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NATIONAL
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77
Summer Street, 10th Fl. |
Alvin
C. Harrell, Professor of Law
2501
vcannady@okcu.edu
Dear
Mr. Harrell,
These
comments are being sent to you in advance of the October 29 through October 31
meetings to be held in
General
These
comments amplify and supplement those made by our letters of
Instead,
the draft appears written for and largely by secured creditors, instead of the
actual owners of vehicles, their transferees, or law enforcement. The fact that automobile lenders predominate
in the audience at COTA meetings is no reason for NCCUSL to enact a model that
ignores many of the fundamental goals of a certificate of title act. For further discussion of these general comments, we refer you to our letters
of
The Act’s Title
Calling
the draft COTA a “Uniform Certificate of Title Act” is seriously misleading to
state legislators and the public. Even
the drafting comments admit that many certficate of
title provisions are not covered and must be left to existing state law. Nowhere does the draft indicate which
provisions a state should keep and which provisions the COTA replaces.
Here
is one example of a glaring omission from the draft COTA: the draft does not require
purchasers at retail to obtain a new title.
Another
example: the draft essentially ignores transfer of titles, even though transfer
of ownership and the rights of a new owner are established by assignment of the
existing title, not by the application or issuance of a new title. Many used vehicles
purchased for re-sale are never accompanied by a new certificate. Because the key event is the assignment of
the existing title, every state has detailed procedures to accomplish this
transfer. We search in vain for such procedures
in the present draft. Section 16(a) only
indicates that the seller “shall execute the certificate to the buyer.”
Recommendation # 1. Change the name of the Act, to “The Rights of
Secured Creditors Regarding Motor Vehicle Titles,”or
“Selected Provisions Relating to Motor Vehicle Titles.”
Recommendation # 2. Specify precisely which missing provisions were
intentionally deleted, and which missing provisions legislatures should retain
as specified in existing law.
Section 11. Contents
of Certificate of Title. In every
state, a certificate of title (and any other document used to transfer title,
such as a reassignment form) is created
using a secure printing process, meaning a process that deters and detects
counterfeiting and unauthorized reproduction and allows alterations to be
visible to the naked eye. Obviously,
electronic titles present special opportunities for forgery and alteration. The
COTA draft makes no mention of electronic titles being produced using a secure
process or meeting any other standard of document integrity.
Drafting
comments to Section 9 obfuscate this failing. [As an aside, the comments
incorrectly state that the odometer disclosure in the application for a new title is in recognition of federal law. Federal law requires disclosure on the reassignment
block of the existing title, not on
the title application. The application is never signed by the transferor responsible
for the disclosure and many transfers do not even involve a subsequent
application for a new title. Nor is disclosure on the application sufficient to
satisfy federal law. State personnel, in
issuing a new title, should review the disclosure on the old title, and not
rely on the buyer’s statement on the application for a new title.]
What
is of concern about the Section 9 drafting comments is their characterization
of NHTSA’s letter to Huddleson.
The drafting comments imply that the letter implies that a simple electronic
disclosure may be sufficient to meet federal law’s stringent integrity
standards for a certificate of title. This cannot be further from the truth. The
Huddleson letter’s implication is the exact
opposite.
Under
federal law, the lessee to lessor disclosure need
only be written, while any
certificate of title or other transfer document must be set forth “by means of
a secure printing process or other secure process.” 49 C.F.R. 580.4. The Huddleson
letter states that use of a “secure password and user identification number for
each lessee” meets the writing
requirement, indicating that the writing requirement is needed to identify the
person making the disclosure, and the use of a secure password and
identification number meets this need.
A
certificate of title must not only be written, but printed using a secure
process, because the concern is not just who is assigning the title, but
whether title information is altered or forged, and whether the title is
counterfeit. (Ask anyone in law
enforcement about widespread title counterfeiting, altering, and forging.) The draft COTA provides no standards for the
integrity of either paper or electronic titles.
In fact, the draft does not even meet the Huddleson
letter’s standard for a written
document, never mind standards for a document created with a secure process.
In
addition, missing from the section’s laundry list of items making up the
contents of the certificate of title are any mention of reassignment blocks on
a paper title or similar spaces on the electronic title. Without this mention, the draft provides no mechanism
to transfer title.
