Dealers Selling Cars Without Title By Keith Thornburg, Vice President and General Counsel

MBA has worked with the Missouri Automobile Dealers Association, the Missouri General Assembly and other interested associations, including credit unions and the Missouri Insurance Coalition, to address automobile dealers that purchase and resell trade-in vehicles without obtaining or delivering title at the time of possession when vehicles change hands. During the 2020 legislative session, the Missouri General Assembly passed House Bill 1963 to address various transportation topics, including new dealer provisions.

Missouri does not have electronic titling infrastructure. Vehicle owners lose their titles or never retitle a purchased vehicle. Missouri vehicle dealers will take cars without title on trades, intending to obtain a duplicate title under an affidavit and assignment from their customers. Dealers will then apply for a duplicate title so the trade-in vehicles can subsequently be sold. Oſten, dealers have an opportunity to sell these vehicles before obtaining a duplicate title from the Missouri Department of Revenue. House Bill 1963 establishes a structure for responsible dealers to sell a vehicle under a written agreement to provide the purchaser a duplicate title within 30 days.

Section 301.210.4 of Missouri law makes it a statutory fraud to sell a vehicle without same-time delivery of the title. Te new law provides that selling a vehicle without title is “presumed” fraudulent “unless” the sale is by dealers following the procedure outlined in Section 301.210.5. Why is this important?

Plaintiff lawyers have successfully targeted dealers who sell cars without title where the dealers have not followed the law and sound business practices. In June 2020, a case out of the Missouri Eastern District Court of Appeals, Heinz v. Driven Auto Sales and First Community Credit Union, found that any lender purchasing dealer finance paper could be liable for the actions of the dealer. In this case, the dealer failed to deliver the title to a vehicle sold by the dealership. Te claims presented included a claim under Missouri Chapter 407 (unfair merchandising practices — UDAP). Te state-chartered credit union sought to be dismissed from the case because 407.020 exempts state-regulated entities (banks, credit unions and insurance brokers) because their regulator exercises consumer protection oversight. Te Eastern District reversed the trial court’s dismissal and remanded the case for trial. Although the

credit union was not directly liable under Chapter 407, the court held that the “fraud” committed by the dealer tainted the dealer finance paper purchased by the credit union and held that the credit union could be liable for the dealer’s violation.

Te key provisions of House Bill 1963 related to dealers selling cars without titles follow.  Section 301.210.5 sets out the primary structure and requirements for dealers to buy and sell vehicles without simultaneously delivering the title. Te Missouri Department of Revenue has updated its dealer manual in Section 13- 2 for the new requirements: forms/Dealer%20Operating%20Manual.pdf.

Te DOR also has prepared the form of agreement — — for the dealer and vehicle purchaser when the dealer sells a vehicle with the commitment to deliver title within 30 days.

Dealers deciding to use the sale without title provisions under Section 301.210.5 must maintain a $100,000 bond with the DOR.

 Section 301.190 allows for 60 days for tag transfers or temporary dealer tags to accommodate the deferred title delivery. Dealers are required to include vehicles sold without title in their monthly sales reports under Section 301.280.

 Section 301.560 addresses claims made on a dealer’s bond, which typically require a court judgment against the dealer. However, in the case of a dealer’s failure to perform an agreement under Section 301.210.5, a purchaser or lienholder may apply to DOR to claim directly on the bond.

Any financial institution that purchases dealer paper should decide in advance if it will accept paper where the dealer is not delivering and assigning title at the time of the sale. If the financial institution is willing to accept such paper, it should then determine whether the dealer strictly follows the law for deferred title delivery and that the dealer has the financial capacity and willingness to unwind transactions where title is not delivered within 30 days. It also may be prudent for the lender to confirm in these transactions that the delivery of title has occurred and have a put-back agreement with the dealer where title has not been delivered.


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