California Repossession Law Blog

Collections Lawsuits With No Proof of Indebtedness--What to Do?

2010-07-13T23:04:46Z

Suppose your vehicle was repossessed. You didn't have the money to get the vehicle back, so the finance company sold it. A year or two has passed, and now you have been sued for the deficiency--the money owed on your contract after the sale proceeds were applied. What can you do? For one thing, you can insist that the bank follow the law before it gets a judgment against you.

In California, banks and finance companies cannot obtain deficiency judgments "unless the court has determined that the sale... was in conformity with" applicable California statutes. That means that the bank must show the court that it sent a proper post-repossession Notice and that the vehicle was sold in a commerically reasonable manner. Our recent experience is that banks and finance companies are not providing this proof.

Today we reviewed a lawsuit that alleged just that the consumer had entered into a Retail Installment Sale Contract. It said the consumer had defaulted, that the bank gave all required notices, that the vehicle was sold in a commercially reasonable manner and that the consumer owed a $15,000 deficiency. It said interest was accruing at the whopping contract rate of 23.75%. Yet the lawsuit did not state the date of either the contract or the repossession. The lawsuit did not attach any contract or notices. It did not say what the car was sold for or how the $15,000 was calculated. But unless the consumer objects--or obtains legal counsel--the court would likely enter a default judgment, just based on the allegations of the lawsuit.

You can fight back. Today's New York Times includes an article about the huge number of collection lawsuits that are filed with zero proof of any indebtedness. Some judges have realized that these lawsuits are largely filed by collection companies that have bought old debt for pennies on the dollar. Because these companies have no proof of the debt,some judges are beginning to throw the lawsuits out or enter judgment in the consumer's favor.

If you are sued on a deficiency claim, we will review the documents at no charge to you and advise whether we believe you have a defense. Often you will.

What Reinstatement Rights Does a Buyer Have for a Second Repossession?

2010-06-21T19:25:32Z

If your vehicle has been repossessed for a second time, you may have limited options to get your car back. If it is a third repossession, you will not be allowed to reinstate.

In most circumstances, the finance company must give a defaulting buyer the right to reinstate--catch up on past due payments and other charges, including repossession fees and charges. That is important, since most buyers do not have the cash to redeem--pay off the entire outstanding contract balance.

But the finance company does not have to give the buyer the right to reinstate under certain circumstances. For example, the buyer has no reinstatement right if he conceals the car so that it can't be found; if the buyer intentionally provided false credit information; or if the buyer abused the vehicle so that its value is substantially impaired.

Importantly, California law also limits the right of reinstatement to once in any 12-month period and twice during the term of the contract. So if your car is repossessed in January and then again in December, the finance company will properly deny you the right to reinstate. That may not seem fair, but that is what California law provides. Be forewarned!

Repo Companies' Storage Charges for Personal Property Are a Ripoff

2010-05-26T23:21:21Z

When cars are repossessed, the owners' personal property is removed from the cars and stored by the repo company. The California Business & Professions Code requires repo companies to send the owner an inventory of the goods and a disclosure of charges for the storage. However, there is no law governing the amount of money the repo companies may charge for storage of goods.

Unfortunately, some repo companies are taking advantage of owners by demanding excessive fees for storage. For example, H & H Recovery in Livermore, CA recently demanded $30 a day plus a $50 admin fee to store some papers and goods that would fit in a garbage bag. The owner got the run-around for a month trying to get his papers and goods back. The company demanded over $900 to get the goods back. Charging rental car rates for storing a quantity is goods is unconscionable. The owner is considering legal action at this time.

Repo Companies are Fined by State Agency

2010-05-26T23:09:20Z

The California Bureau of Security and Investigative Services regulates auto repo companies. The agency cites and fines licensed repo companies for violating the statutes that govern their conduct. Violations include entering property without the owner's consent, failing to report violent acts, failing to register employees, and using owner 's personal property. The agency website lists 26 violations by twelve repo companies. Fines ranged up to $500 per violation.

