As a California consumer attorney who has been handling repo cases for over 20 years, I see a number of common situations that are all considered to be “wrongful repossession.” In this article, I am going to explain what those situations are, the laws that regulate this area, and what you can do about a wrongful repossession.
Repossession By An Unknown Prior Lender. When someone takes out an auto loan, they grant the lender a “security interest,” otherwise known as a lien, on the vehicle. The lien gives the lender the legal right to repossess the car, without having to go to court, and is placed on the car title in order to warn any future buyer of the lender’s interest. Sometimes, a borrower scams his own lender by first fraudulently removing the lien, then selling the vehicle to an unsuspecting buyer. The buyer knows nothing of the old lien or lender, and one day, the old lender seizes the vehicle. Under California law, a buyer who took title without knowledge of the old lien has the superior interest. The old lender committed a wrongful repossession by taking the vehicle, and can be sued for that.
Repossession After A Tow Yard Lien Sale. In this situation, a borrower takes out an auto loan and grants a lien to his lender. Later the car is damaged, stolen, or abandoned, and ends up being towed. The tow yard has a lien on the vehicle to cover its towing and storage costs, but no one ever pays those costs. The tow yard enforces its lien, and sells the vehicle after giving notice to the old lender and registered owner. The new buyer takes title after registering at the DMV, but one day, the car is suddenly repossessed by the old lender. This is a wrongful repossession if all the requirements of the tow yard lien sale were met. But in most cases, those requirements are not met, typically because the tow yard’s selling price was too far below market value. A tow yard lien sale must be “commercially reasonable,” and unfortunately, most such sales are not. The California tow lien statute declares that a sale is “void” if it doesn’t meet the requirements. Yes, void!
Repossession By A Car Dealership. In this situation, a car dealer sells the vehicle on installments, tries to cancel the deal because it can’t find financing, and then repossesses the vehicle before the first payment is even due. Typically, the car dealership has to give you written notice of cancellation of the deal, within ten days after the sale. If it misses that deadline, the repossession is wrongful. We call this “yo-yo” financing in the trade, because the dealer lures the customer to come in again and again like a yo-yo, to sign a new contract. In reality, it is the dealer’s problem if they can’t find financing within the ten days, and no one is required to sign a new contract. Many times, the dealer will tell the customer to come in for repairs or some side benefit, and then snatch the vehicle at the dealership. Nice! See you in court Mr. Dealership.
Breach of the Peace. Even if your lender has the right to repossess, it loses that right if the repossession is not peaceful, and can be sued for wrongful repossession. The phrase “breach of the peace” is a term of art, and encompasses several different situations:
• Threats of violence, or actual violence, during the repossession. This includes any pushing or touching.
• Ignoring an oral objection to the repossession.
• Repossessing from a secured area, such as an underground garage, a fenced above-ground parking area with a security gate, a locked private garage, or a gated and locked driveway.
• Lifting or towing someone while they are in the vehicle.
• Calling the police who make the consumer give up the vehicle.
Denial of Reinstatement. Generally, California residents have the right to reinstate their auto loan contracts by paying the past due payments, and repossession fees. If the lender denies you reinstatement, you may have a case. There is a short list of valid reasons to deny reinstatement, but you need a lawyer to analyze whether the lender’s reason really is on that list.
Defective Post-Repossession Notice. The lender sends out a “Notice of Our Plan to Sell Property” letter after repossession, which is a very important letter. The letter describes how to get the car back, and what will happen if it is sold. Let’s say that the lender repossesses the vehicle, sends out the letter, the consumer does not reinstate, and the car is sold at auction. There is often a “deficiency balance” remaining after the auction sale proceeds are credited to the loan balance. But, the lender can only collect on this deficiency balance if it strictly followed California’s post-repossession notice laws. The post-repossession notice has to have nine different disclosures, and if it is missing even one disclosure, the consumer does not owe any deficiency balance. This is not an area for DIY! Please call us for a free consultation if you want us to analyze your post-repossession notice and see if you owe a deficiency balance.
Applicable Law. So what laws apply here? For repossessions without a default, or breaches of the peace, the main consumer protection laws are the Uniform Commercial Code, the federal Fair Debt Collection Practices Act, and the California Fair Debt Collection Practices Act. In the case of denial of reinstatement or defective post-repossession notices, the main laws are the Rees-Levering Automobile Sales Finance Act and the California Financing Law. If you have a claim for wrongful repossession, these laws afford you the right to sue for actual damages, statutory damages, and attorneys fees and costs. The Trueblood Law Firm can represent you in a wrongful repossession case on a contingent fee, without any out of pocket cost to you, because of these strong consumer protection laws.
I wish you well on your unwanted car repossession journey. It’s a minefield out there and I hope this article helped you navigate it.
Alexander Trueblood of the Trueblood Law Firm is California’s most well-known repossession lawyer, with the longest track record of successful cases and billions in settlements. He is based in Los Angeles, California and serves the entire state. For a free consultation, please submit a contact form below, or click at the upper right to schedule a consultation online. Or just call us at (800) 616-9325.