The Expert Podcast

Getting a title for your vehicle can seem difficult if you have improper paperwork or if there's a lien on a vehicle. But beware of some of the shortcut methods that some people or companies use that could get you into trouble. This scenario has come up many times before in a scheme called lien stripping or lien release fraud. If you have a vehicle with a lien, there’s a proper way to get a lien release, and it’s through proper channels of documentation with the lienholder.

However, there are companies that attempt to get you a lien release using lien stripping, but it doesn’t last long. We’ve seen cases of this as early as 1998. A significant case occurred in San Antonio in 2004, and there’s a new one—it never ends. In this instance, a company stripped liens from 100 cars illegally, leading to their conviction. This is not a local crime; it is prosecuted by the U.S. Attorney’s Office, Department of Justice, and a federal jury has found these people guilty on all charges, including conspiracy. This is major jail time, and many of the vehicle titles in these cases are eventually revoked.

Here’s how it works: Licensed vehicle facilities like repair shops, dealerships, towing companies, or body shops can process what’s called a mechanic’s lien. For example, if a vehicle is brought into a shop for repairs and the owner doesn’t pay their bill, the shop can send out notices, publish information in newspapers, hold an auction, and transfer the vehicle to the auction’s buyer.

Fraudulent mechanics liens occur when companies file fake paperwork claiming a car was brought to a shop for repairs and the bill wasn’t paid. They then hold fake auctions, transferring the vehicle to themselves or friends who claim to have purchased it. These mechanics liens are highly regulated and audited by the DMV, titling authorities, and the U.S. Attorney’s Office. Fraud in this area is quickly identified due to the clear evidence of wrongdoing.

One case involved a company targeting individuals with bad credit, bankruptcy filings, or late loan payments. They offered a "free bankruptcy program" to financially distressed people who owed more on their car loans than the cars were worth. The company promised to cover attorney’s fees if the individuals surrendered their vehicles. People signed up, often from faraway states like California, and surrendered their cars to this Indiana-based company.

The company filed fake mechanics liens, claiming they were holding auctions to satisfy unpaid debts. However, the debts were fabricated, and the storage fees were falsified. Fake auctions were conducted, and the vehicles were "sold" to friends who claimed to have paid the exact amount of the storage fees. In reality, no payment occurred, and the titles were fraudulently transferred. The vehicles were sold for profit, generating over one million dollars in illegal earnings.

Be aware that if you’re thinking of using a loophole or illegal method to obtain a vehicle title, you’re not the first. This type of fraud has been seen many times over the last decade, with cases both large and small. For example, the U.S. Attorney’s Office prosecuted a case involving just one fraudulent transaction per week, but it still led to major federal action.

If you’re trying to get a lien release, ensure you’re following legitimate methods and that any service you hire is also operating legally. Fraudulent lien release schemes result in revoked titles, fines, imprisonment, and other severe consequences. Avoid shortcuts and stick to proper channels to ensure your vehicle title is obtained legally and securely.