Today, we’re talking about auto dealership fraud and “buy here pay here” dealerships. Here’s a press release from the Department of Justice (DOJ) that is a very good example of how small used car dealerships can use an internal financing function to collect millions of dollars that they are not entitled to have. This article has to do with the dealership in Tennessee called Auto Masters. Remember, this is all alleged right now, innocent to improve and guilty. Basically what happens is when a small car dealership finances cars as a buy here pay here dealership. When they have ads that say “we finance anybody”, here’s how it works. When a dealership advertises itself as a “buy here, pay here” dealership or “we finance anybody”, here’s how it works:
The customer goes to the dealership and let’s say they buy a $10,000 car. They put down $2,000 and they finance the remaining $8,000. As a “buy here pay here” dealership, that dealership is the original lender of that loan. So the customer pays the dealership directly for their car payments. It’s not paid to a bank, it’s not paid to a finance company, it’s actually paid to the dealership. Because of that, the dealership is allowed to make its own credit decisions on financing, which sometimes allows for less qualified buyers to get credit. So the dealership will finance the loan and they get their payments. Usually, it’s a weekly payment system where the customer comes in every week when they get their paycheck and they pay their weekly payments. It’s not a monthly payment, it’s a weekly payment. So instead of paying $400 a month, you pay $100 a week.
So the dealership lends this money out but at some point, they don’t have millions of dollars to have out financing on the street. So maybe once a month, they take the package of loans that they have out and package them up and they have a line of credit from what’s called a backup lender. They tell that backup lender “we have this package of loans, it totals to $152,000, here are all the loans, here are the contracts, and I want you to lend us money based on these loans” They’ll sign an authorization affidavit saying “we really have these loans that people are making payments and we want to use that as collateral to get a loan from you so we can go buy more cars”. At some point, if you finance all of your cars, you don’t get cash for that $10,000 car you only have $2,000. You can’t go buy another $10,000 car because the customer still owes you $8,000. So you can get this line of credit. You get the money from the bank and then you go buy more cars. Well, there are some requirements.
First of all, you have to actually have that loan out on the street. Second of all, it has to be performing where you have to represent to the lender that the person’s actually making payments. Some of these lenders require that the dealer gets two or three payments first so it’s not a first payment default before they can get money or refinance from this backup lender. Well, what this dealer did was they went to the backup lender and said “we have all these loans out on the street and we want to get financing for it” and they actually collected almost $30 million from this backup lender without having proper loans in the street, they may have been made up from scratch, they may have been non-performing, they may have been delinquent. For whatever reason, they weren’t real loans that were qualified to get them financing. So how does this affect consumers?
Well, what happens is for many of these loans, the titles are secured by the backup lender or maybe they’re not even acquired at all from the trade-in customer. So if you are a buy here pay here dealership or a small dealership that does your own in-house financing and you don’t pay off your lender, the customer might be in jeopardy of getting their title. So there are a lot of dominoes that could fall for a dealer that doesn’t do the paperwork the right way. So small used car dealers that do their own financing have these financial structures behind them that are usually invisible to the public but may create consequences both for the lender because now they’re out of their money and for the retail public that may have title problems.
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Order Vermont Title LoopholeOrder Deceased Owner Title TransferOrder Bonded Title ProcessOrder Abandoned Vehicle ProcessOrder Prior Owner ContactOrder Lien Release Request LetterPGlmcmFtZSBzcmM9Imh0dHBzOi8vYXBwLmFjdWl0eXNjaGVkdWxpbmcuY29tL3NjaGVkdWxlLnBocD9vd25lcj0xOTQ4ODEyNiZhcHBvaW50bWVudFR5cGU9MjMwNjY0MTAiIHRpdGxlPSJTY2hlZHVsZSBBcHBvaW50bWVudCIgd2lkdGg9IjEwMCUiIGhlaWdodD0iODAwIiBmcmFtZUJvcmRlcj0iMCI+PC9pZnJhbWU+PHNjcmlwdCBzcmM9Imh0dHBzOi8vZW1iZWQuYWN1aXR5c2NoZWR1bGluZy5jb20vanMvZW1iZWQuanMiIHR5cGU9InRleHQvamF2YXNjcmlwdCI+PC9zY3JpcHQ+
We work with government agencies quite a bit on investigations and vehicle title issues. Here’s a case from the Department of Justice (DOJ) where several individuals were caught engaging in vehicle title and odometer fraud in Chicago, Illinois. What happened was the Department of Justice (DOJ) found that these three people allegedly had a vehicle title fraud scheme that involved hundreds of used cars over the course of many years. And what’s the takeaway from this? Well, anytime you’re getting a vehicle title, if somebody else is doing it for you, make sure that you see the paperwork make sure that you understand what process is being used to get a vehicle title. If you just tell somebody to get you a title and it shows up in your name, you don’t know if the method was titled fraud that was used to get you your title. You want to be the one that sees and signs all the documents. You don’t want anybody forging your name because for many of these vehicles, hundreds of used cars over many years, these vehicle titles are going to get revoked.
