Repo Madness: a new report on the dangers of self-help repossession
The National Consumer Law Center just released a report on the dangers of self-help repossessions. In all 50 states, when a lender decides that a borrower has defaulted on the loan, they can unilaterally—and without any court involvement or notice to the borrower—seize the vehicle and sell it. Because self-help repossession doesn’t require the lender to go to court, the borrower—who often can’t afford a lawyer—must then initiate their own court action if they believe the car has been wrongfully taken. Navigating the legal system without a lawyer is a daunting, and often impossible, task for many people. So most wrongful repossessions go unreported and unchallenged.
The report notes that in the last three years there have been 6 deaths reported during self-help repossessions. There have been dozens of injuries and arrests, numerous reports of weapons being used, and two reports of vehicles being seized with young children still in them. The report then details several of the most violent and egregious incidents. And based on my experience handling wrongful repossession cases, many violent incidents go unreported, so these statistics are probably on the low side.
The study points to three main things as the cause of these disturbing statistics: (1) the fact that cars have become an essential part of most people’s lives in the 21st century, which leads many borrowers to resist the repossession; (2) the complete lack of court oversight of the self-help repossession process; and (3) the lack of licensing requirements for repossession companies and agents, often leading to many convicted criminals being employed in the industry.
The report then makes several suggestions to improve the process, and hopefully reduce the number of violent—and even deadly—incidents. I’ve summarized them here, and included my thoughts and comments for each one:
- The consumer should receive notice that a default has occurred and be given a reasonable time period to cure the default. Amazingly, this is not required in most states, including Minnesota.
- A clear rule that if the consumer objects in any way during the repossession, the repo man must stop and the creditor must then seek a court order. This should help defuse most violent situations before they start. While this may occasionally lead to a borrower that is clearly behind on his payments resisting a valid repossession, the lender can still protect its rights by obtaining a court order to repossess the car.
- After repossession, the creditor must give the consumer a reasonable time to redeem the loan before selling the car. Again, this is not required in many states, including Minnesota.
- Strict licensing requirements for repossession companies and agents. To me, this is the biggest no-brainer. And because of the inherent danger in self-help repossession, convicted criminals, particularly those with a history of violence, should not be allowed to work as repossession agents.
- Clear liability by creditors for bad acts by the repo agents they hire. Minnesota case law is pretty clear that a lender is liable for the conduct of the repo agents, but that’s not the case in many states. This requirement would help ensure that lenders only hire reputable repossession companies.
The study also raises the possibility of creating a simplified and streamlined court process that lenders must go through before repossessing a car. The report points to the landlord-tenant eviction process as an example. I think this is a wonderful idea. It would eliminate self-help repossession, give the borrower a chance to dispute the repossession, and add court oversight to ensure that the process is fair to both parties. Lenders will undoubtedly object to this idea. They will probably even resort to their favorite scare tactic, the prospect of increased auto loan costs for all borrowers, to prevent such a process from being implemented. Even if that were true—and that’s certainly debatable—it’s a small price to pay to eliminate the senseless, and largely preventable, violence that can happen during a self-help repossession.
I created a free guide about repossession so that you can learn more about your rights. Feel free to download it and please share it with anyone else that you think could use it. And if you live in Minnesota, and believe that your vehicle has been wrongfully repossessed, consider contacting me for a free case evaluation.
Repo Madness: How Automobile Repossessions Endanger Owners, Agents and the Public (PDF)| National Consumer Law Center | March 2010
(Photo: http://www.flickr.com/photos/davidberkowitz/ / CC BY 2.0)