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Vehicle Repossession: The laws & BHPH

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Vehicle Repossession: The laws & BHPH

David Meyer-VP Sales, Automotive Solutions

Needless to say in today's sluggish economy, auto repossessions have become an increasingly common phenomenon, even in a thriving economy, personal circumstances such as layoffs or a medical crisis can put pressure on a household budget. This makes way for the BHPH business, and it opens many doors for those who would otherwise not be able to purchase and/or finance a vehicle. With this type of economy undeniably comes a risk…. Skips are common thus making repossessions necessary. “It is not personal, it is business” and this slogan has never been more true than for those in the BHPH industry.

Auto repossession laws vary not only from state to state but also according to the contract you created when the vehicle was originally financed.   By examining these laws you can get a general idea of rights & risks involved with compliance regarding repossessions in the Buy Here Pay Here World. I’ve compiled a list of common laws and regs to keep in mind while going through the repossession process.

  • In general, lenders have the legal authority to seize the asset as soon as the loan goes into ‘default’ status. Typically this is considered 10 days passed payments date, but again, laws vary by state. It is also common that NO warning in advance needs to be made to consumer.
    • You must provide written notice of default. Although state laws can vary, there are form letters for 1-15, 15-30, 30+ day and non-financial defaults. Both the buyer and co-buyer need to be notified.
    • You are liable for the actions of a third-party repossession agent.
    • You cannot repossess vehicles with people in them or take the vehicle if it is behind a locked gate
    • You can repossess a vehicle in bankruptcy if the debtor reaffirms the debt and subsequently defaults. Many dealers believe that once bankruptcy is filed, repossession is no longer a viable option. This is far from true. If the debtor reaffirms the debt and then defaults, you are free to repossess the vehicle.
    • A vehicle protected by bankruptcy law can still be repossessed if a motion for relief of the automatic stay is granted.
    • After repossession, you must send notice to the customer before resale and IF you resell the vehicle you must determine the proper amount you can recover.
    • Many dealers operate under the misapprehension that, if they sue, they can recover all the monies they would have received if the customer never defaulted. This is not accurate. First, any monies received from the buyer or co-buyer must be credited to the account. Second, the net amount of proceeds received from the sale of the vehicle at auction must also be credited. Third, any expenses of collection, repossession and resale must be added to the debt. Finally, you are entitled to attorney’s fees and costs. The total may be more or less than the original payment stream.
    • If the deficiency is less than $5,000, you can go to court yourself.
    • If the deficiency is $5,000 or less, or if you elect to recover $5,000 or less, you or any dealership employee can go to small claims court and receive a judgment on the same day the hearing is scheduled. No lawyer needed.
    • The use of electronic disabling devices IS legal and falls within all amendments at this time.

The above bullet points are generalized legal principles applicable across all states, like I previously mentioned it is crucial to know your state’s exact laws as they may differ.  To learn more about your rights as a BHPH dealer and specific repossession requirements in your state, contact your state Attorney General by visiting www.naag.org
 

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