July 19, 2013

Car Repossession - What Next?

Lenders are increasingly aggressive about sending out the repo man. In just the last few years, tens of thousands of California car owners have fallen prey to the tow truck stalking their workplace or their apartment complex at night. Even when borrowers think they have made a verbal arrangement with the bank or credit union over the phone, they may wake up in the morning or get off their shift late in the evening to find their car gone. After the shock and anger wears off, a borrower's first reaction is, what now? tow%20truck.jpg

The first thing to know is that if you are late with a payment and get an extension with the lender, make sure that agreement is in writing. We have heard of at least one woman who looked out the window to see her car being towed way, even while she was holding the phone and talking with the bank representative. She had just been given verbal permission to make her payment the following week.

The repo man is not likely to come to the door and ask if he can just take the car away. They get paid when they hook it up. While the tow truck operator cannot break into the consumer's home or garage, or phsycially threaten someone, neither can the consumer hide the car or breach the peace. This could seriously affect your rights to reinstate the contract or redeem the vehicle.

Many people think that if they lose the car, that is the end of it. But sometimes the lender can sell the vehicle at auction and charge the borrower the difference between the total amount owed and the auction proceeds. This is called the "deficiency." In California, the lender must send the consumer a notice after the car is repossessed, explaining in detail what he or she must do to get the car back. Many of the post-repossession notices do not comply with California law. If the notice is defective, the lender may not be able to collect the deficiency. Know your rights. You can learn more about California repossession rights here.

June 24, 2010

NCLC Consumer Resources

nclc_logo.jpg The National Consumer Law Center just launched a new website. Check it out here. The nonprofit center, headquartered in Boston, has been a premier source of assistance for consumers, legal services and consumer lawyers for decades.

Its new website provides information on NCLC's recent reports, numerous publications and current initiatives. Among other things, NCLC publishes reports on scams and predatory trends in consumer transactions, manuals and treatises on a wide variety of legal topics affecting consumers, as well as other books for lawyers and the public alike.Return%20to%20Sender.JPG NCLC is the publisher of "Return to Sender - Getting a Replacement for Your Lemon Car" by Nancy Barron.

In addition to its publications, NCLC funds research, legal conferences and consumer education programs on a wide range of important consumer topics -- from automotive fraud and warranty law, to financial abuse of the elderly, energy policy, student loans, and predatory lending.

Kemnitzer, Barron & Krieg is actively involved in the work of NCLC. Bryan Kemnitzer is a member of the partner's council and Nancy Barron currently serves on its board of directors.

April 13, 2010

"Repo-Madness" - New Report Is a Must-Read

The National Consumer Law Center has just published a new report on the shocking state of repossession abuse throughout the country. The short but thorough "REPO MADNESS - How Automobile Repossessions Endanger Owners, Agents and the Public," by NCLC staff attorney John van Alst and investigative reporter Rick Jurgens, is a riveting must-read for anyone who is planning to buy a car on credit. It can be read online or downloaded here.

repo-truck-4.jpgA midnight visit from the repo man is one of those things no one ever thinks could happen "to me." Yet, in 2009 alone nearly 2 million vehicles were repossessed. That's 2,000,000 cars and trucks! While some people got themselves into cars they just couldn't afford, many other people may have missed a single payment or been told by the lender not to worry while a late check was in the mail. Based on what our clients tell us, lenders and debt collectors are increasingly aggressive.

Most alarming is a map of the United States showing the location of violent acts associated with repossessions - assaults, battery, use of weapons, kidnapping, impersonation of law enforcement and even fatalities. The authors argue that, because repossessions are one of the only self-help enforcement mechanisms allowed by law, there is in fact a kind of lawlessness in the process. The term "self-help" in this context means that lenders can send out the tow truck by simply alleging that the owner of the car is behind in payments, without any proof or court judgment to back up the claim. "With most repossessions occurring without the involvement of law enforcement, parties often assert their rights in a sort of vigilante justice," the report explains.

This sort of vigilante justice invites a lot of mistakes. Sometimes the tow truck takes the wrong car. That's grand theft. Sometimes the tow truck driver is in such a hurry, he doesn't notice children napping in rear car seats. That's kidnapping. Scroll down through the Consumer Alerts section of our firm website to read "Repossess My Car But Not My Kids". With plenty of evidence and examples to back up their statement that "auto repossession remains a crude, unregulated
and naked exercise of force and guile," Van Alst and Jurgens offer a good case for nationwide reform.

While self-help repossession is still allowed, California has some powerful consumer protection laws to help combat abuses. Read the NCLC Report. And, if you have been a victim of repo-madness, do not wait to give us a call.

