When a car is purchased on credit, a finance company or lender takes a “security interest” in the vehicle. This means the car serves as “security” for the buyer’s performance of the purchase contract, and the finance company or lender can repossess the vehicle if the buyer defaults on his or her obligations under the contract (such as, failing to make a required payment). Until the buyer makes all of the required payments under the contract, the finance company or lender puts itself on title to the car as the lienholder or legal owner, to let others know about its lien against the vehicle.
What happens though if, during the course of the contract, the buyer fraudulently removes the lienholder from title and then sells the car to someone who has no clue about the old lien? If that new owner paid a fair price for the car, he or she is what’s known as a “good faith purchaser for value” — sometimes called a “bona fide purchaser” or “BFP” — with superior rights to possession of the car over the old lienholder who’s been wiped off title, even though it was done fraudulently. This BFP rule means that it is a wrongful repossession if the lienholder repossesses the car from the new owner, and the new owner can sue the lienholder for damages. The lienholder simply cannot disturb the new owner’s absolute right to possession of the car, including by trying to reinsert itself on title through the DMV. The lienholder can only sue its buyer for its loss.
If you bought a car and a company you never heard of repossessed it, it is best to reach out to an attorney right away who can advise you on steps to take to hopefully regain possession of your car, and then possibly bring claims against the old lienholder for damages. You must act quickly, as the old lienholder could sell your car at an auction sale, which could only further complicate matters.