An automobile finance company may repossess a consumer's vehicle if the consumer misses a payment, fails to keep up the insurance or otherwise violates the contract. The finance company is not required to give any advance notice that it is going to repossess the car. That is so the consumer cannot hide or damage the car when faced with the prospect of repossession.

After it has repossessed the car, the finance company must send each person on the contract a Notice Of Its Intent to sell or dispose of the vehicle. That Notice must be given within 60 days of repossession and must inform the consumer of their rights. In most cases, the finance company must give the consumer the opportunity to reinstate the contract--catch up on missed payments--by paying all past-due payments and late fees, as well as repossession charges. But in certain circumstances, the finance company is not required to permit the consumer to reinstate, such as if the consumer has concealed the vehicle. In all cases, the finance company must allow the consumer to redeem the vehicle--pay off the entire contract balance, plus repossession charges.

The consumer generally has 15 days after the date of the Notice to reinstate or redeem. The finance company is also required to permit consumers to extend that period by 10 days, but to get the 10 day extension the consumer must act quickly. The consumer must return the Extension Request form to the finance company by hand-delivery or Certified Mail, Return Receipt before the 15 days expires. The Extension Request must be received within that period, not merely mailed.

After the redemption period has expired, the finance company may sell the vehicle. Usually they sell repossessed cars at private auctions that are open to auto dealers only. Typically these auctions bring sale prices substantially below the vehicle's retail value.

After the car has been sold, the lender must send the consumer an accounting that lists the sale price and other charges and the remaining contract balance. It is unusual for the car to sell for enough money to pay off the contract in full. Usually there is a balance due on the contract, called the delinquency. Finance companies usually try to collect that deficiency with in-house collectors. If that does not work, they send the deficiency claim to a collection agency. If that is unsuccessful, the finance company may sue the consumer to get a judgment for the deficiency balance or it may sell the account to a debt buyer that will try to collect for itself. Sometimes the debt buyer sues the consumer to collect the deficiency.

The lawyers in our firm have a great deal of experience and success in representing consumers who have been sued by finance companies that were trying to collect these deficiency claims. Andrew Ogilvie represented the consumer in the first important case in this area: Bank of America v. Lallana (1998) 19 Cal. 203. In Lallana, the California Supreme Court held that finance companies must strictly comply with the Notice requirements set forth in California's repossession statutes. If the finance company does not strictly comply, it loses its deficiency claim and cannot collect that amount from the consumer. Bank of America had to give back millions of dollars it had collected from consumers on invalid deficiency claims.

Andrew Ogilvie and Carol Brewer had another landmark victory in Juarez v. Arcadia Financial, Ltd. (2007) 152 Cal.App.4th 887. In Juarez the Court held that the Notice must tell the consumer exactly what to do in order to reinstate the contract: who to pay, how much to pay, where to pay it. In short, all the details that the consumer needs to know. Before Juarez, finance companies sent Notices that were incomplete or that just told the consumer to call a phone number to ask what to do.

When Juarez was decided, there was an enormous reaction from the trade associations for auto lenders. They asked the California Supreme Court to reverse the Juarez decision and told the Court that if Juarez is the law, then no auto lender has ever given a proper post-repossession Notice. Since then some of the companies have changed their Notice forms, but there are still lots of non-compliant ones in use.

If your vehicle was repossessed, you should call us to discuss your situation. There is no charge for initial consultation and we only take contingent fee cases. Call us at 415-956-8000 or contact us online for a FREE case review.