When it comes to auto repossession's, many banks and lenders cannot get it right. The following list of actions probably result in an illegal repossession. If you live in Iowa and believe your rights might have been violated please contact us regarding your situation.
To repo a vehicle, the creditor first has to have taken a security interest in the vehicle. A promissory note alone does not create a God given right to repo your vehicle, even if you are late on the payments. Without a security interest and an acceleration clause in the contract, a creditor may not repossess. It's only remedy is to demand delinquent payments.
You have to be in material default under the loan agreement. I have seen repos where the only "default" is moving a vehicle out of state (or the creditor thinks the vehicle is going to be moved out of state). Unless the financing agreement prohibits moving (and that provision of an agreement may not even be enforceable), you are not in default for moving out of state with your vehicle.
For many financing agreements, you are not in default until a payment is ten days late. For Consumer Credit Transactions under Iowa law, or if the financing agreement states the loan is a Consumer Credit Transaction, you are not in default until a payment is ten days late. Creditors do repo cars when payments are only a few days late. That does not make the repo legal.
In a Consumer Credit Transaction, you are entitled to one right to cure notice a year. The right to cure notice has to be a proper right to cure notice. A right to cure demanding money you do not owe is not proper. A typical mistake is to demand payment before a payment is in default (see the ten days noted above).
A repossession cannot result in a breach of the peace. A breach of the peace occurs, for example, when a repo agent threatens to shoot you (don't laugh, it happens). Other examples would be taking your vehicle from your garage or taking your vehicle over your unmistakable objection. Shouting and yelling almost always is a breach of the peace. Remember, however, your vehicle is not worth loss of life, injury or prison.
Police may not facilitate repossession. A police officer has every right to make sure the parties do not harm each other and to keep the peace. A police officer is not allowed to take sides in a repo. You have as much right to your vehicle as the repo agent. Tell the officer politely that you will do whatever you are instructed to do, but you are not consenting voluntarily to the repossession of your vehicle (if that is the case). If the officer requires you to give up the vehicle over your objection, contact an attorney as soon as possible.
Once your vehicle has been repossessed, you still have the right to redeem the vehicle. You have the right to regain possession of the vehicle, but now you may be required to pay the full balance owed to the creditor.
The vehicle must be sold in a commercially reasonable manner. Most repossessed vehicles are sold at "dealer only" auto auctions. There are serious questions whether a wholesale auction is a commercially reasonable sale of a vehicle. These auctions routinely bring far less money than a traditional sale. Unfortunately, you are asked to pay the remaining balance of the loan without getting full credit for the true value of the vehicle. A sale to the lender’s brother for less than full value is not a commercially reasonable sale of your vehicle.
The creditor must apply the proceeds of the sale to the balance of the account. Unfortunately, after repo you are most likely going to be asked to pay a "deficiency" on the amount allegedly still owed on the vehicle. In most circumstances in Iowa, the creditor cannot legally collect the deficiency if the repossession was illegal, if there was a breach of peace, or the vehicle was not sold in a commercially reasonable manner. You are entitled to an accounting of any surplus or deficiency on the loan
Litow Law Office
Ford Motor Credit
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