Under the Illinois Vehicle Code, when a lender receives a payoff of a vehicle loan, the lender must deliver a release and the certificate of title to the owner within 21 days (or 10 business days if the payoff was made with cash or a certified or cashier’s check). The statute prescribes a $150 fine plus reasonable attorney fees and court costs for failure to comply with these requirements. While it is unclear whether your bank ever sent a release of its security interests in the vehicles to the owners after the loans were paid off, it clearly did not return the certificates of title, and consequently we recommend retaining these documents for a reasonable period of time in case the owners reappear and request them, along with certificates of release.

Regarding a reasonable retention period, the IBA Record Retention Manual generally recommends that mortgage loan documents be retained for five years after a mortgage is paid off. Similarly, you may wish to retain the vehicle loan documents and copies of the certificates and releases for five years.

For resources related to our guidance, please see:

• Illinois Vehicle Code, 625 ILCS 5/3-205 (“Within 21 days after receiving payment to satisfy a security interest in a vehicle for which the certificate of title is in the possession of the lienholder, he shall execute a release of his security interest, and mail or deliver the certificate and release to the next lienholder named therein, or, if none, to the owner or any person who delivers to the lienholder an authorization from the owner to receive the certificate. If the payment is in the form of cash, a cashier’s check, or a certified check, the number of days is reduced to 10 business days. If the owner desires a new certificate reflecting no lien, the certificate and release from the lienholder may be submitted to the Secretary of State, along with the prescribed application and required fee, for issuance of that new certificate.”)

• Illinois Vehicle Code, 625 ILCS 5/3-205(c) (“In addition to any other penalty, a lienholder who fails to execute a release of his or her security interest or who fails to mail or deliver the certificate and release within the time limit provided in subsection (a) or (b) is liable to the person or entity that was supposed to receive the release or certificate for $150 plus reasonable attorney fees and court costs. An action under this Section may be brought in small claims court or in any other appropriate court.”)