April 2, 2010

Repossession Class Action Settlements

The car repossession business is merciless, leaving consumers stranded without transportation. The idea that the repo man visits only deadbeats is a myth. We have heard nightmare stories of a car taken in the night after one late payment or a glitch in the way a dealer set up an electronic account. Many consumer advocates complain that desperate lenders engage in deceptive practices. We at Kemnitzer Barron & Krieg are doing something about it. Along with co-counsel, we have recently settled a number of significant class actions involving defective post-repossession notices.

Most consumers think that if they can’t meet their monthly payments, their car will be towed away and that is the end of it. Something like home foreclosure. However, that is not how it works. After the vehicle is repossessed, it will be resold at a discount auction for far less than the amount owing; and the lender then attempts to collect the deficiency from the original owner. At that point the consumer has no car, mangled credit and a mound of debt.

The best thing a consumer can do in a repossession situation is to try to reinstate the contract and get the car back. The lender must send the consumer a notice of how to do so - including where to send payment, to whom, and exactly how much. This notice is called an NOI.

Kemnitzer Barron & Krieg challenge NOIs that do not give the borrower sufficient information to reinstate or redeem their contract and recover their car or truck before it is sold at auction. California law provides that, if the post-repossession notices do not comply with the Rees Levering Automotive Sales Finance Act, the lender may not collect a deficiency after the vehicle is re-sold.

The approximate amounts of the deficiency balances defendants have agreed to erase, or otherwise not collect, are summarized in this list of cases that we have settled in the last few months.

McCoy and Castro v Alliant Credit Union (Alameda County Superior Court Case No. RG 09-444283) $7,370,853.

Meza and Pelkey v ACC Consumer Finance LLC (Alameda County Superior Court Case Action No. RG09458893) $15,319,729.

Friedrichs v BMW Financial Services (U.S. District Court,N.D. Cal., San Francisco Case No. C08-04486 PJH) $35,000,000.

Stephens v Bay Federal Credit Union (San Francisco Superior Court Case No. CGC08478197) $5,159,515.

Ford Motor Credit Company v O’Neal (San Diego Superior Court Case No. 37-2007-00077225-CL-CL-SC) $110,810,774.

Lobel Financial Auto Cases (Sacramento County Superior Court JCCP Case No. 4563, coordinated actions) $43,808,147.

In addition to waiver of the deficiency balances, class members entitled to refunds will get a cash return of all or most of the amount they paid. In each case, the terms and procedures involved in the distribution of refunds is included in the class notices that were mailed to each class member. For more information, including the contentions of the parties, settlement terms and identity of co-counsel, click here

March 30, 2010

Motorcycle Financing – A Bumpy Ride on the Open Road

Motorcyles are all about freedom and fun and wind in your face. But that "open road" fantasy fades fast when the bills pile up in a frightening heap.

For 50 years, Californians have enjoyed protections provided by the Rees Levering Act. This law applies to most street-legal motorbikes when sold with closed-end financing. The buyer may drive the motorcycle off the lot, but the lender holds title until the loan is repaid. The Rees Levering Act requires specific information telling consumers not just the cost of the vehicle, but also the cost of credit, so borrowers can shop for the best finance terms. The law further regulates repossession practices.
656046_red_bike.jpg The traditional credit transaction for a vehicle purchase involves closed end financing. That means you know the term, or length, of the loan, and the monthly payment doesn't change. Credit cards, on the other hand, are open-ended, with no fixed term and fluctuating payments. It is a riskier purchase from the consumer's perspective.

A couple of years ago, we began to see a troubling trend. Motorcycle companies looking for loopholes in the Rees Levering Act started selling street bikes with open-ended credit through what looks like a factory-branded credit card. Despite the outward appearance, these operate differently than the usual co-branded card, such as an airline VISA card that can be used at any retailer that takes VISA. These, on the other hand, can be used only to buy the motorcycle and perhaps some accessories or maintenance services. In many cases this is an abuse of truth in lending rules.

So what's going on here? The ready use of credit helps manufacturers move product in a tight market. A low initial monthly payment gets the buyer past sticker shock.Yet, consumers have no idea they may be giving up important fraud protections when they buy a bike with a factory-branded credit card. The devil is in the details, there in the form of small print legalese. That $99/month offer is likely to be a teaser rate. We have even seen deals like $49 for 24 months. But what happens after that? The bike is not paid off. All of a sudden the monthly charges increase and the consumer has no idea why, or how to challenge the bump. In some cases, this is just a bait and switch with a new plastic lure.

These factory-branded cards are so profitable, that manufacturers have poured money into catchy ad campaigns. The images play to the dream of "Easy Rider," but easy credit can turn the dream into a nightmare of uneasy debt. If you are the victim of this kind of bait and switch, give us a call.

