Friday, January 29, 2010

North Carolina Dealer Lien Fraud Has Unhappy Consequences

I just read an excellent editorial by the Times-News of Henderson, NC about an unfortunate fraud situation. The links to the editorial and the original article are below. Here's what happened. Facts are from the Times-News, inferences (infer) are mine.

November or December 2008: (infer) Cars America acquires a 2004 Honda Accord (probably a trade in). This car has a lien held by American General Finance Services.

December 2008: Richie Ritter purchases a 2004 Honda Accord from Cars America. He finances the vehicle with a $14,000 loan provided by the State Employees Credit Union (SECU).

December 2008: Dealers are normally responsible to complete the application for title (and note a lien) for the owner and especially the lender (SECU). This would include sending a check for the remaining balance of the loan to American General. American General would then release their lien and send the title to the dealer to accompany the application for a new title. This does not happen - American General does not receive a check for the balance of the loan.

December 2008: (infer) Somehow Mr. Ritter receives a plate and registration for the vehicle. This is problematic since instructions for registration require "Complete the title application (MVR-1), declaring all liens, signed in the presence of a notary" and should have been accompanied by the title received from American General.

December 2008 - January 2010: (infer) SECU never receives the title with their lien noted. American General at some point stops receiving payment on the loan and begins repossession process.

December 2008 - January 2010: Mr. Ritter makes loan payments to SECU totaling about $4000.

January 2010: (infer) American General eventually tracks down SECU and lets them know they are asserting their right as lienholder to repossess Mr. Ritter's Accord.

January 25, 2010: SECU informs Mr. Ritter that the vehicle is going to be repossessed by American General.

It looks like Cars America will end up defrauding American General, SECU, and Mr. Ritter, as none of them will likely fully recover what was lost. We're especially sorry for Mr. Ritter's loss since he is the ultimate victim here. This is one reason why state programs like ELT are so valuable. One of our customers told us of a similar situation in South Carolina, but because they combined vigilance with tools (ELT and Title Check) they were eventually able to fully recover the loss from the dealer.

We are hopeful that North Carolina will provide similar services. We'd love to assist lenders and vehicle owners to avoid similar fraud situations.

January 27, 2010 story in Times-News
January 29, 2010 Editorial in Times-News

Image: Cars America Logo