I don’t know how I got to Blog #200 without writing on Repossessions! Well, better late than never.
A fundamental tool in a creditor’s collection arsenal is “self-service” repossession pursuant to Article 9 of the Uniform Commercial Code. The Uniform Commercial Code is a body of commercial law that is not federal but has been adopted in all states of the United States and has remained largely the same in all jurisdictions. Hence the name “uniform”.
It works like this: if the obligee takes or retains a security interest in the guarantee, and if there is an event of default, the obligee can exercise its rights under the law and the contract to withdraw the guarantee from the obligor, the sell and repay outstanding payments. debt, assuming it can do so without breaking the peace. The creditor must overcome many obstacles to undertake and obtain this remedy in the event of default. Still, it remained a proven collection method for years.
Trucks and cars have always been a preferred type of collateral in consumer credit transactions. They have an easily determinable value and frankly, are relatively easy to take back. Interestingly, our current shortage of used cars has made vehicles even more valuable, and therefore more attractive to creditors.
The CFPB raised a warning flag. Due to the demand for used vehicles, the Bureau wants to ensure that creditors do not engage in “wrongful repossession” to profit from repossessions. A recent bulletin issued by the Bureau reminds creditors that repossessing may be an unfair, deceptive, or abusive act or practice (UDAAP) – and therefore a violation of the Dodd-Frank Wall Street Reform and Protection Act. of consumers – if conducted in a pernicious manner. Examples include repossession resulting from consumers being coded as delinquents when they are not, and creditors not rescinding repossession orders as previously promised to consumers. The latter occurs when a consumer has made and kept a promise to put a checking account in exchange for the creditor’s agreement to set aside a repossession order.
Another CFPB concern is that creditors are tackling illegal charges that drive consumers into default and repossession. The Bureau also takes note in its bulletin of unfair practices after repossession.
The CFPB bulletin sets out 20 specific “expectations” for avoiding UDAAPs. To see 2022-04508.pdf (govinfo.gov).
Practice pointer: If you take a vehicle as warranty, remember to study the expectations of the CFPB. It may just prevent you from having hot water.