Repo Men Going Hi-Tech

2010-03-03T23:17:22Z

THe NY Times reports that repo companies are increasingly using a digital system to spot cars on lenders' repo lists. MVTRAC provides mobile digital cameras to repo companies that take pictures of license plates as the repo truck goes down the road. The data is matched to a list of licenses representing cars to be repossessed. When a match is found, the operator brings up additional info on the car to determine he has spotted a wanted car. The repo companies' incentives are to realize the $200 to $400 repo fee from the lenders. Police departments are using the same technology to spot stolen cars. http://www.nytimes.com/2010/02/28/automobiles/28REPO.html?pagewanted=2&ref=automobiles

Fireside Class Action Does Not Include Repossessions Past October 2007

2010-01-27T22:48:57Z

Many of you have called or emailed about Fireside Bank's repossession of your vehicle. You are hoping that you are included in our Fireside class action settlement. That settlement resulted in Fireside clearing class members' credit reports of Fireside's tradeline. The settlement also required Fireside to reduce class members' obligations to zero.

California law requires repossessing finance companies to exactly comply with the law when they send post-repossession notices of intent to dispose (NOIs). If the finance company makes a mistake, then the defaulting consumer does not owe any deficiency following the repossession sale. We reached the Fireside settlement because Fireside's NOIs from October 2003 to October 2007 did not comply with California law.

Fireside changed its NOIs in October 2007. Therefore, unfortunately the Fireside settlement class does not include consumers who received NOIs past October 2007.

Deadline Nears for Cashing Fireside Bank Settlement Checks

2010-01-11T19:44:47Z

Fireside Bank settlement class members who made payments to Fireside after their vehicles were repossessed are entitled to a 90% refund of those payments. Checks were initially mailed several months ago. Most class members cashed or deposited their checks long ago.

If you received a settlement check from the Fireside Bank settlement but have not cashed your check, you must cash it or deposit it right away! Otherwise your check will go "stale" and you will not be able to cash it at all.

Also, if you are a Frieside Bank settlement class member and you paid Fireside after your car was repossessed, but you haven't received a settlement check, you must notify the settlement administrator right away! Please call Joni Brown at Rosenthal & Co, 415-798-5942, with your contact information.

Fireside Bank Settlement Checks to Be Sent September 11

2009-08-28T19:29:15Z

Fireside Bank Settlement Class Members who paid money to Fireside after their cars were repossessed were scheduled to receive refund checks next week. However, as I mentioned in my last post, Fireside had not provided accurate records of payments it collected in 2009. Less than three weeks ago, Fireside finally provided new collection information to the Settlement Administrator regarding Settlement Class Members' 2009 payments. The Settlement Administrator had to input and process that new information. As a result, settlement checks will be delayed for two weeks. They are now scheduled to be mailed on September 11.

This delay does not affect Fireside's obligation to instruct the credit reporting agencies to delete Fireside's tradeline, regardless of whether you paid money to Fireside after your vehicle was repossessed. Nor does this affect Fireside's obligation to reduce the amount you owe to Fireside to zero. Fireside was required to take those steps by August 8, 2009.

Check your credit report in mid-September or so to be sure Fireside's tradeline has been deleted from your credit report. If you need help with a credit problem due to Fireside's tradeline remaining on your credit report, you can call me at 415-861-2265 or email me at carol@kaboblaw.com.

Fireside Bank Settlement Nears Distribution/Finalization

2009-07-27T18:57:06Z

If you received a Class Notice in the Fireside Bank class action settlement, watch your calendar. The "Effective Date" for the settlement is this week, July 29. Ten days after the Effective Date--no later than August 8--Fireside must change all of its records to show that Class Members owe nothing to Fireside. It must also request the credit reporting agencies to delete Fireside's tradeline on Class Members' credit reports.

Class Members should check their credit reports in mid- to late September to be sure Fireside's tradeline has been removed.

Class Members who have paid money to Fireside after their vehicles were repossessed will be mailed their refunds pursuant to the settlement within 30 days of the Effective Date--no later than August 28. Members of the Gonzalez class, who received Fireside's NOIs in 2000 and 2001, will receive back 100% of those payments. Lind class members, to whom Fireside sent NOIs between 2003 and 2007, will be refunded 90% of their payments.

However, if you are a Class Member and made a payment to Fireside Bank in 2009, Fireside may not have accurate records of your 2009 payments. You won't receive a refund without accurate records. Please call me at 415-861-2265 or email me at carol@kaboblaw.com if you received a Class Notice and made a payment in 2009.

We want to be sure that Class Members get all the relief to which they are entitled.

