An effort is underway to encourage state legislation mandating the use of electronic vehicle titling to help fight fraud and control costs.

Nearly 70 million motor vehicles are titled in the U.S. Critics of the current system say many state title laws are outmoded and inadequate.

Most were enacted before the computer age and only contemplated the issuance of paper certificates of title. But paper titles get lost, are difficult to store, are expensive and time consuming to handle and are subject to fraud, critics say.

A recent bill enacted in Pennsylvania is the first to mandate the use of Electronic Lien and Title (ELT) by lienholders.

Essentially, an electronic lien replaces the typical paper title with an electronic stream of data. A DMV simply issues files of data each day to lienholders who have a lien on a vehicle.

DMVs began offering ELT in the late 1980s to offset processing costs. To date 11 states have switched over to ELT. However, various states made the use of electronic title optional to the lienholder.

These DMVs were not seeing the projected cost savings, because some lienholders choose not to participate in the state ELT program, says Larry Highbloom, president of VINtek, an automotive technology support firm.

“The ELT programs in operation to date across the country are tested, secure and stable,” he says.

He predicts considerable cost savings to banks, credit unions, and captive and non-captive finance companies, which will make ELT a must for all states, not just Pennsylvania.