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Traded in Car But Credit Union Won’t Give Me My Title Due to Old Credit Card Debt. – Don

“Dear Steve,

Credit Union who won’t release title of a car because of a credit card that charged off.

Thank you for taking questions. My situation is a complicated one. I traded my car in and the dealership called the CU to get the payoff. They gave them the payoff in which they received the check 2 days later. Two weeks after that the CU called me and said they wouldn’t release the title until a credit card is paid. Mind you a payment hasn’t been made in 2 years, charged off last year and sold to a debt collector. I’m trying to settle with them and we reached an agreement but they refuse to put it in writing. The kicker is the dealership sold the traded in car because they assumed the CU gave them the correct pay off. What do you recommend?


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Dear Don,

This sounds like the classic credit union cross-collateralization problem. Credit unions generally say they will not release the title to a secured item unless all the loans have been paid off. The terms of the credit unions loans generally say that an unsecured debt, like a credit card, will be secured with the car.

I’ve seen this same thing happen so many times over the years. A consumer pays off a car loan but the credit union won’t give the title back until the credit card or other loan is repaid in full.

If the debt was sold to an outside debt buyer I can’t see how the credit union could still claim a security interest in the car title since they no longer own the debt. However, if they still own the debt but have sent it to an outside collector to collect, then I can see that scenario happening.

It sounds like you need to talk to a local attorney who is licensed in your state for specific legal advice regarding your situation. The interesting issue will be the disposition of the underlying credit card debt if the account was actually sold to a new debt owner.

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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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