Fireside Bank Repossession Class Action Settlement is Finally Approved

2009-06-02T18:42:17Z

Our proposed class action settlement with Fireside Bank was finally approved by Santa Clara Superior Court Judge Elfving on May 29. This is great news for the approximately 17,500 members of the Gonzalez settlement class--California consumers to whom Fireside sent post-repossession notices of intent to dispose (NOIs) between May 2000 and October 2001--and the Lind settlement class--people to whom Fireside sent post-repossession NOIs between October 2003 and October 2007.

Gonzalez settlement class members will be refunded 100% of the post-repossession payments they made to Fireside. Lind settlement class members will be refunded 90% of their post-repossession payments. These payments will be mailed by the Settlement Administrator, Rosenthal & Company, no later than August 28, 2009.

In addition, Fireside is required to change its account records to show that each settlement class member has a zero balance with Fireside. It must instruct the credit reporting agencies, Experian, Equifax and TransUnion, to delete Fireside's tradelines on class members's credit reports. And it must recall all collection efforts against settlement class members. Finally, upon request from any settlement class member, Fireside must send that person a letter which confirms that their account balance is zero.

Fireside is required to take these actions no later than August 10, 2009. Therefore, if you are a settlement class member, you should check your credit report around the middle of September to be sure that Fireside's tradeline is deleted.

]]> If you have recently moved, or if you believe you are a settlement class member but did not receive a Class Notice, you should contact Joni Brown of Rosenthal & Company to update your contact information. You can reach her at 415.798.5942 or JoniB@RosenthalCo.com.

Unfortunately, if Fireside mailed you an NOI but then obtained a judgment against you before October 2008, you are not included in the settlement class. However, we have filed a separate appeal regarding people who would have been included in the Lind or Gonzalez settlement class but for Fireside's judgment against them. That appeal is ongoing.

We are extremely pleased to have the Court finally approve this settlement, which provides outstanding relief for the settlement class members. It has been a fight of nearly seven years to get this result, but well worth it to all who will benefit.

Do I Have A Defense to a Deficiency Lawsuit?

2009-04-10T21:52:09Z

Suppose your car was repossessed, recently or years ago. You were having financial difficulties. Maybe you tried to reinstate your contract. Perhaps you were having problems and voluntarily surrendered your vehicle. In the end, you were unable to get your car back and the lender sold your car.

You may have received some letters from the lender--or a collection agent--demanding that you pay the deficiency, the amount remaining on your contract after the lender applied the sale proceeds. You may have ignored those letters. You may have made a payment or two.

Now suppose you have been sued for the deficiency. The lender has added interest to that amount, perhaps thousands of dollars of interest. Do you have any defense to that deficiency claim? Or should you just let the lender get its default judgment against you?

If you bought your vehicle for personal or family use and you live in California, you often have a defense to a deficiency claim. Contact us if you have been sued. We will review your papers and evaluate whether you have a defense, at no charge to you. Because we only take cases we think are meritorious, we never charge our clients.

Checks To Be Mailed in Arcadia/CitiFinancial Class Action

2009-04-08T20:22:09Z

Persons whose vehicles were repossessed by Arcadia Financial, who received a post-repossession notice of intent to dispose (NOI) between November 1, 2002 and September 25, 2007 and against whom Arcadia sought a deficiency are--with minor exceptions--members of the Settlement Class in Juarez v. Arcadia.

In an earlier post, we reported that the San Diego County Superior Court finally approved the proposed class action settlement in January. Arcadia Financial (now CitiFinancial Auto) has now funded that settlement. That means the settlement administrator, Rosenthal & Company, will be sending checks to persons who made deficiency payments to Arcadia, within the next week or so. If you are a class member and made a deficiency payment to Arcadia after your car was repossessed, check your mailbox!

In addition, Arcadia is required to take steps so that all class members' records will reflect that they do not owe Arcadia anything on account of their deficiencies, whether they made any payments or not. Arcadia must change its internal records so that each class member's account reflects a zero balance. If an outside collection agency was trying to collect, it must recall those collection efforts. It must instruct the three credit reporting agencies, Equifax, TransUnion and Experian, to delete Arcadia's tradeline on class members' credit reports.

Arcadia's deadline for taking these steps has passed. However, it often takes a while for credit reporting agencies to change their records. If you are a class member, check your credit report next month to be sure it shows a zero balance owed to Arcadia.