Recommendation # 3. The draft should delineate those aspects of the
content of both electronic and paper titles necessary for the proper assignment
of title. Despite repeated requests of this committee for an explanation as to
how an electronic title will be transferred, we are still in the dark, so
cannot make a specific recommendation here, other than to state that each
transfer must be securely recorded on the existing electronic title.
Recommendation # 4. The draft must contain standards as to the integrity
and security of electronic titles, at least as strong as those that apply
presently to paper titles.
Section 16. Transfer. As described earlier, perhaps no titling issue is
more important to used vehicle purchasers and to law enforcement than how an
existing title is transferred. But the
only draft COTA provision dealing with this simply states that the transferor
executes the certificate to the buyer.
This is clearly inadequate. In every state, each transfer must be
accompanied by the signature and printed name of the individual executing the
transfer, the date of the transfer, the transferor’s full name and address, the
transferees name and address, and the signature of the transferee. Why bother including brands on the title if
there is no requirement that the transferee even acknowledge seeing the title?
Section
16 does not even say that the execution shall be “on” the actual certificate,
appearing to allow execution on a separate document. In every state, the transfer must be executed
“on” the certificate, and delineated exceptions are made where the certificate
is lost, in the possession of the creditor, or where all the reassignment
blocks are already completed. Of course,
such exceptions will never be necessary with an electronic title, because the
electronic title is never lost or physically absent, and the reassignment
blocks on an electronic title are never filled up.
The
draft quotes extensively concerning the NMVTIS.
Nothing is more critical to the successful operation of NMVTIS than the
assurance that every transfer be indicated in a secure means on the electronic
title, with information identifying the transferor and transferee. Many in law enforcement are excited about
electronic titling for one fundamental reason:
it will mean that every reassignment of title, with the information that
must be disclosed on that reassignment, can be reported immediately to the DMV,
and easily captured on an electronic database.
The major flaw of any motor vehicle database in use today is that it
relies on initial information found on new title documents and not that found on
subsequent reassignments of that title. Consequently,
electronic titling has both increased potential for fraud (because of the ease
of manipulation of electronic information) and for stopping fraud. The draft
COTA does not deal adequately with either potential.
Section
16 also uses the phrase “as promptly as practicable.” This is an overly permissive standard,
allowing transfer of the title any time a party wishes, as long as it can make
a colorable argument that it would be impractical to do so earlier. The language makes prompt transfer of title
optional.
Recommendation # 5. Specify that the execution for both paper and
electronic titles must be on the certificate itself, with clearly delineated secure alternatives for any narrow
exceptions for paper titles.
Recommendation # 6. Any transfer of title must be accompanied by specified
information, including the identity, addresses, and execution of both parties.
Recommendation # 7. Replace “as promptly as practical” with “promptly.”
Section 17. Notice of
Transfer Without Application. This section is
confusing. Every transfer must be
indicated on the existing certificate of title.
There can also be standards as to when such a transfer must also result
in a new application for a title. For example, in every state today, a transfer
for retail use requires application of a new title, although this provision is
noticeably absent from the draft COTA.
For
electronic titles, there is no “may” involved.
The transfer must result in an execution on the electronic title, and
that change to the electronic title must be a matter of public record. There is no such thing under federal law as a
transfer of title that does not involve an assignment of the actual title. This
optional reporting of a transfer in law confuses too many concepts.
Recommendation # 8. Delete this provision or rewrite it to require
application for a new title after each sale to a buyer for use, and to require
that every transfer be indicated on the certificate of title. Since one would assume that the DMV and
NMTVIS will have access to the
electronic title, this means that any transfer of an electronic title must
promptly be provided to the state.
Conclusion
These
recommendations do not exhaust our concerns with the draft COTA or with the
process by which it has been achieved.
Instead, we urge the committee to contact those in law enforcement and
other interested parties to develop a more balanced and comprehensive
certificate of title act. At a minimum,
any end product should not be held out as a “Uniform Certificate of Title Act,”
but only should be represented as containing selected provisions relating to
motor vehicle titles. To do otherwise would seriously mislead state
legislatures and the public.
Thank
you for the opportunity to present these views.
Jonathan Sheldon
Staff Attorney
77 Summer Street
617-542-8010
FAX 617-542-8028
jsheldon@nclc.org