UCC1 Filing VS a Lien on the Title

NewYork-Repo.com recently had a problem on Long Island, NY after they repossessed a heating oil delivery truck.

The owner of the heating oil delivery truck reported the truck stolen to the police the following morning. Since NewYork-Repo properly notified the police at the time of repossession it was a matter of minutes until the police were calling New York Repo.

It seems that the lender did not have a lien perfected on the title to the oil delivery truck. Instead they had filed a UCC1 lien in accordance with the Uniform Commercial Code. Since the police did not see a lien on the title, they considered the oil delivery truck as stolen and gave the repossessor 1 hour to return the truck or face charges.

New York Repo returned the truck to alleviate any problems with the police. The lender has filed suit against New York Repo stating that they did not have the right to return the repossessed truck to the debtor.

The lender is technically wrong since a UCC1 filing is a way to put a lien on something that does not have a title. Since the oil delivery truck had a title, a UCC1 filing was an inappropriate way of securing their interests in the collateral.

The lender had signed New York Repo's hold harmless that stated the lender did in fact have a perfected lien on the title to the truck they wanted repossessed, when in fact they did not.

How is a repossessor supposed to protect themselves from being caught in situations like this? One suggestion is to require the lender to include a copy of their lien statement or copy of the title along with the repossession hold harmless. Or at least impose this requirement on new lenders that you have not repossessed for previously.

It would be cost prohibitive for the repossessor to run a lien search on every title for every repossession assignment they receive, but it would be a fool proof solution to the problem.

It is goofy lenders like this that end up driving the cost of doing repossessions for everyone, the lenders and the repossessors themselves.

What's your opinion?

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