]]> What are the grounds for this lawsuit? Our class action alleged that Arcadia had failed to include all of the conditions precedent to reinstatement in its NOIs, as California law requires. If the NOI does not include all the disclosures the law requires, then creditors are not entitled to any deficiency after they sell the repossessed vehicle and apply the sale proceeds to the contract. The trial court determined that Arcadia's NOI was proper and entered judgment against the class. But the Court of Appeal disagreed and reversed, in a published opinion, Juarez v. Arcadia Financial Ltd, 152 Cal.App.4th 889 (2007). Because the Court of Appeal held that Arcadia's NOIs did not comply with California law, we were able to negotiate a class action settlement.

Debt Collectors' Deficiency Suits May Be Time-Barred

2009-03-28T00:58:46Z

If your vehicle was repossessed and sold, the bank or finance company may have sold its right to claim the resulting deficiency to a debt collector. The "deficiency" is the amount still owing on the conditional sale contract after the vehicle sale proceeds were applied. If you did not voluntarily pay that deficiency, the debt collector may decide to file a lawsuit to collect it.

Why are finance companies selling their rights to collect on deficiencies? In these tough economic times, they may simply prefer to collect a few sure dollars now rather than a few more dollars down the road. But sales to debt collectors can also be an indication that the right to collect a deficiency is growing stale. In other words, the statute of limitations may be about to run on the deficiency claim. Creditors are not supposed to sue on claims that are brought outside the limitations period.

For example, if your vehicle was repossessed more than four years before a debt collector files a deficiency lawsuit, the four-year statute of limitations for breach of contract can bar the debt collector's claim. But the statute of limitations is not an automatic defense; the consumer must appear and bring that issue to the court's attention.

Appearing and defending in court can be intimidating to most consumers, even if they know they have a defense. Because very few consumers ever appear in court, most of these deficiency lawsuits result in default judgments for the debt collectors. Then, once debt collectors obtain a judgment--even if the lawsuit was barred by the statute of limitations--they can garnish wages or lien property to get their judgments paid. At that point, there is little or nothing the consumer can do.

If you are sued by a debt collector for a deficiency, look carefully at the grounds for its deficiency claim. if you have questions, we may be able to help you.

Repossessions May be Affected by the Supreme Court's Preemption Decision

2009-03-05T19:57:56Z

Our law firm represents consumers whose cars were repossessed. Many of those consumers are being sued by the bank or finance company that repossessed the vehicle. We review the post-repossession Notice carefully to determine whether the creditor has complied with California repossession law. If the Notice does not comply with the law, then the consumer is not liable for any deficiency remaining after the vehicle is sold and the sales proceeds are applied to the outstanding contract balance.

In some cases, however, national banks have argued that they do not need to comply with California law because the California notice requirements are preempted by federal regulations pursuant to the National Bank Act. Although there are no federal laws or regulations that deal with the contents of post-repossession Notices, the banks argue that California notice requirements impermissibly interfere with their ability to lend money and to collect all that is owed. They have argued that forcing banks to comply with state-law notice requirements is an obstacle to the accomplishment of certain objectives under the National Bank Act.

We have vigorously opposed these preemption arguments. In fact, our law firm has several pending cases where federal preemption is an unresolved issue. But the U.S. Supreme Court issued an opinion yesterday called Wyeth v. Levine that may help settle this issue in the consumer's favor.

Wyeth v. Levine has nothing to do with national banks, repossession or lending. It concluded that consumers could continue to sue drug companies for personal injuries in state court, notwithstanding that the drug labels had been approved by the Federal Drug Administration. But similar to the banks' arguments in repossession cases, the drug company argued that permitting injured consumers to sue for compensation was an obstacle to the accomplishment of the FDA’s safety objectives. The Supreme Court rejected that argument. The Court also recognized that state law tort remedies were not inconsistent with the FDA's objectives, but rather were complementary to them.

We believe the same is true in repossession cases, that state-law repossession requirements are complementary to the National Bank Act's regulations. Federal preemption would leave a vacuum in which nothing would specify the contents of post-repossession Notices, with disastrous consequences. But our trial courts will decide that issue, not us. Check back for further developments.

AP Reports on Repo Violence

2009-03-01T01:23:56Z

The AP has a report that repo violence is increasing. Repossession companies may not "breach the peace" or engage in violence, but the potential for violence is present as explained in the report.