California Repossession Law Blog

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.

Posted by Carol McLean Brewer | Permalink | Email This Post

Posted In: Car Repossession

Bookmark:

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.

Posted by Carol McLean Brewer | Permalink | Email This Post

Posted In: Car Repossession

Bookmark:

We are pleased that a class action settlement against WFS Financial Ltd. was finally approved last week by San Joaquin County Superior Court Judge Carter Holly. The settlement affects persons who vehicles were repossessed and sold by WFS, and who received certain forms of WFS's post-repossession Notices of Intent to Dispose (NOIs).

We posted the news of Judge Holly's preliminary settlement approval in July. Since then, more than 6,000 class members were sent Class Action Notices that allowed them to object to the settlement or opt out. Nearly 1,500 of those class members had made post-repossession deficiency payments to WFS and were sent Claim Forms that allowed them to get all of that money back.

Judge Holly's approval of the Settlement Agreement requires WFS to mail cash payments to all class members who submitted timely Claim Forms. It also requires WFS to stop collecting any deficiency balances from class members, to update its records to reflect an account balance of zero, and to electronically instruct Equifax, Experian and TransUnion to delete the tradelines associated with all of the class members' WFS accounts. That means that class members with poor credit reports due to WFS's tradeline will have that tradeline removed from their credit reports.

WFS must stop collecting against class members and instruct the credit reporting agencies to delete its tradeline by January 2, 2008 and must mail the cash payments to class members by January 7, 2008.

The judgment is final as to all class members except 143 people, to whom WFS said it mistakenly sent Class Action Notices without Claim Forms. Those persons made post-repossession payments to WFS and will be re-sent Notice with Claim Forms so they will have an opportunity to get their money back.

No one objected to the settlement, and only one class member asked to be excluded. Several class members came to the final approval hearing and were pleased that the settlement was approved.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Car Repossession

Bookmark:

Consumers whose cars are repossessed usually want to get them back. California law has long required the repossessing finance company to give particular disclosures about how to do that in post-repossession notice of intent to dispose (NOIs). In June, the Court of Appeal clarified California law in one of our cases by ruling that the repossessing finance company has to tell consumers exactly how much they have to pay and what else they have to do.

Yesterday the California Supreme Court rejected the petition of Arcadia Financial Ltd. to review the Court of Appeal's decision or to depublish it. This is great news for California consumers!

Several other California auto finance companies had also asked the Supreme Court to depublish the decision. They claimed that it was too difficult for them to comply with the Court of Appeal's interpretation of California law. The Court's interpretation requires these companies to tell consumers exactly what they need to do to reinstate, including how much they have to pay and to whom, including names and addresses.

The Supreme Court's decision to reject review and to refuse to depublish means the Court of Appeal's decision is binding, not only on Arcadia but on other California auto finance companies as well. If the Supreme Court had depublished, the opinion would not have been binding on other auto finance companies, only on Arcadia. If the Supreme Court had accepted review, it could have adopted the Court of Appel's conclusions or formed its own independent opinion. As the Court of Appeal said:

"Creditors must provide consumers with sufficient information to allow consumers to fulfill all of the conditions the consumer must meet before a creditor will reinstate the contract. Arcadia's NOI does not satisfy these requirements."

This means that if consumers receive NOIs that do not tell them everything they need to do to reinstate, they are not liable for any deficiency following the sale of their repossessed vehicle. We think this is a huge victory for California consumers.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Car Repossession

Bookmark:

Consumers whose cars are repossessed usually want to get them back. California law has long required the repossessing finance company to give particular disclosures about how to do that in post-repossession notice of intent to dispose (NOIs). In June, the Court of Appeal clarified California law in one of our cases by ruling that the repossessing finance company has to tell consumers exactly how much they have to pay and what else they have to do.

Yesterday the California Supreme Court rejected the petition of Arcadia Financial Ltd. to review the Court of Appeal's decision or to depublish it. This is great news for California consumers!

Several other California auto finance companies had also asked the Supreme Court to depublish the decision. They claimed that it was too difficult for them to comply with the Court of Appeal's interpretation of California law. The Court's interpretation requires these companies to tell consumers exactly what they need to do to reinstate, including how much they have to pay and to whom, including names and addresses.

The Supreme Court's decision to reject review and to refuse to depublish means the Court of Appeal's decision is binding, not only on Arcadia but on other California auto finance companies as well. If the Supreme Court had depublished, the opinion would not have been binding on other auto finance companies, only on Arcadia. If the Supreme Court had accepted review, it could have adopted the Court of Appel's conclusions or formed its own independent opinion. As the Court of Appeal said:

"Creditors must provide consumers with sufficient information to allow consumers to fulfill all of the conditions the consumer must meet before a creditor will reinstate the contract. Arcadia's NOI does not satisfy these requirements."

This means that if consumers receive NOIs that do not tell them everything they need to do to reinstate, they are not liable for any deficiency following the sale of their repossessed vehicle. We think this is a huge victory for California consumers.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Car Repossession

Bookmark: