Posts Categorized: Repossession

6 tips if you must buy a vehicle from a buy-here pay-here dealership

The L.A. Times is currently running an investigative series on so-called Buy-Here Pay-Here auto dealerships. The first installment describes the basic business model used by these businesses and identifies a number of the pitfalls of buying a vehicle from them.

A buy-here pay-here dealership is, as the name suggests, a dealership that finances the car loans itself, rather than using banks or finance companies. They market to people with low-income and bad credit that can’t qualify for conventional financing. In return for agreeing to finance borrowers that don’t have access to mainstream credit, the buy-here pay-here dealers drastically inflate the price of their vehicles, charge very high interest rates, agree to payment arrangements that they know you can’t honor, and aggressively repossess the vehicle once it’s in default, keeping all of the money that the borrower has already paid. And once the vehicle is repossessed, they sell it again. And again. Sometimes the same vehicle is repossessed and sold as many as eight times, creating another revenue stream for these business. The L.A. Times succinctly–and accurately–describes the business model as “sign, drive, default, repossess, and resell. The entire Times piece is a fascinating look into this booming industry and is definitely worth your time.

It would be too easy to advise everyone to steer clear of buy-here pay-here dealerships. After all, they do allow people without access to mainstream credit to buy a vehicle. And let’s face it, most people need a vehicle to get to and from work these days. But buying a car from them is very, very risky. Here are some tips if you’re considering buying a car from a buy-here pay-here lot:

Decide whether you really need to buy from them. Obviously, if you’re considering a buy-here pay-here dealership, you’ve decided that you need a vehicle and have been rejected by conventional lenders. But consider whether you would be better off taking the money that you’ve earmarked for a down payment to the buy-here pay-here dealer and instead using it to buy a used car outright from a private party. This would solve your transportation and financing problem, without taking on all of the risks of buying from a buy-here pay-here dealer.

Do your homework on the purchase price. Because the buy-here pay-here dealer knows that you’re desperate, they often inflate the list price well-over the vehicle’s Kelley Blue Book value. The Times story reports about one particular transaction where the purchase price was inflated to double the KBB price. Do your homework and make sure that you are getting a fair price.

Review the interest rate carefully. The Times story tells the story of one person who thought she purchased a car with an APR of 12%, when it actually was 20.3%. Make sure that the APR is actually what the contract says it is. There are a number of online APR calculators that you can use to verify the dealer’s numbers.

Be sure that you can afford the monthly payment. The Times story reports that 1 in 4 buy-here pay-here customers defaults on their loan. And there is ample evidence that the dealer may deliberately agree to a payment plan that they know you can’t afford because they know that they can just repossess your vehicle and sell it again to someone else. So be conservative in your estimates of how much you can afford each month and be sure to plan for emergencies when doing your budget.

Don’t believe what they tell you about re-financing or trading up. As the Times story details, these are often lies to pressure you into the purchase. If something doesn’t feel right to you, walk away.

Don’t expect them to work with you if you fall behind on payments. Their business model is heavily premised on repossessing cars in default and reselling them. So they aren’t going to be interested in working with you if you fall on hard times. They’re just going to repossess and sell the vehicle again. The Times story reports that many buy-here pay-here dealers outfit their vehicles with GPS devices and remote-controlled ignition blockers to allow for easy repossession. Those that don’t often resort to deceptive or very aggressive repossession tactics. In my experience, some of the most dangerous repossession encounters that I’ve heard about were ordered by buy-here pay-here lenders.

A vicious cycle in the used-car business | Los Angeles Times | October 30, 2011

In Minnesota, be careful about hiding your vehicle to prevent a lawful repossession

I often get calls from people whose vehicles are about to be repossessed. The callers sometimes tell me that the repossession agent threatened to have them arrested if they don’t tell him where the vehicle is located and want to know whether they are guilty of a crime by refusing to tell the repo agent where the vehicle is.

Under Minnesota law, it’s a crime if:

(1) You are (a) legally obligated for an auto loan; (b) you know where the vehicle that is secured by the auto loan is located; and (c) with intent to defraud, you refuse to disclose the vehicle’s location to a creditor or repossession agent that is legally entitled to repossess the vehicle.

