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Indiana’s Bureau of Motor Vehicles Overcharged 180,000 Customers for 10 years

BMV says it will refund $29 million plus interest over the coming months

5 min read
Indiana’s Bureau of Motor Vehicles Overcharged 180,000 Customers for 10 years
Illustration Credit: iStockphoto

IT Hiccups of the Week

Put aside, for a moment, the record theft of credit card accounts from Home Depot. I'll tell you all about that in a later post. Instead let me pick another interesting IT Hiccup from last week's hodgepodge of IT problems, snarls, and screw-ups: The Indiana’s Bureau of Motor Vehicles (BMV) plans to refund some US $29 million plus interest to 180,000 customers for charging them an incorrectly calculated excise tax when they registered their vehicles. The BMV claimed the problem began during the initial changeover in 2004 to its then new $32 million System Tracking and Record Support (STARS) computer system.

According to the BMV’s press release [pdf], when a car is registered with the agency, state law requires that the vehicle be placed in a specific tax classification category based on its value. The value is calculated “using the price of the vehicle and applying an adjustment factor based upon Consumer Price Index [CPI] data related to increases in new automobile price.” The result of the value calculation is then entered into STARS which in turn uses it to automatically determine the excise tax that needs to be paid by the vehicle’s owner. For reasons that the BMV did not disclose, the STARS programming seems to have failed to take into account the adjustment factor for 180,000 out of over 60 million vehicles registered using the software system, resulting in that small subset of registrations being overcharged.

The BMV says it will be mailing out letters to those customers affected within the next month or so. However, those overcharged customers will still need to fill out the form enclosed in the letter and send it back to the state if they want to receive their refunds.

The miscalculation of the excise tax doesn’t just affect BMV customers, either. A percentage of the excise tax collected by the BMV is transferred to Indiana’s local and county governments, which are now going to have to repay an estimated $6 million back to the state. The BMV press release states that to help reduce the financial impact on local and county government budgets, the state will pay back the overcharged BMV customers and the interest they are owed. The local and county governments will then see their excise tax distributions reduced over the next two years to make up for the previous incorrect tax payments they received.

Like most of these types of incidents, this one has an interesting back story: According to the Post-Tribune, the excise tax error was only recently discovered when the latest Consumer Product Index data was being entered into STARS. Someone apparently started asking how the excise tax was being calculated, and this led to the discovery of the tax overcharges going starting in 2004.

In addition, the BMV press release states that Indiana Governor Mike Pence has authorized the BMV to appoint of an independent consulting company to audit the agency to ensure there are no more fee miscalculations. The reason, BMV Commissioner Don Snemis told the Associated Press, was that, “I don't want to discover any more errors after the damage has been done.”  Snemis might have added that what he really didn’t want were any more errors disclosed as a result of yet another lawsuit against the BMV.

You see, the BMV settled a $30 million class action lawsuit last year for also overcharging the fees paid to it by some 4.5 million BMV customers when they obtained or renewed their driver's licenses between 7 March  2007 and 27 June 2013.  The BMV was publicly embarrassed by the suit, and agreed to credit customer accounts for what it called the “inadvertent” overcharges. The lawyers suing the BMV, however, said the fees were actually imposed on Indiana drivers on purpose, something the BMV strongly denied.

Then in September of last year, the BMV was even more embarrassed when it had to admit that it had also discovered that it been overcharging customers on some 30 other fees. The BMV said that it would immediately be crediting customer accounts for any charges imposed going back six years, which was the statute of limitations. The BMV blamed “the errors on misapplying complex state laws governing more than 300 fees for various BMV services,” the Indianapolis Star reported.

Soon after the BMV admission, the same law firm of Cohen and Malad LLP that forced the earlier settlement (and earned $6 million off of it) brought a second class-action lawsuit against the BMV in October of last year asking the courts to force BMV to not merely issue credits, but instead issue full refunds. The lawsuit also demanded that there be a full accounting of all BMV overcharges, including when the overcharges were first discovered by BMV management. The law firm contended that BMV knew about the 30 plus fee overcharges for some time, and did nothing about them until the first lawsuit was filed. The BMV once more denied the charge, and countered that BMV customers were already made whole by the issuing of the credits to their accounts. Snemis also accused the law firm of Cohen and Malad of bringing the lawsuit as just a way of “seeking a very big fee.

However, the Indianapolis Star reported in June that a video tape deposition given by a former BMV Deputy Director in fact indicated that the BMV has known about the overcharging for quite a while, but “secretly kept doing it for at least two years to avoid budget troubles.”  The Journal Gazette further reported that the BMV is now trying to keep secret other depositions taken in the latest lawsuit against it, supposedly because the BMV claims that allowing them to become public would discourage others from testifying in the lawsuit, an excuse no one seems to be buying.

Another wrinkle to this story is that the STARS system itself has a long, controversial history of its own. The STARS system, as was mentioned, was initially introduced into the BMV in early 2004. However, continuing problems with it meant that the system it was supposed to replace, called BOSS, had to be used concurrently with STARS until July 2006, when BMV Commissioner Joel Silverman decided that the agency was to going to use STARS exclusively. It may have been during this cross-over period when the latest fee fiasco occurred.

Silverman’s decision did not turn out well. Angry BMV customers quickly found themselves waiting in long lines as many routine transactions were unable to be completed; online and self-service were also unavailable. Indiana state police also were said to be worried that they might arrest drivers without just cause or have to let drivers who should be arrested go free because the information being sent to them from the BMV appeared to be inaccurate.  

It wasn’t until late August that BMV operations started resembling anything approaching normal. By then, however, former Gov. Mitch Daniels was forced to apologize for the on-going BMV problems in attempt to cool the ensuing political firestorm raised by the debacle.

By early September, Silverman decided that perhaps it was in everyone’s—and especially the governor’s—best interest to resign. No doubt helping Silverman’s decision along was his loud and forceful declaration within a week of STARS going live that the system was fixed when it obviously was not, as well as admitting (pdf) that none of the extensive system testing that was supposedly done showed any indication of problems later encountered. Obviously, all that extensive testing missed the current excise tax problem as well.

It took over a year for STARS to finally start to operate satisfactorily.

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Flawed Federal Health Insurance Calculator Allows Large Employers to Offer Substandard Health Plans

US Labor Department Releases Important CPI Data Early Due to Unknown "Technical Issues"

The Conversation (0)

Why Functional Programming Should Be the Future of Software Development

It’s hard to learn, but your code will produce fewer nasty surprises

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A plate of spaghetti made from code
Shira Inbar
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You’d expectthe longest and most costly phase in the lifecycle of a software product to be the initial development of the system, when all those great features are first imagined and then created. In fact, the hardest part comes later, during the maintenance phase. That’s when programmers pay the price for the shortcuts they took during development.

So why did they take shortcuts? Maybe they didn’t realize that they were cutting any corners. Only when their code was deployed and exercised by a lot of users did its hidden flaws come to light. And maybe the developers were rushed. Time-to-market pressures would almost guarantee that their software will contain more bugs than it would otherwise.

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