The Story of

NMVTIS

& The Genesis of Vehicle Lifecycle Administration (VLA)

1

The Story of

Table of Contents

•

Introduction

•

Combating ID & Vehicle theft/fraud

•

High-level Solution

•

The Foundation of NMVTIS

•

Establishing a Protocol

•

NMVTIS Oversight & Pilot

•

NMVTIS Impact on: - States - Consumers - Third Parties - Law Enforcement

•

Interim Results & Significant Growth

• •

State Testimonials E-Titling

•

Financial Aspects: - Financing NMVTIS - Re-engineering NMVTIS - AAMVA Board Decisions - Calculation & Methodology - State by State Registration Fees - Region II Fees

•

Conclusion

2

consumers don’t be fooled.

protect yourself.

INTRODUCTION

NMVTIS is designed to protect consumers from fraud and unsafe vehicles and to keep stolen vehicles from being resold.

State 2 state Info share

ONE VEHICLE, ONE RECORD

Other business opportunities

NMVTIS platform

DMV Cost savings Consumer protection Stolen Vehicles Damaged Vehicles Terrorism Fraud 3

COMBATING ID & VEHICLE THEFT/FRAUD

oday, widespread vehicle fraud contributes to:

•

Enormous funding resources to terrorism & organized

crime

•

The perpetration of violent crime

•

Billions in financial losses to the government, businesses & consumers

•

Eroding public safety

•

Lives lost

• Based on the FBI’s average valuation of $6,505 per stolen vehicle, the 794,616 vehicles stolen during 2009 caused estimated property losses of

$5.2 billion.

The Federal Bureau of Investigation (FBI) reports that in the United States, a

vehicle is stolen every

28.8 seconds.

4

HIGH-LEVEL SOLUTION

he next critical step in stopping the criminal exploitation of DMV systems: • A consistent and systematic approach to closing state vehicle titling process vulnerabilities.

• The NMVTIS solution is aimed at saving lives, money and resources through the use of tools and processes that will ultimately:

- Improve public safety - Fight fraud - Protect consumers

5

THE FOUNDATION OF NMVTIS

nti Car Theft Act of 1992 (ACTA) was created to address the growing issues associated with auto theft & vehicle fraud: • Prevent introduction or reintroduction of stolen motor vehicles into interstate commerce • Protect states, consumers and other entities from fraud • Reduce use of stolen vehicles for illicit purposes • Provide consumer protection from unsafe vehicles To accomplish goals created by the ACTA, these requirements were set to provide means by which it can be determined: • Whether a vehicle title, regardless of state of issue, is valid • Where a vehicle bearing a known vehicle identification (VIN) is currently • • titled What a vehicle’s reported mileage is Whether a vehicle is titled as junk or • salvage vehicle in another state Whether a vehicle has been reported as junk or salvage 6

ESTABLISHING A PROTOCOL

n inter-state protocol is designed to close gaps in individual state processes functioning independently.

All States

• By Jan. 1, 2011, use and furnish data, and contribute user fees to the • NMVTIS system.

Must use NMVTIS to perform an instant title verification check before issuing a certificate of title.

System Operator

• To States: Two methods of verifying title • information should be made available using NMVTIS.

Enable states to share all info in NMVTIS obtained on a specific vehicle.

To Law Enforcement:

• Ensure access to all title info is available via a VIN search.

To Externals:

• Ensure consumer & insurer access to information.

Governance

• Convene a NMVTIS Advisory Board (NAB) that includes representation from all stakeholder communities.

7

NMVTIS Oversight & Pilot

n 1996, responsibility for the oversight of NMVTIS shifted from the DOT to the DOJ.

The Pilot NMVTIS Program July 1999 – December 1999 Participants included: -Virginia -Indiana -Kentucky -Arizona -National Insurance Crime Bureau -The Polk Company 8

SPECIFIC BENEFITS

MVTIS provides a plethora of direct and indirect benefits.

NMVTIS has demonstrated the ability to: •

Significantly Reduce vehicle fraud

•

Provide reductions in administrative support costs

•

Make improvements in data integrity

•

Improve sharing & customer service delivery

9

THE NMVTIS IMPACT

Impact on States Impact on Consumers

he title verification check process provides an invaluable tool to prevent titling stolen vehicles, title washing, VIN cloning & odometer fraud.