(2) You–whether you are the borrower or not–conceal the vehicle if you know that the creditor is legally entitled to repossess the vehicle.

The potential penalty, provided by Minnesota Statute section 609.62, is imprisonment for up to three years or a fine of up to $6,000.

So under Minnesota law, it may be a crime to refuse to disclose the location of, or otherwise conceal, a vehicle that your lender is legally entitled to repossess. The key phrase here, though, is “legally entitled to repossess.” You may have defenses to the repossession, which would alleviate the potential criminal penalties because the lender isn’t legally entitled to repossess your vehicle. It’s probably best to be proactive and discuss the situation with an attorney before the repo man is knocking on your door. You should also check out this post for some suggestions that may allow you to keep your vehicle. Again–and I can’t emphasize this enough–don’t wait until the repo man is at your house to consider your options and talk to an attorney.

It’s definitely worth noting that I’ve never been involved in a case where a repossession agent or lender filed criminal charges against someone for refusing to tell them where the vehicle was or for concealing the vehicle. In my experience, repo agents use the threat of arrest to intimidate consumers into turning over the vehicle and rarely, if ever, act on them. But there’s a first time for everything and consumers should tread carefully because of the potential for criminal penalties.

You can sue a repo man that wrongfully repossesses your car

I’ve talked to a couple people lately who have told me about some really awful behavior by repossession agents. One person was run off the road by two repo agents working in tandem. Another was forced up against a wall and told that she was going to jail if she didn’t turn her car over. A third was physically dragged out of her car by the repo agent.  Needless to say, all of these people were terrified by their experiences. All three of them called the police, only to be told that the police would not get involved.

3606871463_3d9d351e381Fortunately for these people, there is something that they can do. Although Minnesota law allows repossession agents to take your vehicle without a court order, they can’t create a breach of the peace while doing it. Running someone off the road, slamming someone against a wall and threatening to put them in jail, and dragging someone out of their car probably all result in a breach of the peace. In addition to liability for a breach-of-the-peace repossession, the repo man may also be liable for other damages as well, depending on the severity of his conduct.

You can sue a repo agent that has wrongfully repossessed your vehicle and receive money damages. If you live in Minnesota and have had a bad experience with a repo agent, feel free to contact us for a free case evaluation.

(photo: srqpix’s)

The police can’t help a repossession agent seize your car

An alarming trend that I’ve noticed lately is police officers getting involved in a self-help repossession. Many times the consumer calls the police after the situation escalates and becomes violent. Occasionally, the repo agent gets the police to accompany him to the scene of the repossession. In my experience, police involvement during a repossession ranges from keeping the peace to actively helping the repo agent take the vehicle. But at what point does this police involvement become illegal?

Before I answer that, here’s a little background: under the U.S. Constitution, the state can’t take your property without notice and an opportunity to be heard. This is called due process. But in states like Minnesota that allow self-help repossession, the creditor can repossess your vehicle without any court involvement whatsoever. Notice is not required and there’s no opportunity for you to be heard before your car is taken. So why isn’t this a violation of the Consitution? Because the Constitution only gives you due process rights when your property is seized by a government, or state, actor. Private repossession companies aren’t state actors. But police officers are. So if a police officer assists in the repossession of your car, it’s potentially a violation of your constitutional rights because a state actor is depriving you of your property without due process.

Of course, it’s not always easy to determine at what point the police go from merely keeping the peace to actively assisting in the repossession. Most of the courts that have looked at this issue have noted that the police may act to diffuse a volatile situation, but may not aid the repossession agents in such a way that the repossession would not have occurred but for their assistance. If the police threaten you with arrest or command you to turn over the vehicle, they’ve probably crossed the line from keeping the peace into active involvement. This would violate your rights to due process and you may be entitled to bring a lawsuit against the police and repossession company for wrongfully repossessing your vehicle.

