California Car Repossessions: Creditors Must Exactly Follow the Law or Lose Their Right to a Deficiency
Anyone who has had their car repossessed will tell you that the experience is traumatic and difficult. Aside from losing a car--and the upset that goes with a repossessed car--that consumer's credit will suffer. Usually that means it will be more difficult or expensive to get credit in the future.
Even worse, creditors usually sell repossessed cars at private auctions for wholesale prices. These auctions generally net far less for these vehicles than a car dealer would charge for the same vehicle. The creditor then applies the sale proceeds to the balance remaining on the consumer's conditional sale contract. If the money from the sale doesn't cover the amount the consumer still owes on the contract, there is a "deficiency" that the creditor will then try to collect from the consumer.
However, California consumers have some legal defenses against the creditor's right to claim and collect a deficiency. The creditor cannot collect a deficiency unless it sends the consumer a Notice after repossession that exactly complies with California law.
For example, the Notice must tell the consumer how much to pay to redeem the car (pay it off), and itemize that amount. Usually the Notice must tell the consumer exactly what she must do, including how much she must pay, to reinstate the contract (bring it up to date). The Notice must allow consumers to request extra time to redeem or reinstate, and provide an extension form that gives instructions. The Notice must tell the consumer the name and address of the person to whom she must send payment to redeem or reinstate, and give an address where she may pick up her vehicle if she redeems or reinstates. If the Notice does not include all of these items--and a few others--then the creditor is prohibited from collecting a deficiency from the consumer.
If your car has been repossessed and you have a question about whether the Notice you received from the creditor exactly complies with California law, contact us. We will be happy to review your Notice free of charge.