Impact on Third Parties Impact on Law Enforcement

10

Impact on States

he NMVTIS state program was designed with input from the states, enabling integration into a state’s titling system & seamless processing for titling clerks.

States are Required to Report to NMVTIS:

• VIN • Brand information and any other descriptors on the title • certificate, including odometer reading Name of entity to whom title • was issued If collected by state, info from junk, salvage and insurance entities (JSI data) 11

Impact on Consumers

he ACTA stipulates NMVTIS functions be made available to individual and commercial consumer “prospective purchasers”.

• Without this critical access to data, consumers & states remain vulnerable to criminals seeking to re-title a branding vehicle in a state that does not check with previously titled states.

Consumers may purchase an unsafe/stolen vehicle, or pay more than the vehicle’s fair market value when criminals present re-titled vehicles for sale.

12

Impact on Third Parties & Law Enforcement

Third Parties

n addition to state motor vehicle agencies, other third parties must supply data to NMVTIS.

Junk & salvage yards, auto recyclers and insurance companies (JSI) are required to report vehicles deemed:

junk, salvage or total loss.

Law Enforcement

NMVTIS also provides law enforcement with the info necessary to investigate crimes associated with motor vehicles, including vehicles involved in: 13

Interim Results & Significant Growth

n 2006, at the request of the DOJ, the Integrated Justice Systems Institute (IJIS) reviewed the NMVTIS system and found the following: NMVTIS provides an invaluable benefit to state vehicle administrators and the public community as a whole.

As of May 2011, the NMVTIS system boasts significant growth…

31 states fully participating 9 states providing data only 11 states in development

Growth Statistics

• In 2010, 89.5 million online • transactions were processed NMVTIS data represents more than 85% of total U.S. vehicle population • 381 million current title records & 63 million vehicle brand records • Consumer access increased from

48,000 in 2009 to nearly 100,000 in 2010

14

State Testimonials

“I think it’s great news! Now let’s plan for NMVTIS on steroids.”

- Deb Hillmer, Director, South Dakota Division of Motor Vehicles

ere’s what state officials are saying about NMVTIS: “We think it is great that NMVTIS has hit 87% participation! NMVTIS was created to help prevent stolen vehicles from being titled, but we have found it is also very useful in finding title brands that have been omitted by mistake. Correcting these brands is critical for accurate titling information, thus benefitting all states”.

- Jennifer Cohan, Director, Delaware Division of Motor Vehicles

“We were able to reduce our man-hours used for recording an out-of-state title transfer by another 50%, bringing the total reduction to 75% of our original man hours. We look forward to the time when two of our neighboring states reach compliance with the NMVTIS rule, so that we can move this number much closer to 100%.”

- Betty Johnson, Administrator, Nebraska DMV

“The increase in the number of jurisdictions contributing data to NMVTIS along with the auto recyclers, junk and salvage yards, and insurance carriers contributing data to NMVTIS has significantly improved NMVTIS data. In addition, the web-based portal for NMVTIS queries is a tremendous benefit to those jurisdictions (like Alabama) that have not fully integrated NMVTIS into their motor vehicle systems at this time.”

- Brenda R. Coone, Director, Alabama Department of Revenue

15

E-Titling

ith vehicle manufacturers and lending institutions relying heavily on electronic systems, it is possible to envision protocols that deliver “new” records directly to DMV databases.

• The moment a vehicle rolls off the assembly line or enters a jurisdiction, that vehicle can be followed electronically through the dealer, lender and sales cycle.

Benefits of E-Titling

• • • E-Titling will minimize the following: Paper handling Investigative/Administrative efforts Opportunities for document fraud By following a vehicle to its final disposition, additional assurances are provided to all stakeholders that interests in vehicles have not been compromised by fraudulent manipulation of processes or ancillary records.

Vehicle Manufacturers & Lending Institutions

Car Title Make: Model: Year:

DMV Databases

Car Title Make: Model: Year: 16

FINANCING NMVTIS

n recent years, the AAMVA budget/reserves & federal grants have provided the necessary funding for NMVTIS operations.

