WASHINGTON, D.C. — The American Financial Services
Association recently sent a letter to the commissioner of the New York State
Department of Motor Vehicles on its proposed regulations implementing A. 1346-C.

AFSA explained the law, enacted in December of last year,
authorizes the DMV to issue a lien-free certificate of title upon proof by a
dealer of complete payment of the underlying debt without the involvement of
the lien holder in confirming lien satisfaction.

However, the association contends a lien holder is the best
and most reliable source to certify and indicate whether a lien has been
satisfied.

In the letter, AFSA raised its core concern about how the
regulations allow a financial institution's lien to be extinguished without
providing them with the opportunity and mechanism to dispute the lien's
release.

AFSA expressed concerns that liens may be released without
the financial institution's prior knowledge due to several factors. The
association mentioned:

—The "exceedingly short" two-week timeframe imposed on a
financial institution to verify the status of a security interest

—Lack of standardized form to signal its importance to a
mail room

—Lack of database indicating where a lien release notice
should be sent

"In addition to removing an important check-and-balance that
prevents fraud and protects against errors, these conditions could potentially
lead to situations in which the lien holder receives notice of lien
satisfaction after the collateral has been sold," AFSA said.

To ensure efficient and timely delivery of required notices
from dealer to financial institution, AFSA recommended the creation of a
database populated by lien holders indicating where a lien release notice
should be sent and a standardized form to alert the lien holder that its
security interest will be released unless it objects.

AFSA also requested the regulations require a more robust
burden of proof by the dealer of complete, unambiguous lien satisfaction, a
greater timeframe be provided to the lien holder to verify this proof, and a
mechanism be instituted for a financial institution that has a legitimate
disagreement with a dealer to dispute a release before the department
extinguishes their property right and releases the lien.

The entire letter AFSA sent can be downloaded here.

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