26 SEPTEMBER / OCTOBER 2023 Brett J. Ashton Partner Krieg DeVault LLP BAshton@KDLegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. Electronic Lien Filing Fees COMPLIANCE CONNECTION The information herein is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. Question: Did Indiana law change recently to require banks to file lien interests on vehicles electronically? Can we charge a fee for this service? Answer: Yes and no. Indiana law changed in 2021 with the enactment of Ind. Code § 9-17-5-6, but a subsequent delay in the compliance date of this section of the code as a result of 2022 legislation1 meant mandatory electronic or “e-lien” filings for any lienholder filing more than 12 lien transactions annually did not become required until July 1, 2023. While the ability to file lien interests electronically improves the overall efficiency of the lien filing and release process, the mechanics of how fees are paid in connection with e-liens presents compliance challenges that warrant attention. The electronic lien system is operated by third-party vendors approved by the Indiana Bureau of Motor Vehicles. These third-party vendors assess and collect a fee directly from users for using the electronic filing service, in addition to any required government filing fees. As a result, any fees charged by the third-party vendor facilitating the electronic filing are not considered government fees, regardless of whether they are then later sent to the BMV. You should carefully monitor how any fees paid to a third-party vendor for electronic lien filings in Indiana are disclosed on vehicle purchase agreements, loan 1 P.L.118-2022, SEC.6 2 The $200 prepaid finance limit only applies to consumer credit sales and consumer loans with an amount financed of more than $4000. See Ind. Code § 24-4.5-2-101(11)(c), and Ind. Code § 24-4.5-3-201(9)(b) (iii) respectively. 3 https://www.in.gov/dfi/files/BMV-E-Lien-FeeAdvisory-Letter.pdf agreements and federal Truth in Lending disclosures. Because the payment made to the third-party vendor is not paid to a government agency, it is considered a prepaid finance charge under both the Indiana Uniform Consumer Credit Code and Regulation Z of the Truth in Lending Act, and must be disclosed as such. As a result, for any bank subject to the rate and fee restrictions of the IUCCC, any fee paid to a third-party vendor for electronic lien filing in Indiana is subject to the $200 maximum permissible prepaid finance charge limitation under the IUCCC applicable to both credit sales, and consumer loans.2 The Indiana Department of Financial Institutions recently issued Advisory Letter 2023-013 dated June 30, 2023, that provides additional insight into this issue. Those banks engaged in indirect auto lending should pay particular attention to the manner in which any BMV filing fees are disclosed on consumer credit sale agreements they may purchase. HB
RkJQdWJsaXNoZXIy ODQxMjUw