In the news, we’ve been hearing a lot about foreclosures. Not as much is said about repossessions, though. In this tough economy, car payments can be difficult to make. Under California law, a creditor can repossess your vehicle without prior notice, even if you are only one day late on your payment.
The repossession process cannot begin until the buyer defaults on the sales contract. The default is most commonly one or more missed payments, but may also be a violation of some other contractual issue, such as not maintaining insurance on the vehicle. If the lender required a co-signer to grant the credit used to purchase the vehicle, the lender must provide the co-signer written notice of late payments prior to repossession (Civil Code 2983.35). The lender is not required to give the primary borrower this type of notice.
California law requires standard vehicle sales contracts to include language granting the legal owner (the lender) the right to repossess the vehicle if the buyer defaults (Civil Code 2982(g)). The contract may include specific conditions under which the vehicle may be repossessed. Unless the contract specifies otherwise, the seller may repossess the car immediately upon the first missed payment.
The lender often contracts with a licensed repossession agency to conduct the actual repossession. Both the legal owner and the repossession agency are authorized to repossess the automobile. Only persons licensed or registered with the Department of Consumer Affairs, Bureau of Security and Investigative Services can engage in repossession activities (Bus. & Prof. Code 7502 and 7506.3). Unlicensed repossession agencies and unregistered repossessors are subject to criminal charges and penalties (Bus. & Prof. Code 7502.1-7502.2). Licenses can be verified online from the Bureau of Security and Investigative Services website at http://www.bsis.ca.gov/online_services/verify_license.shtml.
Neither the legal owner nor the repossession agency has to give you notice that they intend to repossess the vehicle. Although repossession agents are not allowed to enter private buildings or any secured or locked areas, they may take cars from unsecured driveways, streets, parking lots, and other publicly accessible areas. The repossession agent may take the car at any time of the day.
You do not have to be present at the time of repossession. However, if you are present, the agent may ask for payment in lieu of repossessing the vehicle. This demand must be made in compliance with the State and Federal fair debt collection laws. If you wish to pay the amount owed at that time, rather than have the vehicle repossessed, the agent must provide you with an itemized receipt, and transmit your payment to the creditor (Bus. & Prof. Code 7507.4).
Within 48 hours of repossession, the agency must provide you with a Notice of Seizure and an Inventory of Personal Effects itemizing all the personal belonging in the vehicle at the time of repossession. If the 48-hour period includes a Saturday, Sunday, or holiday, the repossession agency has extra time to serve notice (Bus & Prof. Code 7507.9). These notices may be served personally or by mail.
The Notice of Seizure must include very specific language, and provide you with the name and contact information of both the legal owner and the repossession agency (Bus. & Prof. Code 7507.10). The Inventory of Personal Effects must include information about how to recover your property and the amount of storage fees for your property. The repossession agency must store your items for 60 days, after which all unclaimed property can be discarded. The repossession agency will only return personal items than can be removed from the car without use of tools (Bus. & Prof. Code 7507.9). Property that is installed or affixed to the car, such as speakers, wheels, or aftermarket engine or exhaust components, will not be returned to you. The legal owner may be willing to release this property, but you must contact the legal owner directly about the return of these types of items. Additionally, the repossession agency is prohibited from returning deadly weapons, dangerous drugs, combustibles, food, and other health hazards (Bus. & Prof. Code 7507.9(b)).
If the legal owner wishes to sell the vehicle after repossession, they must provide you at least 15 days’ written notice of intent to sell the vehicle. This Notice of Intent to Sell must be served on you, either personally or by certified or first-class mail, within 60 days of repossession. This notice must include a lot of very specific language, which is detailed in Civil Code 2983.2. This notice must inform you of your right to request that the legal owner delay the sale of the vehicle for 10 days.
The Notice of Intent to Sell must also inform you of your right to redeem the vehicle and reinstate your loan contract, and give you details about how to do that. These details include the amounts due, and when and where payment may be made. Civil Code 2983.3 requires the lender to reinstate your loan contract if all past due amounts are paid, unless the legal owner can prove that you did one of the following:
- Provided false information on your loan application
- Hid the vehicle in order to avoid repossession
- Damaged, or threatened to damage, the vehicle in a way that reduces its value
- Committed, or threatened to commit, violence against anyone involved repossessing the vehicle
- Used the vehicle in the commission of a criminal offense
Your right to reinstate your loan contract is limited to once every 12 months, and twice over the life of the contract.
If the sale of the vehicle results in a surplus, the surplus amount must be returned to you within 45 days of the sale. If the sale does not net enough to fully satisfy your loan and other amounts due, you will be liable for the difference. This is known as a “deficiency balance.” The lender can sue you in Small Claims or Civil Court for the remaining balance owed.
If the Notice of Intent to Sell does not include all of the specific language and disclosures required under Civil Code 2983.2, or if the Notice of Intent to Sell is not served within 60 days of repossession, you are not liable for the deficiency balance (Civil Code 2983.2(a)).
If the lender sues you for a deficiency balance, the case will proceed like any other collections or breach of contract case. Help responding to this type of lawsuit is available from the Sacramento County Public Law Library’s Civil Self-Help Center. Every morning, an experienced paralegal conducts a workshop that will walk you through the entire process of completing the forms used to answer this type of case. For more information, see www.saclaw.org.