• Unfortunately, federal funding for • operations is expected to end September 2012. User fees remain the only current source available to fulfill legislative and financial requirements.

State Financing

Under the Anti Car Theft Act, it is required that all states participate and that NMVTIS be financially self sustaining from revenues and/or user fees.

• It is further stipulated, if state fees are required for financial sustainability, that ALL states will contribute fees regardless of participation level.

All states are required to participate under the Anti Car Theft Act

17

Re-engineering NMVTIS

MVTIS is continually evaluated to ensure its capabilities continue to meet user needs.

Like other large-scale systems, it is also important to understand that operating and maintenance costs are appropriate when considering the possible benefits of new system technologies and platforms.

Evaluations revealed an investment in re engineering the 12-year old system could provide both user benefit and operational savings that could help reduce state fees.

Modernizing NMVTIS

Modernizing NMVTIS in a manner similar to the recent CDLIS effort, would increase flexibility in data exchange and enhance both user functionality and reporting.

• In May 2011, the Board approved an investment of AAMVA reserve funds in the amount of $3.4 million to begin modernization efforts and hasten the reduction of operating expenses.

• This investment was implemented with no negative impact to states or stakeholders.

• Most importantly, with a 12-14 month implementation time-frame, the modernization architecture is expected to realize…

Immediate operational savings of $800,000 per year

18

AAMVA Board Decisions on State Fees

resented as a one year solution, the AAMVA proposal for FY2013 will allow for continued pursuit of revenue-generating opportunities that, when established, are

intended to offset state fees required.

• NMVTIS operational costs will be split 50/50 between state fees and the AAMVA budget and/or DOJ funding.

NMVTIS Financial Breakdown FY2013 Estimate Revenue:

Jurisdiction Fees AAMVA or DOJ Subsidy

Total Revenue Operating Expenses:

Employee Labor Contractor Labor Datacenter & Hosting Other Direct Costs

Total Operating Expenses

Depreciation Indirect Costs Total Expenses 2,499,650 2,499,650

4,999,299

1,155,280 783,673 700,000 175,000

2,813,953

500,000 1,685,346 4,999,299 19

Financial Methodology & Calculation

ere’s how the funding for NMVTIS operations will work: • Modeled on an equitable 51-tier structure, calculated by each state’s number of registered vehicles (as reported by jurisdictions to the Federal Highway Administration) as a percentage of the total U.S. registered vehicle population.

• State fees will cover 50% of total NMVTIS operational costs.

• Each state has been assigned a percentage of responsibility from the $2,499,650 cost.

• The funding model is calculated by using the state’s FHWA reported vehicle numbers • as a percentage of the total U.S. registered vehicle population as a multiplier. Roughly, this equates to $.02 per registered • vehicle.

The remaining operating costs in the same amount, $2,499,650, will be covered by a combination of AAMVA budget and/or DOJ funding.

Fee Breakdown

$4,999,299 ÷ 2

= $2,499,650

Jurisdictions

(# of registered vehicles x $.02)

$2,499,650 AAMVA budget and/or DOJ funding

* Revenues from consumer access will be applied toward operating costs in a manner yet to be determined by the Board of Directors.

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How State Fee Model Was Chosen

hree models were reviewed and considered by the Board of Directors: • Transaction Based - The fee is assessed by number of inquiries, • and/or updates a state submits every month .

Record Counts: Titles in System - The fee is assessed by the number of title • records in NMVTIS.

Record Counts: # of State Registrations - The fee is based on number of registrations per states (assessed by numbers reported by jurisdictions to the Federal Highway Administration.)

Pros & Cons of Each Model

•

Transaction Based

Pros: Fee based on usage •

Transaction Based

Cons: • Since all states are not participating on-line, there’s no way to access number of all transactions.

Could lead to less verifications and ultimately data • quality issues.

Difficult to predict and forecast.

•

Record Counts: Titles in System

Fee based on usage Pros: •

Record Counts: Titles in System

participating states.

Cons: Need to estimate number of titles for non • Disincentive for reporting vehicles outside of regulation requirements (i.e. trucks).

•

Record Counts: # of State Registrations

Pros: • Consistent with current billing method for AAMVA membership & former NMVTIS structure.