Photo: http://www.flickr.com/photos/bruce_r/3854836367/


What to watch out for if your car is repossessed

Repossession of a car can be a scary experience. The law requires that the lender (and repossession agent) treat you with respect and dignity. Here are some rules they need to follow:

1. The repo agent may not breach the peace. This means the repo agent can’t:

  • Forcibly remove you from the car
  • Stop you while you’re driving
  • Pretend to be a law enforcement agent, or
  • Break into your closed garage to get the car

Any of these things may be a violation of the law and the lender and repo agent could be liable to pay you damages.

2. They can’t repo your car when you’re not in default. Your financing contract should describe what is a default on the loan and what isn’t. Simply, your car can’t be repossessed if it’s not in default. But it gets a little more tricky. If the lender has continued to accept payments after an earlier default, it may not repossess the car unless it gives you written notice that it will no longer accept payments.

3. They have to give you written notice of what’s going on. If your lender repossesses your car, before selling the collateral it has to give you written notice of when, where and how the car will be sold. In addition, it has to notify you how much money you would need to pay to get the car back anytime before it is sold.

After a repossession, the lender must send you a notice stating how much the collateral was sold for, and containing a calculation of any amount the consumer is due back from the sale (after deducting the loan amont) or how much the consumer owes (the legal term is a deficiency). It’s important to remember that a lender cannot collect a deficiency from you if it has not sent you notice of how your deficiency was calculated.

If your car has been repossessed, save originals of all your paperwork and call a consumer attorney who can notify you of your rights.

Dealing with secured debts in bankruptcy

One of the really great features of bankruptcy is that you can use it to get rid of the financial anchors that have been weighing you down. These often include houses that are worth significantly less than you owe on them (very, very common in the current housing market) or cars (also common as cars often depreciate ahead of the payoff schedule). These types of debts are called “Secured,” because the property that is the subject of the loan is used as collateral.

When you file bankruptcy, you will have some choices with regard to to secured debts. You’ll generally have three options:

1) Surrender the property

This, quite literally, involves handing the keys over to the bank. You are then freed from any liability relating to that debt.

2) Reaffirm the debt

After you file bankruptcy, the party that holds your mortgage or car loan may reach out to you through your attorney. They may propose that you sign a Reaffirmation Agreement. This means that you would agree to repay a debt that would otherwise be discharged in the bankruptcy. As a general rule, we discourage our clients from signing these agreements, because they aren’t always in the client’s best interest. There are some instances where a reaffirmation makes sense. Sometimes lenders will agree to reduce the interest, the principal or the term of the loan. Of course every situation is different.

3) Retain and pay

Retain and pay is the most common solution. Essentially, this occurs when you do not sign a reaffirmation agreement, but keep using the collateral and making your scheduled payment to the lender. The lender has the right to foreclose/repossess, but they don’t have any incentive to do so, because they are getting paid. The advantage to retain and pay is you can use the collateral as long as it suits you (even through payoff), and still decide to surrender it with no consequence if it ceases to meet your needs (if your car blows a transmission you may not want to keep paying for it).

Want to know more? Call us for a free consultation.

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Woman’s car repossessed even though it was fully paid off

Your lender usually has the right to repossess your car if you’re in default by not making your payments. Of course, before your lender can exercise their right to repossession, you have to actually be, you know, in default.

Apparently, Wells Fargo never got this memo. They repossessed a Tacoma, Washington woman’s 1999 Chrysler LHS even though she had paid the car off in full and had clear title to the vehicle. Only after the local news station’s investigative reporting team got involved, did Wells Fargo admit its mistake and return Newton’s car.

If  you live in Minnesota and your car has been repossessed even though you’ve paid it in full, feel free to contact us for a free consultation.

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Wells Fargo Repossesses a Fully Paid Off Car | Huffington Post | November 2, 2010

Welcome to the Friedman Iverson, PLLC Consumer Blog!

The world needs another blog like I need an additional hole in my head.  So why are we doing this? We get calls everyday from people who are frustrated and frightened by situations they’re facing. They aren’t necessarily looking to hire a lawyer, but they need some information to determine their rights and assess their options.  We’re always happy to take these calls, but we thought posting answers to the most common questions would be convenient for consumers.

