Repossessed Car? Learn Your Rights

Each year 1-800-MY-LEMON receives calls from new clients
requesting lemon law help for their repossessed car. The rate of repossessions are increasing at an alarming rate, especially in light of the poor economy. If your car has been repossessed, you have rights which could help you avoid or limit the cost of the repossession.

We are happy to post the following repossession information courtesy of our good friend, and fellow Pennsylvania consumer law attorney, William Bensley.

Repossessions happen to good, responsible people every day. They get far less media attention than home foreclosures, but they are just as disruptive. Moreover, the same abusive practices that have plagued mortgage lending have plagued car sales and lending, and now plague repossessions.

The good news is that repossessions are highly regulated, primarily under state law. Everyone should note that the law may very slightly from state to state. This article pertains strictly to Pennsylvania law.

In Pennsylvania, if the bank (creditor), debt collector or repossessor breaks the rules, then the repossession victim may be able to get her car back, get out from under the alleged debt, or even get the bank, debt collector or repossessor to pay her.

It is highly advisable that any repossession victim contact a qualified attorney immediately to evaluate her possible claims. Most attorneys will provide free evaluations. Most evaluations can be completed over the telephone in under 30 minutes.

Let’s start at the beginning. Most vehicles are purchased on credit. Until the buyer makes her last payment, the seller/creditor retains the right to “repossess” (take the car back), if the buyer “defaults” (breaches the agreement). The buyer’s and creditor’s rights are spelled out in the finance purchase contract (the big 8.5” x 14” or 8.5” x 17” contract) and state law.

A default can occur in a number of circumstances. The most common is where the consumer does not make payments as agreed. A default can also occur, if the consumer allows insurance on the car to lapse or subjects the car to seizure by using it for illegal purposes.

The first thing that a consumer must understand is that the creditor may not have the right to repossess the vehicle. Under state and federal law, the finance contract holder is responsible for the seller’s wrongdoing. This is true, even where the seller/creditor sells the finance purchase agreement. In short, if the dealer arranged the financing, then the bank is liable for the dealer’s wrongdoing.

If dealer tricked the consumer into buying the vehicle, if the vehicle is defective, if the seller misrepresented any significant fact, if the seller did not fully or accurately disclose the vehicle’s prior use, then the contract may be unenforceable. Not only may the creditor not repossess the vehicle, but may be responsible for paying the consumer for any harm caused by the seller’s wrongdoing.

The second thing that a consumer must understand is that if the creditor agreed to accept late payments or to change the payment due date, then the terms of the original contract may no longer apply. Changes may be made orally, in writing, or simply by accepting a late payment. The creditor can’t agree to accept a payment and not to repossess and then go ahead and repossess. These determinations are extremely fact specific and will depend on exactly what was said by the bank and the consumer.

There are three types of repossessions: (1) Voluntary; (2) Self-Help; (3) Court Ordered.

Voluntary repossessions are self-explanatory. The consumer gives the car back by either bringing the car back to the dealer or handing the keys to the repossessor. It’s important to know that a voluntary repossession is just as damaging to your credit rating as any other type of repossession.

Self-Help repossessions are a little different. This is where the repossessor takes the car, often in the dead of night. They may not “breach the peace.” They may not enter a home, building or enclosed property without prior consent. They may enter non-enclosed private property, but if asked to leave, then they must go. They cannot argue, insult, or use force or threats of force. They cannot threaten to call the police. If a consumer objects, they cannot continue to take the car — even if it is parked on the street. They cannot bring the police as an implied use of force.

If the repossessor breaches the peace, then the repossessor loses its right to take the car. The repossessor may have to pay the consumer statutorily required compensation. If the repossessor still takes the vehicle, then it is an unlawful repossession and a form of theft entitling the consumer to additional compensation.

Court Ordered repossessions are where the repossessor goes to court and gets an Order requiring the consumer to give the car back. With a court order, the repossessor can enter private property, even if the property owner objects, and take the car. If a repossessor has to get a court order, it may charge the consumer for the time and effort.

Consumers often have questions about notice. Prior notice is not required to repossess a car in Pennsylvania. Twenty-one day prior written notice is required to repossess a mobile home.

A repossessor must provide immediate notice to the consumer after the repossession. The notice must be delivered in person or by registered mail.

The notice must be sent no less than 15 days before the car is sold. The notice must provide the following information:
(1) identify the consumer (debtor), the car, and the location of the car.
(2) provide the time, place and manner that the car will be sold.
(3) provide an itemized statement of amounts owed, including any repossession charges.
(4) provide a list and the location of any personal property contained in the car –which must be kept for 30 days.
(5) explain how to redeem the contract — pay the full outstanding debt to get the car back.
(6) explain whether the opportunity to reinstate the contract is being offered — pay the overdue amounts to get the car back.

Creditors must give notice of the repossession to the local or state police within 24 hours
Creditors usually will resell the car. The sale price will be applied to reduce the amount of money still claimed owed. The consumer will be responsible for balance plus reasonable repossession and reselling charges.

The sale may be public or private, but must be conducted in a commercially reasonable manner. If public, the consumer can and should attend and take photos of the car. If the car was not prepared for sale appropriately, then the sale may not have been commercially reasonable. If the sale is not done in a commercially reasonable manner, then the creditor may not be entitled to any further payment.

It bears repeating that any repossession victim should seek competent legal counsel. Violations are common. Banks, dealers, debt collectors and repossessors will only follow the law, if they are forced.

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