Illegal Auto Repossession
When it comes to car repossession’s, many lenders, car dealers, repo agents and even police officers simply cannot do it right.
Lenders fail to follow proper procedures or give proper notices–especially those from outside Iowa who are not familiar with Iowa law.
Many buy here, pay here dealers seem to think they own the vehicle they sold–even after repossession. They do not. A consumer has a right to redeem the vehicle and has a right to an accounting of the proceeds.
Repo agents frequently receive little or no training in repossession laws. A repossession where there is a breach of peace is illegal, and it makes no difference who is causing the disturbance.
Law enforcement officers also get very little training on car repos. They routinely take the creditor or repo agents’ side during a repossession. Some police departments in Iowa actually refer to a repo call as an “assist.” Police may keep the peace, but as to the repossession itself they may not assist or facilitate repossession of the consumer’s vehicle over the consumer’s objection.
The following actions probably result in an illegal repossession. If you live in Iowa and think your rights might have been violated, please contact us regarding your situation. If you live outside Iowa or the repossession did not take place in Iowa, go to the web site of the National Association of Consumer Advocates and try to find an attorney in your state to assist you.
Common Violations Resulting in an Illegal Auto Repo Include:
- Repossession without a security interest in the vehicle
- Consumer is not in material default under the loan agreement
- Consumer is not behind on loan payments
- Force placing insurance on the loan when the consumer already had insurance
- Treating payment less than ten days late as being a late payment
- No Right to Cure Notice prior to repossession
- The automobile was repossessed causing a breach of peace (yelling, swearing, taking the vehicle over consumer’s protests)
- A police officer facilitated the repossession
Once your vehicle has been repossessed you still have rights:
- You have the right to a proper notice of sale and opportunity to redeem the vehicle
- The vehicle must be sold in a commercially reasonable manner
- The creditor must apply the proceeds from sale to the balance on the loan
- You are entitled to an accounting of any surplus or deficiency on the loan
- You are entitled to payment of any surplus
To repo a vehicle, the creditor first has to have taken a security interest in the vehicle. A financing agreement or sales agreement 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 as they come due.
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 driving or moving out of state with your vehicle. You financed a car, you aren’t on parole.
You must actually be behind on your loan payments. For some reason, creditors do not always have the best accounting procedures. Repos do occur when a consumer is not even behind on payments.
In Iowa consumer credit transactions, 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). You do not have to receive the right to cure notice under Iowa law. The creditor only has to mail it to your last known address.
A repossession cannot result in a breach of the peace. A breach of the peace occurs, for example, when an assault occurs or the 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, yelling and swearing almost always is a breach of the peace, as is forcibly removing you from your vehicle. Remember, however, your vehicle is not worth loss of life, injury or prison. Conduct that clearly is a breach of peace can also result in arrests for violations of the criminal law.
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 the creditor’s side and assist the creditor in an auto repossession. 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, do so, but 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. It happens. Call or contact us.
The creditor must apply the proceeds of sale to the balance of the loan. 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, the vehicle was not sold in a commercially reasonable manner, or the right to cure or notice of sale were not proper. You are entitled to an accounting of any surplus or deficiency on the loan
Companies, creditors and debt buyers involved in obtaining auto deficiency judgments in Iowa:
- Credit Acceptance Corp.
- United Auto Credit
- Asset Acceptance
- Ford Motor Credit
- Chrysler Financial
- Citizens Finance
- One Main Financial
- Portfolio Recovery Associates
- Midland Funding
If you feel that your rights have been violated please click HERE to discuss what the Johnson Law Firm may be able to do for you