay a premium for them.

The Profit Potential and Challenges
Even if you pay full sticker price for some of these cars in the US, by the time you pay shipping and export fees, you can still make a lot of money by selling them in China. The problem is, these vehicles are not allowed to be sold in those countries. What happens is, the dealerships that sell them are very suspicious of people buying them to export to another country. Why would the dealership care if you’re paying full price for the vehicle? Who cares where it’s going? Well, they do care.

Dealerships and Manufacturer Restrictions
If you are a franchise dealership, let’s say for Land Rover, Mercedes, or BMW, and you sell a vehicle without performing proper due diligence to ensure it stays in the United States, and it ends up in China, the manufacturer will find out. They may penalize you financially, cut your allocations—meaning they won’t give you as many cars to sell in the future—or even pull your franchise if this happens enough. So, dealerships look for red flags. Is someone buying a car and wanting to register it out of state? Are they buying a car without living in the area? Do they have other cars in their name? Are there red flags on the transaction? These vehicles are not supposed to be sold in other countries, and the dealership is the frontline for the manufacturer to ensure this doesn’t happen.

Why Manufacturers Care
Why does the manufacturer care if the vehicle goes to another country? They want these cars in the US because they generate service and repair business. If someone buys a car in the US, in three or four years, they’re probably going to buy another car of the same brand. If the car goes overseas, they’re going to lose that future business. In addition, the manufacturer may sell other models of that car in other countries that aren’t as competitive, so they could lose sales in other countries because these cars came from the US.

Potential Legal Issues for Exporters
The reason we say this is that sometimes people call us up and say, “Hey, I want to get into the business of flipping these cars—buying new cars from dealerships and sending them overseas.” The problem is the dealership is going to be very cautious about doing it. There will be some export problems because you won’t have a title—you’ll have a manufacturer statement of origin. Some people who want to do this want to avoid sales taxes and try to figure out how to do that. In most cases, the only way to actually make money doing it is to do something illegal. Otherwise, it’s not going to be profitable. Sometimes, those things that are illegal seem like legitimate loopholes, but technically, there may be some violations involved.

Compliance and Due Diligence
You have to declare vehicles that are leaving the country. CBP doesn’t let you export vehicles without declaring them, so you have to declare it. You can’t hide it in a container. You have to have a title—normally, they don’t want cars leaving with a manufacturer statement of order or MSO. If you are a dealership coming across this, we can talk about some things that will help you identify it and perform due diligence on your buyer. If you are a potential exporter, make sure that you’re following all the rules of purchase. Sometimes, your purchase agreement will state that if you sell it overseas, you may have a financial penalty that you have to pay to the dealership, and they could sue you for that.

Consequences of Illegal Activities
These kinds of exports may seem, on paper, like, “Well, if it’s my car, I bought it, who cares if I export it?” But there may be some restrictions. Now, this article you’re reading on screen shows a person who took it a step further. They were getting loans on the cars in other people’s names, selling them overseas, and not paying off the loan, essentially getting a free car and keeping all the money. But even if you purchase it legitimately by paying cash, there are still some red flags that could arise between exporting it and laundering the title paperwork.

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Can You Transfer Over A Car Titles Online?

Electronic Vehicle Title Transfers
All right, so here it goes again, some more great news from the vehicle title industry. It’s kind of a snowball effect. The dominoes are falling, and more and more states are going to electronic title transfers. And as you know, we’re one of the founding members of the EART Coalition, a group of companies promoting electronic titles. Some of the partners in that group are DocuSign, CarMax, Carvana, companies and industries that have a vested interest in getting vehicle titles into the modern era rather than just old-school paperwork and documents with ink.

Michigan Allows Online Title Transfers
So here’s another state. Vehicle title transfers are now available online. Not just titles, but you can actually transfer them online. So how does this work? In Michigan, residents can now transfer a vehicle title online through a website. To transfer a vehicle online, both the buyer and seller must have a valid Michigan license. So there are a few requirements.

Eligibility for Online Title Transfers in Michigan
To transfer a title online, you must have a paper title. The vehicle must be a car, minivan, or truck. Camping vehicles and ATVs are included. The transaction must be between one individual seller and another individual; it cannot involve companies or co-owned vehicles. The vehicle cannot be financed. Eligibility checks will be performed throughout the transaction, and you can transfer it online.

