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Automobile Fraud: 3.5 Title Information That Dealers Must Retain

Federal regulations create title document retention requirements that apply to “dealers and distributors of motor vehicles,” acting as either transferors or transferees.79 A dealer is defined as a person that sold at least five motor vehicles during the prior twelve months to buyers that in good faith bought the vehicles other than for resale.80 A distributor is a person that sold at least five motor vehicles during the prior twelve months for resale.81

Automobile Fraud: 3.6.1 Introduction

Prior sections discussed the consumer’s right to see the certificate of title because federal law requires that the consumer sign the certificate as transferee and what information is found on that certificate of title. A related issue is when in the transfer process must the consumer sign the document and, thus, when does the consumer have the opportunity to examine the information on the certificate of title.

Automobile Fraud: 3.6.2 Federal Requirements

Federal regulations require that odometer disclosures be made on the title “in connection with the transfer of ownership.”88 The mileage disclosed should be the mileage at the time of transfer of ownership, not when the title is assigned.89 Consequently, federal law allows the title to be signed by the transferee at some time after the transfer of ownership, and not necessarily simultaneously with the transfer of ownership.90

Automobile Fraud: 3.6.3 Explicit State Requirements As to Timing

Virtually all state title statutes specify when the old title must be signed over to the transferee. A substantial majority of states require that the title documents must be signed over to the transferee “at the time of delivery.”91 In other words, when the consumer takes possession of the vehicle, the dealer on that day must fill out and sign the reassignment form on the title or on a separate document, and obtain the consumer’s signature on that document.

Automobile Fraud: 3.6.4 No Ownership Change Until Title Documents Transferred

In certain states, the law provides a natural incentive to transfer the title document immediately. In these states no ownership can change hands until the title document is completed and provided to the transferee. These are called strict title states. For example, Missouri title law states that the sale of a vehicle without assignment of the certificate of title is fraudulent and void.96

Automobile Fraud: 3.2.5 Transfers Not Requiring Assignment of Title

Almost every type of transfer requires an assignment of title, but there are certain exceptions. A secured creditor repossessing a car typically does not receive an assignment of the title from the debtor, because the transfer is involuntary. Instead, the states have created procedures whereby a new title will be provided in the name of the secured creditor after certain documentation is filed by the creditor. It is improper for a repossessing creditor to sign over the old title, which is still in the prior owner’s name, to the secured creditor’s transferee.

Automobile Fraud: 3.2.7 Vehicle Registration and License Plates

Titles typically are not kept in the vehicle but retained by the lienholder or, hopefully, kept in a secure location by the owner. A registration is provided to be kept with the vehicle that shows proof that the vehicle is titled. A registration may also show operators in addition to the owner. Although a registration may refer to an individual as an “additional owner,” that individual may only be an operator and not an owner.

Automobile Fraud: 3.3.1 Importance of the Issue

Federal law requires that a transferee of a used vehicle sign the certificate of title being transferred.13 There are two narrow exceptions, and in those cases federal law specifies alternative documents that the transferee signs.14 Federal law does not require the buyer to sign a title when purchasing a new vehicle, for the simple reason that there is no title until the first purchaser for use applies for a title on the new car.

Automobile Fraud: 3.3.2 Consumer’s Signature When New Vehicle Is Transferred

A new car is issued a manufacturer’s statement of origin (MSO) at the time of production, and when that vehicle is transferred to the first purchaser for use, there is no existing certificate of title. Consequently, the consumer does not sign an assignment of a certificate of title. Federal law also does not require the consumer to sign the MSO, although state law or industry practice may so require.

Automobile Fraud: 3.3.3 Standard Procedure When Used Vehicle Is Transferred

When a used vehicle is transferred, the transfer will be detailed on the existing certificate of title. Usually the existing title will have printed on it the name of the most recent purchaser for use (that is, it will be titled in the name of the most recent purchaser for use). The title will not have printed on the front the name of the dealer or others in the chain of title that purchased the vehicle for resale.

Automobile Fraud: 3.3.4 When Transferee Signature Allowed to Be on Reassignment Form Instead of on Title

A title will typically have three or four reassignment blocks allowing the title to be assigned multiple times. When a vehicle is purchased for use state law will require that a reassignment block be completed, and then that the title be turned in to the state in exchange for a new title showing the transferee for use as the owner. The new title will similarly have a number of blank blocks for future reassignment of that title.

Automobile Fraud: 3.3.5.1 General

Dealers frequently seek to obtain a power of attorney from a consumer, which allows the dealer to sign the old certificate of title for the consumer, in effect signing both as transferor and transferee. In this way, the consumer never sees the old title. In addition, if the dealer rips up a power of attorney, the dealer can pretend that the transfer never happened.

Automobile Fraud: 3.3.5.3 State Law Must Allow Use of Power of Attorney

Federal law allows use of a power of attorney only if allowed by state law.46 In general, states do not prohibit use of a power of attorney, but may place certain restrictions on their use, and the dealer will then have to comply with both these requirements and the requirements of federal law.

Automobile Fraud: 3.3.5.5 Part A of the Power of Attorney Must Already Be Completed

A dealer’s ability to use a power of attorney to transfer a vehicle to a consumer is sharply limited by federal law. A power of attorney can be used to transfer a vehicle from the dealer to a consumer only if that dealer already has a power of attorney covering that vehicle from the party who transferred the vehicle to the dealer. This can happen only when the party transferring the vehicle to a dealer gives the dealer (the transferee) a power of attorney to complete the title documentation.

Automobile Fraud: 3.3.5.7 Further Requirements for a Valid Power of Attorney

In the rare situation in which a dealer has properly obtained a power of attorney to act as both transferor and transferee, the dealer has further obligations. The dealer reviews the physical or electronic title and any reassignment documents and, only if no discrepancies are found, acknowledges disclosure on the physical or electronic title.

Automobile Fraud: 3.3.6 Fallacious Argument That Buyer Cannot Legally Review All Information on the Title

Certain dealers allege that the federal Driver’s Privacy Protection Act (DPPA) prohibits car buyers from reviewing all the information on the title, because this statute prohibits release of the names and addresses of prior owners. This argument is certainly fallacious, and one can expect it to be used only to hide information on the title that would otherwise uncover a fraudulent transaction.

Automobile Fraud: 3.4.2 Information on the Title

Physical titles generally include the name of the jurisdiction and the phrase “certificate of title” at the top center of the form. Below that is printed the vehicle identification number,72 the year and the make, model and body type.

Automobile Fraud: 3.7.2 The Development of Electronic Titling

There have been efforts to convert some or all aspects of the automobile lien and titling system to electronic formats for many years. The reasons behind this push are varied. Automobile creditors see electronic liens as less expensive and time consuming and easier to maintain from a recordkeeping perspective. Some states and other title issuing jurisdictions also see electronic titling as a time and money saver.

Automobile Fraud: 3.7.3 Federal Standards for Electronic Titling

In 2019, NHTSA issued a rule establishing federal standards for electronic titling and electronic title disclosures.124 The rule may encourage some states that have not implemented electronic titling to do so, and also may encourage states with hybrid systems to implement an entirely electronic system.125

Automobile Fraud: 3.8.1 The Driver’s Privacy Protection Act

The Driver’s Privacy Protection Act of 1994 (DPPA),132 effective September 13, 1997, established privacy rights concerning title and other motor vehicle information held by state agencies. This statute complicates the ability to trace the identity of former car owners through a title search. The Act prohibits state departments of motor vehicles (DMVs) from releasing this information in certain situations, permits the information’s release in others, and even requires DMVs to supply this information in yet other circumstances.