Frequently Asked Questions about Repossession Laws
What is repossession?
Repossession is a process that occurs when a creditor reclaims possession of a vehicle that a consumer has stopped making payments on.
When is a creditor allowed to repossess a consumer’s vehicle?
A creditor has the right to repossess a consumer’s vehicle as soon as the consumer defaults on their loan. A consumer can enter into default by missing their scheduled payments or by violating the terms of their contract. If the creditor holds a secured interest in the vehicle that is secured by the loan, they can legally repossess that vehicle once the consumer is in default.
Does a creditor have to notify a consumer before they repossess a vehicle?
It depends on the state. In the majority of states, a creditor can repossess a vehicle without sending the consumer a pre-repossession notice beforehand. However, in a select few states, the creditor must send the consumer a pre-repossession notice before they can conduct a repossession and they may be held liable for unlawful conduct if they fail to provide the consumer with this notice.
How does a repossession occur?
Most of the time, a creditor will contract a third-party repossession company to carry out the repossession. The repossession company can choose to conduct the repossession at any time they wish. They have the right to repossess the consumer’s vehicle from public streets and public or private parking lots, and in some states, the company can even take a consumer’s vehicle from an open driveway on their property. However, in other states, the company cannot take a vehicle from an open driveway on the consumer’s property or from anywhere on their property.
Is it illegal for a repossession company to trespass onto a consumer’s property in some states?
Yes. In some states, like Massachusetts and Maine, it is illegal for a repossession company to trespass onto a consumer’s property. In these select states, a repossession company cannot come onto any part of an individual’s property (including the driveway) without first obtaining their permission.
Can a repossession company breach the peace during a repossession?
No. A breach of the peace is illegal in all fifty states. The law regarding a breach of the peace limits the actions of a repossession company during a repossession in order to protect consumers. There are many actions that may constitute a breach of the peace and some examples include using physical force, using threats, or being violent. Damage to a consumer’s property is also considered to be a breach of the peace. Additionally, unless the consumer gives them permission to enter their property, the repossession company cannot force their way into a locked garage or secured area to conduct a repossession. The repossession company may also breach the peace if they continue with a repossession despite the consumer’s objections to their actions. If the consumer asks the repossession company to leave their property and they do not listen to the consumer, their actions can be considered unlawful.
Can a repossession company repossess the wrong vehicle without breaking the law?
No. The repossession company is only legally allowed to repossess the vehicle that is secured by the consumer’s loan. It is illegal if they repossess the incorrect vehicle.
What will happen to the vehicle after the repossession?
Each state has its own laws regarding the disposition of the vehicle but generally, a creditor can choose to sell the vehicle at either a public or private sale or they can keep the vehicle as full payment of the consumer’s debt. However, if the creditor decides to keep the vehicle, the consumer can demand for the vehicle to be sold instead.
Can a consumer retrieve their personal items from the repossessed vehicle?
Yes. The consumer should contact their creditor in order to recover their items. While the creditor is not allowed to keep or sell a consumer’s personal goods, they may be able to keep any items that are considered to be attachments to a vehicle (eg. luggage racks and stereo systems).
Is it possible for a consumer to reclaim a vehicle after it has been repossessed?
Yes. In order to take back a vehicle, a consumer can either reinstate the loan or redeem the vehicle. Some states will allow the consumer to reinstate the loan by paying back all of their missed payments, as well as any late fees and costs accrued by their creditor. If they successfully reinstate the loan, the consumer will be able to restore their pre-default rights. If the state does not allow the consumer to reinstate the loan, they still have the opportunity to redeem the vehicle. They can do this by paying off the entire amount that remains on their loan (not just the missed payments) and any additional fees or costs as well. In most cases, the consumer will have up until the day of the vehicle’s disposition to reinstate the loan or redeem the vehicle.
Should a creditor notify a consumer of the vehicle’s sale?
It depends on the state. In some states, the creditor is required to send the consumer a pre-sale notice in a reasonable amount of time prior to the sale, and the notice should include information in it such as the date, time, and location of the sale.
Is the sale required to be “commercially reasonable”?
Yes. All aspects of the sale should be conducted in a commercially reasonable manner. If the vehicle ends up selling for a price that is significantly lower than its average market value, the creditor may be held liable for unlawful conduct.
Should a creditor send a consumer a notice after the sale has occurred?
Notice requirements vary by state but in general, the creditor should provide the consumer with a post-sale accounting that provides them with information about the vehicle’s final selling price, how these funds will be applied to their debt, and the amount of any surplus or debt that is left over.
How is the money that is received from the sale used?
The money earned from the sale is first used to pay off any reasonable costs that the creditor accrued during the repossession, storage, or sale. Afterwards, the remainder is then used to pay off the consumer’s debt.
Will a consumer still owe money after the sale?
It is possible that the consumer may still owe money after the sale of the vehicle. If the money earned from the sale is not enough to fully pay for their debt, they may have to pay for the deficiency balance, which is the amount of their remaining debt.
What happens if there is a surplus?
If a surplus of funds remains after the consumer’s debt has been paid for, the creditor must provide them with the leftover money.
Is it possible that a consumer’s vehicle was wrongfully repossessed?
Yes. A consumer’s vehicle may have been wrongfully repossessed if their creditor did not abide by their respective state’s repossession laws. If the repossession was unlawful, then depending on the state, the consumer may not have to pay for the deficiency balance. It is also possible that the repossession company violated the Fair Debt Collection Practices Act (FDCPA) – a federal law that protects consumers from debt collectors who act unlawfully – by breaching the peace during the repossession, by repossessing the incorrect vehicle, or by illegally trespassing on the consumer’s property if that is illegal in their respective state. If a violation of the FDCPA occurred, pursuant to the Act, the repossession company would have to pay the consumer compensation of up to $1,000 in statutory damages and cover their legal fees and any costs.
Should a consumer contact a lawyer if they believe that their vehicle was wrongfully repossessed?
Yes. A consumer should contact a law firm licensed to practice law in the state that the consumer resides in, that pursues companies that conduct illegal repossessions in order to try to attain justice and damages for consumers. Many law firms offer free initial consultations. A consumer can also try to contact the Consumer Financial Protection Bureau (CFPB), and/or the Attorney General’s Office in their respective state. Some Attorney General’s Offices have consumer protection divisions which also may be able to help consumers.
Businesses should not engage in predatory practices that violate your rights. If you need help, call our law firm, Rights Protection Law Group, PLLC, at CALL for more information and possible assistance.