The Expert Podcast

Big Time article today in Fortune Magazine, one of the largest financial publications, about a subprime auto lender going out of business. We get hundreds of calls every day from people who bought a car from a dealer, and the dealer went out of business before they got their title after paying it off. This means they did a buy-here-pay-here deal with this dealer. They paid payments directly to the dealer—one year, two years, whatever it is—and at the end of that period, the dealer had gone out of business, and they never got their title. You don't get your title until you make your last payment, so if that dealer goes out of business within that period of time, you're out of luck. It’s a very serious problem to get a title, and you can see the link below for some methods to get your title if you've been a victim of a dealer going out of business.

But what does it mean for this particular dealer, and how big of a problem is it? Well, this dealer is called American Car Center, and they closed their doors. They had a $222 million bond sale that they just pulled. They were trying to get some money. They had 288 people working for them at their headquarters, and they had 40 dealerships across 10 states.

What does that mean? Well, if each dealership, let's say, sells—I don’t know—maybe 30 or 40 cars a month, probably more, but let's say 40 cars a month, that means every month they're putting like 1,600 cars on the street across all their dealerships. There’s probably more than that, but let’s just call it 1,600 cars every month, or 20,000 cars a year. These are cars that are being put on the street without giving titles because they hold the title until it's paid off. So even if their loans are only for a year long, that's 20,000 people who are at risk of not getting a title. And if their loans are two years, or if they sell 50 cars a month, you could be talking 30,000, 40,000, or 50,000 cars. There's a possibility there could be a hundred thousand cars out there with title problems.

So, what happens? You buy a car from this dealer, you pay payments for six or eight months, and then they go out of business. Now, how do you get your title? Presumably, there may be a company that comes in and buys up their assets or takes over their operations, or whatever it is, or they go bankrupt. But in the meantime, your title is now at risk.

If you are a customer of this dealer or any dealer that goes out of business while you're making payments to them, you want to get good legal advice right away. This may be something you contact an attorney about. At least make a filing with the licensing board. So, how do you go about getting a title? Well, you need to file for a court order title or a magistrate title, sometimes called a civil lien. This may eliminate you from having to make the rest of your payments, too. But what you want to do is start that process early because, in some cases, the titling division of your state has a victim’s restitution fund that this dealer's been paying into for years. Once that fund is exhausted, it may not be as easy to get a title. You want to be at the front of the line. So, if you are a customer of this dealership or any dealership that has gone out of business, the first thing you do is file for a magistrate title or a civil lien title or a court order title. Every state, and even counties, call it different things.

But this is huge news. This could mean tens of thousands of vehicles out there with title problems and lien release problems because there’s really nobody around anymore who can issue these titles and sign off on lien releases, because they’re going out of business. They laid off 288 people, and all employees will be terminated by the end of the business day. It’s not like they’re going to be around to finish up on paperwork or to get people their titles. All employees are gone that same day. It was very sudden, so it’s not like they’re going to have a staff that says, "Hey, let’s wind it up and get these people their titles." They’re done, and the office is closed. That’s going to be a problem.

So, anybody who has this type of scenario, you want to start right away with getting the process going to make sure that you don’t lose out on your vehicle, and all that money you spent on payments doesn’t go down the drain.