Used Car News

Tightening loopholes in Texas’ mechanic’s lien law reduced fraud drastically, according to one local tax assessor.

The Texas Independent Automobile Dealers Association worked with the state’s Department of Transportation and other local officials to change a law which allowed some dishonest mechanics and title service providers to obtain vehicles fraudulently.
Danny Langfield, Texas IADA’s deputy executive director, said one problem under the old law was that a mechanic’s lien supersedes the first lien-holder on a vehicle.
That allowed a person to place a fraudulent mechanic’s lien on the car, forcing a dealer to either pay a bill or pay thousands of dollars to take the issue to court.
The dishonest party would do the very minimum to contact a lienholder under the law, knowing that the lienholder would lack either information, money or time to address the issue before losing the vehicle.
The IADA worked with the Department of Transportation’s Division of Vehicle, Title and Registration Services to make it harder for people to file fraudulent liens.
Tarrant County Tax Assessor Betsy Price said legislation gives the vehicle owner/dealer more time to address the issue while requiring the person holding a mechanic’s lien to do a better job of notifying the dealer about the issue.
A mechanic must now notify the lienholder within 30 days of taking in the car and doing the work. Then 10 days later, the mechanic must mail his notice, and must also surrender – to the county tax assessor – copies of the work order and letter to lienholder and owner of record.
The tax assessor then has 10 days to send notice to the lienholder, and whomever signed the work order, to let them know that the mechanic should have notified them by now. The mechanic must provide them with a right to review the car and a signed work order must be attached. They must also provide the location where the dealer can view the vehicle and how to get in touch with the mechanic.
It has hindered crooked mechanics and title service providers who previously took advantage of the law.
In the past, the mechanic’s notice requirement could wait up until 30 days after the work was done to deliver a notice to the dealer/lienholder.
Also, the law didn’t require a signed work order be included in the notice. All the mechanic had to do was notify the dealer and even then the abuses were rampant.
The assessor has seen notices that included little to no information – except to let the lienholder know that the mechanic had his car, for example.
“I had one dealer who received an envelope full of grocery store coupons,” she said. “It was just turning into a legal license to steal.”
So Price joined other officials, along with the Texas IADA, and petitioned the legislature to pass the bill and “put some teeth in it.”
She is pleased with the results.
“It seems to be working,” Price said. “Everybody’s mechanics’ liens are significantly down.
“We were averaging 35 to 40 a month in Tarrant County and we’ve only done two since Sept. 1 (through mid-November).”
Price said Harris County was averaging 100 or more a month and they’ve done 10 in the same time frame.
Once the people with the liens realize they had to do all this extra work before selling the car, they just quit doing them.
Price said it’s great to see this reduce the fraud that was occurring, but she added that people are creative in finding ways to skirt the system.
“We’re not naive enough to think this will stop it completely,” she said.