Expansion of Electronic Title Transfers
More and more states are going to do this. We expect that within the next 12 to 18 months, many states will have vehicle title transfers electronically, which is how everything else is done nowadays. You can buy a house online now; everything is electronic. However, the government is dragging its feet on electronic titles, something we’ve been promoting for years. It’s now starting to come to fruition. Be glad you’re not going to have to deal with old-school paper titles soon. For the moment, you probably still do, but hope is coming. Soon, you’ll deal with the DMV in the same way.

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Do You Include A Letter Of Non Interest For A Lien Release?

Lean Release Request Package
Yes, when we prepare the lean release request package to send to lean holders, we also include what’s called a letter of non-interest. What is a letter of non-interest? Well, when a lean holder is requested to sign a lean release document as they’re, you know, um, they need to do to clear the lean off the title, sometimes if it’s an old lean, if it’s a charge off, if it’s a write off, if it’s not in their system, they can’t sign a lean release cuz technically they can’t release something they can’t see. They can’t release something that is not current.

The Challenge for Clerks and Administrators
So sometimes the clerk or administrator or the receptionist that’s signing it says, “Well, I can’t see that it’s released. I see that it’s charge off, I see it’s a write-off, I see it’s bankrupt, I see that it’s out of the system, but I don’t see release so I can’t sign this.” However, a letter of non-interest is an alternate document that basically says we no longer have any interest in this vehicle, or we don’t have an interest in this vehicle. Maybe the bank sold off that loan to another bank.

Simplifying the Process with a Letter of Non-Interest
But if they’re listed on the title, they’re the only ones that can sign off on that title. So if you provide them with a letter of non-interest, that’s a lot easier to sign because they can look on their system and say, “We don’t have an interest in this vehicle. It’s a write-off, it’s a charge off, we sold that loan to another bank, it went bankrupt, it was not in our system, it’s purged, it’s voided.” So by including that letter of non-interest, you’re increasing your odds that you’re going to get something back.

The Importance of a Return Envelope
Because if you just send a lean release, it’s an official document. It looks, it says, you know, under penalty of perjury, sometimes has to be notarized. Many times that clerk or person at the bank may not be sophisticated enough to know that they need to sign that. But a letter of non-interest is a lot more likely to have somebody say, “Yeah, we don’t have an interest in this vehicle,” sign it, send it back. As you know, we’ve said this before, it’s important to send a return envelope with that document because you don’t want them to throw it away cuz they don’t have a stamp.

Final Thoughts
So, letter of non-interest and return envelope is part of the process. Make sure that you follow all those details because leaving one of them out could be the difference between getting a clean title and still having a car you can’t sell.

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How To Run A VIN History

How to Run a VIN on a Vehicle
So, how do you run a VIN on a vehicle? How do you perform a VIN check on a car you’re looking to buy, maybe one you purchased, and you’re trying to get a title for?

Misconceptions About Online VIN Checks
Now, one of the misconceptions is that you can do this online. You’ll see things like Carfax or VIN Check or all these VIN lookups online that you can pay $10 or $15 and get a VIN report. The problem with that is it’s going to be about 40% accurate, and if you’re looking to get 100% guarantee to make sure that there are no liens on a vehicle, that it’s not stolen, that it’s not a parts-only vehicle, that there’s no title limitations like export only or salvage or other types of records, there’s only one method to get it 100%. And in most cases, it doesn’t cost any money; it just takes some time.

The Inconvenience of Accurate Information
The sad part is it’s not going to be as convenient as just pushing a button on your computer and waiting for it to pop up on your screen. But the reason that convenience is there is because they don’t look for everything. In fact, if you look at the disclaimers on Carfax and other websites, it’ll tell you this isn’t 100% accurate and may be missing things. For example, CARFAX is not allowed by law to access all the lien information in all 50 states. Lien information is protected under federal law and legally cannot even be released to third parties unless it’s done in person.

The Three-Step Process to Run a Valid VIN Check
So, how do you run a valid VIN check? Well, let’s take a look at the three-step process that anybody can do. You don’t have to be licensed, you don’t have to have any kind of certification, you don’t have to have any kind of authority or logins—anybody can do this for free. Some states might charge you five bucks to get some of the records.

Step One: Department of Motor Vehicles (DMV)
You have to do three checks of information. Number one is you have to go to the Department of Motor Vehicles in person in the state where you’re located. So if you’re in, let’s say, Florida, you go to the DMV, any local office. Some states call their office a different thing; some states call it Secretary of State, like here in Illinois, and some states call it Department of Transportation, like in Pennsylvania. And you’re going to request a VIN history. Now, they’re going to make you sign a form. You can see on the screen an example of that form—it’s an information request form.