We want this blog to grow organically. We will definitely comment on developments in the law and relevant news stories. We will probably also trumpet our successes (blogs are nothing if not a bit self-indulgent), but a lot of how we’ll develop depends on our readership. If there is a topic that you would like us to address, shoot us an email at: info@nullfriedmaniverson.com.

In the coming weeks and months look for posts on bankruptcy, debt collector harassment, auto fraud and foreclosure.  Please check back early and often and offer your comments.  Let’s make this fun.

How to defend a repossession deficiency lawsuit

After your lender repossesses your car, they will sell it and apply the sale price to the amount remaining on your loan. In most cases, there is still a deficiency remaining on your loan after applying the sale proceeds. More often than not, your lender will then sue you for that deficiency. If that happens, here are some possible defenses to the deficiency lawsuit:

  • Statute of limitations. In most Minnesota debt collection cases, such as credit cards, the statute of limitations is six years. However, the statute of limitations for a repossession deficiency claim is four years. If the creditor brings the deficiency lawsuit over four years after you made your last payment, the statute of limitations on the claim may have passed.
  • Incomplete or ineffective assignment of the loan. Like credit card debts, many repossession deficiency accounts are sold to third-party debt buyers. The debt buyer must be able to provide a complete and detailed chain of title of ownership of your account. Often, the chain of title is either incomplete or does not specifically identify your account, but rather a large batch of accounts.
  • The sale of your car after repossession was not commercially reasonable. The general rule is that every aspect of the sale of a car after repossession must be commercially reasonable. This essentially means that the creditor must act in good faith and use its best efforts to get a fair price for your car.
  • The creditor accepted your car as a full satisfaction of the loan. Occasionally, creditors tell people that if they turn over their car voluntarily, they will not pursue the person for a deficiency. Creditors may later deny making this promise. Some courts have held that promising not to pursue you for a deficiency if you turn over your car voluntarily bars that creditor from pursuing a deficiency.

It’s also possible that the creditor may not have followed the proper procedures when they repossessed your car. This may allow you to bring a counterclaim against them in the deficiency lawsuit. This post details some of the most common wrongful repossession practices. While a counterclaim is not technically a defense to a deficiency lawsuit, a valid counterclaim can often lead to a reasonable settlement of the deficiency claims.

What to do if your car is about to be repossessed

If you’ve missed a few payments on your auto loan and are concerned about the lender repossessing your car, here are some options to consider that may allow you to either keep you car, or lessen the impact on your finances:

  • Can you re-finance the loan so that you can better afford the payments? Credit unions usually offer better rates than more conventional auto lenders.
  • Can you sell the car to a private party and get enough cash back to repay the loan?
  • Will the creditor negotiate waiving any deficiency balance or a less damaging mark on your credit if you voluntarily surrender the vehicle to them? If so, make sure you get that promise in writing. You may want to talk to a lawyer before voluntarily turning over your vehicle to make sure you do not have any defenses to the repossession.
  • Is filing bankruptcy an option? If so, consider discussing your bankruptcy options with us.

If you’ve explored all of these options with no luck, and repossession seems like a sure thing, here are some tips:

  • Keep all letters and documents related to the repossession, including the envelopes;
  • Remove any non-essential personal property from your car (don’t forget the glovebox and trunk). Make a detailed list of any things that you must keep in the car, like jumper cables, child seats, flashlights, tools, etc. Or better yet, take pictures or video;
  • You don’t have to consent to the repo man entering your house or garage. But never use violence against the repo man. Keeping your car isn’t worth risking a violent or dangerous confrontation.
  • Even if the lender is legally entitled to seize your car, the repo man can’t use violence or the threat of violence during the repossession. It’s also illegal for the repo agent to break into a locked garage or to use the police to aid in the repossession. If any of these things happen during the repossession, you should discuss the situation immediately with an attorney.

Most of these suggestions will take a while to work out, so consider keeping your car in a locked garage while you work out the details.  Before you do, though, read this post because there may be criminal penalties for fraudulently concealing your vehicle if the lender is legally entitled to repossess it. You should also be proactive and discuss your situation with an attorney. Don’t wait until the repo man is knocking on your door to act, because at that point, it’s going to be very difficult for an attorney to prevent the repossession.