Illegal Auto Repossession
Iowa law mandates creditors send legal notices prior to repossession. Creditors must also comply with certain guidelines during and after repossession of a vehicle. Many creditors fail to properly repossess a vehicle or do so without the right to take the vehicle. Others illegally retain possessions that were inside. Students, debtors, and consumers have rights before, during and after a creditor repossesses a car or truck. Contact the Johnson Law Firm for a free consultation regarding your legal rights if your car has been repossessed.
Common Illegal Vehicle Repossessions Include:
- Repossession without a Security Interest in the Vehicle
- The Consumer is Not in Material Default Under the Loan Agreement
- The Consumer is Not Past Due on the Payments
- The Creditor Failed to Send a Proper Right to Cure Notice Prior to Repossession
- The Repossession Caused a Breach of the Peace (Yelling/Swearing, Threats, Assaults, Taking the Vehicle Over Protests)
Consumers Rights After Vehicle Repossession:
- The Consumer Has the Right to Notice and the Opportunity to Redeem the Vehicle
- The Creditor Must Sell the Vehicle In a Commercially Reasonable Manner
- The Creditor Must Apply the Proceeds from Sale to the Balance on the Loan
- The Consumer is Entitled to an Accounting for Any Surplus or Deficiency on the Loan
The Creditor must have a Security Interest in the Vehicle. A promissory note alone does not create a right to repossession – even if the consumer is late on the payments. A creditor may not repossess without a security interest and an acceleration clause in the contract. Without a proper security interest, the creditor’s only remedy is to demand delinquent payments and pursue collection of a delinquent account.
The Consumer Must Be in Material Default Under the Loan Agreement. The loan agreement likely provides complex terms that even the creditors misinterpret. Usually, the attorneys drafting the loan agreements are not the same people enforcing those agreeements through self-help repossession. Consumers must be in material default prior to having their vehicles repossessed.
The Consumer Must Be Behind on the Loan payments. Repossessions frequently occur when the consumer is not even behind on payments. These vehicle repossessions can occur due to renegotiated terms, misallocation of payments, and poor accounting practices.
In a Consumer Credit Transaction such as a Vehicle Purchase, the Consumer is Entitled to One Right to Cure Notice Per Year. The right to cure notice must comply with the law and contain specific language. A right to cure notice is not proper when it demands money the consumer does not owe, the language fails to comply with the law or the vehicle is repossessed before the cure date on the right to cure notice.
Vehicle Repossessions Cannot Result in a Breach of the Peace. A “breach of the peace” is a legal term that represents many situations where repossession agents take a vehicle in an unlawful manner. Breaches of the peace may also result in invasions of privacy. If a repossession has resulted in a breach of the peace, contact the Johnson Law Firm for a free consultation. Breach of the peace examples include: yelling and swearing, generally causing a scene in front of others, repossessing a vehicle over the consumer’s objection, taking a vehicle that is being stored inside a garage or fence, threatening bodily harm and fights, brandishing a weapon, and threatening to stab or shoot the consumer. Please remember that your vehicle is not worth prison, injury, or your life. Contact the police if you are being threatened. Contact an attorney if you experienced a similar repossession that may qualify as a breach of the peace. You can be prosecuted criminally if you engage in criminal conduct during a repossession attempt, but for purposes of an illegal breach of peace repossession, it is irrelevant who caused the breach of peace. You have every right to make it very clear the repossession agent is not to take your vehicle. The exception is if the creditor has obtained a court order. Court orders have to be obeyed. Police officers also need to be obeyed, but you may have legal claims against the officer if he or she takes the creditor’s side during a repossession and facilitates the repo.
The Consumer Still Has the Right to Redeem the Vehicle After Repossession. The Consumer has the right to regain possession of the vehicle upon payment of the full balance owed to the creditor.
The Creditor Must Sell the Vehicle in a Commercially Reasonable Manner. The Creditor must sell the vehicle in a fair manner, because the Creditor can still seek a deficiency for the remaining balance on the loan after the sale. Contact our office if you believe the sale is suspicious or unfair. Common examples include a small dealership selling the vehicle to a friend or relative for far below the vehicle’s fair market value.
The Creditor Must Apply the Proceeds of the Sale to the Balance on the Account. Unfortunately, the Consumer often believes the repossession or voluntarily surrendering a vehicle ends the issue with their car loan. That is not the case. In most situations in Iowa, the creditor will seek a deficiency from the consumer. The deficiency is the remaining balance on the loan minus the vehicle’s resale price after the repossession. In some cases, there is a surplus following the resale, to which the consumer is entitled. Consumers are also entitled to an accounting of any surplus or deficiency on the loan, and creditors often fail to seek a deficiency in a proper manner. Contact our office for a free consultation immediately after a repossession to get information on your rights.