Could an electronic titling system that tracks the sales of vehicles from the manufacturer to a dealer and ultimately, to a consumer, work effectively in the U.S.? In September, South Dakota and a handful of other states are going to find out.

The South Dakota Division of Motor Vehicles (DMV) is spearheading a federal pilot program that will test whether a completely electronic method of vehicle-titling is feasible. If successful, the project could set the stage to eliminate the traditional paper title and transfer process in years to come.

“We talk about this as an industry, and one of the biggest concerns you hear is the timeframe that it takes to get a paper title -- and then signing it and sending it and everything else,” said Deb Hillmer, director of the South Dakota DMV. “So we’re really looking at how we can move that process to an electronic means, similar to how a lot of contracts are done today.”

Hillmer added that the project will involve “six or seven” states out of a working group that includes Arizona, California, Delaware, Florida, Iowa, Maryland, Pennsylvania, South Carolina, Texas, Vermont, Virginia and Wisconsin.

The pilot will run for approximately nine months. Hillmer said the hope is to have a handle on the plusses and minuses of electronic titling and what needs to be done to make it a reality by June 2014.

In the meantime, the South Dakota DMV has been preparing its internal technology for the eventual change. The state developed and implemented its own electronic lien and title (ELT) system last October, specifically to move the entire lien process over to a digital format. With the switch, South Dakota joins a number of states that offer and/or mandate use of an ELT program.

Vehicle dealerships in South Dakota have been using electronic lien systems for title transactions for several years now. While the dealerships still issue and remove liens on paper, the information was also required to be entered electronically — anticipating the state’s move to an ELT system.

It took about four months to build and test South Dakota’s ELT system. Hillmer said her team did “quite a bit” of testing to ensure the messages and language going back and forth between the state system, dealers and finance institutions was correct and provided all the details needed for all parties. Development of the technology cost approximately $60,000, which includes programming and staff time.

According to Hillmer, the only challenge the South Dakota DMV staff had on the project was overcoming human error. When it comes to the new system, she said one of the issues they’ve had is when someone goes to add a lien, instead of looking at the options provided on a drop-down box, a person will type in the name of a lien holder incorrectly, causing confusion and adding clutter to the database.

To reduce the errors, DMV staff members have encouraged lenders also entering their Federal Employer Identification Number (FEIN) so the name is accurately matched to the number.

Hillmer admitted that the technology hasn’t really saved a huge amount of time for her staff, but said it’s a necessary step to move toward a complete electronic-titling system. She added that the goal is more to improve the efficiency of being able to note and cancel liens quicker.

“You can get [a lien] released and it’s off our system, and the lender can actually tell us to send the title to that dealer who paid off that lien. I think it’s really going to expedite commerce in those transactions.”

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Brian Heaton  |  Senior Writer

Brian Heaton is a senior writer for Government Technology. He primarily covers technology legislation and IT policy issues. Brian started his journalism career in 1999, covering sports and fitness for two trade publications based in Long Island, N.Y. He's also a member of the Professional Bowlers Association, and competes in regional tournaments throughout Northern California and Nevada.