Title-Washing: A Growing Threat to Lienholders
Title-washing—the fraudulent removal of a lien from a vehicle title—is on the rise. For lienholders and lessors, it poses a serious risk to collateral interests and recovery rights. The good news is that in most cases, the law allows you to undo these fraudulent transactions and restore your lien.
How Title-Washing Works
Title-washing occurs when someone removes or hides a lien from a vehicle title, often through a forged release or fraudulent submission to the DMV. The key legal question in every case is whether the lien was released voluntarily or involuntarily.
A voluntary lien release happens when a lienholder or authorized employee intentionally processes the release—even if deceived by a fake payoff. These situations are more challenging to reverse.
An involuntary lien release happens without the lienholder’s involvement—such as a forged Release of Lien filed with the DMV or a tampered title issued after a third-party sale. These releases are void under New York law, meaning the lienholder’s rights remain fully intact and the fraud can be corrected through legal action.
If your internal records show no employee action authorizing a lien release, you likely have an involuntary transaction—and a strong case to undo it.
What the Law Says
Vehicle and Traffic Law § 2115(c) establishes that any title issued following an involuntary transaction is not binding and can be corrected or voided entirely. New York courts have consistently upheld lienholders’ rights in these cases:
- Green v. Arcadia Finance Co. — The court confirmed that a forged lien release did not eliminate the lien, even after the vehicle was sold to another party.
- Fitzpatrick v. Bank of New York — The court held that even a DMV error does not extinguish a valid lien.
In short: If someone removed your lien without authorization, the title can and should be fixed.
The “Innocent Buyer” Myth
Fraudsters often sell vehicles after title-washing to so-called “innocent buyers.” But this defense—known as the bona fide purchaser (BFP) rule—does not apply when the lien release was involuntary.
Under the Uniform Commercial Code (UCC 2-403), BFP protection applies only to voluntary transactions. A forged or fraudulent lien release is not voluntary, so the lienholder’s claim prevails every time. New York courts treat title-washing like theft: a thief cannot transfer ownership rights to property they never rightfully possessed.
What to Do Next
If your lien disappeared from a vehicle title without your consent—or if you suspect a fraudulent title transfer—immediate action is critical. These cases can be reversed, but success depends on early involvement and proper legal filings.
Our firm represents banks, finance companies, and lessors across New York in recovering vehicles and restoring liens lost through title-washing fraud. We investigate quickly, prepare the required filings to void bad titles, and work to recover your collateral efficiently.
Contact our Title Recovery Team today to review any suspicious lien releases or DMV transactions. Protect your portfolio and ensure your secured interests remain enforceable.