So if you received the vehicle title through a method that was fraudulent, you’re at risk of that title being revoked. According to court documents, these three people allegedly altered vehicle title documents to reflect false low mileage and also reflect false scenarios of how that title was obtained. They’re charged with conspiracy to make counterfeit securities meaning titles. The vehicle title is considered a security because it is a legal government document. And these people are subject to years in prison for conspiracy. This type of fraud results in an estimated $1 billion annually, this type of fraud, not these particular people. And they even have a hotline for this type of fraud. This is the DOJ, this isn’t your local police department or your state police, this is the US DOJ that investigated this.
We see this quite a bit. We see a lot of attempts at obtaining a vehicle title using improper methods. You don’t want to use an improper method. There is almost always a legal good way to get a vehicle title for your vehicle. Almost always, unless you have a stolen car or a car that’s not supposed to get a vehicle title, then forget about it. But if you have a legitimate vehicle that’s clean, that doesn’t have any red flags on the title record, you can get a title if you do it the right way. A lot of times a client or actors like this allegedly want to use alternate methods because it seems a little easier. It seems like it’s some kind of a shortcut. It might be cheaper might be faster. You might not have to do as much work. But if it’s going to result in problems, in the long run, you want to avoid it. This scheme out of Illinois went on for two years. There are people that two years ago thought they were in the clear with their vehicle title and come to find out that now they could be at risk.
So make sure when you’re getting a vehicle title that you recognize that title is not just a piece of paper, you are signing documents that say that what you’re claiming is true and correct. And if you make false statements, just to try to get a title, it could result in serious problems. Again, we’re not attorneys, we’re not giving you legal advice. You know if you’re concerned about anything with a vehicle title you might want to get a qualified legal opinion from an automotive attorney or law enforcement, but keep in mind there’s always a good legitimate way to get a vehicle title. If you take a shortcut, at the very least it could result in aggravation, at the very most it could result in different types of serious legal liability.
So how long does it take to get a title or registration for a vehicle from the DMV? How about months? Well, that’s a little bit of a teaser because it doesn’t always take a month but here’s an article from WRAL News in North Carolina, where their own Department Of Motor Vehicles is saying they’re acknowledging that customers are experiencing extreme wait times from a backlog from the pandemic and a lot of the positions in the organization are vacant. Hiring problems don’t just exist in the public, the government faces the same problem. This is just one state but it’s an example of what you might find in your state. Remember, this is not in the middle of the pandemic, this is November of 2022. Getting a title or driver’s license or registration is an important event, you need that to drive your car. What can you do to speed up the process?
Well, first of all, make sure the paperwork is correct when it’s submitted. If you send something to the DMV, even if it’s a three-week wait time, but there’s something wrong with it, you have to wait three weeks to find out something’s wrong with it. Then fix it, then send it back in and then wait another three weeks. Sometimes the rejections take longer than a successful title. Here’s why. If you send in a package and it’s correct, it goes through the proper channels of issuing a title. If it’s incorrect, the first person in the department that gets it this supposed to issue a title. They see that it’s erroneous and they don’t just send it back, they pass it along to basically their supervisors to make sure that it’s really incorrect. They don’t want to just reject it right off the bat, they want somebody else to look at it to make sure they’re right. So sometimes you might have to wait longer to find out something is wrong than you would have if it was right in the first place. As an example, we find in the state of Vermont, if you send in the properly completed paperwork, you might get it back in 10 to 14 business days. If you send in erroneous paperwork, you might have to wait three weeks to find out that it’s wrong. So make sure your paperwork is correct.
What’s another strategy? Well, sometimes if you go in person to the DMV office closest to you, you might think that’s going to be faster, but maybe not. That office that’s closest to you might be a branch office, they might not actually process documents in the office. You might think Well if I go there in person I can walk out with my paperwork, it doesn’t work that way. Not every office is designed to actually process paperwork, they’re usually just reception desks in many states. The main branch is usually in the state Capitol in North Carolina it’d be Raleigh, in some states it’s in a different city than the Capitol, like in Connecticut it’s Weathersfield which is next door to the Capitol of Hartford, but that’s where their main branch is. Sometimes we find if you send it by mail to the main branch of the DMV, you will actually get faster results than if you try to walk in and make an appointment. So try using that as a strategy. Plus if there is something wrong with it, that’s where they determine it. You’ll get it sent back right away. If they find a problem at a branch they might have to send it to the main office have them review it and then send it back to you. If you mail it directly to the main office, you might find out instantly if you have to get more paperwork.
So be prepared for delays and try to work around them. Remember, a title is a legal government document issued only by a government agency. You can’t buy one from a company. You can’t download one from the internet. It has to come from that agency and it’s considered a legal document. So make sure your paperwork is correct, submit it correctly, and get your title as fast as possible.