March 16, 2010

Kemnitzer, Barron & Krieg Launches New Website

Kemnitzer, Barron & Krieg LLP, the host of this California Lemon Law Blog, has just launched a new website with a Q&A section on a variety of consumer protection areas, ongoing consumer alerts, attorney biographies, internet resources, a bibliography and contact links. Check it out here

The firm represents consumers throughout California and has, to date, filed cases in 34 separate California counties. Bryan Kemnitzer, Nancy Barron and Bill Krieg have a combined 99 years experience as trial attorneys fighting to protect consumer rights.

Supported by a dedicated staff, attorneys in the firm have taken individual and class action cases to trial, obtaining verdicts and judgments that include punitive damages and civil penalties. On the other hand, the vast majority of cases settle prior to trial. In settlement, Kemnitzer, Barron & Krieg have obtained debt relief exceeding $300 million, as well as thousands of new car replacements and refunds.

As California consumer lawyers, the members of the firm believe that every consumer is entitled to safe and reliable transportation, fair credit, truth in lending, access to the courts and freedom from fraud. All clients have the opportunity to learn more about consumer protection in ways that increase consumer literacy and save money, as well as resolve the particular case at hand.

March 6, 2010

Repossessions Have Serious Effect on Credit Score

Your credit score affects not only your ability to get a loan, but the interest rate you pay and many other aspects of personal finance. A car repossession is a big black blotch on your credit score. Contrary to popular belief, a voluntary surrender has the same negative impact on your credit report as a repo does. After all, as credit blogger John Ulzheimer reports, “Credit scores aren’t meant to evaluate the ethics involved with lending.” It’s simply a cold, hard calculation of the likelihood you will pay future bills. A negative trade line reporting repossession may stay on your credit report for up to 7 years. That is a long time to be in financial purgatory.

For this reason, in actions Kemnitzer Barron & Krieg bring to challenge unlawful repossession notices, deletion of the negative trade line from the credit report is on the list of remedies we seek. In the last few years, we have succeeded in requiring lenders to make efforts to halt reporting of more than $250,000,000 concerning repossession accounts. Some recent class actions involving this remedy are reported here.

Why does it matter? Beginning in the late 1980’s, FICO (Fair Isaac Corporation) and other credit scoring sources developed algorithms (mathematical formulas) and software that generate consumer credit scores from data collected by credit bureaus like TransUnion, Experian and Equifax. Some credit bureaus in turn license FICO’s credit-scoring systems to provide credit scores to lenders, insurance companies and consumers themselves.

Designed to predict consumer behavior, credit scores determine who gets approved or rejected for car loans, insurance, mortgage and credit cards, with the lowest rates going to consumers with the highest scores. Since the people least able to pay end up spending more in higher interest, this system locks in a vicious cycle of credit and debt.

Credit bureaus and FICO itself keep the formulas secret, labeling them “proprietary information.” Consumer advocates have long been troubled by this secrecy. It is one thing to keep the recipe for Coca Cola or KFC out of the public eye, but it is another to bar transparency of a system that can wreak havoc on millions of Americans’ financial lives. While the precise algorithms remain unpublished or under protective orders, you can get a sense of how the formula works here and here.

Regardless of the precise equation, it is clear that a repossession, which impacts both “amounts owed” and “payment history”, has a huge negative impact on the overall score. Of course, the best thing to do is avoid having your car or truck repossessed in the first place. If you are having trouble making car payments on time and risk a repossession, check out the advice from the Federal Trade Commission here. The FTC explains, “Once you are in default, the laws of most states permit the creditor to repossess your car at any time, without notice, and to come onto your property to do so.” Sometimes there are defenses to these repossessions or collection of the deficiency charges that follow. If your car has been recently repossessed, contact us.

February 12, 2010

Ford Motor Credit Company Repossession Class Action Settlement

1102882_traffic_warning_sign_4.jpg Ford Motor Credit Company ("FMCC") has settled a class action involving 15,877 vehicle repossessions. For details on this case and other similar cases, click on Class Actions. FMCC will stop collection of approximately $110,810,774 in outstanding deficiency balances. FMCC will also refund the full amount that qualified class members already paid toward their post-repossession deficiency. This class action settlement received final approval of the San Diego Superior Court at a duly noticed hearing on January 8, 2010. The case is entitled Ford Motor Credit Company v O'Neal (San Diego Superior Court Case No. 37-2007-00077225-CL-CL-SC). Bryan Kemnitzer and Nancy Barron of Kemnitzer Barron & Krieg in San Francisco, Alec Trueblood of Los Angeles, and Lilys McCoy of San Diego represented the class. Class members are invited to call 1-877-435-4072 for an update on this case.