What Happens When You Don’t Pay Your Auto Loan?
January 10, 2010 | In: Auto Cars Motors
K, so heres my story, it’s a little different than most people.
I bought a car in February of ‘09 and the dealer failed to get the title to my bank as well as getting the plates to me. I ended up filing a case with the motor vehicle enforcement division. And I called my bank to let them know the situation. What the dealer did was they sold me a car that someone else traded in, but still had a loan on it from another bank. 10 months after I bought the car, the bank from the previous owner came and repo’d my car that I’ve put a 5k down payment and been making payments for the last 10 months to my own lender. The dealership shut down long ago (pretty much a few weeks after I bought my car), and are now having criminal charges filed against them. They’ve done this to probably 13 other people, according to my investigations officer. Problem is the dealer does not have any money and I don’t think I’m getting my money back anytime soon.
I called my bank and talked to them about what to do and they said I’ll still need to be paying off my loan, but I need to get an attorney to file against the dealers bonds. I highly doubt the dealer has any money left from the bond and even if they did, I’ll probably get pennies to the dollar because I have to split it between 13 other people.
So, I talked to a friend of mine who is also a car dealer and he was shocked. He said normally banks do not give out loans unless they get the title first. And he asked me why hasn’t my bank checked the title to make sure it was clear before giving me my loan, banks should have all the tools and resources to do so. And he said he couldn’t believe they gave me an auto loan to use with this fraudulent dealer without even retaining or checking the title first.
So because of this I got even more pissed off. If the bank had checked the title and told me that there’s still a lienholder from the previous owner or at least asked the dealer for the title first before giving the loan, none of this would have happened. I would have got up and left that dealership and take my $5000 down payment back. What the dealer did was illegal, but if my bank did their job and check what they were supposed to check, I wouldn’t have unknowingly bought a fraudulent car.
And if I stop paying my loans and tell them the reason why, what will they do?
Also, the scary thing is I also bank with them. Will they just reach their hands into my checking or savings account and just take money since I have accounts open with them?
9 Responses to What Happens When You Don’t Pay Your Auto Loan?
fire4511
January 10th, 2010 at 12:27 pm
When you buy a car from a private party, the bank will often ask for a copy of the title prior to issuing a loan. When you buy from a dealer, they do not. They issue a check payable to you and the dealer (or just to the dealer) and on the back there is a notice that endorsement of the check constitutes an agreement to record a lien in the banks favor on the title.
What happened here is that the dealer took the check, and your down payment, and failed to deliver title to you, or to record the lien. You were a victim of fraud, but the bank did nothing wrong. You still owe the bank the money you borrowed. The only involvement that the bank had in this transaction was loaning you money. They did not guarantee the title, or recommend the dealer. They just loaned you a sum of money to make a purchase.
If you loan me $1000 to buy a new computer system from Dell, and after I get the computer, someone breaks into my house and steals it, would you think that I should not have to repay you? Of course not! This is the same situation with the bank. They loaned you money, they want to be repaid.
Get a lawyer involved and file against the bond of the dealer. You may also want to file suit against the dealer and try to seize any assets that they may have.
Another thing the lawyer could look at is the possibility that you could have a claim under your auto insurance.The car was insured against theft, and it was in effect stolen from you.
Pay the car payments until you can get money from the bond or an insurance claim to pay the loan off. You borrowed the money and owe it. If you do not pay, the bank can sue you, and seize your assets (bank accounts) and attach your wages.
Good luck
ken k
January 10th, 2010 at 12:27 pm
you need a lawyer/thats why they were invented/protect your interests
N
January 10th, 2010 at 6:45 pm
The bond may be on a first come, first served basis.
The bank doesn’t really have any liability here.
Its fairly typical for dealers to sell cars, put the bank down as lien holder without actually having the physical title. The bank couldn’t have avoided this without a big inconvenience to you. Would you want your bank to tell you that you have to wait weeks to buy the car because less than 1% of dealers scam people ?
You don’t really have a lot of options here. Pay the bank or get your credit ruined and possibly get sued. Sue the dealer but you may not ever get anything.
For sure follow up via the DMV. If the guy had a $10k bond, would you rather have part of that $10k or none of it ? And maybe the bond amount is larger in your state ?
You aren’t the only one this kind of thing has happened to. Bigger dealers with cash flow problems did it to LOTS of customers last year from what Ive read.