Legal Requirements and Inconveniences
Why do you have to go in person? Why do you have to sign a form? Well, here’s why: There is a federal law called the DPPA, and you can look it up, USC 2725. That makes it a statute prohibiting the disclosure of personal information without permission of the person or acceptable uses, and you have to be an authorized recipient. Well, to be an authorized recipient, they have to know who you are—you have to be there in person in front of them. They’re going to make you sign this form, and you’re going to have to certify that you’re not going to use it for any prohibited uses like stalking, identity theft, fraud—you’re using it to verify information, and that’s one of the permissible uses that allow you to get this detail.

What You’ll Learn at the DMV
Now, I know it sounds inconvenient—you have to go to DMV; nobody likes to go there—but if you want 100% accurate information, it’s the only way to get it. Now, here’s the thing: They’re only going to be able to tell you about liens and prior owners. They’re not going to be able to tell you about salvage or even about stolen vehicles because stolen vehicles’ information is kept in a separate record system with law enforcement under the NCIC (National Crime Information Computer).

Step Two: Local Law Enforcement
Here’s the thing: Some states at the DMV will log into the National Crime Information Center and get stolen car information occasionally. They may not do it every single day; they may do it once a month, once a quarter, or twice a year. So, you run the risk if you just rely on the DMV under this information request that you might not get stolen information.

The Risk of Relying on the DMV Alone
We get over a thousand phone calls a day in our office. Very often, we get calls from people who say, “Hey, I ran a VIN check; I even went to the DMV. I found out later my car was stolen because the DMV doesn’t have stolen information.” How do you get stolen car information? Well, what you do is now you leave the DMV, and you go to a local law enforcement office—Police Department, Sheriff’s Office, State Patrol, anybody with a badge and a gun. Same thing—you have to go in person with your photo ID and tell them the VIN number. They will look it up.

The Importance of Going In Person to Law Enforcement
The reason you have to go in person to the police department is that if the car does come back stolen, they want to know who you are so they can find out where the car is. They don’t do it by phone because if you call them up and say, “Hey, is this car stolen, VIN number 1234,” if it is stolen, they say, “Yeah, it’s stolen,” you can just hang up, and now they don’t know who you are or where the car is. They don’t want that—you have to go in person. They may also make you sign a form.

Get It in Writing
Now, here’s an important thing: If you go to the DMV or the Police Department, whatever they tell you, get it in writing—get a printout. Because you don’t want to go back later and they say, “Oh no, there is something on this car,” and you can’t say, “Well, Joe Schmo told me two months ago that it was clear.” You want to get it in writing because sometimes they may have wrong information verbally.

Step Three: National Motor Vehicle Title Information System (NMVTIS)
The last thing you need to do is check with the NMVTIS (National Motor Vehicle Title Information System). This system has information about flood cars, salvage cars, parts-only cars, and export-only cars.

Why NMVTIS Is Important
Now, you might think, “Well, gee, can’t I get that from the DMV?” Not always. The DMV doesn’t always have the information. Again, we get thousands of calls a day. Many, many times people say, “I got a title from the DMV; they gave it to me—everything was good, right?” And then I found out later it was a junk VIN number—the VIN number had a salvage on it. Sometimes the DMV doesn’t always check in advance when they issue a title. People want a rush title—they want it on the spot—and the DMV gives it to you. And then later, if they find out there’s something wrong with it, they revoke it.

Why You Should Check All Three Sources
So, you want to check the NMVTIS. If you go to their website, you can find out if they have a local branch you can go to. Sometimes they’ll give you a login where you can get it through their database. You want to check all three. If you don’t check all three, you run the risk of buying a car with a bad history or even not getting a title for a vehicle because of something or needing some requirement like an inspection. You want to know this information before you move forward.

The Danger of Taking the Easy Way Out
Don’t try to take the easy way out. If you run a Carfax or a VIN check or any of these websites, you’re going to spend $10 or $15. It might seem like it’s easier than having to go someplace in person, get in a car, and drive down to the DMV, but you might save an hour’s worth of time, but you might get bad info. These Carfax-type reports are very misleading—very misleading about what they have—and you don’t want to be risking thousands of dollars on a vehicle on something that maybe you saved a little bit of time but found out later that the vehicle has a problem that wasn’t disclosed online.

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