Hello:

I was wondering if anyone knows what to do in a case where a release of lien was signed in error on a title that was crossed pledged to another loan. The situation is that a customer paid off a loan, a title was crossed pledged to another active loan, and the title was signed and released in error along with an acknowledgement paid off letter for the loan. The customer comes in and want another loan, and currently does not qualify for another loan for derogatory credit and is denied and then threaths the lender of going and pledging the released titles at some other bank. What is our postion in this case? What actions can be done at this point? We basically ordered duplicate titles for this loan but the customer comes in and tells us that the titles are now pledged at some other bank. Our lien will be taken off of the title and so will the loss payee on the insurance part of the collateral.

Aside from taking legal action to enforce your claim, I am not sure what else you can do. Consider the cost involved vs. the amount left owed on the other loan.

Consider also that even though you accidently released the title to the car, you should still be able to enforce the unpaid obligation through a default judgement if it should come to that.

If you can find out who the other bank is, you might consider contacting the other bank to let them know the disputed status of the title.

Finally, you should review the procedures in your Note Department to make sure collateral that is cross pledged is properly marked both on your computer system, and on the physical evidence of the collateral.

This happened to me, but note we didn't push the issue as it wasn't a cost effective option.

We had a loan secured by an auto. The borrower paid it off and we signed the title, releasing it. Customer borrowed again and gave us the same title. They never filed for a new one so our lien was still shown.

Customer filed for bankruptcy and showed us as an unsecured creditor. I protested (I am not an attorney) and the Trustee opined that if we wanted a lien, we would have filed for one and not had our lien (signed) shown as released.

Our attorney who was present accepted this as well. Perhaps this was a cost decision on his part as well though they don't usually not want hours to bill.

Bottom line, I disagreed then and I disagree now but it was years and years ago and we did get paid. Just in years instead of months. If these titles are important, learn from my experience and discuss it with counsel.