Are you waiting to receive your car title in the mail from the DMV, but wondering why you haven’t received it yet? Check out our article How Long Does It Take For A Car Title To Come In The Mail?
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Here’s another dealership barred from selling vehicles over title problems, let’s take a look. An article from KWCH talks about this dealership in Kansas that had an $87,000 default judgment for complaints about the dealership failing to provide titles to buyers. In addition to that, they failed to pay off outstanding loan balances on trade-ins resulting in consumers having two car payments and no titles.
This is a big deal and here’s a big red flag. The deal, allegedly this is all alleged at this point, is they sold that vehicle that they didn’t pay off to a protected consumer without paying off the trade-in. So this is an often overlooked reason why dealerships have title problems. If you take in a trade-in that has a lien on it, let’s say it’s a 2019 Toyota Camry somebody owes $20,000 on it. So you take in that trade-in, as a dealership you’re supposed to pay off that $20,000 loan, but what if you say well I’m not going to pay it off right away because that $20,000 is real money coming from my bank account. What if I sell that car to somebody else, don’t pay off the loan right away, and let them drive it? And then eventually when I get the money I’ll pay it off, but what if you never get the money? What if you use that $20,000 for payroll or for rent or for some advertising? Now the person who bought the car paid you whatever they paid you for the car, maybe they paid you $25,000, and you got that money, but you didn’t pay off the $20,000 loan.
So you’re like double dipping on that car. It’s called being out of trust. And a lot of dealerships do it when they run into money problems because it’s an easy way to get some extra financing without having to go to a bank. You already got the financing, it’s somebody else’s car loan. Now, if you’re the person who traded it in, you have a problem because your car loan is not being paid. You might get late payments. It’s going to hurt your credit. Or if you’re the person who bought the car, you can’t get the title because some other bank is holding a title to a car you paid cash for. So, this is a very serious problem of not paying off trade-ins. Again it’s alleged at this point with this particular dealership. But we get calls all the time from people that bought a car and never got the title and they found out there was a lien on it at another bank that never got cleared. We get calls a lot of times from somebody who traded in a car and find out that their lien never was removed. So anytime you’re doing a vehicle transaction buying or selling, make sure if there are any liens involved that they get cleared from the title record. Even if you show that it was paid to the bank getting the check, but it doesn’t clear it from the title record unless proper documents are signed and submitted to the DMV.
So a lien release is as important as a title, sometimes more important. And dealerships a lot of times play fast and loose with titles. Anytime you see a dealership having a title problem, the first red flag in your mind is, is it a lien release problem? Is it a lien release default from that dealership? And if you look at that option first, it might point you in the right direction of solving that title problem.
In our work with government agencies, we often encounter various investigations related to vehicle title issues. A recent case in the state of Illinois sheds light on title fraud and odometer fraud schemes carried out by several individuals. This case emphasizes the importance of vigilance when obtaining a vehicle title and the potential consequences of fraudulent methods.
The U.S. Department of Justice (DOJ) uncovered a title fraud scheme allegedly orchestrated by three individuals in Illinois. This scheme spanned across many years and involved hundreds of used cars. The individuals are accused of engaging in odometer fraud and altering title documents to reflect false low mileage and misleading scenarios about how the titles were obtained.
According to court documents, the charges include conspiracy to make counterfeit securities, with vehicle titles considered as such due to their status as legal government documents. If convicted, the accused individuals face significant prison sentences. The fraud is estimated to have resulted in an annual loss of around $1 billion.
1. Be Involved in the Title Process: Whenever someone else is handling the process of obtaining a vehicle title on your behalf, ensure that you actively participate in the process. Demand to see and understand all the paperwork involved in obtaining the title.
2. Avoid Forged Signatures: To prevent any fraudulent activity, be the one to sign all the necessary documents. Avoid situations where someone else may forge your signature, as this could lead to severe repercussions, including the revocation of the title.
3. Understand the Legitimate Ways: There are legal and proper methods for obtaining a vehicle title. Even if it might seem easier or quicker to take shortcuts, engaging in improper methods may lead to complications down the road. Always choose the legitimate route to secure your title.
The three individuals charged in this case face serious consequences, highlighting the severity of title fraud. When obtaining a title, individuals are making legal declarations that the information provided is accurate. Making false statements to obtain a title can result in legal problems.
Disclaimer: Seek Legal Advice This information is not legal advice. If you have concerns about your vehicle title, seek qualified legal opinion from an automotive attorney or law enforcement.
This case serves as a stark reminder that a vehicle title is not just a piece of paper. It represents a legal commitment, and fraudulent actions can lead to significant problems. Stay informed, be cautious, and always choose the legitimate path when obtaining a vehicle title. Taking shortcuts may result in aggravation or, at worst, various forms of liability.
For more insights into navigating the complexities of vehicle titles and staying informed on related issues, visit our website autoinsightsupdate.com. We provide valuable information to empower consumers and industry participants in making informed decisions regarding auto-related matters.
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