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If you borrow money to buy a vehicle, the bank or finance company requires you to sign a loan agreement. These agreements are long intimidating documents that contain many terms and conditions that are designed to protect the lender. One of the most important protections that the law and the contract provide to lenders is the right to repossess and sell the vehicle if the borrower fails to make the promised payments. Another important right of lenders is the right to sue the borrower for the difference between the loan balance and the amount obtained after it is resold. This amount is called a “deficiency” balance. For example, if the borrower owes $15,000 and the car is resold for $12,000 the borrower can be sued for the $3,000 deficiency. The vehicle buyer/borrower does have some rights under California law.
The law requires lenders to comply with each and every condition of the repossession laws or they will not be allowed to sue the borrower for the “deficiency”. The lending/Finance Co. can take the vehicle without informing the borrower in advance. They cannot legally break into a closed garage nor do anything that will create a disturbance of the peace or violence. They can take the vehicle from an open carport or driveway. Lenders that violate the repossession laws are liable under the law for any damage they cause and for the repossession itself.
After a vehicle has been repossessed, the finance company must send the owner/borrower a letter called a NOTICE OF INTENT TO DISPOSE OF VEHICLE. The letter must be sent within 60 days of the repossession and must be delivered personally or sent by certified mail with a receipt signed by recipient. The letter must clearly state that they intend to sell the vehicle. It must also state the exact amount that must be paid to get the vehicle back, where the vehicle may be picked up, and information necessary to protect the borrowers’ rights. Borrowers must be informed that they can reinstate the loan contract if done within 15 days or they must be given the reasons they do not qualify to do so. Borrowers should also be told that they can be granted an extension of time to reinstate the loan if they qualify.
After the repossessed vehicle is resold, the finance company is required to send the borrower an itemized statement indicating the amount the vehicle was sold for and all expenses related to the sale. Finance companies usually report the repossession to the credit reporting agencies and then sue the borrower for any deficiency balance owed.
Consumers that receive repossession letters should immediately discuss the situation with an attorney to learn about and protect their rights. Always keep all important documents related to vehicles in a safe place and not in the vehicle. And if repossession is likely, take all personal items out of the vehicle or they may be lost after the car is taken. ¡NO SE DEJE! ®
JESS J. ARAUJO, ESQ.