Vehicle or Boat Repossession Scenarios

Scenario 1 - Ten-Day Notice Before Repossession
Scenario 2 - Three-Day Notice After Repossession
Scenario 3 - No Notice Given Before or After Repossession

Scenario 1 - Ten-Day Notice Before Repossession

If the lender gave a Ten-Day Notice (personally or by registered or certified mail) before repossession, the notice:

Shall state that the retail buyer is in default

• State the period at the end of which the goods shall be retaken
• Designate the obligations required to be performed to cure the default, including the dollar amount of any required payment and the date by which such obligations shall be performed
• In the case of repossession of a motor vehicle, notify the buyer that they are responsible for all personal property from the motor vehicle prior to the repossession date

The lender has the following rights. The lender:

• Can charge the buyer with fees for towing and storage.
• Can accelerate the loan and require the buyer to pay off the amount due on the remainder of loan.
• Has the right of resale if the buyer does not perform (pay the loan). The buyer has no right of redemption.

Consumer Protections: If the lender does not give a Ten-Day Notice to the buyer:  Right of Redemption

- The holder shall retain the repossessed goods for fifteen days after the retaking within the state in which the goods were located at repossession.

- During the 15-day period, the buyer can bring the payments current (the loan cannot be accelerated) and pay the expenses of retaking and storage.  When the loan is current, the buyer can take possession of the goods and the original loan contract goes back into effect, with no change in terms.

Scenario 2 - Three-Day Notice After Repossession

The lender does not provide a notice to the buyer before repossession. The lender needs to provide a letter with the notice personally or by registered or certified mail within three days after repossession. The lender letter has to provide the following information to the buyer. 

• The unaccelerated sum due under the contract
• Actual and reasonable expense of retaking and storage
• In the case of repossession of a motor vehicle, that the buyer is responsible for retrieving personal property left in the motor vehicle
• Such property will be available for retrieval at least sixty days after the date of repossession.
• The contact and business hours information for the buyer’s use to make arrangements for retrieval of the personal property. 

If buyer retrieves personal property more than fifteen days after repossession, the custodian of the property may charge the buyer up to twenty-five dollars. (There is no fee for the storage of personal property retrieved within fifteen days from vehicle repossession. A cap of $25 applies to storage of personal possessions between the fifteenth and sixtieth day after the repossession).

Consumer Protections:  If the lender does not give proper three-day notice after repossession to the buyer, the buyer only has to bring the payments current and cannot be charged with fees for towing and storage.

Consumer Tip:

Please remember to save all pages of the notice and the envelope the notice came in.
Report violations to the Department of Banking.

Scenario 3 - No Notice Given Before or After Repossession

If the lender does not provide a notice to the buyer before or after repossession, the lender:

• Cannot charge the buyer with towing and storage fees.
• Cannot require that the loan be accelerated but can require the buyer to bring the loan current.
• The original loan contract goes back into effect (with no change in terms) when the loan is brought current.

Consumer Protection Notices - Three Days After Repossession

Note: These protections apply to Scenarios One, Two, and Three in this section.

Within three days after repossession, the lender of the car loan contract is required to provide the following notices to the borrower. The borrower:

• Is responsible for removing their personal property from the vehicle.
• Has up to sixty days after the repossession to retrieve their personal property.
• Receives a notice from the lender with the contact information and business hours for the borrower to retrieve their personal property.

Compulsory Resale

The following protections apply regarding compulsory resale.

If the buyer does not redeem the repossessed goods within fifteen days after the repossession:

• The lender may sell the such goods not less than fifteen days and not more than 180 days after the repossession.
• The lender is required to give the buyer not less than ten-day notice of the time and place of any sale or settlement of the goods
• If a repossessed car had an original price greater than $4,000:
  • The amount of the proceeds of the sale is the greater of:
    • The amount paid for goods at the sale, or
    • The fair cash retail market value of the personal property at the time of repossession. To determine the fair market value at time of repossession, refer to the National Automobile Dealers Association (NADA) Used Car Guide, Eastern Edition.
  • Add together the following:
    • The average trade-in value and highest stated retail value. Divide by two.
    • If the average trade-in value is not stated in the NADA guide, the highest-stated trade-in value stated in the guide is used to determine the proceeds of the sale.
• The proceeds of the sale (see steps above for proceeds of the sale and the fair cash retail market value) are applied in the following order to determine the deficiency due from the borrower or excess to be returned to the borrower:
  • Expenses of the resale.
  • Expenses of retaking the vehicle and storage.
  • Balance due under the contract.
• Within thirty days after the sale, the lender shall provide the buyer with a written statement itemizing the settlement of the proceeds of the resale.
• Unearned Insurance Premiums are insurance premiums paid by the buyer in advance of the coverage period and subject to refund if the coverage is not used. The Unearned Premium corresponds to the time period remaining on an insurance policy (the unexpired portion) and are paid back upon policy cancellation.  In the case of a repossession, if the lender receives a refund of unearned insurance premiums, the lender applies the refund amount to the balance due from the buyer.

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