Tim is searching for a used car to purchase.  He decides to buy a car from a private party rather than a dealership.  Tim has been searching on sites like Craigslist, Autotrader, and/or other private party bulletin board sites to locate the car he wants. 

After some searching, Tim finds the car he wants.  He contacts the seller and arranges a meeting to test drive the car.  The test drive goes well so Tim brings the car to his mechanic for an inspection.  His mechanic says the car is in good shape.  The sellers shows Tim the title and says the car has been paid off in full.  The title is in the seller’s name and does not show any liens on the car. 

Tim feels comfortable that he can safely purchase the car.  Tim and the seller agree on a price, he pays cash for the car, and the seller signs the title over to Tim.  Tim is excited about his car and completes the title transfer and registration paperwork with the DMV.  A few weeks later the DMV sends Tim title to the car in his name and the registration card.  At this point, Tim believes he is done.  The private party car purchase through craigslist or other online directory was a success.

Until A Couple Months later…

One morning Tim wakes up and is ready to go to work.  Tim walks outside to find his car missing.  He is in complete shock and believes that his car has been stolen.  There is no other explanation for why the car is missing.  The last thought on his mind is that the car has been repossessed.  Tim immediately calls the police to report the car stolen.

After explaining to the police that his car is missing, the police inform Tim that his car has been repossessed.  Tim doesn’t understand how this is possible and believes his car must have been mistakenly repossessed.  The police provides Tim with the name of the repossession agency that reportedly repossessed his car.

Tim calls the repossession agency to get his car back. The repossession agency says it doesn’t have the authority to release the car to him.  The repossession agency gives Tim the name of the finance company that ordered the repossession.  The repossession agency further states that the finance company ordered the repossession six months ago (before Tim purchased the car) and that it won’t return the vehicle to him without the finance company’s permission.

Frustrated and confused, Tim calls the finance company. The finance company states that it has a lien on the car and that the it hasn’t received a payment on the loan in months.  Tim explains that he purchased the car and paid for the car in cash.  Tim also explains that the car title and registration is in his name without a lien holder. 

What happens next depends on which position the finance company takes.  Sometimes the finance company says that it rightfully repossessed the car and will refuse to return the car.  Other times the finance company states that after reviewing the paperwork, it mistakenly repossessed the car and returns the car. 

Either way, in Tim’s mind, the car was wrongfully repossessed.  What are Tim’s repossession rights?  What are the repossession laws?  How do you get your car back after your car was repossessed when you have title?

The California Repossession Laws:

Fortunately, California has a number of repossession laws that give consumers rights when their car is wrongfully repossessed.  This wrongful repossession scenario is a little unique.  The conclusion as to whether the car was wrongfully repossessed really depends on the facts surrounding the finance company’s lien and Tim’s knowledge or lack of knowledge of the lien.  Here, are a couple possibilities:

1. The finance company did not have a lien on the vehicle.  A previous owner of the car paid off the loan and the finance company did not properly update their books to show the loan had been paid.  Instead, the finance company wrongfully believed that payments had been missed by the borrower and wrongfully ordered the repossession of the car.

2. Another possibility is that a previous owner did not pay off the loan.  The finance company is rightfully owed money on the car.  Moreover, the finance company never received notice that the car was sold to Tim or that title was reissued in Tim’s name and registered to Tim.  This usually occurs when the vehicle was purchased in another state and the car was then resold to a private party in a different state.

What are your rights under the repossession laws under both of these scenarios?

In California, in order for a finance company to lawfully repossess a car, it must have a valid lien on the car.  In the hypothetical situation above, the finance company does not have a valid lien on the car because title was issued in Tim’s name by the DMV prior to the repossession. 

In the case where the finance company did not update the previous owner’s loan as paid, the conclusion is very clear.  The finance company wrongfully repossessed the vehicle and should return it to Tim.  In this situation, not only did the finance company not have a valid lien on the car, the finance company was paid in full on the car loan, and was not owed any additional money.  The finance company should immediately return the car to Tim and he most likely has a very strong wrongful repossession case.

If this has happened to you, the repossession laws are on your side and you have strong case against the finance company.  We recommend contacting a repossession lawyer immediately for help.

In the case where the finance company still has an unpaid loan outstanding for the car, the case is more complicated.  But, the repossession laws should still protect Tim and the repossession should still be considered a wrongful repossession.  In this situation, the finance company did not have a valid lien to lawfully repossess the car.  Again, title was issued in Tim’s name prior to the repossession and the finance company was not listed as a lien holder on the title.  As a result, the finance company does not have a valid lien on the vehicle. 

This scenario is complicated because the finance company is more likely to decide not to return the car to Tim.  The finance company will sometimes state that there is still an unpaid loan on the car, and therefore, it is a valid lien holder.  It might also state that someone (maybe even accuse Tim) fraudulently removed the finance company as a registered lien holder on the title.  The finance company may even be partially right about being defrauded.   

There are cases where a previous owner “washed” the car title by somehow removing the lien holder from the title when the car title is reissued in a new state. But, even if this occurred, as long as Tim is a “bona fide purchaser for value”, the repossession laws should still protect Tim and deem the repossession of the car as a wrongful repossession. This would allow Tim to get is car back and make a claim against the finance company for damages under a wrongful repossession theory. 

In order for Tim to be considered a “bona fide purchaser for value”, he cannot have any knowledge of the lien holder when purchasing the car.  Basically, Tim must be a completely innocent purchaser of the car with absolutely no idea that there is a finance company that has or should have a lien on the car.  If Tim received any warning that there is a lien holder from the seller or from any research he performed during the purchase of the car, Tim would not be a “bona fide purchaser for value”.  And, if Tim is not a “bona fide purchaser for value”, he will most likely not have a wrongful repossession claim.

If you were a “bona fide purchaser for value” and your car was repossessed after purchasing it from a private seller, you should contact a repossession lawyer.  The repossession laws should protect you and you most likely have a case against the finance company.  Feel free to call the Law Office of Paul Mankin, APC at 1-800-219-3577 for a free no obligation case evaluation.