I wish I had better news but the bank is not responsible here. Now, some banks can be hard tails and insist that THEY do the title work, but most of them presume a copy of the title application will suffice because in 99.9% of the cases, it does,
This situation has nothing to do with your checking or savings accounts. They cant just take your money. Unless you fail to make your car payments, then they may be able to. My credit union this year sent me notification that they could seize any & all savings accounts to pay any & all amounts due to them under any & all loans that were past due.
You might look for an attorney who will work on a % of amounts recovered. It may be too small for them to deal with though.
You could probably win a judgment against the dealer but collecting it is a totally different situation and if the dealer is broke you judgment isn’t worth anything.
If you stop paying your loan, they will report it on your credit and potentially sue you and later garnish your wages. You still owe them. Unless you want to chance it that the judge sides with you and agrees they are at fault for the dealers going belly up.
That’s a big risk for you to risk your credit on.
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January 10th, 2010 at 11:03 pm
Forget any “opinions” that you get and seek out a lawyer with experience in this sort of fiasco.
It sounds to me like the bank is guilty of not dotting their I’s and crossing their T’s and now they want to hold you totally guilty.
Paul
January 11th, 2010 at 2:21 am
If you don’t pay the loan they repo the car when you by a used car you have to look at the title to make sure there are no leans recorded when a loan is in progress on a car the title says one lien recorded and once the last payment is made you will get a new title saying no liens
Scott H
January 11th, 2010 at 3:12 am
You borrowed money from a bank to buy a car. Regardless of whether it was a legit deal, the money was spent by the lender, You signed a contract promising to repay the bank for that money. Nothing you have written here changes that. The contract was signed by you, you owe the money.The bank can use whatever remedy they have at their disposal to recover that money. They can repossess the vehicle, they can take you to court, they can garnish your wages. You are going to have to prove the bank was negligent and failed to act in good faith in the process of approving your loan. This would happen in court, and could take months or even years. In the meantime, you are still on the hook for that monthly payment. The loan is totally separate from any other issues you have described. Until a judge rules in your favor, the loan is still valid.
swarovski rhinestones
January 11th, 2010 at 9:57 am
Since the dealer sold the vehicle out-of-trust, and then went under, the only recourse you have is through the courts. I would definitely consult with an attorney.
And, as alluded to before, it’ll get messy.
***Add – Folks, he already mentioned that the car was repo’d by the original lender on the original owner’s loan. Only remedies he could get at this point would be to get his money back on the payments made and downpayment. I’m amazed that the current loan is still being enforced since there is no collateral.
Dogbetto
January 11th, 2010 at 4:25 pm
What a mess! First off, your friend told you wrong. The money goes to the dealer who processes the paperwork through the DVM who registers an encumbrance to the bank and lists the bank as the lien holder on the title. Usually the DMV will send the title to the lending institution. But then again that’s with a normal dealer. I will admit that I’ve never come across this type of trouble but some common sense might be large here. The first owner traded the car thinking that the dealer would pay it off before resale. So that guy got screwed first. That guy’s bank stops receiving payments and chases after him who tells them the car was traded. But the dealer blew it and did not forward funds to get the title. They track the car through the dealer to you. The repo guy grabs the car for bank #1. The first guy gets charged with a repo. But your bank wants to be paid. They can’t repo because the first bank owns it. You may make arrangements with the second bank to accept interest only payments until the dealer’s bond company settles the claims. You have a claim, as does your bank, and possibly the guy who traded. Most states require that a used car dealer post an insurance bond of at least $150,000, but usually more. The insurance bond is registered at the DMV. Start filing those claims for your down stroke money and payments made. Your bank needs to do the same. My guess is the insurance company will pay. Hopefully this dealer did not let it lapse. One year paid up front is usually required. Hopefully he renewed. You might choose to not pay your bank. They can’t repo the car. They have only one recourse and that is to keep billing you and showing late payments on your credit bureau. They won’t list a repo. My gut tells me that you and your bank will be paid by the bond. You will undoubtedly have some bruises on your credit but they will go away in time. It will not show a repo. Your bank can’t legally tap into your account without signed permission from you but prudence says to move your money to a different bank. Hopefully you did not sign up for direct withdrawal. You may be wrong about the pennies on the dollar. Get your claim in. Wow. What a nightmare………………………….… the bank that loaned to you for the purchase did everything proper. They don’t check each car on every application. Don’t even go there. You weaken your position when you base your argument on hearsay that is incorrect. You did right. The bank did right. The bad guy is the dealer. Period.
Vipassan
January 11th, 2010 at 8:45 pm
“it’s a little different than most people.”
No, it’s really not.
Bottom line is that the bank owns the car. Don’t pay the loan, they repo the car.
End of story.