The Story of NMVTIS & The Genesis of Vehicle Lifecycle Administration (VLA) 1

Table of Contents The Story of 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

INTRODUCTION NMVTIS is designed to protect consumers from fraud and unsafe vehicles and to keep stolen vehicles from being resold. consumers don’t be fooled. protect yourself. State 2 state Info share DMV Cost savings Consumer protection Terrorism Damaged Vehicles Fraud Stolen Vehicles ONE VEHICLE, ONE RECORD NMVTIS platform Other business opportunities 3

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 COMBATING ID & VEHICLE THEFT/FRAUD The Federal Bureau of Investigation (FBI) reports that in the United States, a vehicle is stolen every 28.8 seconds. 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. 4

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

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 THE FOUNDATION OF NMVTIS 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 The Pilot NMVTIS Program July 1999 – December 1999 Participants included: -Virginia -Indiana -Kentucky -Arizona -National Insurance Crime Bureau -The Polk Company n 1996, responsibility for the oversight of NMVTIS shifted from the DOT to the DOJ. 8

SPECIFIC BENEFITS NMVTIS has demonstrated the ability to: MVTIS provides a plethora of direct and indirect benefits. Significantly Reduce vehicle fraud Provide reductions in administrative support costs Make improvements in data integrity Improve sharing & customer service delivery 9

THE NMVTIS IMPACT he title verification check process provides an invaluable tool to prevent titling stolen vehicles, title washing, VIN cloning & odometer fraud. Impact on States Impact on Consumers Impact on Law Enforcement Impact on Third Parties 10

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: Impact on States 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

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

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. Impact on Third Parties & Law Enforcement Third Parties Law Enforcement NMVTIS also provides law enforcement with the info necessary to investigate crimes associated with motor vehicles, including vehicles involved in: terrorism violent crimes smuggling fraud 13

n 2006, at the request of the DOJ, the Integrated Justice Systems Institute (IJIS) reviewed the NMVTIS system and found the following: Interim Results & Significant Growth As of May 2011, the NMVTIS system boasts significant growth… NMVTIS provides an invaluable benefit to state vehicle administrators and the public community as a whole. 31 states fully participating 9 states providing data only 11 states in development 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 Growth Statistics 14

ere’s what state officials are saying about NMVTIS: State Testimonials “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 “I think it’s great news! Now let’s plan for NMVTIS on steroids.” - Deb Hillmer, Director, South Dakota Division of Motor Vehicles “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

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. E-Titling 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. Car Title Make: Model: Year: Car Title Make: Model: Year: Vehicle Manufacturers & Lending Institutions DMV Databases 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. 16

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 User fees remain the only current source available to fulfill legislative and financial requirements. FINANCING NMVTIS 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. 17

MVTIS is continually evaluated to ensure its capabilities continue to meet user needs. Re-engineering 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 month implementation time-frame, the modernization architecture is expected to realize… 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 Immediate operational savings of $800,000 per year 18

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. AAMVA Board Decisions on State Fees NMVTIS Financial Breakdown 19

ere’s how the funding for NMVTIS operations will work: Financial Methodology & Calculation 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. $4,999,299 ÷ 2 Jurisdictions (# of registered vehicles x $.02) $2,499,650 AAMVA budget and/or DOJ funding = Fee Breakdown 20 * Revenues from consumer access will be applied toward operating costs in a manner yet to be determined by the Board of Directors.

hree models were reviewed and considered by the Board of Directors: How State Fee Model Was Chosen 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.) 21 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 Pros: Fee based on usage Record Counts: Titles in System Cons: Need to estimate number of titles for non- participating states. 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.

$4,999,299 ÷ 2 Jurisdiction # of registered vehicles Cost/RegistrationTotal $ State by State Registration Fees Source: U.S. Department of Transportation Federal Highway Administration State Motor Vehicle Registrations Does not include large trucks, buses, taxi cabs or motorcycles. 22

$4,999,299 ÷ 2 Jurisdiction # of registered vehicles Cost/RegistrationTotal $ State by State Registration Fees Source: U.S. Department of Transportation Federal Highway Administration State Motor Vehicle Registrations Does not include large trucks, buses, taxi cabs or motorcycles. 23

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

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. Conclusion 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. 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 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/ NMVTIS Timeline