Repossession Laws In Michigan
If a consumer has entered into an auto loan agreement with a creditor but is unable to make the scheduled payments, the creditor will have the ability to repossess their vehicle. While a creditor has the right to conduct a repossession, they must comply with a set of laws that governs this process. Being aware of Michigan’s repossession laws can provide consumers with knowledge of their rights in case they ever find themselves threatened with repossession.
Is breach of the peace illegal in Michigan?
Yes. A repossession that is conducted in Michigan must occur without a breach of the peace for it to be considered as legal. Under this provision, there are many actions that a repossession company can do that will cause the repossession to be unlawful. For example, during a repossession, the company cannot take physical action or use violence against a consumer to force or threaten them into giving up their vehicle and they cannot trick a consumer into surrendering their vehicle by giving them incorrect information about the repossession. The company also cannot use police intervention during the repossession, unless they have a proper warrant. Furthermore, if the company damages a consumer’s property while repossessing their vehicle, this will also count as a breach of the peace. Repossession companies are able to take a vehicle if it is parked in plain sight but they cannot force their way into a closed garage or gated area on a property if they suspect that the vehicle is inside. Additionally, if the consumer is present for the repossession, they can ask the company to cease their actions and leave their property. If the company continues with the repossession after the consumer objects, a breach of the peace may occur. However, due to this fact, many repossession companies choose to carry out repossessions at night when consumers may be asleep. In this case, breach of the peace can still occur if a consumer wakes up and finds that the company has damaged their property when they repossessed the vehicle.
Is a pre-repossession notice required to be sent to a consumer?
No. In Michigan, a creditor can conduct a repossession without sending the consumer a notice beforehand. However, a creditor has to hold a valid lien on the vehicle that they are attempting to repossess and the consumer has to be in default in order for the repossession to be lawful.
What can a consumer do after repossession has occurred?
After repossessing a vehicle, the creditor will still have to follow certain rules that outline the next steps of the repossession process.
If the consumer did not get a chance to take their personal items out of the vehicle before the repossession, the creditor should let the consumer know where the vehicle is being stored so that they can retrieve these goods. A creditor is not allowed to keep or sell any of a consumer’s personal items. However, if there are improvements added to the vehicle (such as luggage racks), they may be able to keep and sell these with the vehicle.
The creditor should send the consumer a notice that informs them of their right to redeem the vehicle. This notice should include the total balance that they owe, which is usually the sum of their missed payments and any reasonable fees that were accumulated by the creditor, and it should provide them with a period of 15 days to redeem the vehicle. If the consumer can pay off the full amount of debt within this time, they will be able to receive the vehicle back, cure their debt, and restore their pre-default rights under the original loan agreement. However, if the consumer cannot pay the balance, the creditor will have the ability to sell the vehicle. The consumer may still have the right to redeem the vehicle if they pay off the debt before a sale occurs.
Before a sale occurs, a creditor should send a consumer a pre-sale notice that gives them information on the time and location of the sale. The creditor has to receive a commercially reasonable price for the vehicle—not doing so could be an indication of unlawfulness. They do not necessarily have to receive the highest possible price, but they should sell the vehicle for an amount that is comparable to its average market price. After the conclusion of the sale, a consumer should be provided with a post-sale accounting that documents the vehicle’s final selling price, the application of the proceeds to their debt and fees, as well as any remaining balances on their debt. Reasonable fees or costs that were collected by the creditor should first be paid for with the money brought in from the sale. After, the remaining amount should be used to cover the loan balance. In the event that there is an excess of funds after the creditor’s expenses and the consumer’s own debt have been paid, the creditor should give the surplus of money back to the consumer. However, if the money garnered from the sale is less than the amount that is needed to cover the full balance, the consumer could be held responsible for paying the deficiency amount, which is the remaining debt that is left over.
What happens if a consumer’s vehicle was wrongly repossessed?
A consumer’s vehicle may have been wrongfully repossessed if their creditor did not follow Michigan’s repossession laws. For example, failure to send a right to redeem notice or a pre- or post-sale notice could indicate unlawfulness. If the creditor did not provide these notices, the consumer may not have to pay the deficiency balance. It is also possible that the repossession company violated the Fair Debt Collection Practices Act (“FDCPA”) by breaching the peace during the repossession or by repossessing the wrong vehicle. The FDCPA is a federal law that protects consumers from debt collectors by placing restrictions on their actions. If they carried out an unlawful repossession, then pursuant to the FDCPA the repossession company could have to provide the consumer with monetary compensation of up to $1,000 in statutory damages. In accordance with the act, their legal fees and any costs could be paid for as well.
Where can a consumer look for help or for answers to their questions?
In the state that a consumer lives, a consumer protection agency, the Office of the Attorney General, and/or a consumer protection attorney who is licensed in a consumer’s respective state can assist a consumer with receiving help and/or determining the answers to their questions in regard to the aforementioned laws. The Consumer Financial Protection Bureau can be of assistance to consumers as well.