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This option is not meant as a spell checker.
It will look at the content of the fields and see if they can be abbreviated - in accordance to the postal rules for that county.
In your case, all "standardizable parts" of the street are already in the shortened version, e.g. Road => RD.
Please look at the documentation for this feature for more information.
Thank you Andre!
I didn't think to check the Developers guide for whatever reason and that link was very helpful. It sounds like I will need to come up with some appropriate business rules for any 'I' type codes.