Transparency: Federally published (FHWA statistics) • Consistent with funding mechanisms for Feds.

• Does not discourage use of the system and won’t penalize a state for providing more (which gears for e-Titling platform).

Record Counts: # of State Registrations

Cons: • Ratio of number of registrations versus the number of titles varies between states.

21

State by State Registration Fees Jurisdiction

District of Columbia Alaska Wyoming Vermont North Dakota South Dakota Montana Delaware Hawaii Rhode Island Idaho Maine New Hampshire New Mexico West Virginia Nevada Colorado Nebraska Kansas Arkansas Mississippi Utah Oregon Oklahoma Iowa Louisiana

# of registered vehicles

166,898 239,938 254,948 303,645 342,327 342,512 369,364 454,294 480,466 485,624 528,544 555,374 645,573 676,336 686,908 688,894 724,053 801,716 875,757 947,554 1,141,605 1,180,261 1,433,133 1,640,823 1,785,547 1,900,021

Cost/Registration Total $

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$3,076.17

$4,422.40

$4,699.06

$5,596.61

$6,309.58

$6,312.99

$6,807.91

$8,373.29

$8,855.68

$8,950.75

$9,741.82

$10,236.34

$11,898.84

$12,465.84

$12,660.70

$4,999,299 ÷ 2

$0.02

$13,345.34

$0.02

$14,776.78

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$16,141.46

$17,464.78

$21,041.42

$21,753.90

$26,414.70

$30,242.72

$32,910.19

$35,020.11

Source: U.S. Department of Transportation Federal Highway Administration State Motor Vehicle Registrations -2008.

Does not include large trucks, buses, taxi cabs or motorcycles.

22

Jurisdiction

Kentucky South Carolina Connecticut Alabama Arizona Minnesota Missouri Maryland Wisconsin Tennessee Indiana Massachusetts Washington North Carolina New Jersey Virginia Georgia Michigan Illinois Pennsylvania Ohio Florida New York Texas California

# of registered vehicles

1,945,936 1,984,700 2,006,656 2,202,962 2,217,098 2,530,340 2,612,681 2,636,359 2,643,143 2,809,235 3,109,865 3,214,737 3,276,728 3,539,487 3,784,092 3,847,286 4,229,369 4,337,278 5,703,589 6,035,192 6,344,543 8,063,718 8,493,769 8,711,324 19,705,643

State by State Registration Fees Cost/Registration

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

Total $

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$35,866.39

$36,580.87

$36,985.55

$40,603.75

$40,864.30

$46,637.79

$48,155.46

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$0.02

$48,591.88

$48,716.92

$51,778.23

$57,319.27

$59,252.21

$60,394.80

$65,237.82

$0.02

$0.02

$69,746.24

$70,911.00

$0.02

$77,953.34

$79,942.25

$105,125.32

$111,237.24

$116,939.03

$148,625.89

$156,552.34

$160,562.19

$363,203.26

Source: U.S. Department of Transportation Federal Highway Administration State Motor Vehicle Registrations -2008.

Does not include large trucks, buses, taxi cabs or motorcycles.

23

NMVTIS Fees for Region I $5,596 (VT) $10,236 $156,552 $111,237 $11,898 (NH) $59,252 (MA) $8,950 (RI) $36,985 (CT) $69,746 (NJ) $8,373 (DE) $48,591 (MD) $3,076 (DC)

24

Conclusion

he measureable benefits of NMVTIS and its use as part of a Vehicle Lifecycle Administration strategy to public safety, fraud

reduction and consumer

protection are no doubt, compelling. • • • NMVTIS also boasts ancillary benefits such as: Cost reduction Data integrity New business opportunities

Consider This:

In addition to societal benefits, DMVs should consider that with each vehicle fraud case averaging $6500 in property loss, reducing a state’s theft cases by even a marginal amount will have significant impact on administrative, investigative and legal sources.

NMVTIS Timeline

The Board of Directors, DOJ approval, • governance on participation and payment, along with notification and fee start date: Board met in April and summer regionals • to gain member feedback.

Final Board decision will come at the end • • of August 2011.

Presentation for DOJ approval Formal notification to states with required • 12 month leadtime to go out 9/30/2011 State fees to begin 10/01/2011 25